One thing you have to know

Posted by Chuck Butler - Daily Pfennig

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Excerpt from Chuck Butler’s Daily Pfennig


I do believe that market participants and traders have gone into “lock-down” mode, until they see the color of two things today… 1. The FOMC statement this afternoon, and 2. the President’s State of the Union address tonight. I’ve got plenty of thoughts about that, but I’ll keep them to myself. I have really tried to avoid the State of the Union addresses in recent years. In fact, I don’t believe that I’ve really sat down an watched/ listened to one since Ronald Reagan was president!

So… Since there’s not much we can do about the markets’ “lock-down” I’ll just go into the collection of thoughts today…

First up is yours truly… Yesterday, I told you about the President’s proposal for a “spending freeze”… Well, after I hit “send” I thought about this more, and came to conclusion that this isn’t really “spending freeze”… It’s more like a “cooling off”… But, if the President is really serious about “cooling off” spending, he’ll stop the proposed debt ceiling increase in its tracks… You know, the one I told you about that will increase the debt ceiling by $1.9 Trillion!

And… Don’t even try to spin this as a “positive” which I’m sure will be done, for it’s not a spending cut… It’s not even, oh forget about it, the “spin” will be all the rage in the dumbed down media…

OK… Now, that was one thought… Here’s the second by me… People tend to get short-term and long-term and put them under the same umbrella.

It is a proven fact that short-term currency forecasts are wildly incorrect and can not be made with assurance that they will be correct.

Long-term forecasts, are based on fundamentals… And short-term is simply noise…

Fundamentals move markets… Charts do not. Charts simply become the “excuse” or the reason why the fundamental exists!

So, speaking from a fundamental basis… The U.S. Deficits will have to be dealt with at some time in the future… The only way to deal with this is a choice of 3 things…
The Gov’t can
1. reduce spending…
2. raise income (taxes)
3. allow a general debasement of the currency

The reason #3 works is simple… If you allow a $20 bill to be worth just $5, your debt is easier to pay down, and you have more dollars to do it with…

So, for anyone on earth to not realize that this is our future, then they are dreaming… 

Chuck Butler
EverBank World Markets

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