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August 12, 2014 · by Chuck Butler

Good Day! …  And a Tom Terrific Tuesday to you! I wasn’t too sure about being here this morning, last night, but morning has broken, like the first morning, Blackbird has spoken, like the first bird, and I feel fine! Amazing what some sleep can do for me! I could have gone to bed with a sour stomach because of the way the Cardinals were playing, and I’m sure that had a lot to do with it, but the main culprit was the usual stuff…

The euro is suffering through a rotten day, and it’s the usual stuff affected it too! Ukraine, sanctions, a weak overall economy, and a rotten ZEW…  Yes, this morning, German Investor Confidence as measured by the think tank ZEW, fell to the lowest level since all that negativity spread throughout the Eurozone in 2012… German Investors are running scared of what’s going on in Ukraine, even more than they are scared of the economic slowdown! We’re still waiting for the German 2nd QTR GDP to print… My spider sense is tingling on this one, folks… For in my mind, it takes this long to print a report that should have printed already, there must be something wrong… And the wrong will probably show that the German economy was in negative territory in the 2nd QTR…

You know, European Central Bank (ECB) President, Draghi, has been masterful in his attempt to keep from outright Quantitative Easing / QE/ bond buying/ money printing/ crack cocaine, and entering into the Currency Wars… He knows all too well, that the euro’s entry into the Currency Wars, would not be good for the euro, and talk about generating inflation! Yes, the ECB wants some inflation right now, but not the kind of runaway inflation that would be generated with a deep decline in the euro’s value… So, I expect for Draghi to continue to mention to the markets that he still has arrows in his quiver… It will be up to the markets if he is ever to get around to using those arrows… Right now, I don’t see it… But then I didn’t see Draghi falling for that rate cut trap. You know, the rate cut trap that Japan and the U.S. have already fallen into, when you continue to cut rates when rates are already too low…

Man, wasn’t that sad news last night that Comedic genius, Robin Williams had died?  Mork from Ork is no more… Williams burst onto the scene in the 70’s with his Mork & Mindy Show, and went on to movies, stage, you name it, he entertained the troops in Iraq, Afghanistan and Kuwait, he was quite the talented person… May he rest in peace…

OK… That was eating at me all morning, and I just couldn’t wait until the end to talk it through… Now, back to our regularly scheduled programming… The Aussie dollar (A$), is flat today, after suffering through a sell off yesterday… In Australia overnight, the National Australia Bank (NAB) issued a report on their latest Business Survey, which showed a rise in both conditions and confidence, and an improvement in all key components… There was also some troubling, to me that is, housing data, that showed a 10.1% rise in home prices year on year… In Sydney alone, the increase was 15.6%!  This is troublesome to me, because the Reserve Bank of Australia (RBA) has said over and over again that rates are going to be on hold for some time to come…

That’s only feeding the price rises in homes, folks… If everyone knows that their mortgage rate isn’t going anywhere, the housing sector becomes engulfed in this craziness that we’ve seen here in the U.S. before… But given the track record of the RBA Gov. Stevens having avoided a recession in Australia under his watch, I doubt we’ll see any rate hikes to combat this craziness in housing, for the Aussie economy seems to have turned the corner and is heading toward better times right now, and he wouldn’t want to be the guy that pulls the punchbowl away at the party…

We’ll have to keep an eye on this situation in Australia… 20 years ago, I was an elected official in my little river town, an Alderman, if you will… I was so thrilled with my little river town, and how we were so flush with cash, and living high on the hog as they say… But when I got into the books of the city, I noticed that we were so dependent on the revenue stream from one entity… The Chrysler plant that resided in our city… I pushed the other alderman to begin to diversify our income… And eventually they got around to do that… Which was a good thing given what happened to the Chrysler plant years later…

Now, Chuck, why are you telling us this? Ahhh grasshopper, this talk of diversifying one’s income stream is a talk that Australia needs to be having right now… They are so dependent on China… And while I do see China moving along at a slower speed, but still moving along going forward, that doesn’t mean Australia should pin their colors to the Chinese mast, and forget about everything else…  Diversifying the income stream worked for little old Fenton, Mo. It can work for you too, Australia…

The Peoples Bank of China (PBOC) made it 7 consecutive nights that they allowed an appreciation in the renminbi / yuan. OK, I’m not going to keep counting here… The thing here is that the PBOC has seen the recent data from China, and decided that China no longer needed a weak renminbi / yuan. Of course, given the whole scheme of things, the U.S. still believes that the renminbi / yuan is too weak… I guess it all depends on what side of the fence you’re looking at all of this!

Well, yesterday morning the Norwegian krone had moved to the front of the class, from the back of the class where it and its kissin’ cousin, the Swedish krona, had been sent for bad behavior several months ago. This move for the krone, appears to not be a one-day phenomenon as the krone is eking out a gain VS the dollar this morning, but the krona has slipped back…  Sweden printed their inflation report this morning for July, and it didn’t hold the same upside surprise that Norway’s did yesterday. Sweden’s July CPI fell to .6% from .8% in June…  It was in line with expectations, so no big deal, except that after Norway’s big upside surprise yesterday, everybody was thinking that maybe, just maybe Sweden’s report would hold the same result… But that was not to be, and the krona has slipped back while the krone is still basking in the sun at the front of the class…

Singapore printed their 2nd QTR GDP revision yesterday… And it was better than expected… on a year on year basis, Singapore 2nd QTR GDP printed at 2.4% up from 2.1% previously shown for the 2nd QTR… But the Sing dollar (S$) didn’t find any solace in the upward revision and is basically flat to down a little this morning…  The fear in Singapore is that manufacturing is weak, not as weak as expected, but weak, and that has spurred some Chicken Littles to appear… I don’t think we need to worry too much here, Singapore will work it out… They always do!

Gold is up a couple of bucks this morning with Silver & Platinum moving higher too. Palladium is getting sold a bit this morning, strange, given the other three precious metals are stronger! But that’s the scene in precious metals this morning…  Hey! Did you hear about how firms like JP Morgan and Chase are going to have to appear before Congress next month and explain that they did not abuse their commodities holdings at the expense of clients, consumers, the environment or the health of the market?

Apparently, Senator Carl Levin, and his investigators have been preparing for this for over 2 years, as they probed  the firms’ commodities dealings… Hmmm… OK, Mr. I don’t believe in Price Manipulators… If the investigators find something and present it to the public, will you then admit what’s going on here? And if they don’t find anything, that doesn’t prove dookie…  And why would they call these firms before a Senate sub-committee if they didn’t have “something” interesting?

The U.S. Data Cupboard is still running on fumes this morning, although the U.S. Monthly Budget Statement will print… This Budget data has become almost invisible to the markets, as they have become Comfortably Numb with the numbers, which except in a couple of tax revenue months, have been negative… But tomorrow, tomorrow, it’s only a day away… we will get July Retail Sales and as I’ve explained previously… The report will most likely be disappointing…  The BHI says so!

For What It’s Worth… I have a few readers that send me notes from time to time asking me why I don’t spend more time talking about Silver… I tell them all the time that I don’t have anything against Silver, it’s just that Gold gets the headlines, and there’s nothing I can do about that… In fact I probably personally own about the same amount of Silver that I do Gold… So, when I saw my Casey Research letter yesterday and Jeff Clark was talking about his 7 reasons why he’s buying Silver now, I knew this was something I would want to talk about today!

Now, I can’t give you his whole article, but it’s well worth your time to read it, and can be found at www.caseyresearch.com/

Jeff’s 7 reasons why he’s buying Silver now:

7. the Inflation adjusted price of Silver has a long way to go…

6. the Silver price VS production costs. Silver has declined while costs go higher

5. Low Inventories… all U.S. coins intended for circulation have been minted…

4. He believes that the we’ve reached the conclusion of the bear market…

3. Silver is still very cheap compared to other commodities…

2. Silver’s low mainstream participation… how much it represents of global financial wealth

1. Watch out for China!  The Shanghai Futures Exchange (SHFE) is taking over!

“Don’t look now, but the SHFE has overtaken the Comex and become the world’s largest futures silver exchange. In fact, the SHFE accounted for 48.6% of all volume last year. The Comex, meanwhile, is in sharp decline, falling from 93.4% market share as recently as 2001 to less than half that amount today.

Chuck again… Yes, long ago when I first heard that China was going to start its own futures exchange, I thought, that this might be a way to end the price manipulation… Well that’s all yet to be seen, but the fact that they’ve taken over the lead, is a good sign to me!

To recap… The currencies remain mixed this morning, but the bias to buy dollars remains. The euro has taken one to the chin this morning as the ZEW showed German Business Confidence at a low last seen during all the Eurozone negativity in 2012.  The Chinese allowed another appreciation in the renminbi / yuan, and Chuck relives his Aldermanic days in his little river town… Gold is up a few bucks, and the Big Boys are headed to the hill…

Currencies today  8/12/14… American Style: A$ .9265, kiwi .8430, C$ .9135, euro 1.3345, sterling 1.6775, Swiss $ 1.0995, … European Style: rand 10.6605, krone 6.1790, SEK 6.8840, forint 235.77, zloty 3.1550, koruna 20.8530, RUB 36.12, yen 102.25, sing 1.2505, HKD 7.7515, INR 61.08, China 6.1517, pesos 13.19, BRL 2.2750, Dollar Index 81.64, Oil $97.41, 10-year 2.42%, Silver $20.11, Platinum $1,471.75, Palladium $880.53, and Gold… $1,312.02

That’s it for today… Neil Young is playing his song: Words on the IPod right now… And that’s what I need every morning… Words…  People ask me all the time why I begin each letter with a silly saying about the day… It’s how I get going… Once I begin to type, it’s amazing how things flow, but I have to start typing! That really was sad news about Robin Williams, eh? Chris is back today, I hear that he did better than his goal in the ironman competition… Good Show!  Little Braden Charles was at the house yesterday… He was very excited to show me what a good jumper he was… The Cardinals lose 6-5 to the Marlins as the Marlins, Mr. Excitement, hit two home runs and made an amazing catch in the field! WOW!  Reminded me of when I played softball many years ago, and our team reached the city semifinals, but the first 5 guys in the other teams’ lineup all hit home runs. Our left fielder, who was no stranger to hitting home runs, yelled to me, to “walk the next guy” (I was the pitcher) I turned and said, “do you want me to walk the whole team?”  Well, we lost that game, but it didn’t diminish how good that team was, getting all the way to the City semifinals…  I’m sure the Cardinals outfielders were yelling to the Cardinals’ pitcher to walk that guy too! A great way to come to an end of the Pfennig this morning… Al Stewart’s song: The Year of the Cat is playing… I love his music!  And with that, I’ll get out of your hair today, and hope you have a Tom Terrific Tuesday!

Chuck Butler

President

EverBank World Markets

Editor of A Pfennig For Your Thoughts

1-800-926-4922

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