Traders took advantage of a dollar rally in the prior session to sell on views the Fed will signal plans to maintain loose monetary policy well into 2010.

Currency investors are also bracing for G20 leaders to discuss rebalancing the global economy this week, a process that would almost certainly require a weaker dollar.

A document obtained by Reuters showed how Washington would urge G20 leaders to launch a new push this year to get debtor nations like the United States to save more and exporters like China, Germany and Japan to spend more.

“If you take the view that too much of U.S. growth has been domestically driven, the next logical step is to say an orderly decline of the dollar — it’s not in anyone’s interest to see a collapse — in many ways makes sense,” said Tom Fitzpatrick, chief technical analyst at Citigroup in New York.

“And at the end of the day, the U.S. has a zero interest rate policy and the highest fiscal deficit in peacetime while (foreign investors) are holding a lot of dollars, so the path of least resistance for the dollar is down,” he added.

The euro was up 0.8 percent at $1.4794 after options-related demand and strong Asian buying pushed it above $1.48 for the first time since September 2008. The dollar fell 1 percent to 91.09 yen and 0.9 percent to 1.0231 Swiss francs , near a 14-month low touched earlier.

Sterling rose 1.0 percent to $1.6375 while the New Zealand dollar surged more than 2.0 percent to a 13-month high after dairy exporter Fonterra raised its estimated payout to farmer shareholders. Fonterra accounts for some 7.0 percent of the New Zealand economy.

With no major economic data on the calendar, traders said $1.4825 may be the next target in euro-dollar, with many predicting an eventual move back to $1.50.

“Every time we get to a round number in euro-dollar, we’ll probably try to chip away on the way to $1.50. But for now $1.4825 is the next line in the sand, and then we’ll have to wait and see about $1.49,” said Steven Butler, head of FX trading at Scotia Capital in Toronto.

DOLLAR IN FOCUS AT G20?

European Central Bank Governing Council member Axel Weber said on Tuesday recent moves in currency markets were “not out of line” given the euro zone’s economic performance relative to other areas.

Some said this suggested the ECB was comfortable with the euro’s level and was a green light to push it even higher, especially in light of the U.S. proposals to put fixing global imbalances on the G20 agenda in Pittsburgh this week.

But others said there is still a risk of dollar bearishness engulfing the market and selling turning into a rout.

“A discussion at the G20 on currencies, and especially the dollar, is not only appropriate but essential, as this move could accelerate swiftly,” said Maurice Pomery, managing director at Strategic Alpha in London.

Sept 22 (Reuters)

Source: Another Dismal Earnings Season for U.S. Companies?

Well… We have a week ahead of us that will be dominated by the U.S. data cupboard. And this week, we’ll get the June Jobs Jamboree (JJJ) on Thursday instead of Friday. Saturday is the 4th of July, and I guess the Bureau of Labor Statistics (BLS) isn’t working on Friday! HA! No, they do this every now and then when the markets will be quite thin on a Friday before a Holiday weekend. And this week qualifies BIG TIME! It will be the 4th of July! And maybe, just maybe because you never know, someone in Washington D.C. will realize that the it’s supposed to be about WE THE PEOPLE, not we the politicians…

Friday, I left you with the currencies moving higher on yield demand, I held by breath this morning when I turned on the currency screens, as I was concerned that another “demand” was going to be the headline. Because that’s how it’s been lately, eh? One day this “demand” the next day some other “demand”… But, no such new trade direction today. WHEW! I totally dislike getting whipsawed around like that, when we all know, and the traders all know, and the Hedge Fund managers all know, that in our collective heart of hearts, that in the end, the dollar will be much weaker… It’s just all this stuff that goes on between now and when the end of the trend takes place.

For instance, one of the headline stories on the Bloomie this morning is that the “Best Currency Forecaster says the Dollar to Rise Most Since 1981 by year end”… WOW! Now that’s an interesting forecast… But, it’s just that… The “forecaster”, believes that the U.S. recession will have come to an end in the U.S. this year, and U.S. growth will outpace everyone else, making the dollar the King once again… Now… I talk about going out on limbs all the time with my opinion / look ahead on things, and this is “forecast” qualifies as going out on a limb!

It’s important that I tell you about these things, because… This is market commentary, and I wouldn’t be doing it right, if I only told you stories on one side the ship… Right? Of course that’s right! Of course, you know me, I just don’t see it happening that way, and the one thing I think of when I read something like that is: rose colored glasses…

And… Speaking of the sides of the ship… Union Bank of Switzerland (UBS), the world’s 2nd biggest currency trader, has just revised THEIR CURRENCY FORECAST for year end, believing the dollar will be lower… So there you go… Two stories from both sides of the ship!

Playing well with the “forecast for a strong dollar” is a story overnight that China has once again backed off their statements calling for a replacement to the dollar as the world’s reserve currency. Of course, that’s what the “markets read”… I don’t read it that way… Let’s see what you think… “China ruled out “sudden changes” to its foreign-reserves policy”… I think it’s strictly China being China, aloof, cunning, and other things… Of COURSE they don’t want any “SUDDEN CHANGES”, they haven’t had enough time to rid themselves of hundreds of billion of dollar reserves!

Even with those two stories this morning, the dollar remains on the down side against the currencies, with the euro remaining above 1.40 through Friday, overnight Sunday, and so far this morning… The euro did get a boost this morning from a report on economic confidence, as the data moved upward to an index number of 73.3, VS the 71 that was forecast…

The European Central Bank (ECB) will meet this Thursday, and I do NOT expect them to make any moves with rates, leaving their internal rate at 1%. The most important thing will be if ECB President Trichet, has something to say that could me the markets after the rate announcement.

Sweden’s Central Bank, the Riksbank, also meets on Thursday this week. (there’s a ton of stuff going on Thursday, eh?) With internal rates at just .50%, I guess they could cut, but what would be the point?

The Swiss franc is getting caught in the middle of a war between the Swiss National Bank (SNB) and traders… The SNB has been in the markets quite a few times recently intervening (selling francs) to keep the currency from getting too strong. And traders see that as a great opportunity to test the SNB’s intestinal fortitude… I’ve always loved watching these things develop… If the traders “really” want to test the SNB, they’ll win, as the SNB doesn’t have the war chest that, say a Japan has… Unless they want to get into the “printing” business….

Besides data, and Central Bank meetings this week, it’s also the end of the quarter tomorrow… Which means the books get closed as some businesses have their year end, on June 30th. This also means that 2nd QTR earnings isn’t that far off, and I think these reports will be quite interesting, maybe taking some of the shine off the thoughts that the recession ended already!

The High Yielders have remained strong since Friday of last week, with Aussie, kiwi, Brazil, all leading the way. And there was no “new News” from the BRIC’s over the weekend… For those of you new to class, the BRIC’s are Brazil, Russia, India and China, all emerging markets that are clamoring for change and a great influence in the world’s financial matters… And why not? They have more money in reserves than you can shake a stick at, and… The have the a very large portion of the world’s population!

So, let’s go to the data cupboard and see what else will be on the docket this week data wise…

Today we have a couple of 3rd tier reports, so nothing to write home about, but tomorrow… We’ll see the April S&P Case/Shiller Home Price Index… I truly expect this data to show that Home Prices continue their downward spiral… We’ll also see The Chicago Purchasing Manager report (manufacturing), and Consumer Confidence…

When we turn the calendar page to July on Wednesday, we’ll be met by the ADP Employment report, and the ISM Manufacturing Index. There’s also Construction Spending, Pending Home Sales, and Total Vehicle Sales. Then on Thursday, which will be the “Mother of all Economic Data and Central Bank meeting days”… The June Jobs Jamboree, along with the Weekly Initial Jobless Claims… Which is going to look really stupid for the Jobs Jamboree… You see, the monthly report from the BLS is expected to print at -350K… Whereas the “WEEKLY” Initial Jobless Claims will print at over 600K for the week! I know, I know, it doesn’t add up, folks… Which is one of the things I complain about, and point out, and make fun of all the time… The BLS… Need I say more?

And then there was this… Did you know… That U.S. Treasuries posted their largest 1st half losses in 30 years? Well, that’s the facts Jack! Now… Quite a few “bond dealers” believe that the worst is over… OVER? Nothing’s over until we decide it is! Was it over when the Germans bombed Pearl Harbor? HAHAHAHAHAHAHA! (ok that’s a line from Animal House, please I know it’s incorrect, just funny!)

Seriously though… I don’t see how these “bond dealers” can say something like that, as they know all too well that the supply of Treasuries that will be issued this year will be enough to send yields higher… How can they get away with saying something like that? Oh! I know! They won’t be technically wrong, if Treasuries continue to lose value, as long as they don’t lose as much as they did in the 1st half of this year! Shame, shame, shame…

OH, and remember last week, when I told you about the President saying “not yet” instead of a resounding “no” when asked about another Stimulus? Well… The White House Senior Advisor, David Axelrod, said this weekend that the President is ready to discuss additional measures… And the President also casually mentioned that “we have not broken the back of the recession”… Is that like baiting the hook? I think so folks…

Now… On to the Big Finish for this Marvelous Monday!

Currencies today 6/29/09: A$ .8065, kiwi .6490, C$ .8685, euro 1.4065, sterling 1.6570, Swiss .9215, rand 7.8405, krone 6.4470, SEK 7.7390, forint 196.30, zloty 3.1920, koruna 18.4855, yen 95.30, sing 1.4540, HKD 7.75, INR 48.10, China 6.8335, pesos 13.1920, BRL 1.9355, dollar index 79.94, Oil $69.69, 10-year 3.50%, Silver $14.12, and Gold… $941.95

That’s it for today… As I said above, yesterday was my little buddy Alex’s birthday. We went to breakfast, as we always do… Yesterday was also my darling daughter Dawn and husband Jerry’s 6th wedding anniversary. I felt bad after sending out Friday’s Pfennig that I had not paid respect to Farrah Fawcett, who had passed away after losing her battle with cancer on Thursday. I wonder how many T-shirts were bought and worn back in the 70’s with Farrah on the T-shirt… They were everywhere! And this weekend, the info-commercial guy, Billy Mays, passed away… OK… Our little Christine returns to work today, after a brief vacation… Yay for us! And a good show for the U.S. National Soccer Team yesterday, losing the Championship game 3-2, after leading 2-0 at halftime! Gotta go… It’s a Monday, so we might as well make it Marvelous, eh?

Source: A Week Dominated By Data

The greenback pared some of its earlier gains as stock markets in Europe gained ground and U.S. stock futures pointed to a higher opening on Wall Street .

Analysts said currency movements would remain subdued ahead of U.S. payrolls data and European Central Bank (ECB) and Sweden’s Riksbank comments expected later this week, while some said that the dollar may eke out some gains.

“There is some position squaring … Normally the week before payrolls numbers investors tend to be defensively positioned and right now being defensive means to be long dollar,” said Geoffrey Yu, FX strategist at UBS in London.

The market will pay close attention to U.S. payrolls figures, due on Thursday, for any signs of improvement in the economy’s health. According to a Reuters poll, forecasts are for a reading of -363,000 in June compared to -345,000 in May.

By 1035 GMT, the dollar index was essentially flat at 79.922. The euro slipped 0.1 percent to $1.4033, having touched the day’s low of around $1.3984 earlier in the day. The dollar was up 0.2 percent at 95.40 yen .

H1 PERFORMANCE

The dollar has suffered broadly in the first half of 2009 as recovering stock prices has stoked demand for risk — chipping away at the U.S. currency’s safe-haven appeal — while concerns about the U.S. fiscal position has also weighed on the currency.

The dollar has struggled the most against higher-risk currencies including sterling and the Australian and New Zealand dollars, which have each gained more than 10 percent this year.

Some analysts said that market focus may turn away from risk issues in the second half, while economic fundamentals may take up more of the spotlight, which could reward currencies whose economy are seen improving in the mid-term.

“The dollar should recover in the second half if U.S. recovery expectations increase,” said Johan Javeus, chief currency strategist at SEB Merchant Banking in Stockholm.

Other analysts agreed, but said the dollar may falter if concerns grow about Washington’s debt burden as it borrows aggressively to help its economy out of recession, along with ongoing speculation about reserves diversification.

The dollar had come under pressure last week as debate intensified about the use of an alternative global currency to the greenback, with China’s central bank renewing its call last week for a super-sovereign reserve currency.

However, China said at a meeting of central bankers in Basel at the weekend that the policy governing its currency reserves, which comprise mainly U.S. Treasuries, was stable and consistent with no sudden changes, giving some respite to the dollar.

Analysts said that while the issue of diversification would likely continue, any move away from the dollar as the reserve currency of choice could take a long time to materialise.

“There will be a structural shift away from the dollar as global players begin to diversity away from dollar assets as well (but) people are so cautious on the outlook right now. No one is too sure when to pull the trigger and they’d rather err on the side of caution,” said Yu.

In a sign that the economic downturn may be easing, euro zone economic sentiment improved more than expected in June.

A survey by the European Commission showed economic sentiment in 16 countries using the euro rose to 73.3 points in June from 70.2 points in May. The data had little initial impact on the euro.

LONDON, June 29 (Reuters)

Good day… And a Tub Thumpin’ Thursday to you! Yes, I know the currencies and commodities got whipsawed yesterday, and my Cardinals got spanked, but that’s no reason for us to not enjoy a Tub Thumpin’ Thursday! Every day is a gift, and it has nothing to do with stocks, bonds, currencies, and commodities!

OK… Not that I try to be philosophical, sometimes it just comes out that way! Besides, you don’t want to think that I’m just a smart *** all the time! HAHAHAHAHAHA!

Well, as I said in the open, the currencies and commodities got whipsawed yesterday, and the culprit was the FOMC minutes… You see, the Fed Reserve met to discuss rates, and other items. And what they said just blew away the bond vigilantes, and really ticked off the Hawks, but in the end, what they said, was really that things will remain status quo…

Their announcement of bond buying didn’t measure up to what the bond folks wanted to see, and their announcement that interest rates won’t be going up for some time, didn’t measure up to the inflation Hawks, who wanted a comment about fighting inflation. Instead, what they received was more Alfred E. Newman on inflation… “What, me worry?” That’s how ridiculous their statement was folks… The Fed still looks for inflation to “remain subdued for some time”… Although… Their outlook for the economy was slightly upbeat…

So… If your confused about what the Fed is thinking… Then join the rest of us! The markets spent the day trying to sort it out, and when it was all said and done, they couldn’t, so they sold risk assets… So… The 1.41 level the euro enjoyed yesterday morning when I signed off, is now 1.3945…

On top of all this, the Swiss National Bank (SNB) has issued a communiqué’ that talks about their “new aggressiveness” toward Swiss franc strength. Now, isn’t that just one of the most ridiculous things for a Central Bank to say about it’s currency! Would someone over there at the SNB, please think about what you’re saying!

Oh well… This is all I’ll say about the SNB… It’s hard to soar with the eagles when you have to work with a bunch of turkeys! OH! And it’s also reported that this “aggressiveness” showed up as intervention by the SNB yesterday… They sold francs in the markets… UGH!

OK, let’s get back to the Fed, and their bond purchase program / Quantitative Easing / monetizing the debt / money printing… It’s all the same… Oh, one more thing, it’s the road to ruins, but don’t let that get in the way of the Fed Party! You see, the Fed didn’t announce anything this time, because all the world was watching and waiting for them to announce a “mega-buying program”… I told you earlier in the week to NOT expect the Fed to announce any changes to their road to ruins at this meeting, but instead the August meeting, when during the dog days of summer, when almost every #1 trader on earth is on vacation…

So… The bond vigilantes who want bond yields low realize, with the amount of supply that the Treasury is issuing these days, that the only way to get those lower yields is to have the Gov’t buying bonds!

I came across something yesterday, that I yelled across the desk to make certain everyone knew… Recall at least a month or so ago, I told you how China had called for a new reserve currency, replacing the dollar with SDR’s (special drawing rights), which would be a basket of currencies. This news received a ton of publicity… But one thing that didn’t receive a ton of publicity was the fact that President Obama agreed at an economic summit in London that SDR’s should now be used to help stabilize the balance sheets of nations struggling to combat the current crisis.

Now… On the outside that looks harmless right? Just helping these struggling nations… But! Could this also be a baby step toward a global currency? Could this be a baby step toward a further devaluation of the dollar, and it’s signed off on by the President?

OK, now here’s the thing that really caught my eye… The IMF is going to issued $300 Billion worth of SDR’s. That’s 10 Times… That’s right, I said 10 Times the amount of SDR’s that CURRENTLY EXIST!

Could this be the facility for China to quietly exchange dollar reserves for SDR’s? Come on! Somebody has got to see this the same way I do!

I mean, it was just LAST WEEK, that the countries of Brazil, Russia, India and China (BRIC’s) called for a “more diversified international monetary system?” Why, yes, Chuck, it was… Just last week! And then this week, the IMF “just happens” to be issuing 10-TIMES the amount of SDR’s that CURRENTLY EXIST! Hmmmm…

I probably should stop there… I’ll be accusing people of all sorts of things if I continue on this path… But there’s some food for thought, eh? You won’t see this on TV… They have more important things to show you and talk about, like… The President killing a fly! That’s a really sad thing, to think that our news has come to that!

OK… New Home Sales for May dipped lower, but the inventory of homes for sales also dipped… And, we got the surprise of year when Durable Orders for May showed an unexpected and very strong gain of 1.8%… While I think this is wonderful news, I have to question it… I mean, with the automobile industry basically shut-down, one would think this number to be quite lower… However, I’m told… That non-defense aircraft orders more than offset the auto losses. OK, so, this is NOT a green-shoot folks… This is a One-and-done!

OH! And to follow up on yesterday report regarding Existing Home Sales… I totally forgot to mention that Foreclosure Sales are soaring, and thus a big part of the rise in Existing Home Sales… So, no green-shoot here either!

Today, we’ll see the Weekly Initial Jobless Claims, and… The Final print of 1st QTR GDP, which will remain at -5.7%…

So, once again, not much on the data watch for today.

Before I go to the Big Finish… I want to follow up on the news I wrote about yesterday regarding the European Central Bank’s (ECB) EUR 300 Billion injection of liquidity out 12-months… The total came in at a higher figure than that, at EUR 442 Billion… Still, much lower than the forecasts, which had seen some call for a number as high as EUR 1 Trillion! And… This morning, the Eurozone announced that Industrial Orders fell 1% in April… So that data isn’t helping the euro any either!

And then there was this from the NY Times this morning… “The U.S. House Oversight and Government Reform Committee will question Federal Reserve Chairman Ben Bernanke about his role in Bank of America’s acquisition of Merrill Lynch. While Republican lawmakers are launching an attack on Bernanke, who is Republican, Democrats are defending him.”

Man, is that all mixed up! But… A week ago or so, we were getting reports about the Bank of America (BOA) purchase of Merrill Lynch… And now, nothing, absolutely nothing, say it again! Any wonder why? Well, maybe it will come out in the U.S. House Oversight and Government Reform Committee questioning, although I doubt it…

And the State of California… The largest economy in the U.S. and in the top 7 economies of the world (used to be 7th, but with their recession, who knows?), announced that they were going to pay their bills with IOU’s… The state’s controller said. “Next Wednesday, we start a fiscal year with a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression.”

And… The Fed believes the recession is easing? Hmmm… Maybe they are too far away from the California books and records!

I’m on a roll here, somebody stop me! OK, I’m stopped!

The Treasury will auction $27 Billion of 7-year Treasuries today… Just keep the supply spigot open must be the Treasury’s motto these days!

Currencies today 6/25/09: A$ .7955, kiwi .6360, C$ .8605, euro 1.3940, sterling 1.6280, Swiss .9095, rand 8.0775, krone 6.5170, SEK 7.9350, forint 199, zloty 3.24, koruna 18.72, yen 96.40, sing 1.4575, HKD 7.75, INR 48.65, China 6.8345, pesos 13.27, BRL 1.9705, dollar index 80.78, Oil $69.05, 10-year 3.69%, Silver $13.86, and Gold… $934.20

That’s it for today… Draggin’ the line today, late night with my little buddy Alex’s baseball game. A ringing double and single with two RBI for Alex last night, in his last game of the year. HEY! How about the U.S. National Team, beating Spain in soccer / football? WOW! It’s been a while since the U.S. beat a ranked national team. So good for them! No breakfast sandwiches today for the boys and girls, as out little Christine is on holiday… Yay for her! She normally picks them up and I buy, but I forgot to do both this morning! UGH! 11-0 spanking by the Mets last night, leaves the Cardinals only 1 game in front in their division… Well… I’m going to attempt to have a Tub Thumpin’ Thursday, I hope you do too!

Source: Increasing SDR Issuance

Overnight, the euro climbed as high as 1.4140, only to sit at the cusp of 1.41 as I begin to write this morning. Of course 1.41 certainly looks a lot different from the 1.35-1.40 range we’ve seen in recent days. But then, we’ve seen these probes above 1.40 before only end with the euro falling back to the 1.35-1.40 range again…

I would imagine that the thing weighing heavily on the euro to bring it back to 1.41 and now a little below that figure is the news that the European Central Bank (ECB) had allocated EURO 300 Billion in 12 month funds for liquidity… I think any sell off from this announcement is strictly a knee-jerk reaction to the announcement. But when the dust settles and the traders / investors realize that EU 300 Billion is far less than the numbers that were rumored (some as high as 1 Trillion euros), this knee-jerk reaction will slow…

One of these times it will shake the cobwebs off, and proceed to either move higher, or lower than the established range… For now, I would have to think that given the sentiment in the market that’s growing toward anger with the U.S. deficit spending tactics, the move would look to go higher… But, who knows? I can only look at things from a fundamentals viewpoint and from 17 years experience trading currencies…

Once the euro got going, or the Big Dog got off the porch, the other currencies (little dogs) were also on the rise VS the dollar… And Commodities, after spending Monday circling the bowl, came back with a vengeance! And we all know that when the Commodities rally, so do the Commodity currencies of Aussie, kiwi, Canada, Brazil, and South Africa!

Speaking of Brazil… Recall when I told you that this currency can give you whiplash? The volatile, wild swings in the currency are enough to make someone request oxygen! So, after a day (Monday) that saw the Brazilian real move back above “2″, it was posted the best performance of any currency on earth, on Tuesday!

Brazil’s real had its biggest gain in more than a month, as Commodities rallied, and… The currency also bounced back after investors “overreacted” yesterday to speculation the Central Bank will intervene to keep the real at “2″… The real gained 2.7 percent, the best performer in the world and its biggest gain since May 4, to 1.9794 per U.S. dollar.

The real has gained 17 percent this year, the best performance among the 16 most-traded currencies, as commodities rallied.

One thing that helped the Commodities rally yesterday was the fact that it finally “occurred” to traders and investors that the Fed’s FOMC meets today, and will probably signal that interest rates will be held to near zero in the U.S. for the rest of the year.

Now… Why would that be a feather in Commodities’ hat? Ahhh, grasshopper… You have to remember that the underlying fear in the markets is that the Fed will NOT be pro-active in removing their stimulus when inflation begins to knock at the door… And making a statement that interest rates will remain near zero for the rest of the year, simply makes those fears even stronger… And what will people flock to when inflation is racing toward double digits?… Commodities…

Of course, tomorrow will be a different story should the Fed not make an interest statement like that!

I listening to the radio, while I write… And the song that’s playing is Elton John’s “Friends”, which was the theme song of my senior prom! Now, that’s a really old song!

OK, I’m back now… See how my fat fingers decide to start typing things that pop into my mind?

So, the Fed’s FOMC is today… I just can’t see them doing anything but trying to calm the markets’ fears about inflation, while keeping rates Steady Eddie. You all know that I’m not a fan of the Fed… I just don’t see how a entity, who’s main job is to protect the value of our currency, could keep their job, given the fact that the dollar has lost over 90% of its value since they took over! I mean, the Fed is NOT a Gov’t Agency, folks… It’s supposed to be an independent entity… But now, it’s got it’s hands in all kinds of things that aren’t on their job description, and they are in cahoots with the U.S. Treasury, and before we know it they will be regulating all the banks and financial institutions… All, from doing such a good job at protecting the value of the dollar! I shake my head in disgust… And I should NOT be the only one doing so!

So… While I’m on my soapbox, and ranting at the Fed, and the people making the decisions… Big Ben Bernanke is up for reappointment… I think the thing I would like to see from Big Ben before I would reappoint him is for Big Ben to come out and say… “I’m in favor of Ron Paul’s Bill to audit the Fed” Now, that would cause me to fall out of my chair from the shock of disbelief!

Speaking of the bill to “audit the Fed” I believe every voting citizen should contact their representative and let them know you support the bill to “audit the Fed”…

And… While I’m up here on the soapbox, I might as well get this rant off my chest too… Well folks… I think we’re in for yet another stimulus package… yesterday, during a press conference the president was asked about that very thing, and his reply was not a resounding “NO”… it was a “not yet”…

Now you know me… I said after the first $150 Billion in the spring of 2008, that there would be more… and I said after the $787 Billion this past winter, that there would be more… and does a “not yet” from the Gov’t that loves to spend money, give you a warm and fuzzy that there won’t be another one? I didn’t think so!

Yesterday, the data cupboard gave us Existing Home Sales data… For the second consecutive month, sales of previously owned homes in the U.S. increased, but the improvement was less than expected, further fueling fears of a slow, weak recovery for the economy as a whole… And the most important thing from the report is that the Home Sales were driven by two things… A drop in home prices… The median price for an existing home last month was $173,000, down 16.8% from $207,900 in May 2008. And… The low mortgage rates that existed up until about 3 weeks ago… Mortgage rates have climbed back above 5% (remember when we thought that was a low rate?) and the message that I’m getting is that mortgage lending is drying up once again… Most of the lending had centered on re-fi’s any way, not Home Sales…

Hey! Remember earlier this month when the Jobs Jamboree number printed and everyone (except those that knew better because of the BLS) was celebrating? Well… I saw a piece on Reuters last night that caught my attention… Mass layoffs — at least 50 job losses by a single employer — grew to 2,933 last month, from April’s 2,712, the U.S. Labor Department reported. That is practically a tie with March’s figure, which set a record. Hmmm… That certainly paints a different picture of the labor market than the BLS Jobs Jamboree now doesn’t it?

The Data cupboard will also give us the latest readings on Durable Goods (don’t expect miracles here!) New Home Sales (no miracles here either!) and then the FOMC… The U.S. Treasury will also be auctioning $37 Billion of 5-year Notes today… Good luck!

Down in New Zealand… Consumer Confidence surprised to the upside, and is helping to boost the kiwi performance this morning… These are “index” numbers so they probably don’t make much sense on the outside… Just look at them as “better”… New Zealand Consumer Confidence rose to an 18 month high in 2nd QTR from 96.0 to 106. Optimism about near term prospects improved from -57 to -28.

And finally… Gold and Silver have taken some tough shots to their respective mid-sections this week… I even said to Chris Gaffney yesterday… “Silver sure is tempting below $14, isn’t it?” I’m reminded of an old saying we use to have on the Margin Desk in my early years in the brokerage business… Just input the asset and price to make this saying work… For instance, we’ll use Silver… “Hey! If you liked Silver enough to buy it at $15, you’ll Love it at $13.98!”

Of course, I personally don’t expect Gold and Silver to remain at these bargain basement prices too long, but then that’s just my opinion, and according to the Legal Beagles, I have to say that I could be wrong!

Currencies today 6/24/09: A$ .8010, kiwi .6435, C$ .8740, euro 1.4085, sterling 1.6585, Swiss .9320, rand 8.0830, krone 6.4120, SEK 7.85, forint 197.30, zloty 3.2180, koruna 18.56, yen 95, sing 1.4525, HKD 7.75, INR 48.52, China 6.8330, pesos 13.28, BRL 1.9790, dollar index 78.75, Oil $68.77, 10-year 3.64%, Silver $13.92, and Gold… $928.40

That’s it for today… The Heat Wave continues here… But, like I told someone yesterday… Hey! It’s summer, it’s supposed to be hot! When I was a young man playing my guitar around the country out of VW micro-bus, I built in-ground swimming pools as a day job. In Oklahoma! Now talk about a HOT job! YIKES! I know there are hotter jobs, but that was the worst for me! Nice game last night for my beloved Cardinals… And, my little buddy, Alex, has his last baseball game of the year tonight. At least it is an 8:15 game! Well, the doctor visit yesterday was interesting… He’s happy that I’ve done so well… But the honeymoon on the weight is over according to him! Of course, I have no idea what’s he’s talking about! HAHAHAHAHA! Let’s get this going… I hope you have a Wonderful Wednesday!

Source: More Stimulus On The Way?

Well… As much as I dislike having to say so, because I told you this might happen… The currencies have given back some major ground VS the dollar since Friday morning. It’s all tied to the fact that the euphoria going around the markets the previous week regarding stocks and the U.S. economy, came to a screeching halt last week. I pleaded and begged for the currencies to break this link to stocks, but it wouldn’t / didn’t happen and voila! What we have here is a failure to break the link, and now that there’s a falling demand for stocks, currencies have tanked too… UGH!

Not that I’m cheering for currencies to go one way or the other, what I’m rooting for is a return to fundamentals… And apparently, that did not happen!

The proverbial straw to break the stock rally’s back was the color of Industrial Production on Friday… Not that Industrial Production is that Big of a piece of data… It just got added on to all the other bad data that acted like a shot of Round-Up on all those so-called Green Shoots! For the record, Industrial Production decline .5% in April, and March’s already bad figure was revised downward to -1.7%… So… The “glass is half full crowd, would say, “Hey!, the pace of decline has slowed, this is an indication of a bottom!” Unfortunately, that’s not how the market participants saw it… You have to think outside the box here, and recall all of the announced shutdowns that will be coming down the pike… I fully expect this data to reverse itself and go deeper into the tank.

We also saw the “stupid” CPI (inflation) number on Friday… CPI fell .7% VS a year earlier, which on the outside screams “deflation”! But… That’s not what I see… I see a CPI that’s dominated by food and energy, and we all know that energy prices have plummeted from last year… So, to me, this is strictly price deflation of energy, and not overall deflation that would include a contraction of money supply. (Like that’s going to happen any time soon!) No… And I’m sure there are few readers that will beg to differ with me on this, as they already do every time I mention inflation, but… This data continues to suggest the risk of deflation remains remote, since the drops are still mostly centered in energy and energy-related products.

So… If we’ve gone back to the black cloud over risk assets that existed July 08 through February 09, that means you can see Japanese yen as the lone wolf rallying major currency… Recall what I told you on Friday about the opposition party in Japan, calling for a boycott of U.S. Treasuries denominated in dollars… Imagine there’s no rift between the two, It isn’t hard to do, China and Japan getting together for currency cooperation… Hmmm… Makes you shiver, eh? Any way… The yen, is back on the rally tracks and trading this morning with a 95 handle…

But wait! What’s that I see? Is it a White Knight for risk assets?

Another Asian currency that I talk about occasionally, the Indian rupee, has been through the spin cycle a few times in the past year… Just when the rupee looks like its on a run, it gets sent back to the spin cycle and comes out looking quite wrinkled… But… We might be seeing a change… This past weekend, India held an election, and the Congress Party – led alliance chalked up a decisive victory… This is the party, led by Prime Minister Singh, that is pro-growth, pro-economic reform. And the news of the decisive victory sent the Indian stocks soaring… Along with the rupee, that’s now trading with a 47 handle for the first time in 5 months! So… The rupee has it all going on today, eh?

This news from India, helped turn the stocks around in Japan overnight, and that’s a good thing! If stocks can maintain this momentum, that’s a good thing for risk assets… But… I’m being pessimistic here… I just don’t see how the Indian stock market euphoria can outweigh the bad data here in the U.S. But… I guess we’ll have to wait-n-see, eh?

I was reading an article in the Wall Street Journal this weekend, and saw this, that caught my eye… “Economists Say Full Recovery to Take at Least 3 Years”… I bet they didn’t make Mssrs Obama and Bernanke happy with that call! Here’s snippet of the story from the Wall Street Journal… “Economists in the latest Wall Street Journal survey see an end to the recession by August, but say it will take years to eat up the slack created by the downturn. Nearly half of the economists said it will take three to four years to close the output gap, while more than a quarter say it will take five to six years. The economists on average expect the unemployment rate to climb to 9.7% by the end of the year, with two million more jobs lost over the next 12 months.”

Don’t know if you remember or not… But some time ago, I told you that I believed the Chinese were stockpiling commodities… They knew they would need them, and it sure seemed like a better investment than buying more dollar denominated assets… Well, the Royal Bank of Canada (RBC) just issued a report that agrees with my earlier statement! Let’s see what RBC had to say… “China is stockpiling commodities such as copper and iron ore as part of a reallocation of its sovereign wealth amid concern that the value of its dollar assets may decline. It’s part of an overall desire to decrease its exposure to dollar assets.”

That’s been a reoccurring theme here lately hasn’t it? I’ve spent a ton of time writing about China and their new found diversification bone… I’ve told you about all this here, in and if you are a subscriber to my monthly “paid” subscriber newsletter, The Currency Capitalist, well, you’re probably growing tired of hearing about China… You see I really have to tell you, that it all gets so intense, from my experience… This is BIG NEWS! Oh, and if you want to see what the Currency Capitalist is all about.

We have a holiday in Canada today… Victoria Day… I had a reader question why I talked about Australia more than Canada… Hmmm, I said… I did talk about Canada twice last week! But he’s right, I do talk about Australia more, and that’s because the story right now is China coming out of the economic doldrums before any other country, and demanding more raw materials from Australia… Now, if the price of Oil were to soar to $75 or higher, than I’d be talking about the “juiced” Canadian economy more and more once again…

Before I left for Viva Las Vegas (admit it, you were doing your Elvis voice there!) I had talked about the “rift” going on in the European Central Bank (ECB) well, ECB President, Trichet hasn’t done anything on the outside to calm the waters there. Bundesbank (Germany’s Central Bank) President, Axel Weber, a very outspoken voice against Quantitative Easing probably stirred up the hot blood again overnight… Let’s listen in on Mr. Weber… “the ECB has done enough to help the economy and shouldn’t consider further measures unless things get a lot worse.” He went on to say a bit more… “the ECB doesn’t see the risk of a broad credit crunch or deflation in the euro area.”

I’m sure his opposition in Italy, Spain, Ireland, to name a few, will take offense to those statements, and we’ll get the “rift” going again, which won’t be a good thing for the euro to have to deal with.

The data cupboard is fairly empty this week, and for sure void of any major data until Thursday, when the Weekly Initial Jobless Claims, Leading Indicators, and Philly Fed Index all print… So… Not too much to deal with every day, which can lead to some strange currency moves. It just depends on the overall bias of whether to sell dollars or buy them. We’ll get a feeling for that today…

Well… If stocks are going back into the sell gear, then look for Gold to push higher… Which is what it’s doing right now, at $930… Speaking of Gold, my webcast Gold presentation last week wasn’t much a draw… We had less than 100 people watch it on their computers… Hmmm… Don’t know if we’ll go that route any more. At least the room was packed!

So… On that note… I’ll head to the Big Finish… This is a bit earlier than usual this morning, as I woke up long before my alarm was to go off, and decided to just go ahead and get up.

Currencies today 5/18/09: A$ .7580, kiwi .5895, C$ .8550, euro 1.3475, sterling 1.5240, Swiss .8910, rand 8.6440, krone 6.5025, SEK 7.8630, forint 212.50, zloty 3.3260, koruna 20, yen 95.60, sing 1.4680, HKD 7.7515, INR 47.90, China 6.8269, pesos 13.26, BRL 2.1150, dollar index 82.97, Oil $57.10, Silver $13.98, and Gold… $930.75

Source: Spraying Round-up

The ECB announced that it will cut its key lending rate to its lowest level ever and begin a form of “quantitative easing,” in which it will buy corporate debt in order to reduce commercial interest rates. Details to follow, it said. “Stops” are to central bankers what safety fuses are to electricians. You may take them out when you really want to get the juice flowing; but your house might burn down.

But thus did the European troops pull out the stops and get under-way. Reluctant allies, they set off to join the battle against capitalism…with no reliable maps…with insufficient supplies and a strategy elaborated by incompetents. Of course, the gods must have laughed at Napoleon too. His armies had been cut off and destroyed in Egypt. Then, his Peninsular Campaign was a disaster. But the plan to attack Russia topped them all; even the draft horses must have snickered.

It doesn’t seem to bother the Europeans that their American commander is the same fellow who failed to spot the biggest bubble in history until it blew up in his face. Nor that their field marshal has no idea of the lay of the land; nor that anyone on either side of the Atlantic seems to know where they are going; nor that, wherever it is, it will cost more to get there than they’ve got.

This week the Obama government revealed its new budget deficit. If nothing goes wrong, it will reach $1.84 trillion this year – nearly 400% of the record set last year. In 2009, the US government will borrow 50 cents for every dollar it spends. Accumulated deficits to 2019 will reach $7.1 trillion, says the forecast. Moody’s was so alarmed it warned that the US may lose its Triple-A bond rating, which it has had since 1917.

But even as bad as it looks, Obama’s budget map is still fanciful – its mountains are made of whipped cream and its rivers run with Scotch. It imagines a loss of only 1.2% of GDP in the current downturn…and a quick return to growth, with a 3% increase in 2010. Yet, the last report showed the US economy contracting at a 6% annual rate. As for growth in 2010…where would it come from? Consumer credit is falling at its fastest pace in 18 years. Consumer incomes are falling too – down 1.2% in the last 12 months. If there were any lasting consequences of this downturn, opines the New York Times, it is likely to be the “shift to savings” by the US consumer.

Meanwhile, businesses aren’t exactly hankering to spend either. Even if they had the money, businesses wouldn’t expand; they don’t have to. Spiders build their webs on America’s remaining assembly lines with little risk of being disturbed; one out of every three factories is quiet. Until existing capacity is put to work, businesses will have no power to raise prices and no need to add to their facilities.

And yet, Napoleon Bernanke is upbeat. The troops will be home “before Christmas,” he says. But the central banks’ calendars are no better than their maps. In 2004, Mr. Bernanke credited improved monetary policy with having created what he called “the Great Moderation” – the period of strong growth and low-inflation since the mid-’80s. Specifically, he was referring to the Fed’s policy of ‘inflation targeting,’ which presumes that the inflation numbers carry all the information the Fed needs to guide an economy.

This was the map the Fed was using seven years ago. Then, a tiny recession took GDP down to all of 0.2% over an 8-month period. The Fed panicked. Its emergency policy pushed the fed funds rate well below the rate of consumer price inflation and left it there for two years. This was not merely a slight miscalculation. It was a fatal strategic error, say professors Carr and Beese of the University of Akron. Not only did the Fed’s map fail to warn them; it actually sent the economy over a cliff:

The low interest rates signaled…that credit was inexpensive and readily available…[then] the Federal Reserve moved from a low accommodative interest rate policy to one of a steady and consistent increasing of interest rates between 2004 and 2007…and became a prime cause of the financial services mortgage crisis of 2008.

Today, central banks use the same computers, same theories, and same maps they had seven years ago. With these feeble instruments, they set out to go where no central bank has ever gone before – borrowing, inflating, and intervening on a scale that would have been unimaginable a few years ago. Where will they end up?

We will take a guess: this grande armee sets off on the road to recovery with the wind at its back; it will end up in Moscow with snow on its face.

Enjoy your weekend,

Bill Bonner

Source: On to Moscow!

Good day… And a Thunderin’ Thursday to you! It may not be Thunderin’ where you are, but apparently it was yesterday in my little river town, as I heard we had some shingles blow off… And… It certainly is Thunderin’ over in the Eurozone this morning, I’ll tell you why in a minute. So, let’s get going don’t want to get caught in any of that Thunder!

I finished the last of my 3 presentations yesterday, and called it quits, as far as walking back and forth to the Conference Center. They’ll just have to do without me at the booth! But the presentation was good, I think, and I made some very important points. None of which, were brand new to Pfennig readers!

Once again yesterday, the currencies traded in a very tight range, with a bias to buy dollars… Something quite opposite to what we’ve seen in recent trading sessions. Earlier this morning, the Weekly Initial Jobless Claims printed at 637,000 (forecast at 610,000), so once again the euphoria that was in the markets last week with the thought that the U.S. was coming out of the recession is turning into hogwash… Oh, and the continuing claims, which to me is just as important as the new claims, rose much more than expected too at 6,560,000…

And, we’ve already seen the color of the PPI data this morning. (Not that it accounts for a hill of beans! In my opinion, that is!) PPI rose a bit in April, but nothing, according to the Gov’t., to be worried about, with regards to pipeline inflation… Yeah, right… The Gov’t also probably believes we are all dumb enough that we would have to be told what the answer to 2+2 is!

So… Regarding the Thunder in the Eurozone this morning… Reuters is reporting this morning that the: “ECB HAS REJECTED C.EUROPEAN CBANKS’ REQUEST TO ACCEPT LOCAL CURRENCY BONDS AS COLLATERAL – HUNGARIAN CBANKER KIRALY”

Recall that the European Central Bank (ECB) adopted Quantitative Easing two weeks ago, but there were some very important and powerful dissenting votes. For instance, the Bundesbank, Germany’s Central Bank, and the most influential Central Bank in the ECB, was totally against Quantitative Easing…

So… Now today, apparently, the ECB’s Quantitative Easing has a line drawn in the sand… And it’s for “members only”… ECB President, who just a week ago engineered a truce among Eurozone Central Bankers, will need to polish up his negotiating tools once again… While this is happening, the euro, gets hung out on a line.

Recall that I told you that the Swiss National Bank (SNB) was watching for currency appreciation, as they did not want the Swiss franc to gain. Because… The Swiss are fighting deflation, and a strong currency would fight inflation.. The SNB has said they would intervene if the franc got too strong… Well, this morning, an SNB official told the markets once again that he’s concerned with the franc’s recent strength… HEY! SNB! GET OVER IT! You should never, ever, not in a million years, want a weak currency… You should be careful what you wish for!

A reader sent me a story that is very interesting… Here’s the skinny, from the BBC… Japan’s opposition party said that it would refuse to buy U.S. Treasuries denominated in dollars, if elected… Whoa there partner! What’s this again?

The chief finance spokesman of the Democratic Party of Japan, Masaharu Nakagawa, told the BBC he was worried about the future value of the dollar.

“Japan has been a major buyer of US government bonds, helping the US finance its Federal budget deficits. But, he added, it would continue to buy bonds only if they were denominated in yen – the so-called samurai bonds. If it’s [in] yen, it’s going to be all right. We propose that we would buy [the US bonds], but it’s yen, not dollar.”

OK, before everyone begins to panic… Observers say that it is unlikely that Mr. Nakagawa’s party will win the forthcoming election in Japan. But… What happens if they get enough attention to this position? Could it be adapted by the winning party too? I don’t know… I tend to think no, as this would be a large reversal of current policy, and the Japanese aren’t known for major shifts of policy!

So… The main point of this exercise was to point out that it’s not just the Chinese who are running scared of the U.S. deficit spending…

Meanwhile, back at the ranch… This week’s data, so far, has really put the risk takers off balance, and risk aversion seems to be sneaking back into the markets… If that’s so, and we need a couple more days of this type of trading to tell for sure, then stocks will take a hit, and so will the currencies… Again… This is why I want this link to break… I’ve never seen it before and would hope to never see it again! Fundamentals! That’s what I want to see!

I’ve talked so much about Gold here in Las Vegas, and haven’t really touched on it much in the Pfennig lately, so… I’m here to change all that! With the stocks wobbling again, Gold gets some McLovin… The shiny metal pushed higher yesterday and overnight to settle in this morning at $924… While the stocks were getting bought, Gold had to take a back seat to the proceedings… But now that we’ve seen a few days of stock weakness… Gold gets to move to the front of the car! (Hey don’t forget to buckle up!)

A lot of people here at the Las Vegas Money Show are interested in buying Gold… But… They are all convinced that the U.S. is going to confiscate it again like they did in the 30’s… If I’ve told one of these people, I’ve told 100, that 1. in the 30’s Gold was a part of our money. Dollars were backed by Gold, and with the problems of the depression, the Gov’t needed to print more dollars, and thus needed more Gold to do so. That’s certainly not the case today, the dollar is no longer backed by Gold, and Gov’t sure doesn’t have any governor to hold back their printing of dollars! And 2. So, confiscation doesn’t do the Gov’t any good, unless they want to see thousands of people storming the White House with pitchforks and rakes!

And on that note… Let’s go to the Big Finish!

Currencies today 5/14/09: A$ .7550, kiwi .5905, C$ .8515, euro 1.36, sterling 1.5150, Swiss .9020, rand 8.58, krone 6.50, SEK 7.89, forint 212.15, zloty 3.29, koruna 19.7725, yen 95.65, sing 1.4650, HKD 7.75, INR 49.85, China 6.8249, pesos 13.27, BRL 2.0980, dollar index 82.60, Oil $57.33, Silver $13.92, and Gold… $924

Source: The ECB Clash Over Policy Again

Good day… And a Happy Friday to one and all! Let’s make it a Fantastico Friday, eh? Why not! It’s the Friday to kick off Mother’s Day weekend! More on that later, but first, let’s talk about the Stress Tests.

Personally I could just as easily forget about them, because as I’ve said over and over again, The Gov’t wasn’t going to “spook” the markets with “true results”… This whole “exercise” is a just another effort to make us all “feel good”…

OK, the rumor mill has finally been shut down, and the facts, as the Gov’t would let us know them to be, are out… Let’s take a gander at the results!

The Wall Street Journal (WSJ) reported it like this: 10 of the 19 largest U.S. Financial Institutions will be required to raise a combined $75 Billion in new capital.

The Washington Post (WP) reported it like this: Nine of the 19 banks do not need any new capital at all.

It’s all in the way you word it… Both of them are correct… The WSJ tells it like I think most people would want to hear it, while the WP, is for the Polly Annas of the world!

When it’s all said and done… This feel good circus is now over, and we can get back to dealing with the financial meltdown, deficit spending, China, and other things that are easier for us to deal with, like the story that came across the screens yesterday regarding credit card charge offs, than a feel good circus! Yes, the credit card charge offs are up 44% VS last year… Now, isn’t that one of those things that make you go, oooooooohhhhhh nooooooooo!

The currencies drifted most of the day yesterday waiting for the stress tests results, and then rallied at the end of the day with the euro pushing past 1.34 once again. The euro has fallen back below that figure again this morning, but remains close to the 1.34 figure.

Yesterday, the European Central Bank (ECB) did what I said would be the prudent thing to do, if you “had” to do it, and cut rates only 25 BPS, instead of the 50 BPS the markets were expecting. The euro had to deal with the dolts that think larger rate cuts are what values a currency… But, as I said before, the ECB wants to be able to come back to the rate cut table, if needed, and cut rates again.

Unfortunately for the euro going forward is the fact that ECB President Trichet, finally gave in to the “weak links” in the European Union, and announced that the ECB would begin to buy bonds to support the credit markets. This move was fiercely opposed by Germany’s Central Bank, the Bundesbank and it’s President, Axel Weber. I’m with the Bundesbank on this one… To bad Trichet “gave in”… This move now throws the European Union on the roster of nations employing Quantitative Easing… And you know where I stand with that!

Well… Today is the Jobs Jamboree for April… Yesterday, the Initial Jobless Claims fell from 635K the previous week to 601K… And, just like I said they would… The media was all over this move, pointing out that this is mostly likely an indication that the recession is coming to an end. Well… Today’s Jobs Jamboree is expected to show a fall in jobs lost too… I guess they haven’t polled Chrysler and GM workers… But any way, the “experts” believe April’s figure will be right at 600,000, down from last month’s 663,000… That’s quite a ride down the slippery slope don’t you think? I’m going to say that 600,000 is too “pie in the sky” and actual number will be disappointing compared to 600K. But, if it shows a figure below last month’s 663K, then again, we’ll hear about how all is right on the night, and happy days are here again…

That should boost risk assets… Should…

OK… About two months ago, I wrote to you all, and said I wanted to hear from the people that owned or worked at businesses that were doing well… I called them feel good stories, and this time “feel good” had a good connotation! First I was gone for March, then in April I kept forgetting to deal with it on a Friday… But not today! Today, I give you the first feel good story during this recession… A company that’s doing well, despite all the rot on the vine in the economy…

So, here’s how it will work… After the currency round-up, and final sign off, I’ll tell you about this week’s choice… So… Let’s go to the Big Finish, and get this Fantastico Friday started!

Currencies today 5/8/09: A$ .7590, kiwi .5965, C$ .8610, euro 1.3405, sterling 1.5050, Swiss .8860, rand 8.4075, krone 6.4675, SEK 7.85, forint 208, zloty 3.25, koruna 19.88, yen 99.40, sing 1.4650, HKD 7.75, INR 49.34, China 6.8217, pesos 13.10, BRL 2.110, dollar index 83.78, Oil $57.71, Silver $13.96, and Gold… $916.80
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Source: A Jobs Jamboree Friday!