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

“I think we can break the back of this thing,” said Ben Bernanke yesterday, as much of a Braveheart-style battle cry as he could muster. If the Fed and U.S. government take “strong and aggressive action,” he assured us, “we will begin to see improvements in 2009.”

That was the height of Mr. Bernanke’s optimism yesterday… here are the forecast highlights from his speech at the National Press Club and the latest FOMC minutes.

• Unemployment will reach 9% by the end of the year, and will stay above 5% until 2012
• The economy will contract between 0.5-1.3% this year. That’s worse than the
• Fed’s previous forecast of a 0.2-1.1% decline
• FOMC participants “generally expected that strains in financial markets would ebb only slowly, and hence that the pace of recovery in 2010 would be damped”
• Inflation should remain tame, around 1.5-2% over the next couple years. (As you know, we think this is a gross underestimation… proof below.)

The stock market reacted nervously to all the Federal Reserve hubbub . We showed you yesterday that the Dow was at a critical crossroads… well, it seems traders agreed, as the index crossed its break-even point 50 times Wednesday before coming to rest with a mere 3 point gain.

So we’re still at the precipice of new credit crisis lows. Today looks like we might step back from the cliff’s edge… with the help of better-than-expected earnings from CVS, Whole Foods and Sprint Nextel, the Dow opened up 50 points. Ironically, the only Dow component to report earnings was HP, which slashed its 2009 outlook after reporting a 13% drop in profits.

“For individual investors with a small-cap focus,” notes our small cap analyst Greg Guenthner, with a helpful list in hand, “there are ways to play the recession and come out on top:

“1) You need to think cheap. No, we’re not talking about fundamentals (although it’s always good to take a look at price to sales, debt and other important metrics before buying a stock). In this case, we mean cheap goods sold by discount retailers. When consumers are stretched thin, cheap stuff rules the roost. Don’t believe me? Just look at Tuesday’s drop. As of 4:00 p.m., only one Dow component had posted a gain: Wal-Mart. For the small-capper, screen for retailers with market caps less than $1.5 billion and you should find some interesting plays related to this idea. And for this screen, avoid specialty retailers and stores that primarily sell big-ticket items.

“2) During tough times, sin wins… Sin stocks are the comfort food of troubled times. A consumer who recently lost his job probably isn’t going to go out and buy a new car. But by the same logic, he isn’t going to give up his beer and cigarettes, either. In fact, the best-performing stocks during past recessions have been tobacco and alcoholic beverages.

“3) Find the necessities. We’ve already talked about the top two recession gainers from the chart above. But what about household products? Yes, families are cutting back. But we seriously doubt they’ll stop buying toilet paper and bleach just because they’re stretched thin. There are plenty of items every family can’t live without. Companies that make the goods should do just fine.”

If you want Gunner to do the legwork for you, check out Bulletin Board Elite.

This week’s commodity trade seems to be on pause today. Gold remains near its recently lofty high, around $980 an ounce. And oil remains suppressed, at $35 barrel.

“Lots of commodities look cheap these days,” notes Chris Mayer, “compared with what prices were before the meltdown started in full swing. Gold may not come to mind as a cheap commodity, because unlike oil or copper, it’s not wallowing near yearly lows.

“Yet on an inflation-adjusted basis, gold is nowhere near its all-time high of $850 per ounce reached on Jan. 21, 1980. To get there, gold would have to rise to $2,306 per ounce. All of which is to say we’ve got a long way to go in this bull market for gold.

“Perhaps the best chart I’ve seen on this is from Casey Research. The folks at Casey note: ‘Last month, the price for a single ounce of gold surpassed the S&P 500 index for the first time in 18 years. Following the last such inflection point that occurred in 1973, gold surged ahead over 600%.’

“There are other reasons for liking gold stocks in 2009,” Chris continues. “The first is the gold miners will enjoy a windfall from falling energy prices. Largely because of lower energy costs, mining costs will fall in 2009. Then there is the currency effect. In many gold-producing countries, the local currency collapsed against the dollar.”

Naturally, Chris found a gold stock for his Special Situations readers with both these assets. Get the ticker here.

Here’s what our colleague Dan Denning says is “the most disturbing story of the day.” Credit spreads and bond pricing in Europe hint of looming defaults and credit downgrades for practically half the continent.

For starters, the market is currently betting on credit downgrades for Hungary, Poland and the Czech Republic. Investors are demanding higher yields for these countries than other nations with the same credit rating.

“Investors are getting nervous about governments in Spain, Ireland, Greece, Portugal and Italy, too,” says Dan. “The spread between 10-year government bonds in these countries and 10-year German bonds is widening.

“What’s more, the credit default swap markets now appear to be factoring in the possibility that certain national governments in Europe may simply default on their debt. Take, for example, Ireland. According to The Times of London, the pledges made by the Irish government to support its banking sector amount to 220% of the country’s GDP.

“The Irish government has promised to bail out its banks. But who’s going to bail out the Irish government? That’s what everyone’s starting to wonder. And that’s why — in addition to the billions in loans made by Western European banks to Eastern Europe — the euro is looking shakier by the day.”

That’s also why “the mighty U.S. dollar is still rolling on!” proclaims our currency man Bill Jenkins. Do we detect… sarcasm?

“I’m looking for more dollar strength in the near term, not because the dollar is stronger, but only because of its relative strength against other major currencies. With the unthinkable drop in GDP by Tokyo, it looks like the USD is challenging all opponents! In the end, what will in the short run appear to be the cure for the dollar (short-term stimulus) will be its fatal death blow (longer-term massive inflation).”

The dollar index roared up as high as 88 yesterday, about half a point below its credit crisis high. Closer to 87 now, we’re seeing some profit taking this morning, especially after this number hit the tape:

Wholesale inflation shot up 0.8% in January, beating the Street’s estimate nearly threefold. The government reports today that its producer price index broke its five-month losing streak last month, led by a 15% boom in gasoline price inflation. Even the core PPI — which the Fed used throughout early 2008 to quell inflation fears — popped up 0.4%.

But we suspect deflation will remain the fear du jour. The Labor Dept. reports wholesale inflation fell 0.9% in all of 2008, the first year of wholesale deflation since 2001.

Elsewhere in the data patch, the number of Americans filing for unemployment benefits has attained a new record high. “Continuing claims” climbed to 4.98 million strong last week, the most since at least 1967, when the Labor Dept. started keeping track. Initial claims — people seeking unemployment benefits for the first time — matched last week’s count of 672,000. That’s just shy of a 26-year high.

But fear not, lowly American, Barack Obama is coming to the rescue. Mr. President unveiled the details of his new housing rescue package yesterday. What was described as a $50 billion program early this week has already morphed into a $275 billion beast.

Essentially, $75 billion goes toward “encouraging” lenders to lower monthly payments or extend the length of loan agreements. The other $200 billion goes straight to Fannie and Freddie, who will refinance loans on their books (also conveniently keeping the two GSEs on life-support).

The mission of the program will be to reduce all American monthly mortgage payments to no more that 31% of the owner’s monthly income. Those who are already in a home they can afford, well, they get reassurance of knowing they did the right thing… and the bill.

Aside from plenty of other concerns, we wonder… what happens five, 10, 20 years from now when the bailed-out homeowners sell their homes? If they’re worth more than the price today, who gets to keep the profits?

And look at this… enterprising homeowners around the country are finding their own ways to stall foreclosure. Here’s our favorite: Just ask to see the original mortgage paperwork.

“During the real estate frenzy of the past decade,” explains the AP, “mortgages were sold and resold, bundled into securities and peddled to investors. In many cases, the original note signed by the homeowner was lost, stored away in a distant warehouse or destroyed.”

We can only imagine the paper trail cluster%*#$ emanating from boom-to-bust mortgage villains like Countrywide and IndyMac. Oy… sadly, this sounds like a decent strategy.

“I guess it didn’t occur to Alan Greenspan and Lindsey Graham,” writes a reader referring to yesterday’s “nationalization” buzz , “that it would have been much less expensive to ‘assume temporary control’ over some banks by letting them go bankrupt, rather than bailing them out? Sheesh… our government at work.”

The 5: Ugh… don’t get us started.

“Your reader slamming the comments about our way-too-expensive military budget sounds slightly insane,” writes another. “Nobody said the military should be abolished. Just that they get too much money and have too much influence. I don’t care how good it is at helping teach people to be leaders. Our economy simply can’t support the combined total of all other countries’ military spending, which is what our military budget represents. It’s a simple fact. That doesn’t mean we should get rid of the military all together, as your overly excited reader seems to think was proposed. I mean, after all, it was a former general, Eisenhower, who coined the term ‘military-industrial complex’ and warned of its power and influence. And I’m sure he knew the value of the system.”

“If not for the military,” writes the last reader, “Uncle Sam wouldn’t be able to execute these stimulus programs and other wealth-redistribution programs. The military is the ‘teeth’ that the government needs to carry out all of its evil deeds, both foreign and domestic. As for speaking German and Japanese, get real! Common military doctrine teaches that to conquer an enemy the invaders need to outnumber the defenders 3-to-1. Let’s say only 100 million Americans owned a rifle. You’re talking about an invading force as large as the current population of the U.S. Sorry if I don’t get misty-eyed about you heroes splattering your guts for Leviathan. To defend a country, a volunteer militia is sufficient. Note the meaning ‘volunteer’ means it is done for free, without leeching off of the taxpayers.”

Source:Small Cap Wisdom, Bernanke’s Forecasts, Gold Stocks, the Foreclosure Mess and More!