Trichet talks tough! Kohn sends warnings… The currencies bounce back! Will the BLS create ghost jobs?

Good day… And a Happy Friday to one and all! A Fantastico Friday in my books, as we had a day without rain yesterday, and… Mr. Trichet did jawbone the euro back to life, as I hoped he would do yesterday… After all that craziness from Big Ben this week, things sort-a got back to the awful fundamentals of the U.S….

OK front and center this morning, I’ve got to tell you that European Central Bank (ECB) President Trichet set the record straight yesterday, and reminded the world’s traders that U.S. rates are low… But Eurozone rates could be going higher, and increasing the already wide interest rate differential that exists between the dollar and euro.

Trichet warned that inflation was high, and probably going higher, and then reminded everyone that the ECB’s mandate is to maintain price stability… There’s two ways to go about that… Turn the money supply spigot off, or raise rates… With the economy slowing in the Eurozone, he can keep the money supply spigot trickling as to not completely kill the economy, but raise rates… The ECB might not get around to raising rates in this cycle, but the threat to do so is there, and the markets have to take that seriously…

So… In taking that threat seriously, the markets sold dollars and bought euros for the first time in two days… And the euro’s rise was something to behold… The single unit sat at 1.5385 when Trichet began to talk… And soon afterward, it was well into the 1.55 handle!

It wasn’t all Trichet though… The Fed’s Vice Chairman, Kohn, had some very strong words about the lending landscape… Let’s go to the tape…

Kohn noted that bank loan quality would worsen, bank write downs would increase, and expressed concern that loan losses might spread. Now before I go on, let me say that the “banks” he’s talking about are all those that participated in the mortgage Ollie, Ollie oxen free the past few years… Let me say also that EverBank did NOT, participate in the sub-prime, fancy free mortgage loan business… We stayed the course with our tried and true principals… Yes, we didn’t make as much money as the “other” guys the past couple of years, but then, we don’t have the losses to book now either!

Anyway… Kohn, sounded like he was a Pfennig reader… I just get a kick out of others that finally come around to my way of thinking that we may have averted a major meltdown, but the problems aren’t going away… And… We’ll have another “Bear Stearns” from all of this…

To follow up what Kohn had to say… 1st QTR mortgage delinquencies were reported by the Mortgage Bankers Association, showing a rise to 6.35%, a record high in data back to 1979. These delinquencies threaten the banking system folks… And on top of that the economy as a whole.

So… We saw a huge turn around in the currencies on our Thundering Thursday… If you had sailed around on the ocean and was gone for a week, and just came back, you would think that nothing had happened, except a stronger bias to sell dollars…

OK… Continental announced job cuts of 3,00 yesterday… And… A BIG home builder here in St. Louis, Taylor, Morley Simon closed their doors! It’s a sign of the times… I saw a funny sign yesterday that was titled: A sign of the times… “Beer costs less than gas” Drink Beer, Don’t drive! That’s funny!

Under the heading of: That’s NOT so funny, is the news that the SEC is going to investigate AIG on their accounting of sub prime mortgage contracts… Here’s where my thoughts are headed on all of this… Recall about 7 years ago, when one Corporate Scandal hit the news after another? I have the feeling that we’re heading right back to that awful time… It just all depends on how many rocks the investigators want to turn over…

Another Fed Head, Lacker chimed in yesterday and struck a nerve… Let’s go to the tape here… In a striking insider’s critique, Lacker said lending programs the central bank has created to combat the credit crisis distort private markets, encourage risky behavior and could endanger the Fed’s independence. Federal Reserve Bank of Richmond President Jeffrey Lacker’s remarks show that concerns that outsiders have raised about the Fed’s actions — in particular its rescue of the investment bank Bear Stearns — are shared by some inside the Fed.

Whoa there partner! Those are some harsh words… But… Sounds like Lacker has become a Pfennig reader!

The weaker dollar yesterday sent Oil prices climbing to the tune of $6 on the day! I looked at some stuff last night and saw that our friend, Jim Rogers, was speaking again, and said that the Bull Market in Oil has “years to go”… I agree… The demand has amped! I know that some will point to the U.S. and say that there aren’t lines at gas stations, etc. but… The slack in demand here is being taken up and more so by India and China…

Speaking of China… A former colleague at the old Mark Twain Bank, brought at thought to me attention yesterday and that is… With the election period on its way, the guys with the bats that are always beating on China to allow greater appreciation with their currency, will be tied up, and focusing on getting re-elected rather than beating on China… Therefore, China gets a “get out of jail free card” and therefore, I suspect the appreciation to slow for the rest of this year…

Pages: 1 2

Pages: 1 2