Good day… and a Tom Terrific Tuesday to you! The stock, bond and everything else markets in NYC are closed today, as the people up East attempt to deal with a devastating hurricane Sandy. I’ve seen a lot of film footage of what the hurricane has done so far, and it’s not good… So, thoughts go out today to our fellow Americans dealing with this hurricane. Well, I was able to answer the bell and get to the office today… I guess when the infection in my leg is finally gone, I’ll know… I need to stop rushing its healing process! But, I did have my laptop on all day, so I was able to see the couple of hundred responses to my Super Sunday Pfennig & Pfriends… I want to say a great BIG Thank You, to everyone that had favorable things to say… But the most important thing was that many people acknowledged that maybe “the plan” isn’t their ideal plan, but that I had spoken my mind, which seems to be lacking these days by our leaders… Except of course when they want to talk about economic data that has seen the books get cooked…

This morning, we have some healing going on in the currencies, with the euro leading the way up 1/2-cent, which is pretty strange given the news this morning that German unemployment rose 20,000 this month from September. That was twice the amount the “experts” were calling for and was the first increase in the unemployment rate for Germany in more than 3 years… For those of you keeping score at home, Germany’s unemployment rate is 6.9%…

The Bank of Japan (BOJ) did announce that they had increased their bond buying program by 11 Trillion yen (which is $138 Billion in dollars, just so you get the picture). This brings their total in the most recent “plan to stimulate the economy” to 66 Trillion yen or to over $800 Billion… And… the yen gained in value! Come again? Yes, once again the mental giants that trade currencies viewed this as promoting growth, and therefore marked up the yen VS the dollar. Strange, eh? Well, it’s not like we haven’t seen this trading scenario before… But, what gives these mental giants the warm and fuzzy that THIS plan to stimulate the Japanese economy is going to work, when the Japanese Gov’t has been doing this for nearly 2 decades? Sort of like when a product gets “new and improved”… it must be better! HA!

One currency that’s seen selling the past two days is the Canadian dollar / loonie. The loonie has dropped below parity to the green/peachback dollar. This is the first time the loonie has been below parity since August. The price of Oil hasn’t helped the loonie, and neither has the risk off sentiment that hung over the markets from Friday till this morning. Today’s trading in the loonie marks the first time since last May that the currency has seen losses for 5 consecutive days. I’m wondering just what the mental giants have in mind here, for it can’t be simply an “oil play”… The other data that has printed in Canada, has been very constructive to a stronger loonie… like the fact that the Canadian Gov’t will post a SURPLUS of C$3.2 Billion in the 2015-16 fiscal year…

Had to stop for a minute to drum along with the great song by the O’Jays, The Backstabbers… Whenever I hear this song, I’m reminded of 1998… A long story, so I won’t bore you…

So… did you see the Personal Spending and Income data yesterday? Didn’t I tell you that we’re going right back to where we were before the financial crisis, with the spending more than we make scenario? Personal Spending was up a stronger than expected .8% in September, while Personal Income only gained .4% in that same time period. When will we ever learn? When, will, we, ever, learn? Reminds me of a Dave Clark 5 song… Here we come again…

OK… give it up Chuck… nobody listens to Chuck until it’s too late… It’s what I tell my family at home and work, and anyone else that I come in contact with! But, this is exactly what was going on before the financial crisis, and we didn’t have 23% unemployment then!

Last week, I told you how the interest rate cut bets were being pared back in Australia and New Zealand, and how that would be good for the currencies… Well, except for the 2-day risk off sentiment that gripped the markets on Friday and Monday, the Aussie dollar (A$) and New Zealand dollar / kiwi have performed with a bias to buy more of the two currencies. China’s economic recovery is the keymaster here… but right now, that looks promising…

Speaking of China… the renminbi/ yuan has appreciated 2% since July, and you would have to think that no matter how strongly the markets push for appreciation of the renminbi/ yuan, the Chinese Gov’t still holds the keys to the car, and I would think that the Chinese Gov’t would apply the brakes for a few days, just so the markets don’t get that “one-way street” feeling again… But, I’ll tell you this… Since 2003, I’ve been talking about the Chinese renminbi/ yuan, and began to sound like a broken record saying over and over again that the Chinese should allow faster appreciation of their currency so they can use the currency’s strength to combat inflation…

Not that the Chinese were listening to me (see above), but now the Chinese leaders acknowledge the benefits of a stronger currency, as inflation has taken its grip on the Chinese economy… What else were you going to get when your economy grows at +10% year after year? So, I saw it coming, and gave the solution to the problem before it even took over…

The Monetary Authority of Singapore (MAS) uses this plan, and sees to it that the Sing dollar is strong when inflation is a problem, choosing to use the currency’s strength to combat inflation rather than using arbitrary interest rate adjustments…

Gold is up $3 this morning… not much movement yesterday, hmmm… the price manipulators weren’t there, and they won’t be there today either… That means Gold gets a chance to catch its breath, and attempt to form a base here before making another run higher… Well, that’s how I see it, I could be wrong…

Today, here in the U.S., the data cupboard has the S&P/ CaseShiller Home Price Index for August to observe… But, with the markets here, closed, I wonder if the dollar will react at all to the results… London will still be open, but after high noon, there won’t be much liquidity in the markets… This Friday, is the Jobs Report, the last one before the election, which thankfully is next week, for if I see one more political advertisement, I’m going to go bonkers! I change the channels every time one begins to come on…

Then There Was This… my good friend, John Mauldin, sent out his Out of the Box email this week, and it had a great article by Dylan Grice, of Societe Generale, on Central Bank’s debasing their currencies… “I am more worried than I have ever been about the clouds gathering today (which may be the most wonderful contrary indicator you could hope for…). I hope they pass without breaking, but I fear the defining feature of coming decades will be a Great Disorder of the sort which has defined past epochs and scarred whole generations…. So I keep wondering to myself, do our money-printing central banks and their cheerleaders understand the full consequences of the monetary debasement they continue to engineer? now the social debasement is clear for all to see. The 99% blame the 1%, the 1% blame the 47%, the private sector blames the public sector, the public sector returns the sentiment … the young blame the old, everyone blame the rich … yet few question the ideas behind government or central banks … I’d feel a whole lot better if central banks stopped playing games with money…. All I see is more of the same – more money debasement, more unintended consequences and more social disorder. Since I worry that it will be Great Disorder, I remain very bullish on safe havens.”

Chuck again… I would think that his safe havens are Gold, Silver, Oil, and real estate… and currencies that aren’t participating in the currency wars!  but then maybe not… I don’t mean to put words in his mouth..

To recap… The risk off sentiment of the past two days, seems to have dissipated, with the currencies pushing higher VS the dollar this morning, led by the euro which is up 1/2-cent, even in the face of a awful looking labor report from Germany this morning. The A$ and kiwi are seeing the interest rate cut bets being pared back, which gives these two the ability to gain VS the U.S. dollar, and the Canadian dollar / loonie has not participated in the currency rally, and has fallen below parity for the first time since August.

Currencies today 10/30/12… American Style: A$ $1.0375, kiwi .8220, C$ $1.00, euro 1.2955, sterling 1.6070, Swiss $1.0715, … European Style: rand 8.6470, krone 5.75, SEK 6.6575, forint 220, zloty 3.1985, koruna 19.3420, RUB 31.37, yen 79.45, sing 1.22, HKD 7.75, INR 53.96, China 6.2395, pesos 13.06, BRL 2.0310, Dollar Index 79.98, Oil $85.79, 10-year 1.72%, Silver $32.06, and Gold…. $1,714.25

That’s it for today… I just heard that the hurricane was downgraded… but that doesn’t change the devastation that it has already been inflicted on the East Coast… Well, tomorrow is Halloween… our local paper, has a writer that I always read, his column is called “The Life Sherpa”, and last weekend he wrote about how Halloween has been stolen from the kids by the parents… I then thought about it, and from the conversations I hear from parents, he’s right! But times change, and not always for the better… I’ll still sit outside and give out the treats, and get a kick out of the little kids in their costumes telling their awful jokes! OK… hope everyone is safe up East… it is the most important thing… The markets will still be there when they reopen… be safe everyone! And with that I hope you have a Tom Terrific Tuesday!

Chuck Butler

President EverBank World Markets

1-800-926-4922

www.everbank.com

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