But, alas, lacks the requisite proper punctuation, which in this case I judge to be two exclamation points, at least. Probably three.

Anyway, he provides a quote from Dr. Adrian Rogers (1931–2005) where he says, “You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it.”

The reason that this resonated with me is not, as you would think, because I am outraged at being sick and tired of being taxed at every freaking turn so that the combination of local, state and federal taxes now consumes almost exactly half of all incomes, and the teensy-weensy little bit of depreciating fiat dollars that the taxman or the rapacious insurance companies don’t get is gobbled by one’s wife and children to pay for their stupid medicines and food, which is not to even mention people collecting for “good causes” and, of course, the rising costs of playing golf.

Instead, the reason that struck me is that I had just read, “Got a Mortgage or Credit Card? Don’t Pay Them” by Marygwen Dungan.

Normally, I just ignore these kinds of appeals because I know what happens if you don’t pay your mortgage or your credit cards, and that is why most people pay them. But perhaps I am just a stupid guy who cannot see that he is being handed a terrific opportunity, as Ms. Dungan agrees, “Finally something that we can all get behind: Don’t pay your bills. It’s not my idea, although it has appeal. It’s the Fed’s and it’s the cornerstone of the new Homeownership Preservation Policy.”

At the news that this is a plan pushed by the Federal Reserve, my ears instantly prick up and my Keen Mogambo Senses (KMS) bombard my brain with the message “Alert! Alert! Ahh-oogah! Ahh-oogah!”

Sure enough, I was right, as she goes on, “To qualify for aid, the homeowner must be at least 60 days past due on his or her mortgage payments”!

This is fabulous! I can do this! I can stop paying! I’m good at it, in fact! And now I can stop paying, but instead of the sheriff coming over here one day after the expiration of the Termination Notice and dragging the pitiful pile of crap that I call “clothing and furniture” to the curb, now the government gives me money! Whee!

I’m all a-twitter with excitement, but she cautions me about my irrational exuberance and says, “This program is for mortgages acquired from Bear Stearns and AIG rescues. Another program begun in December 2008 required that the homeowner be 90 days late” which is even better, because I can be 60 days late with my mortgage payment, or 90 days, or even late for years at a time! Hahaha! I love this!

But apparently it is not a true bailout, and I still have some responsibility, albeit smaller, because, “At the same time, the mortgagee must be able to make a reduced monthly payment, therefore, must have some income, presumably a job.”

That is when I knew that Ms. Dungan was sending this message to me personally, as she added, “The having a job part might be tough; the missing two payments part, easy.”

And even if this doesn’t work out for me, I still have plenty of other options. For one, she notes that “several mortgage lenders have suspended foreclosures, at least through January 2009”, and that “Several cities and states have suspended enforcing foreclosures”! Too sweet! Hahaha!

Of course, since real governmental stupidity requires universal participation, “Initially, delayed-foreclosure preference was given to mortgagees who lived in their houses. It now has been extended to having an occupant in the house.” Hahaha! Now I can stop paying the mortgage on my rental property, too! It just keeps getting better and better! Hahaha!

Of course, this is all part of a desperate, last-ditch attempt to make overvalued houses more overvalued because of the benefit to, for the most part, government revenues, although it is not working, as housing prices have now come back to where they were in 2004, according to the S&P/Case-Shiller index, which has the average home price at about $160,000 now, versus $225,000 around the peak in 2006, meaning that the average homeowner has lost about $65,000 in equity, and for those poor bastards that bought at the market top, they are paying the mortgage interest on $65,000 for nothing! Hahaha!

I could use up some of your valuable time and explain how all of these losers would be a lot better off if they had bought gold and silver, but as Junior Mogambo Rangers (JMRs), you already know that! Whee! This investing stuff is easy!

Source: Don’t Pay Your Debt: A Page from the Fed’s Playbook

The most amazing part is that they’ve never had even one customer default on a loan. And that’s thousands of customers over a 20-year period. How can this possibly be true?

A number of reasons…

This bank strictly adheres to one of the most basic principles of solid banking, and one we can all understand: Know your customers well, and only lend money to people you know can afford to pay you back. Sound like a bank you’d like to do business with? It gets even better – the banker goes to the customers, meeting with them right in their homes.

These customers are a dream-come-true for a bank-lending officer: They live well within their means, save a lot, and don’t have credit cards.

If you’re scratching your head about where this bank does business, I’ll give you a hint: It isn’t overseas or in a foreign country. It’s right here in the United States, and there’s a way for you to benefit from these dream customers.

Unique Loans, Unique Customer Loyalty

If you’re from Pennsylvania, you’ve probably guessed by now I’m talking about the Amish. And in the Old Order Amish Community of Lancaster County, the banking system is working just fine.

Hometowne Heritage Bank, a division of National Penn Bank (Nasdaq: NPBC), has offices in the heart of Amish country, and is the biggest lender to the Amish. Even the drive-up lanes have a special lane for horse-drawn buggies only. More on Hometowne in a minute, but here’s a brief history of the Amish for those of you not familiar with them.

The Amish, members of a Christian denomination called Anabaptist, first came to this country in the early 18th century to avoid persecution in their native Switzerland. They refer to themselves as “plain folk.” They’re best known for simple living, plain dress and for shunning modern conveniences, such as automobiles, tractors and electricity.

They are a hardworking people, leading mostly simple farming lives. As of 2008, they number around 227,000 mostly in the United States and Canada. Strict-order Amish seek to limit contact with the outside world. And they’re low maintenance: They never buy insurance and don’t accept any government assistance, such as Social Security or Medicare.

For daily living expenses – including buying the horse-drawn carriages they typically use for transportation – they pay by cash or check. They would never think of buying things like shoes, clothing or food on credit.

The only time they vary from the no credit rule is when they’re buying a farmstead. The problem is that there aren’t any Amish bankers, or Amish-owned banks, so they have to deal with local banks run by “English.”

According to National Public Radio’s David Gilkey, the one that stands out above the rest is Hometowne’s Bill O’Brien. Ninety-five percent of his customers are Amish, and he racks up nearly 1,000 miles a week visiting them.

Bill oversees about $100 million in loans, and he’s used to no credit score, no driver’s license customers who contact him about buying a farm. According to Bill, “I’ll find out who his dad is, and I’m also interested in who his father-in-law is. It takes a team to make a farm go. We’ve never lost any money on an Amish deal.”

Once an Amish man becomes a customer, Bill doesn’t worry about them missing a payment. The Amish feel that missing a payment brings shame… not just on the borrower and his family, but on the entire Amish community.

And unlike a lot of mortgages that are sold or securitized, Amish loans have to remain with the originating bank. An odd quirk in banking law states that mortgages on homes without electricity or commercial insurance can’t be securitized or sold.

As a result, Hometowne services all its loans and the system is obviously working: The company just wrapped up its best year ever. Hometowne’s parent, National Penn Bank, is doing just fine, too.

Its third-quarter income rose 14% over last year, and the company raised its cash dividend for the thirty-first consecutive year. In early 2008, it acquired two smaller regional banks and is now one of the largest regional banking operations in eastern Pennsylvania, with 127 offices available to serve its customers.

In this tumultuous year that’s seen nearly 30 banks fail and may others taken over and sold by the Fed, it’s refreshing to find a place where someone actually knows how to run one. And even more refreshing, happy customers who know how to live within their means.

Source: A Rare Bank Without Defaults

This from Investor’s Daily Edge:

The government’s latest bailout moves have me scratching my head. It’s throwing $200 billion worth of guarantees at recent and current loans tied to consumer and small-business spending.

Hank and Ben want the consumer to bail out the economy. And they want to do it by putting consumers deeper into debt.

They don’t get it.

They don’t get that consumers are tapped out.

What do they think when they see numbers that show that American households are in deeper debt than ever before? Or when they see that consumer spending in October fell the most in seven years?

Is it really because credit card rates are too high?

So let’s get this straight. Some 1.2 million jobs have been lost so far this year and millions more fear that their jobs are in jeopardy.

This isn’t paranoia on the part of workers either. Companies really are experiencing declining revenues … tightening their belts … and laying off workers. Even companies that have the money are reluctant to spend it as we sink deeper into recession.

But for those companies that don’t have the money and would like to jack up spending, banks are reluctant to lend them money (regardless of the interest rate, and can you blame them?).

By the way, isn’t’ that how we got into this economic mess in the first place? The government allowed and even encouraged banks to lend to home buyers who couldn’t afford the loans. It led to a rash of defaults which triggered the current banking crisis which has spilled over to the entire economy.

Asking debt-ridden consumers to take on more debt when they have actually begun to save more is just wrong.

Lower rates have already triggered a mad rush by home owners to refinance. Presumably, the government thinks that Americans tapping their home equity for extra cash to spend is a good thing for the economy.

And initial reports indicate that stores did better than last year on Black Friday.

But, once again, spending more than we earn is a big part of how we got into this economic mess in the first place.

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INTERNAL ENDORSEMENT The Great CEO Tip-Off… I’ve found a signal so accurate, that it’s almost like the CEO of a major corporation came up and told you “Our business is in trouble, now short our stock and make tons of money”. This signal has preceded the downfall of… Heinz which fell 23% in 2002… Dynergy which dropped 49% in 2002… Citigroup which plummeted 32% in 2008… National City Corp which fell 41% in 2008… Alliant Energy which fell 25% in 2002… And just this year alone, this ‘Red Flag’ predicted winners with 92% accuracy. So what is this ‘Red Flag’? Why does it lead to lower stock prices? And how can you find out which companies may be on the verge of doing it? I’ll Explain Everything to You Here.

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There is a better way to get out of this mess than relying on a consumer-led recovery. The government should let (even encourage) consumers to put more of what they earn into their savings accounts and for banks to use this money for infrastructure and capital equipment investments.

The U.S. economy would grow on the back of bigger and more factories rather than bigger and more cars, TVs, X-boxes, etc.  Most of these items benefit Asian countries more so than the U.S.

Other parts of the government’s bailout plans also don’t make much sense. For example, the government doesn’t have enough money to cover banks’ exposure to rancid debt.

The collateral debt swap (CDS) market alone is north of $50 trillion. These swaps are essentially insurance contracts on corporate debt. If just one of the big three auto makers fails, for example, it would trigger underwriting and losses of around $1.2 trillion for banks with exposure to this market.

By the way, a trillion dollars is about the size of the entire economy of Mexico or India.

The fact is, default rates for all kinds of collateral will rise over the next 2-3 years. Mortgage-backed securities, junk bonds, triple-A rated corporate bonds, Alt-A mortgages, car loans, credit-card loans, and loans made to the governments and companies of dozens of countries.  Countries in central Europe plus Turkey and Russia stand out. They will all be experiencing rising rates of default.

Pumping up consumer lending and doling out tens of billions of dollars to banks (and over $100 billion to insurance giant AIG alone) won’t stem the massive tide of failures and buy-outs in the financial sector.

It will, however, help create the conditions for the next round of economic crises: a precipitous drop in the dollar, a massive national debt, and down the road a $100 trillion bailout of our social security system.

Our bailouts are getting bigger and more destructive with the passage of time.

Government intervention usually helps in the short-term, but brings unexpected and harmful consequences in the longer-term. This time around, we’re not even getting the short-term benefits but we will be getting the longer-term consequences which will prove to be bigger, more harmful and more difficult to fix than what we have now.

Source: Why This Bailout Isn’t Working

Good day… And a Thunderin’ Thursday to you! Michael Phelps didn’t swim in any finals yesterday, so no gold for the United States! I’m just floored by this kid! My oldest son, Andrew, was a pretty good swimmer in his day, but my goodness, this kid is on a different planet!

OK… Well, front and center this morning, we have a report that just printed that shows U.S. Home Foreclosures rose 55% in July. Bank seizures almost tripled according to RealtyTrac Inc. That’s sad folks, simply sad. I look at this report and shake my head in disgust for Alan Greenspan. Yes, Big Al Greenspan is the root of all evil in the housing meltdown. Sure there were the greedy folks that booked loans that shouldn’t have and all that, but down at the root of the meltdown you’ll find Big Al’s picture!

But dollar bulls are still dancing in the streets, as the dollar continues to maintain the ground it has gained versus the euro (EUR) and other currencies in the past three weeks. I talked to a guy yesterday and he asked me how I was doing with all this dollar strength. I said, “Dollar strength? The dollar isn’t ’strong’ by any stretch of the imagination; it’s simply stronger than it was, which isn’t saying much considering how weak it had gotten.” And that about sums it up, folks. So, with that, I’ll head to the Big Finish, and go back to sleep… Thank you, you’ve been a great audience; I’m here all week; try the veal!

HA! Had you going there for a minute, eh? Nah, I couldn’t be that short-n-sweet! Besides, who would talk to you about the -0.1% showing of retail sales yesterday? Yes, retail sales printed negative -0.1% in July, but if you take out the meltdown in auto sales, retail sales would have been positive! Now… Let me ask you something here… What did I just do there? Yes, that’s right, I did what the media always does to put lipstick on the pig. (I did it on purpose to have this discussion!) Why would we care if auto sales were taken out, etc. etc.? If they were included on the way up, they should be included on the way down! That’s so typical of how we view things these days… If it makes us feel bad or makes us work harder, just take them out. We grow seedless watermelons… We take pulp out of orange juice… We don’t count “unemployed people who’s benefits have run out”. We take food and energy out of inflation calculations… Oh, I could go on there, but you get my drift.

Retail sales were disappointing, just as I thought that they would be. Looks like the “fluff” from the stimulus checks has all gone through the wringer! And credit cards are getting maxed out. Shoot Rudy, even American Express (NYSE:AXP), who you would think would have more upscale card holders, are reporting a huge increase in late payments. So… Where does the U.S. consumer turn for money to spend now? I hate to have to say it, but retirement money is the next pile of cash to get raided. Shoot Rudy, if the government can do it, why not it’s citizens? Think about that one for a minute… OK, stop! I had to stop thinking about that, because it scares the bejeebers out of me!

Gold finally showed some life yesterday rising $18 at one point in the day. I was telling a customer yesterday that it appears to me that gold and Aussie dollars (AUD) have been tarred with the same brush, and so… If gold recovers, as I believe it will, it should take Aussie dollars along for the ride… But that’s no given! So don’t be firing off emails to me telling what a dolt I am for saying that “would come true”, if it doesn’t. I’m just painting pictures here, and my picture shows gold and Aussie dollars as closely related trading-wise at this time.

The Aussie dollar did see some love (finally!) with the rise in gold yesterday… But, there are rumors going ’round that someone’s underground, and… That Japanese are beginning to sell their Aussie dollar holdings. Now, wait a minute there! I wrote about this yesterday as something to look for, but didn’t believe it would really take hold at this time, and then rumors get started? Hmmmm… Has the Pfennig grown to have the reach to start rumors? Now, that would simply blow me away! I doubt it could happen, as this is just my little old newsletter that I share with a few hundred thousand readers each workday! I don’t give any credence to those rumors at this point.

In the Eurozone this morning, we had a flash estimate of second quarter GDP print right in line with expectations at 0.2%, or 1.5% year-on-year. Nothing to write home about, but not negative! And not the armegeddon that the traders have been pricing into the dollar/euro. But before the euro could add to yesterday’s small rise, Eurozone CPI printed softer than expected at -0.2% for the month of July, bringing the annual inflation rate to 4%.

Now, 4% is still leaps and bounds above the 2% ceiling target for inflation that the European Central Bank (ECB) hangs on to… So… In my mind, that should keep interest rates right where they are. However, traders whom I’ve really come to the realization are not mental giants, are looking at this downward move in inflation as a reason the ECB could lower rates. Again, I’m not buying that line of reasoning either! Geez Louise, serenity now!

Some of the euro’s performance problems in the past few days have been affected by the meltdown in pound sterling (GBP)… You know, I’ve explained these cross trades to you before, so I won’t go deep into this, but all these currencies are tied together by cross trades. As American investors, we only concern ourselves with the dollar versus another currency… But in the currency world, there are more cross pairs of currencies than you can shake a stick at. It’s just that way. So sometimes a currency is dragged down by the outstanding cross trades it has against it… When I travel with the FX University people I’ll make a point of explaining crosses!

Anyway… Pound sterling has been doing a “Wicked Witch of the West” and melting… I’m melting; I’m melting. Oh what a world, what a world! Who would have thought a little girl… I don’t mean to make light of sterling’s problems, so I’ll stop with the Wizard of Oz stuff. However, it is melting away, and there’s nothing the Bank of England (BOE) can do about it. I told you yesterday that the BOE had slashed their growth forecast for the United Kingdom and that was on a day that saw inflation rise. Uh-Oh! This means stagflation for the U.K. and that’s not a good thing. Of course I truly believe that’s what’s in our future here in the United States, too… But that’s a different discussion, as this is about pound sterling! Pound sterling is going to be facing an uphill battle versus the dollar, euro and yen (JPY) this year.

The Brazilian real (BRL) has been able to hold its ground pretty good versus the dollar during this dollar rally. The real is the “darling” of emerging market currencies these days… And why not? The economy is juiced, and the central bank is doing what it can to control inflation. Interest rates are high enough to attract investment, and so on and so on.

Today in the United States we’ll see the data cupboard yield July’s CPI report along with the Weekly Initial Jobless Claims, which lately have been going in the wrong direction. But first, the stupid, CPI report. The experts forecast that CPI for July will show an increase of 0.4%, bringing the annual rate to 5.1%… But hear me know and listen to me later, the media will only talk about the “ex-food and energy” number of 0.2% and an annual rate of 2.4%.

OK… If we see an up-tick in inflation, the dollar will get an additional boost… Because… The mental giants will see this as paving the road to higher interest rates here in the United States. Of course, they are forgetting all the bad stuff going on that would get worse should rates go higher in the U.S., but don’t let that get in the way of their thought process!

I had better get to the Big Finish this time, as I’m beginning to get cynical and when I do that, who knows what might get typed by my big fat fingers!

Currencies today 8/14/08: A$ .8770, kiwi .7025, C$ .9435, euro 1.4920, sterling 1.8750, Swiss .92, ISK 80.75, rand 7.8345, krone 5.3720, SEK 6.2825, forint 159, zloty 2.2180, koruna 16.29, yen 109.60, baht 33.72, sing 1.4080, HKD 7.81, INR 43, China 6.8615, pesos 10.14, BRL 1.6115, dollar index 76.33, Silver $14.92, and Gold… $833.41

That’s it for today… I got great news yesterday afternoon, as it was decided after all that I DON’T have to go to Orlando all next week! YAHOO! Chris and Jen will be going to Orlando, thus leaving the desk quite short handed, but I’ll be here as the anchor! Tomorrow morning I will be doing an interview on a radio show that I’ve been on several times in the past… Here’s the skinny: KRCN-AM’s Business for Breakfast (Longmont, CO) Fri, 8/15: 10:34 am CT/ 9:34 am MT. It will be a quickie 5-minute deal, so be there or be square! We’ve been experiencing some unbelievable Chamber of Commerce type weather for St. Louis in August, and I’m loving it! I will take the kudos for bringing it back from San Francisco with me! On that note, I’ll hit the send button… I hope you have a Thunderin’ Thursday!

P.S. To get The Daily Reckoning sent directly to your inbox, sign up for our free email newsletter, or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.

Source: Retail Sales Disappoint

“But the big banks are about to get a whole lot cheaper.”

Andrew should know. He’s the CFO of a publicly traded bank. He knows how banks work… He’s the one who decides what the bank does with its money. He explained how it’s feast or famine now in the banking business… It’s feast if you’re a small bank, like his. And it’s famine if you’re a big bank.

Andrew is so optimistic about small banks, he’s just invested a chunk of his own savings in shares of tiny regional banks.

But he won’t touch the big banks like Citibank.

He says beyond the problems you already know about, the big banks have two more crises ahead of them – commercial real estate loans and credit cards. Let’s take a look at both…

When it comes to commercial real estate, banks are about to get hit with defaults here… You see, when a big bank makes a huge construction loan, it gets two years worth of interest payments in advance. Well, for many of those loans made at the top of the market, those two years are coming up.

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As Andrew explained, this could mean trouble… The big construction loan might have been made to build a shopping center to serve a new neighborhood… The problem is, that new neighborhood was either never built or it didn’t sell well. Therefore the shopping center was either never built or it has no tenants. Now, there’s a real chance the developer will walk away from the construction loan.

Andrew figures big banks are in big trouble with their credit cards, too…

That’s because homeowners got used to taking a line of credit out on their home – a home-equity line. But once the real estate market turned, instead of cutting back on spending, homeowners turned to their credit cards.

Andrew told me the big banks moved too slowly here… It took ‘em a while to realize what was happening. Now they’ve pulled in those lines of credit. But Andrew thinks they were a few months too late.

So beyond the liquidity crisis… beyond the subprime crisis… beyond the housing crisis… the big banks have two more crises coming: commercial real estate loans and credit cards.

The opportunity here is in the tiny banks instead.

Andrew says the big banks have tightened up their lending standards so much, they’ll hardly make a loan. So Andrew, with his smaller banks, can make “slam dunk” loans all day… like jumbo loans to people with excellent credit and big down payments.

While it’s a worst-of-all-worlds environment for the big banks, the high-quality small banks – ones that simply stick to taking deposits and making safe loans – are in an ideal situation…

The small banks have less competition (mortgage lenders have disappeared and big banks aren’t taking their customers). Now they can charge higher interest rates – and make bigger profits.

So is it time to buy bank stocks?

According to my banking insider, Andrew, it’s time to avoid the big bank stocks… and back up the truck on the little ones that simply take deposits and make safe local loans.

Good investing,

Steve

Source: Time to Buy These Tiny Stocks?

Then you discover that every check you wrote in the past week has bounced. And, you receive a call saying that your retirement assets are frozen. The kicker is that you had over US$1 million dollars in your account.

You try to call your bank for answers, but they won’t help you.

I know this story sounds like I’ve pulled it right out of the Great Depression. I’ve got news for you…this story is very real. It all happened last month to a US$2.1 BILLION bank in a little community in Bentonville, Arkansas.

How a Bank “Suddenly” Goes Under
in the 21st Century

It was a very organized attack. On May 9th, the accountants snuck in the back door that Friday night after 5:00pm once the bank’s doors had closed. Little did anyone know the doors were closing for good…

And under the cover of darkness, over a hundred FDIC accountants began to systematically dismantle ANB financial headquarters – the venerable US$2.1 Billion institution that had been in business just hours before.

In short, FDIC officials were there to pick up the pieces because ANB was about to become the third bank to FAIL here in the United States in just the last six months. The fourth-largest bank in Arkansas was about to become yet another sub-prime casualty that choked on their own bad loans and investments.

The unlucky customers of ANB received nothing more than a letter that stated nothing of the bank failure, but rather introduced the “new” bank – Pulaski Bank.

Yet, I am sure most customers figured out their bank had gone south long before the formal letter arrived. As of 5:01 PM on May 9th, every single account at ANB was frozen. Money market accounts to trust assets to basic checking accounts…

What FDIC Insurance Really Means
If Your Bank Goes Under

When you hear your account is “FDIC insured,” do you really know what it means? In short, it means the Federal Deposit Insurance Corp. will reimburse you for up to US$100,000 for any one account you hold in your name.

If you have a joint account, then both account holders are insured up to US$100,000. You also can secure US$100,000 for each beneficiary in certain accounts (payable on death). (For full FDIC rules see FDIC’s Guide to Deposit Insurance Coverage.)

Does this insurance help? Absolutely. But when you have an account worth more than US$100,000…well, that’s how you can lose money if your bank goes under.

Also, these days most respectable businesses make well over US$100,000 a year, so that limit is fairly easy to reach. And when accountants poured over ANB’s books, they discovered 647 accounts that exceeded that limit. That equaled US$39.2 million in uninsured funds.

FDIC representatives, who I believe must hate their jobs on a regular basis, had to call these unfortunate account holders and tell them what they lost. One ANB client lost US$1.4 million. Overnight. With no warning. And as for the rest…well historically, uninsured deposits recoup 65 cents on the dollar. Plus, it can take years to get your money back.

A shocked ANB client said to me: “It’s like [your money] doesn’t belong to you anymore…it’s theirs.”

Good day… And a Wonderful Wednesday to you! We received more rain yesterday, and the spotting of a twister less than five miles from our office! I’m beginning to feel as though we should be gathering up the animals in twos. The old saying, “right as rain” is losing favor on the list of things I say!

Yesterday, I left you with the thought that the London traders had been buying dollars since they arrived back from their three-day Holiday weekend. The U.S. traders did the same… And I believe profit taking was the order of the day. Unfortunately though, it left the euro (EUR) down one-cent on the day.

The data for the U.S. yesterday wasn’t anything that would lead one to buy dollars, but that’s the game that people play now, every night and every day now… So, let’s go to the tape on the data and be finished with that!

First off, the Case/Shiller Home Prices data showed more rot on the housing vine, as their 20-city home price index fell 14.4%y/y in March – a new record low in data back to 2001. Las Vegas led the way (-25.9%), with Miami a close second (-24.6%).

You can’t tell me the housing meltdown has “bottomed” – not with data like this! And… You can’t tell me that consumers are not being just beaten around the head and shoulders daily with gas prices, food prices, falling house prices, and debt up to their eyeballs!

Speaking of consumer debt… I’ll bet a dollar to a Krispy Kreme that the next big shoe to drop will be the “maxed out” credit cards that consumers have been busy running up, since their “ATM” (house) has closed. I’m not wishing this to come true, folks… I’m simply talking about what I see happening. Sure hope I’m wrong about that one, because credit card debt is the absolute worst thing to have hanging over your head!

OK… Down from the soapbox, and back to the data… The U.S. Conference Board’s consumer confidence fell more than expected in May from 62.8 to 57.2. This is a new low for the data since October 1992, and a depth surpassed only during and just after the depths of recessions since 1970. Need more data that spells “recession”?

Speaking of a recession… A reader sent me a note yesterday saying he was surprised that I didn’t mention that George Soros and Warren Buffett were both “Pfennig readers”, since both were quoted in Europe Saturday as saying that the United States is in a recession, and both said it will be long and deep.

Alrighty then! Hey! My friends down under sent me a note that said they fully expect the Reserve Bank of Australia (RBA) to increase interest rates 50 BPS before year-end. That’s two 25’s… With the first coming in August. Basically, I agree totally, and think these rate hikes will grease the tracks to parity for the Aussie dollar (AUD).

The news didn’t help the Aussie dollar yesterday though, as it looks as though the selling of the Big Dog (euro) affected all the little dogs, even down under!

I’m going to step up on the soapbox again here folks… So if you don’t want to subject yourself to more “Chuck’s views” then skip ahead. OK… If you’re reading this, then that means you’re ready… So, here goes… I was reading stories on the Internet last night and seeing how bloggers and writers are ripping the oil companies. Hmmmm… I guess the “rippers” don’t realize that the guys that head the oil companies don’t own them! The oil companies are owned by pension funds – you, me, and the guy down the street that cuts his grass with his shirt off! We even had some dolt representative from California mention “nationalization” for the oil companies. Of course, she called it “socialism”… Doltness showing there, folks… I shake my head in disbelief.

OK, I’m back now… I have more to say on the subject, but I had better stop there!

In the overnight markets of Asia and London, we haven’t really seen much movement to follow on yesterday’s selling, which is why I believe it was profit taking. Most of the “Big Boys” were out on Friday and Monday… So when they came back and saw the levels, they said, “By Joe, let’s take a profit or two”!

The only currency to see more slippage was the Japanese yen (JPY), with a little slippage from Swiss francs (CHF), as stocks were back en vogue yesterday, and thus the carry trades were back at work.

And the yen’s losses weren’t just against the dollar. Yen is losing lots of ground to the euro again. The losses to the euro had stopped for a while, but they are back!

So… The bad earnings reports of the past 10 days are swept under the rug, eh? Let’s go buy stocks again, the coast is clear! UGH!

Gold saw an end to its rally yesterday too, with a $14 sell off… UGH! The gold sell off also coincided with a big drop in oil price the past few days. Of course, the oil price sell off is the only “welcome” price drop! Oil has dropped from $135 last week to $127 this week… I guess maybe someone in the oil biz got the memo that U.S. drivers are putting the brakes on and not driving so much. Who can? Not with gas prices around $4!

OK, I know that those that own Prius cars can, but you are a very low minority of drivers…

In Germany this morning, we’ve seen some data that should keep rates right where they are if not eventually push them higher. I’m talking about inflation data. Five of the six German regions have reported higher inflation this morning – which points to an increase of 0.06% month-on-month. The consensus was for an increase of 0.04%, so this upside surprise reverses the sharp fall we saw in April. I knew that the April number was questionable.

Norway’s Norges Bank is expected to leave rates unchanged this morning… However, with oil prices being what they are, I expect the Norges Bank to revisit the rate hike table this summer… And that thought should underpin the krone (NOK).

Fed Head Fisher, one of the two dissenting votes of the last rate cut, will speak today. He will speak on “inflation and debt”. This ought to be interesting folks.

Today, we’ll see the color of the U.S. April durable goods, which is not expected to be a “warm and fuzzy for the economy” data print. The forecast is for a decline of -1.5%… But, hear me now and listen to me later… If the print is really this bad, the media will sweep it under the rug, or spin it to sound like good times at Ridgemont High!

So… There you have it! The currencies are drifting about, and are waiting for new signs to give them direction. With that, we’ll head to the Big Finish.

It was a comment born of frustration. Richard was annoyed that on the very day he’d planned to phone First Direct about a mortgage, they pulled the rug from under him. Faced with a backlog of applications, the lender is refusing to take on new business.

Richard’s not the only ‘real person’ feeling the effects of the credit crunch. Britons everywhere are seeing their finances hit — and they’re resorting to drastic measures. Unsecured personal borrowing shot up in February, by £2.4 billion. To put that in perspective, it rose in January by just £900 million.

This is a symptom of the contracting mortgage market. Mortgage approvals have fallen by 40%, and there are fewer deals available. Last month there were 7,726 products on the market. Now there are just 4,794.

Consumers across the land are raiding the piggy banks, spending their future wealth to keep up with today’s rising living costs. Those without savings are borrowing to the hilt. A comfortable retirement is now seen by many as a luxury they can’t afford.

But one can’t do this forever. Soon the savings are gone, the credit cards maxed out. Those who continue to put something by — and who put it in the right investments — will come out way ahead in the long run.

Bernanke sticks his neck out… a bit

The thing about a recession is you don’t realise when it starts. It takes a few months before the figures are in and we can say “Look! Two consecutive quarters of negative growth. We’ve started a recession.”

So there’s always a bit of guesswork involved as to whether a recession has actually started. We’ve been seeing it in the US for the last few months. Are they or aren’t they?

One by one, investors, commentators and the man in the street come round to the idea that, yes, we probably are in a recession. In the case of the US, the Order of Realisation has gone something like this: nervous Wall Street investors, people who’ve already lost their jobs, sections of the media, more investors, some more of the media, politicians (in private), the mainstream media, most Americans, the rest of the world, the bloke who makes the sandwiches for our office, my sister’s cat, undiscovered life forms on other planets… and yesterday, at last, Ben Bernanke, chairman of the US Federal Reserve.

Well, almost.

In his speech to Congress, Bernanke stopped short of saying a recession had arrived, merely saying it was possible:

“It now appears likely that real gross domestic product, or GDP, will not grow much, if at all, over the first half of 2008 and could even contract slightly.”

I’m being facetious, of course, in suggesting the Fed chairman is really so far behind the curve. Privately I reckon he’s as worried as anyone. His position just won’t allow him to say so.

But now he’s done the next best thing, that surely can’t be a good sign.

“The empire is rolling over,” says my US correspondent Bill Bonner. “Now, in its advanced, decadent phase, the imperial government must provide bread — in the form of food stamps — and circuses — in the form of national party conventions, elections and foreign wars. The combination settles the public… and distracts them.”Bill tells me that food prices are up 9% in America, while house prices have slumped 11%. In Denver last year the average foreclosure rate was one in thirty-two. In some neighbourhoods today it’s one in eight.

Not a great time for investors with US exposure. But our resident market maven Frank Hemsley has been following all that money which is fleeing the States… and he’s hit on an interesting alternative to gold for those seeking some safety…

Check out the “Swissie”

Private bank Rothschild, based in Geneva, has seen its shares rise 12% this week, Frank tells me. The reason? Asian, Middle Eastern and Latin American investors seeking a safe haven from the US-led financial crisis.

But if you’re not lucky enough to have a Swiss bank account, you might want to consider their currency.

“The Swiss franc’s getting close to parity with the dollar, for the first time ever” says Frank.

Of course, there’s a risk that America’s economic problems and a weakening dollar could hit Swiss exports to the US. This could cause the Swiss to cut interest rates, which would temper any currency appreciation. But Frank reckons the risk is to the upside.

“Switzerland’s a traditional safe haven. The global financial turmoil could see the Swiss franc break through the one for one level in the not-too-distant future.”

Americans just won’t stop driving!

Some interesting, if not entirely surprising, news from our commodities desk, piloted by our Mr Commodities Garry White.

The Energy Information Administration (EIA) say US supplies of gasoline fell 4.5 million barrels last week.

“It shows demand has stayed strong even though we’re seeing record prices,” says Garry. “And let’s face it, compared with what we pay for petrol, they’re still getting a bargain!”

Despite the media bleating, Garry reckons they’ll get used to it. This demonstration of inelastic demand (i.e. unresponsive to price movements) bodes well for Garry’s oil plays.

Readers of Garry’s Smart Commodities letter could be sitting very pretty in the months ahead…

Time to “unblur” your view on Emerging Markets…

“Old structures are breaking down. New sources of economic power are rising. But our views are blurred by the whirlwind of markets.”

That’s the view of Robert Zoellick, president of the World Bank, who delivered his keynote address yesterday.

Helping us “unblur” our view and see through the whirlwind is our overseas investment expert Manraaj Singh.

“Emerging market shares have been hit badly since the crisis kicked off last August,” he told me this morning. But the long-term growth story is still hot hot hot!”

Indeed, while their markets have taken a wallop, investors remain confident. Debt issued by emerging-market countries tends to pay a higher yield than that issued by the US. That makes sense, as it’s perceived as riskier.

But here’s the thing: despite the turmoil, the spread on this debt — i.e. how much more it pays than US debt — has barely risen.

“This shows that investors don’t think that the current falls in emerging markets are going to lead to financial crisis,” says Manraaj. “You can’t really say the same about America… or the UK for that matter”.

Jérôme Kerviel sues SocGen — but still has time for Facebook

He may not be winning any Nobel Economics prizes, but rogue trader Jérôme Kerviel could be first in line for the Bare Faced Cheek award. This morning it was reported that he’s suing former-employer Société Générale for unfair dismissal. SocGen denies it, but if he goes ahead, it’ll be an interesting case…

Oh, and remember when Kerviel went missing, just after the story first broke? Ever the intrepid journalist, Garry White tracked him down on Facebook, and “poked” him. And Kerviel “poked” him back.

Sadly his profile’s not there anymore, but at least Garry has the memories…

Until tomorrow

Ben Traynor