OK… Enough of that! I don’t like talking about stuff like that, because I’ll have 100 people write me nasty emails about politics, and 100 people write me that I was bang on!

Well… I don’t know, I don’t know, I don’t know where I’m a going to go when the volcano blows… Things around the world just don’t see to be anything to write home about… This morning, the euro has lost all the ground it gained yesterday and more, before climbing back this morning. The euro led the other currencies (minus yen) to higher ground yesterday, and the rally last most of the day. The euro climbed to near 1.31, before profit taking set in last in the day bringing it to just above 1.30. However, in the overnight market, the euro has been sold again down to 1.2894 before rallying back as I write to 1.2970… Here’s the skinny…

Russia owes the European Union and other countries a boat load of money on loans made to Russia. This has been a “known” thing for years now. But… Russia is now asking the European Union to moderate talks with foreign creditors on $400 Billion of loans… This obviously shows that the credit crisis is still in play, and now affecting Governments from obtaining needed credit. This news has caused the euro to take a shot to the mid-section…

OK… The President was very clear last night that U.S. Treasury Sec. Geithner will explain his “new and improved” plan for dealing with the remaining $350 Billion from the TARP (troubled assets relief program). Now, I have no idea what Geithner is going to say, but I know what he had better say, or else the risk takers are going to go back under their rocks and stay for awhile. I expect Geithner to talk about how the remaining $350 Billion will come with some major strings attached, like: a provision that any of the funds taken are to be used to clear up funds for lending.

And here’s where the cheese binds folks… Without the credit markets operating in a near-normal capacity, the “new and improved” Stimulus Package that’s going through Capitol Hill now, won’t stand a chance! Businesses need to get credit to expand and hire workers, individuals need to get credit to buy homes, etc.

I was talking to a banker that I’ve known for a very long time last week, and one that was a lender for many years, and he thinks that even if the credit markets unlock, who’s going to have a “sound” balance sheet to obtain a loan? His thought was that “whey would any lending institution make a loan when 500K jobs losses are posted each month, and bankruptcies are at record levels, and regulators are breathing down their necks to make certain we don’t slip back into past lending practices… Just imagine, if you will… A return to the old adage that a lender looks at the borrower’s ABILITY TO REPAY THE LOAN…

OK… So now, after having said all that… I need to say, that we HAVE to find a way to get past all this… The Credit markets need to unlock! Or else… We’ll be stuck in Jimmy Carter’s “malaise” for years to come! We don’t even want to slip into anything resembling “Japan’s lost decade”…

So, I’ve spent the morning talking about stimulus and TARP, and the credit crisis… Time to skip over to something else!

Yesterday, the Aussie dollar had it all going on, rising to well above 68-cents… Overnight, however, with the euro getting sold, the A$ has seen selling. Add to the euro’s plight, the fact that Aussie Business Confidence dropped to a record low last month, and we’ve got A$ selling down below 67-cents… But hey! At .6670, the A$ is still quite a bit higher than it was just a week ago…

With the risk takers on the run yesterday afternoon and overnight, the Japanese yen is back on the rally tracks after a couple of days off of them.

Union Bank of Switzerland (UBS) announced more layoffs along with more losses last night, but assured everyone that they would return to profit next year.

A couple of weeks ago, I talked about how I believed U.S. Treasuries were the next bubble to burst… I spent a ton of time explaining how this would work in my presentations last week at the Orlando Money Show. Well… A quick look at the Merrill Lynch Treasury Master Index, shows that Treasuries have lost 3.6% so far this year… That’s the worst start in any year since 1980!

I remember what was going on in the early 80’s in bonds… I was running the bond operations at Mark Twain Bank, and this is nothing like that… But… I think the thing that resembles this move in bonds the most is what happened in the 90’s. Back then, the bond markets’ participants made sure the President’s spending plans were put aside and a balanced budget was pursued instead. The bond market participants drove up borrowing costs then… And it looks like they have plans on doing that again, which would really throw a spanner in the works for President Obama’s plans…

I’m so bummed about all of this… If the lawmakers in Washington had just had read their Financial Reckoning Day books that were sent to them 6 years ago, or their I.O.U.S.A. books that were sent to them last year, maybe we could have done something about this before it got so dire… BTW Bill Bonner and Addison Wiggin wrote Financial Reckoning Day, and Addison Wiggin and Kate Incontrerra wrote I.O.U.S.A.

And to add to my / our misery this morning… Fannie Mae and Freddie Mac, remember these two? They kick started all these losses, now say they need more bailout funding. Well, let me clarify that, they said they will need $200 Billion more if the housing market continues to deteriorate. Well… They might as well get in line for that $200 Billion now folks… That’s how I see it…

And then there was Gold… My friend, the Mogambo Guru, had this to say in his weekly letter that posts on the Daily Reckoning site, (along side my Pfennig!) www.dailyreckoning.com So, here’s the Mogambo talking about buying Gold!

“Well, since you asked, the point is that “At the end of 2007, above-ground privately held gold bullion amounted to less than $650 billion, and the total amount of silver and platinum bullion was less than $5 billion. Put together, this is less than 1/3 of 1 percent of the estimated $187 trillion of global financial assets”, which doesn’t even start to address the implications that “China, Russia and the OPEC countries are considering substantial increases to their gold allocations in order to diversify their US dollar risk”, which means that “Any reallocation by these countries will drive prices much higher.”

>>> back to me, briefly… I get asked all the time about the Gov’t confiscating our Gold like they did in the 30’s… I tell people that times are different. Back then, Gold was a part of our money. Dollars were backed by Gold, and therefore the Gov’t had a “need” for the Gold… But that’s no more! Therefore, I just don’t see the Gov’t getting involved in a confiscation… Besides, as I told the crowds last week, I’ve got a rake, you’ve probably got a pitchfork, and if they want to take my Gold, they will face the rake and pitchfork! HA

But, I think the Mogambo nailed it even better, so back to my friend, the Mogambo Guru…

“And in that regard, people keep asking me if the government is going to confiscate gold, and I tell them “Why don’t you ask the government?” Hahaha! As if they would tell you the truth! Hahaha!

But not even mentioning that the Federal Reserve can print up all the money it wants, so they would not confiscate gold for the money, or the fact that all the gold held at the Federal Reserve is chump change; if the Fed still has all of its reported 261 million ounces, then at even $1,000 an ounce, all the gold would only be worth a lousy $261 billion dollars! Less than a quarter of the Federal budget deficit for this year alone! Hahaha!

And then the government has to store the gold someplace and start absorbing all of the expenses of guarding it, which doesn’t even address that the “takings clause” of the Constitution which prevents the government from taking anything away from you, including gold, without paying full market value to you, the owner.

So will the government confiscate gold? Why in the hell would they want to do that?

>>>> Ahhh… The Mogambo on a Tuesday, there’s not a better way to start a Tuesday! (except of course if you won the lottery and asked for Gold instead of dollars!)

OK… So to sum up today… U.S. Treasury Sec. Geithner will give his “new and improved” plan for TARP money. But before he speaks, the Fed Chairman, Big Ben Bernanke, will speak on lending programs at the Fed… The markets will wait for Geithner, to see if the risk takers are coming back… Let’s hope he can do a Bullwinkle and pull a rabbit out of his hat!

Currencies today 2/10/09: A$ .6670, kiwi .5335, C$ .8165, euro 1.2970, sterling 1.48, Swiss .8625, rand 9.6960, krone 6.6760, SEK 8.1250, forint 222.25, zloty 3.4410, koruna 21.6375, yen 91, sing 1.4975, HKD 7.7510, INR 48.74, China 6.8325, pesos 14.20, BRL 2.2545, dollar index 86.10, Oil $40.59, Silver $12.95, and Gold… $895.78

Source: The Geithner Plan Day!

The single unit was higher within the 1.29 handle overnight than it is right now, as it has given back a bit of ground on the news that a European Union Commissioner, Buti, said that, “economic indicators point south very badly.” This is strictly, jawboning to keep the euro’s move VS the dollar in check, folks…

The Bank of Canada (BOC) did cut rates yesterday 75 BPS… You may recall me telling you yesterday that the “experts” thought the cut would be 50 BPS, but I thought it would be 75 BPS… Maybe, one day, these surveys of “experts” will include the Pfennig writer, as he seems to be more “on target” than the current “experts”! Now, Chuck, who would you be referring to here? HA!

I also said yesterday that I didn’t think the markets would care, and they didn’t, as the larger rate cut did little to hurt the loonie. In fact, the loonie rallied a bit on the news!

Again, I don’t understand the mentality here with these Central Bank rate cuts… It’s not the cost of the credit that’s keeping the credit crisis all locked up, it’s the availability of such credit / money! So… Here’s a memo to Central Banks around the world… “STOP ALREADY!” All you’re are doing is inviting inflation into your economy, and debasing your currency!

That glimmering light that I talked about the other day for the Credit Crisis is getting smaller all the time, as the Big 3 still don’t have their bailout from the Gov’t (read taxpayers)… It now looks as though it could get done today, but at a much smaller figure than previously discussed. It now looks as though the Big 3 will get $15 Billion and they had better smile and say “thank you very much” as they leave the room!

It also looks like the Big 3 will get the “Car Czar” that they so desperately fought to keep from looking over them. The “Car Czar” will have the power to call Chapter 11 on GM or Chrysler should they not deliver a sound plan by the end of March. Geez Louise, why do they get 4 months to some up with a sound plan? They should have had one to get the funds to begin with! OK, I had better stop there, I’m really pounding the keys right now… I think I’ll step away for a minute and cool off…

OK, I’m back now, hope you didn’t miss me, or that I was away too long! No wait, this is text, you have no idea how long I was gone! Silly me!

You know… I was thinking aloud in my car yesterday, and saying to myself that it sure looks like all those pundits that called for a breakup of the European Union by the end of the year, will have to put their tails between their collective legs, and fade away… You know, the European Union (EU) had more pressure on them in 2005, when the French voted no on the Constitution, and other things, and they held steadfast then, and if they could it then, then this little tiff with Spain and Italy will pass… These pundits like to point to the problems that Italy is experiencing… And I say…”What’s so new about that? Italy has had problems since I’ve been following currencies (1985 for those of you keeping score at home)! I truly believe that Italy and Spain like to complain about the European Union and the euro, but when they get behind closed doors, when they let their hair hang down, they thank their lucky stars that they were included in the Euro Club!

The boys and girls over at Bank of America (BOA) believe they are seeing the dollar repatriation flows waning… Now, I wonder how many research people they employ over at BOA, when all it would take is for one of them to read the Pfennig, to see that I said all that yesterday! Any way… Let’s listen to what BOA had to say about this… “The repatriation demand for the dollar may have run its course, we retain our core long euro-dollar exposure and add long euro-dollar exposure today”… Now… You would think that given the size of BOA that saying something like that could really “move the market”…

But, given the markets “don’t care” attitude until the credit crisis unlocks, I understand why it didn’t! The BIG POINT here is that we could very well be seeing all this dollar repatriation end. And… Like I said Monday, the risk takers were slowly dipping their toes back into the waters which is what it will take to get the currencies and precious metals on the rally tracks again. But, put these two things working together, and voila’ you’ve got the makings of what could very well be a Santa Rally…

The boys over at the Bank of Japan (BOJ) are at “it” again… Mom… He’s doing it again! He’s looking at me! Mom! He’s got his hand on my side of the car seat! OK, I’ll stop there… But the BOJ was “jawboning” again in an attempt to keep the yen from strengthening further VS the dollar. BOJ Gov Shirakawa reminded the markets last night that the Ministry of Finance has the option of intervening if necessary… The Ministry of Finance (MOF) are the signal callers for the BOJ, and they are the ones that determine if intervention is to come into play. For new readers… BOJ intervention means the Bank sells yen in the markets to keep it from getting too strong.

In the currency world, this is called a “dirty float”… And the MOF and BOJ like to keep it “dirty”…

OK, I was laughing when I wrote that last bit, but notice I didn’t carry on… Maybe I’m growing up! HA!

Down Under in the South Pacific, Australia saw a very nice rise in Consumer Confidence of 7.6%, adding on to November’s 4.3% gain. The index collapsed this summer, but with the rate cuts the Reserve Bank of Australia (RBA) have instituted, it seems to be rounding back into shape.

In New Zealand, Reserve Bank of New Zealand (RBNZ) Gov. Bollard, gave a speech titled “Everyone needs to play their part.” In the speech, Bollard, reminded everyone that New Zealand’s inflation rate is still very high (5.1%). Hmmm… Was that the “wink and nod” that interest rates are not going to go much lower? I think it was folks.. But I guess it all depends on if the rest of the world continues to think that by cutting rates they will unlock the credit crisis!

Both of these things for Aussie and kiwi could underpin the currencies at current levels…

And another “Commodity Currency” the Brazilian real really put on the Ritz yesterday with a very strong rally… Just another sign that the risk takers are dipping their toes again…

OK… I’ll slide away from the currencies for a minute to talk about a news article that one of my fave writers, William Pesek, provided to Bloomberg, titled: China Will Be Happy Geithner Isn’t a Goldman Guy… Here are some snippets of the article that can be read in its entirety HERE.

“Why does Goldman Sachs run your government?”

After seven-plus years in Asia, I’m no longer startled by this question. It was posed to me yet again recently — this time by Kuala Lumpur taxi driver Sumit Kotari.

“What’s wrong with America is that it’s run by investment bankers, mostly from the same bank,” the 49-year-old Malaysian said. “How can Americans stand for it? Is Barack Obama from Goldman Sachs, too?”

It has been reported in Asia that Neel Kashkari, assistant Treasury secretary in charge of the Troubled Asset Relief Program, worked for the same New York-based investment bank. President-elect Obama’s decision to seek advice from other former Goldman Sachs bigwigs, such as Robert Rubin, also grabbed attention.

Even the guy helping choose a replacement for Timothy Geithner at the Fed Bank of New York came from Goldman Sachs. It makes one breathe a sigh of relief that Geithner, who will be the next Treasury secretary, doesn’t have Goldman Sachs on his resume.

The point here isn’t to pick on Goldman Sachs. Yet it is seen by many in Asia as the gold standard of investment banks. Its name also is a byword for the perception of incestuous ties between Wall Street and Washington.”

OK, I’m back now… The point of the discussion is to acknowledge that to Asian, it appears that Goldman Sachs runs our country… Now, that may be perception, but as they teach you perception is reality. And you have to wonder if the Asian Central Banks are shaking their heads at what we’re doing, and how we’re doing it… Now, some might say, “Who cares what the Asian Central Banks think of what and how we’re doing it.?” Ahhh grasshopper… We all have to be very cognizant of what the Asian Central Banks think about us, because, you see… They hold most of our I.O.U.’s and they could make things very messy for us any time they wish!

So… How about the Illinois Gov. getting arrested yesterday? Could it be two Illinois Governors incarcerated? That whole story is pretty amazing that someone would do what he is alleged to have done, knowing that his phone was tapped!

Ok enough of that! We’ll see the Monthly Budget Statement / Deficit for November, today… Look for it to explode!

Currencies today 12/10/08: A$ .6590, kiwi .5465, C$ .7950, euro 1.2950, sterling 1.4830, Swiss .83, ISK 261, rand 10.21, krone 7.0475, SEK 8.1650, forint 203.50, zloty 3.05, koruna 19.99, yen 92.60, baht 35.50, sing 1.5010, HKD 7.75, INR 49.01, China 6.8835, pesos 13.50, BRL 2.4725, dollar index 85.71, Oil $43.80, Silver $10.02, and Gold… $792

Source: A Bailout For The Big 3