In This Issue…

* ECB throws Greece a bone…
* Germany approves next payment…
* Oil rises to $102…
* Stephen Roach…

And, Now, Today’s Pfennig For Your Thoughts!

Euro Is Yanked From The Slippery Slope!

Good day… And a Happy Friday to one and all! My colleagues here at EverBank (St. Louis) have been looking forward to today for a couple of weeks, and it’s finally here! Today, we have two birthdays to celebrate in the office… Sue Grabowski, and Mike Meyer… To celebrate the day, Sue is making pancakes for us this morning, and then we’ll have pizza for lunch! WOW! I’ve known Mike for about 10 years now, and he does a great job with the Pfennig when called on, and Suzie Q is an early arriver like me, so we share stories while making coffee… So, I’ll say it’s going to be a Fantastico Friday, right out of the starters blocks this morning!

Yesterday, the euro sure looked like it was headed for a ride on the slippery slope, but about 1/3rd down the slide, the single unit was yanked back to the top, by a newspaper (Die Welt) report that the ECB is exchanging Greek Bonds for new securities, easing concern that Greece will get its second bailout. And that news was followed up by an announcement that German officials will approve the next bailout payment for Greece.

Talk about a reversal! The euro which had fallen to 1.2975, reversed course, and rallied nearly 2 full cents on the news! I sent a note to the trading desk boys and girls, letting them know what was going on, and included a note that the other currencies were playing follow the leader, and then went into the Peter Pan song… (See I even do it to them!) But on the way to work this morning, I heard a great old song from the 60’s that describes the currencies always following the Big Dog, euro… Follow me… I’m the Pied Piper, Can’t you see? I’m the Pied Piper…follow me…

So… there you go! That’s what happened yesterday… This morning, the euro is holding gains it made yesterday, and there was something else that happened yesterday that has carried over to this morning. I know you’re waiting patiently… But a rally in Gold is what I’m talking about, which illustrates what I’ve been saying that Gold is the anti-dollar… You see, if it were merely a “safe-haven” from geo-political problems, or weakening economies, Gold wouldn’t have rallied on news that calmed the fears in the Eurozone… But it did, and why did it rally? Because the dollar was getting sold, and Gold simply “piled on”… In the NFL you used to get a penalty for that, these days I’m not sure what is a penalty on a hit and what isn’t anymore. But that’s a discussion for the Butler Patio…

But once again, let me repeat something that I keep saying over and over again… The euro is not out of the woods… in fact the single unit isn’t even half-way through the woods… So, these 2-cent rallies can be wiped out at the drop of a hat, or a Greece problem… And the Greece goes on… And the Greece goes on… (I can’t take credit for that a reader sent it to me!)

Speaking of being of not being out of the woods… The U.S. economy continues to show signs of a pulse… But to me, and I’ll probably rile a few… But, to me, the U.S. economy is enjoying a brief relief in the “eye of the storm”… I do believe it will begin the “eye of the storm” soon enough, and when it does it won’t be pretty… I think, and you can mark this down, as one of the few times I’ll praise the Fed, that the Fed sees this, (maybe they’ve become Pfennig Readers!) and that’s why they announced that near zero rates would continue to late 2014, and… laid some groundwork for additional Quantitative Easing… OK… I’m not praising them on their reaction to their revelation… I’m praising them for the revelation!

Speaking of the U.S. economy having a pulse… yesterday’s data cupboard had enough data printed that it could choke a horse! (no animals were injured here)… PPI (wholesale inflation rose just .1% in January, Weekly Initial Jobless Claims fell to 348,000 from 361,000, Housing Starts rose 1.5% after falling 1.9% in December… I thought out loud when I saw this data being hailed as a savior for the economy, and said, “Hmmm… Home prices are getting murdered because of the glut of inventory, and we’re still building houses?” The Bloomberg Consumer Comfort Index rose to -39 from -42, and the Philly Fed (manufacturing) rose to 10.2 from 7.3…

The one nasty piece of data that printed yesterday and something that’s going to eat away at the U.S. economy this year… Foreclosures in the 4th QTR showed that the trend to see huge foreclosure numbers this year in place, as Foreclosures rose 4.38%, adding to December’s 4.48% rise… Of the 4.38% , 3.28% were from Prime mortgage loans, and 14.45% was from sub-prime mortgage loans… So, that nasty thing called sub-prime just won’t go away! It will be here to haunt us until these loans get closed… and that could take some time!

Today, the data cupboard has the stupid CPI report for January… And the media will be all over that report like a cheap suit…And with gas prices rising for over a month now, CPI should reflect higher inflation, but knowing the Gov’t book cooks, that probably won’t be the case… So, I’ll be watching for something that makes much more sense, and that is Leading Indicators…

OK… enough with the data! Talk about boredom city! U.S. Treasuries also saw some selling along with the dollar, which makes sense, yesterday… the 10-year yield rose from 1.92% to 1.99%, which doesn’t sound like much, but when you’re dealing in hundreds of millions that’s a hit… (remember when bond yields rise, the price of the bond goes down!)

Yesterday, I went way out on the limb and talked about Australia, looking to me, as if it could become the new “safe haven” currency… And then I read a report that my good friend, Sean Hyman, where he says that the A$ and Gold are “great traveling partners”… “When Gold heads higher, so does the A$. So when I see Gold breaking higher, I get bullish on the Aussie dollar. And Gold just tipped me off to the Aussie’s next move.”

Good stuff Sean! They are both anti-dollar currencies, and since Australia is #2 in the world when it comes to Gold production, and Sean points out something that I’ve not seen before, so see even an old dog like me learns something new each day… and that is that Australia has more Gold reserves than any other country in the world!

The price of Oil moved past $102 this morning. Hold on a minute, I need to stop and sing along with Al Green and Let’s Stay Together… Ok, I’m back now… what was I talking about? Oh yeah, the price of Oil… well I told you yesterday that I thought the saber rattling between Iran and the U.S. is all about Oil… and with every rattle of the saber, the price of Oil moves higher…

I don’t like seeing this… but, there are a few currencies out there that don’t mind seeing the price of Oil rise… The Canadian dollar / loonie is the major beneficiary, but other petrol currencies like Norway, Brazil, Russia, and even Mexico with their depleting oil reserves, all see buyers when the price if Oil rises…

Now that Reserve Bank of New Zealand (RBNZ) Gov. Bollard has announced that he’ll step down when his term is up, he’s talking up New Zealand… WOW! This is like a 180 degree turn-around for Bollard… Let’s listen in as he talks about New Zealand…

“Our view is that in New Zealand, some conservative statistical interpretations and particular characteristics of our economy have resulted in the understatement of New Zealand’s economic performance. In international league tables New Zealand is in some ways better off than is often thought.”

In other words… Bollard is saying that in New Zealand they don’t cook the books to make things look better, but if other countries followed their lead, New Zealand would look much better when compared to the other countries…

Yes… when comparing countries and their data, you have to think about whether that country cooks the books, or if they simply do their best Aaron Neville and Tell It Like It is… That’s why I always point out, what I feel to be manipulated data…

Canada’s CPI rose in January to 2.5% from 2.3% in December… Prices for just about everything in Canada, except leisure products, rose in January, led by food and fuel… So, the 2.5% rise VS last year, is quick, and something the Bank of Canada (BOC) shouldn’t ignore, like I know the BOC and their Gov. Carney, would love to do…

Back to the U.S. one more time before I head to the Big Finish… I see where an independent company says that 2.5 million people here in the U.S. have gone back to work… The total spent by the Gov’t on job creation so far is $744 Billion… That works out to about $200,000 per job… Hmmm… I could really go on here, but I’ll just leave that for you to decide whether or not this is a function of the Gov’t, using taxpayer money…

Then There Was This… Then There Was This… Long time readers know or will remember hopefully that I used to quote one of my fave economists, Stephen Roach of Morgan Stanley, all the time. For what he was saying was so similar to what I was saying. Then, Stephen Roach went to Asia, and I really lost track of him.

Yesterday he announced his retirement to pursue “scholarly pursuits”… But, before he rides off into the sunset, he left us with a few thoughts that again, echo what I’ve said over and over again for years…

Here’s Stephen Roach in a Bloomberg interview… After predicting that China will overtake the U.S. as the dominant economy by 2025, Roach said, “the U.S. must stop blaming China for its problems and focus on creating economic growth through exports.” He then went on to say, “As I look to the United States, I think to this day, there’s a glaring absence of truly being able to fathom the mistakes that were made either on Wall Street, Washington, or main street, heading into the great crisis of 2008 and 2009. So humility is not something that we’ve been able to fully grasp a this point, I’m sorry to say.”

Chuck again… yes, playing the blame game has been something the U.S. has done for about 10 years now with China… and a game that needs to be completed, and the game board, and all the pieces put away!

To recap… The euro was yanked back from its visit to the slippery slope yesterday, when the ECB announced that they would swap old Greek bonds for new ones, and Germany approved the payment of the next bailout funds for Greece, the euro rallied nearly 2 cents! Gold also took advantage of the weaker dollar and rallied. The U.S. economy is showing a pulse, but Chuck believes its simply enjoying the calm of the eye of the storm, with the exit out of the eye, coming soon.

Currencies today 2/17/12… American Style: A$ 1.0770, kiwi .8380, C$ $1.0055, euro 1.3150, sterling 1.5840, Swiss $1.0895, … European Style: rand 7.7375, krone 5.6980, SEK 6.7080, forint 220.05, zloty 3.1775, koruna 18.9880, RUB 29.95, yen 79.10, sing 1.2565, HKD 7.7538, INR 49.28, China 6.2988, pesos 12.76, BRL 1.7135, Dollar Index 79.40, Oil $102.68, 10-year 1.99%, Silver $33.69, and Gold…. $1,732.90 and since its Friday it’s time to take a peek at the Debt Clock again… make sure you scan down to the Unfunded Liabilities… and remember, the Gov’t says they are going to make good on those payments… then ask your congressperson “how are you going to do that?” Click here.

That’s it for today… Pitchers and catchers report tomorrow, I think I’ll celebrate that! Some players are already in camp in Jupiter, Fl, and the reports on Adam Wainwright’s return after Tommy John surgery are very good! We may have lost Albert Pujols, but we got Adam Wainwright back! And no a pitcher that plays every 5th day, can’t make up what an everyday ballplayer can, but the idea that we won the World Series last year without Adam, gives Cardinal fans a warm and fuzzy knowing that he’s back! My mother always told me that she thought would be a good sports writer or announcer… I think I missed my calling! You can see me writing about a play that went awry… “And you really meant to throw it to that base? “ Seriously?” HA! Nice win by my Tigers over Oklahoma St. The Tigers are really coming on strong at the right time of the year… Ok… Suzie Q is here, and setting up her griddle for the Pancakes… Next Tuesday will be Shrove Tuesday for Irish people… where we fill up on Pancakes… It will be Fat Tuesday for everyone else! The Big Mardi Gras street party in historic Soulard takes place this weekend. It’s the second largest Mardi Gras celebration in the U.S. ! Ok… I’m could go on for hours, but all good things must come to and end, eh? HA! I hope you have a Fantastico Friday, and Monday is a Holiday, so a Wonderful 3-day weekend! Talk to you Tuesday!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837
www.everbank.com