We found the dollar’s initial response to the Fed’s decision interesting indeed, for immediately after the announcement the dollar went into free fall. The EUR rallied from 1.3070 to 1.3250 in a moment’s notice and as we listened to CNBC from out hotel room here in Montreal we heard “talking head” after “talking head” inform us of the dollar bearishness of this statement and this policy shift. This we found odd, for the Fed has not said that it had changed policy; indeed it said quite clearly that it was holding its current policy “constant.”  The market, collectively, for a moment clearly misunderstood the difference between a policy shift and a shift in operations. – Dennis Gartman – The Gartman Letter)

A Pfennig for Your Thoughts

In This Issue..

* Dollar flies high on FOMC…                                                                    
* FOMC puts $2 Trillion floor down…                                                               
* Bailing out the states…                                                                       
* Aussie Consumer Confidence soars!

Good day… And a Wonderful Wednesday to you! Well… The FOMC set off some fireworks yesterday, and so did the Cardinals & Reds, more on the latter later! But first, we have to go to the tape and see what the Fed Heads said to trigger the fireworks in the markets… And let me tell you, it’s back to square one for a few things this morning…

OK… The dollar is flying high this morning, as the knee jerk reaction to the FOMC announcement yesterday, didn’t last long. Let me explain… The FOMC statement was full of things that could be taken two different ways, but the first way it was taken was that the Cartel would exit their reversal plans and implement a form of Quantitative Easing (QE)… I call it QE Light… Less filling…

Now… I told you what would happen if the Cartel decided to implement QE, and that’s exactly what happened, with the dollar getting sold, and currencies along with Gold rallied… Shoot Rudy, the stock market here in the U.S., recovered almost all of its 100 point loss for the day, in a matter of minutes following the FOMC announcement…

But, then, the markets got a real good look at the statement, and in the end, the cartel had not announced a new round of QE (not yet!) instead, they had basically placed a floor on their balance sheet of $2 Trillion, and decided to keep its bond holdings level to support an economic recovery. They also announced that maturing bonds would be reinvested into longer dated Treasuries, to keep rates low for the mortgage sector.

The Cartel also assessed that in the near term, the recovery proved to be “more modest” than they had anticipated.  Shoot, if they had only been Pfennig Readers 6 months ago when they made those statements about a growing economy… They would not have opened mouth and inserted foot!

So… As I turn on the currency screens today, I see the euro holding on to the 1.30 handle by the skin of its teeth, and Gold down $7… Quite a bit different looking than yesterday afternoon, right after the FOMC statement! So… Just put that down as a knee-jerk reaction, and the trading now, as a return to the “flight to safety” dookie we’ve seen off and for two years now.

The FOMC averted a HUGE dollar sell-off yesterday by wording what they were doing differently than the markets had seen before… But in the end, isn’t it the same stuff? I mean, if they aren’t going to reverse their previous bond holding plans, then they are continuing on with the current environment to hold toxic waste bonds, and keep interest rates a historic lows… Thus further inflating what will end up being the biggest bubble of all time… Treasuries…

Speaking of Treasuries… The 10-year is now at a 2.71% yield… Talk about measly yields! But, that’s not as bad as a 1-year Treasury Bill… Get this… A 1-year T-Bill currently yields .23%… Now… If you buy that from a broker, and they charge you a commission, you’re now negative… And… If your money manager buys it for you, you’re still negative, because of their management fees! Why in the world would any one buy a T-Bill?

OK… I’ve got to go on to other things here… I can feel my blood pressure rising! Of course, sitting here, sweating, waiting for the A/C to turn on, isn’t exactly helping me keep calm either! UGH!

Well… On Monday, the price of Oil was $2 higher than it is today… And, while I like to see cheaper gas, I have to wonder just what’s going on… Of course the Cartel telling everyone that our economy is stuck in the mud, isn’t going to make any one think that U.S. consumers will be out buying gas!

Speaking of U.S. Consumers and our economy, I’m going to share with you an observation I made last week, that falls right into the “economics” that I use to help me make the calls I make…

I’ve been camping about the same time of the year with my family for many years. (except the 2007,2008) Shoot, I used to go with my beautiful bride’s family before we were married! And years ago, the campgrounds would be full, especially on the weekends, and there would be lots of boats in the lake. But since 2000, the campers dwindled, along with the boats in the lake… There was one year, that besides my family, there was only one other family in the campground!

But this year, it was very reminiscent of years before 2000… I thought to myself, Self… I see this as a sign of the economic times… Instead of going to Rome this summer, these people stayed close to home, and camped for their vacation… A sign of poor economic times if you ask me!

And what about the labor crisis here? What’s the Cartel doing about that? Oh, they are failing miserably once again, at this, that, and anything else they do!

I see where the President signed a $26 Billion Bill to give emergency aid to states… Didn’t I tell you this was coming? And I doubt that $26 Billion is going to be near the amount that will be needed by the states… But stop right there and think about what he just did… He took $26 Billion of your tax dollars and spent them without your authorization… Once again!

I did see though that the bill calls for a reduction of the food stamp program by $11.9 Billion… That’s interesting isn’t it? I mean, I’m all for ending a majority of the spending in these programs, but didn’t I just tell you how the number of people on food stamps has grown yesterday? Strange happening as far as I’m concerned…

And did you see where the Pentagon is going to cut thousands of jobs? That’s right, thousands… But again, I have to question the timing… Aren’t we fighting two wars right now? But then, if there are thousands of people there that aren’t needed, why have they waited until now to cut them?

OK… Let’s talk about something other than the U.S. economy, I’m growing tired of it!

Let’s talk about the Canadian economy… Today, we’ll see the color of Canada’s Trade Deficit for June… I’m expecting it to narrow, as I assume that the energy sector will have done enough to narrow the deficit here, which is small in nature, and manageable by all means. Canada’s economic growth is solid, folks… No worries here…

And then we have Australia… One of the TV’s we had on here yesterday had a spokesperson from Australia on to talk about the Aussie job creation sensation… He announced that there would be free 1-year work visas given to people 18-30 to come to Australia and work… Amazing!

That job creation shows up in Consumer Confidence for sure… And look what we have here! Aussie Consumer Confidence printed last night and showed a nice strong increase for the second consecutive month… +5.4% this month… Following +11.9% last month…

Then there was this… And this story that was in the Washington Post, just made me sick! But since I enjoyed it so much (NOT!) I thought I would give you a snippet of it and the link to the whole story, as long as you promise to put away the sharp objects first!

http://www.washingtonpost.com/wp-dyn/content/article/2010/08/10/AR2010081000138.html

It seems that there’s a new way to escape house payments on a home that’s underwater and many never recover… It’s called, “buy and bail”… Where a home owner, acquires a new home before their credit rating is ruined by walking away from the old house that’s underwater, or worth less than the mortgage…

So… In essence, the practice of “lie on your loan application” is continuing, even though Fannie and Freddie thought they had beefed up their standards to prevent this from happening…

I shake my head in disgust…

To recap… The FOMC did a QE sort of dance yesterday that caused a knee jerk reaction, pushing the currencies and Gold higher, but only for a short time before the markets realized it wasn’t really any new QE, and the FOMC also downgraded the economy, thus throwing the markets into a “flight to safety” which has the dollar flying this morning.

Currencies today 8/11/10: American Style: A$ .9040, kiwi .7195, C$ .9635, euro 1.3010, sterling 1.5715, Swiss .9485,… European Style: rand 7.2825, krone 6.1550, SEK 7.30, forint 217, zloty 3.0850, koruna 19.10, RUB 30.28, yen 85, sing 1.3610, HKD 7.7655, INR 46.69, China 6.7750, pesos 12.72, BRL 1.7430, dollar index 81.66, Oil $79.38, 10-year 2.71%, Silver $18.16, and Gold… $1,197.50

That’s it for today… Well… Did you see the “baseball brawl” in Cincinnati last night between the Cardinals and the Reds? I see nothing wrong with teams ironing out their differences… But do it like men… Not like one Reds player, who took to kicking his opponents in the back and face with his metal cleats… I don’t know who taught him to fight… Cardinals and Reds play another game today, I’m sure a lot of people will be looking for more extra curricular activities from these two teams… Well, that’s all I had to talk about today… I sure hope your Wednesday is Wonderful!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837

We just hosted a dinner in Boca Raton, Florida, and once again, the interest among American high net worth families in Canada is overwhelming.  Indeed, the relative risk-reward opportunity of investing in Canadian assets relative to the United States has rarely been as compelling as is the case today. – David Rosenberg (more HERE)

A Run for the Canadian Border

The Gulf of Mexico disaster has changed U.S. priorities, costs, and energy supply sources for years to come. But the fact that the U.S. needs energy isn’t changing anytime soon, and as mass sources of green energy are still a while away, the most likely alternative might be the most surprising one.

With US$15 billion invested annually in offshore drilling in the United States, the disaster in the Gulf of Mexico means that this money is getting ready to migrate elsewhere. And it is the Athabasca oil sands of Alberta, Canada, that are number one on the list.

Given the amount of bad press the oil sands get, this could come as a shocker. But technological advances and improvements in recovery methods, as well as reduction of water usage and greenhouse gas emissions, have made oil sands a viable and popular option for the future of U.S. energy.

The numbers, too, are looking in their favor. Out of the 1.34 trillion barrels that is the world’s total proved oil reserves (2009), only about 20% (270 billion barrels) of this number is actually available to free-flowing capital investment – the vast majority is in the tight grip of various national oil companies.

And a good chunk of these “free-market” barrels, about 178 billion, is sitting underneath the feet of Canadians, or as some call them, the Crazy Canucks. For a country that runs on oil, the United States couldn’t have been presented with a better lifesaver. Compared to alternatives such as Chavez’s Venezuela or the oil fields of the Middle East, reliable oil from politically stable and friendly Canada is by far the easier pill to swallow.

As it is, roughly one in every six barrels of oil consumed by a U.S. citizen today comes from the Canadian oil sands. The fact that infrastructure is already in place for oil sands development and oil already flows through pipelines between the two countries only sweetens the deal.

So, we wouldn’t be taking a huge step in assuming that any future capital spending that will be diverted away from the Gulf of Mexico will find it hard to bypass Canada. In addition, as global oil supply is affected by the drilling restrictions, in the long term we’ll be seeing higher oil prices. While this news might not make the drivers amongst us happy, it couldn’t get better for Alberta and the energy companies operating in the oil sands. With oil prices hovering over US$70 a barrel, the stream of investment dollars into the oil sands is guaranteed.

Obama’s first-ever Oval Office address has confirmed our expectations of no more growth in the American offshore drilling industry anytime soon. But the Gulf accounted for a large chunk of U.S. oil production (25-30%) and consumption (9% – the entire consumption of France), and that shortfall must be met.

While renewable energy is where the future of U.S. energy lies, according to Obama, it is still some time before green energy producers will be able to meet the full demands of the nation. In the meantime, authorities have also realized the importance of Canada for U.S. energy and are enticing companies with new pipelines. Plans on expanding the Keystone Pipeline, linking up Texas and Oklahoma to 500,000 Canadian barrels a day, have already been drawn up and put into motion.

The turmoil in the U.S. energy market has created a number of opportunities, both in the short and long term. For now, investment into the Canadian oil sands is about to increase dramatically, and things are moving rapidly. We’ve uncovered the lowest-cost producer with significant upside production, and they’re the one on the list as a takeout target by Big Oil.
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[Discover the oil sands company Marin thinks so highly of… and get ready to profit when shares shoot up. But oil sands are not the only energy investment to benefit from the Gulf Coast disaster – read more here or sign up right now for a $39/yr. subscription with 3-month money-back guarantee.]

In the US:

Why I’m Not Hiring

With unemployment just under 10% and companies sitting on their cash, you would think that sooner or later job growth would take off. I think it’s going to be later—much later. Here’s why.

Meet Sally (not her real name; details changed to preserve privacy). Sally is a terrific employee, and she happens to be the median person in terms of base pay among the 83 people at my little company in New Jersey, where we provide audio systems for use in educational, commercial and industrial settings. She’s been with us for over 15 years. She’s a high school graduate with some specialized training. She makes $59,000 a year—on paper. In reality, she makes only $44,000 a year because $15,000 is taken from her thanks to various deductions and taxes, all of which form the steep, sad slope between gross and net pay.

Before that money hits her bank, it is reduced by

….read more HERE

In an interview with the Financial Post last week, the founder of Barrick Gold Corp. (TSE: BAR), the world’s biggest gold miner said, “the future of gold mining likely lies in mixed-metal mines.”  Peter Munk, the company’s chairman, further noted that “Gold finds are becoming more and more difficult right now. What most large companies do now is look for mixed-metal mines, where gold is a part of other metals and other minerals.”  Although Barrick does not have any current exposure to development projects or mine production in British Columbia, there are a number of interesting properties in B.C. which can provide mixed metal exposure right in the Toronto-based company’s proverbial back yard.
British Columbia’s mining industry reported pre-tax net earnings of $2.3 billion during 2009 in spite of the worldwide economic slowdown, according to a recent PricewaterhouseCoopers (PwC) report…..

….read more about Potential Opportunities & The Future Outlook  HERE

Warren Buffett shortened the duration of bonds held by his Berkshire Hathaway Inc. after warning that deficit spending could force inflation higher.

Twenty-one percent of holdings including Treasuries, municipal debt, foreign-government securities and corporate bonds were due in one year or less as of June 30, Omaha, Nebraska-based Berkshire said in a filing Aug. 6. That compares with 18 percent on March 31, and 16 percent at the end of last year’s second quarter.

….read it all HERE