China to grow 8%? An end for Mark-to-markets?  What will the ECB do today?  Gold at a discount…. And Now… Today’s Pfennig!

We have the Bank of England (BOE) and the European Central Bank (ECB) meeting today. Look for rate cuts from both of them, as recessions are deepening in both camps. The BOE doesn’t have many arrows in their quiver, while the ECB has held some in reserve. I doubt the ECB would go for a “huge honkin’” rate cut today, as they are normally more stick in the mud thinking… The BOE will probably move rates nearer to zero…

The currencies all had a day to bounce yesterday, more on that in a minute… But the day on the trampoline had to end, and as the day turned to night, the overnight market participants took a look at the rate cut meetings and decided to sell… So, last night when I went to bed, the euro was 1.2645… And right now it’s 1.2585… Not a huge change, but one that’s going the wrong way for euro holders.

OK, back to yesterday… All my troubles seemed so far away… Now it looks as though they’re here to stay, oh I believe in yesterday… Suddenly… NO WAIT! My fingers were going to continue that tangent! UGH! Any way… Yesterday, the currencies all rallied on the news that China was going to introduce a new stimulus package and their leader Wen Jaibao said he believed there would be a return to 8% growth for the Chinese economy. This news got commodities rolling, and risk takers dipping their toes back into the water. But then… Stephen Green, head of China research at Standard Chartered Bank in Shanghai has this to say in rebuttal of Wen… “Every day the world economy gets worse and they’ve probably got two years of very slow global growth to get through.”

So… Either Wen was saying what he truly believed was going to happen… OR… He has taken a page out of the Bernanke / Paulson, un-dynamic duo’s book on how to deceive the public as to how bad things are… Oh, I know the un-dynamic duo eventually came around to say things were bad… But, all you have to do is go back to the last part of 2007, and the first part of 2008, to find all the quotes you need to fill your bag, from these two regarding how things weren’t that bad… It wasn’t a recession… And subprime won’t filter out into the economy…

What I believe is taking place in China is a move away from a dependence of U.S. consumers… Which won’t happen overnight… But, if I’m correct in this thinking, it would eventually lead to a HUGE problem for the U.S. For, if China can make this move, they won’t need to keep buying U.S. Treasuries… Uh-Oh!

There was other news that goosed the risk takers yesterday, and that came from the U.S. as reported by Reuters… “A U.S. House Financial Services subcommittee is expected to hold a hearing on mark- to-market accounting rules, which have been blamed for forcing banks to record billions of dollars in write downs, a source briefed on the matter told Reuters.

The congressional subcommittee on capital markets has tentatively scheduled the hearing for March 12, the source said.  The U.S. Securities and Exchange Commission’s chief accountant and the chairman of accounting rule maker, the Financial Accounting Standards Board, will be asked to testify, the source said.”

So, recall about 10 days or so ago, I told you there was a rumor going around, that someone’s underground, and she will rock you in the, NO WAIT! Darn it! I’m really going off on song lyrics today, because it’s a Tub Thumpin’ Thursday! Any way, I told you about the rumor that was going around about how the dropping of the mark-to-market was being considered… Well, I said then, that I smelled smoke… And when there’s smoke there’s a fire… And here’s the proof in the pudding folks… They congressional subcommittee will talk about this next week!

I can’t believe that they will go through the effort of talking about his, dragging everyone up to Capitol Hill to testify, without suspending the mark-to-market… Now… Talk about unlocking the credit crisis! All those reserves being held to cover the mark-to-markets, could be released on the economy!

But wait! With over 500K being placed on the unemployment rosters every month these days, and most likely a number of 600K being placed on the roster last month, who in their right mind would make loans to consumers in an economy like that? Well, that will be the next hurdle, but don’t tell the markets now, as stocks really liked this news about the mark-to-market, and rallied on the day!

So… Commodities had a day in the sun, much like I will be doing in about a week from now! Or, should I say “hope there’s sun?” Doesn’t matter much to me, as I’ll be in the ball-park next Saturday watching my beloved St. Louis Cardinals with my family at my side… It doesn’t get any better than that my friends! Oh! I was talking about commodities… Well, the commodities that rallied didn’t include Gold, as the shiny metal has seen better days this past week after hitting $1,002… I would have to think that $900 or $890 is a level it will hold. Consider, if you will, the fact that there’s so much uncertainty in the world today… And… Surrounding that uncertainty is the fact that so many Central Banks are near zero with their rates, and have announced quantitative easing as their next move… Recall, I told you a day or two ago that the Bank of Canada has joined the ranks of those employing the quantitative easing measures… The list is getting longer all the time, and now includes the Fed, the BOE, the Bank of Japan, and Bank of Canada… There’ll be more, as we go along… What else can a Central Bank do, after they’ve cut rates to the bone?

So… As I said the other day… I truly believe that Gold is trading at a discount right now… But, that’s just my opinion, not that of EverBank’s, and I could be wrong… I certainly was wrong about the Obama bounce, eh? I wasn’t wrong about calling the end of the Great Unwinding of the Carry Trade, though! Nailed that one to the wall!

Speaking of the end of the unwinding of the Carry Trade (let’s see how would my friend, the Mogambo shorten that… EOTUOTCT!) Japanese yen continues to weaken, after being the best performing currency of 2008, it is now the worst performing currency of 2009! And there doesn’t seem to be any change in that selling patter for yen… In fact, there was a story yesterday on Bloomberg that caught my eye… “Scottish Widows Investment Partnership, which oversees 42 billion pounds ($59 billion) in bonds and currencies, cut its yen-denominated holdings by a fifth because of Japan’s worsening economic situation.”

Before I head to the Big Finish, I wanted to mention the Richard Russell Tribute Dinner that is going to take place in one of my fave cities, San Diego, on April 4… My friend, John Mauldin, is putting this all together, so if your interested in attending, here’s a link to click for more information…. https://www.johnmauldin.com/russell-tribute.html

Currencies today 3/5/09: A$.6425, kiwi .5010, C$ .78, euro 1.2565, sterling 1.4245, Swiss .8510, rand 10.5250, krone 7.1150, SEK 9.1325, forint 247.55, zloty 3.7675, koruna 21.9925, yen 99.40, sing 1.5540, HKD 7.7580, INR 51.70, China 6.8405, pesos 15.30, BRL 2.3680, dollar index 88.98, Oil $44.41, Silver $13.09, and Gold… $916.60

Source: China Announces A Stimulus Plan