Good day… And a Happy Friday to one and all! The end of another week… I was out on Monday, and it still seems to have been another long week! UGH! Oh well… It’s Friday, and this weekend is Father’s Day… So, we’ve got that going for us, eh?

More range trading in the currencies yesterday, with the euro leading the currencies higher for most of the day, only to see their gains slip, sliding away by the late afternoon. In the overnight markets, the currencies, once again, have moved higher, but nothing to get all lathered up about…

This morning, the euro got a boost when, in a draft statement from European Union leaders, it was reported that they believe they are seeing the first signs of a “sustainable economic recovery”, and that there will be little to no need for further stimulus of the economy… Now… Normally this would have sent the euro on a trip to the moon, soaring ever higher… But, these days, everyone has to take a statement like that, and temper it a bit with a dose of reality… These guys don’t really know if the economy is going to have a “sustainable economic recovery”… Every country is in uncharted waters with their economy right now, and it remains a possibility that the economy could rebound a bit, and then take a double dip…

That’s what I see happening in the U.S. later this year… Double dipping, which is taboo when dipping chips into salsa or the myriad of different dips… But is a possibility with an economy so deep in a recession / depression, that with all the stimulus, it does show signs of recovery, only to fall back… Because, it was never on terra firma…

Speaking of the economy here in the U.S… Yesterday, we saw the Weekly Initial Jobless Claims remain above 600K for the week, but… The Continuing Claims dropped drastically… And this is where I draw the line between make believe and reality… First of all, no one in the media had covered the Continuing Claims data while it was going up, up and away in its beautiful balloon… But, show a drop, and these knuckleheads were all over it like a cheap suit! OK… So the number dropped… Well… I don’t see that as a “sign that the job meltdown is over”, like many in the media said… When Chris Gaffney told me that the number had dropped, I told him…

That means one of two things… 1. That people are going back to work… Or 2. that unemployed people saw their unemployment benefits expire, which means, and I’ve explained this many times before, so it shouldn’t be a surprise, but it means that they are DROPPED from the list of unemployed! Now… What mental genius came up with that one? Any way… I would put my money on what’s behind door number 2! Wouldn’t you at this point?

When the Bureau of Labor Statistics (BLS) can report a strong jobs number without all the adjustments, then I’ll jump on the job creation bandwagon…

OK… It looks as though the story I told you about the other day, as a potential hoax, but wondered why the media wasn’t covering it, regarding the $130 Billion in bearer bonds confiscated from two Japanese men at the Swiss, Italian border, turns out to be a non-event after all… The bonds, which at first were reported to be “real”, are now being called fakes / counterfeit… So… So much for the secret war financing under the cover a dark knight stuff, eh?

OK… Enough of that… Let’s see what the Fed has up its sleeve these days… The Fed is looking for ways to communicate to the markets that they will NOT be raising interest rates until, at the earliest, 2nd half 2010! Now… They also want everyone to know that they will be quick to remove the stimulus from the markets… One, doesn’t add up to the other one here, folks… And just as the Fed has always been… Cagey… They’re just not being truthful to us…

You see, they don’t want the markets jumping ahead, and moving yields higher on bonds, which would basically shut down the nascent mortgage business recovery… But, they are very quick to say that they will remove the stimulus… I wonder how many people out there really, truly, in their heart of hearts, believe the Fed will 1. know how to remove their stimulus without damaging the economy, and 2. will do it at the right time?

You won’t see me signing up on the roster of those that believe in those two things! Just look at their track record! If you want some insight to the bumbling, tumbling, fumbling that has gone on at the Fed over the years, you should check out a book by William Fleckenstein, “Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve… You can get it on Amazon… It will open your eyes wide open to all the things I talk about regarding Big Al’s incompetence and the Fed’s bungling…

Today is called a Quadruple Witching Friday… No… It’s not because there are 4 witches flying around! Quadruple Witching Friday is a day on which contracts for stock index futures, stock index options, stock options and single stock futures all expire. There have been some strange things happen in the markets on a Quadruple Witching Friday… So, watch out!

The data cupboard has been emptied out this week, which means there are no scheduled data releases today in the U.S. So, we just have the stock stuff to deal with…

I would think that the currencies would just drift today for the most part… However, there’s one currency that seems to be in the mood to outperform all others this morning… The Aussie dollar (A$), is seeing a nice bid and wind in its sails from an overall general feeling that the Reserve Bank of Australia’s next rate move will be up, and not down.

Just like I talked about yesterday with Norway, and their Central Bank (Norges Bank) stating that they believe that they will raise rates next, this gives traders something to “trade on”… And there’s nothing better for a trader to trade on than interest rate differentials…

That makes two Commodity Currencies that are on the list of reversing their interest rate cut cycles… New Zealand / kiwi should be the next to get on this list, but not for some time in my estimation, as the Reserve Bank of New Zealand (RBNZ) is not as optimistic, at this time… South Africa, Brazil, and Canada round out the Commodity Currencies, and I really don’t see any of these three getting on the list any time in the near future… But, South Africa, and Brazil, already enjoy strong interest rate differentials VS the dollar, so it’s not so bad not having them on the list at this point… And Canada? Well… If the price of Oil continues to inch higher and higher, so too will the Canadian dollar / loonie… At least, that’s how I see it!

Australia and Norway don’t see the end of their rate cut cycles because inflation is under control! It’s quite the opposite… And here’s where I think the dollar gets squeezed once again… A double whammy if you will… First you have the Commodity Currencies / high yielders gaining VS the dollar because their interest rates will be higher than the interest rate a dollar can give… But their interest rates will be going higher because inflation is going higher… And… This is the second whammy for the dollar… If inflation is moving higher… Than that too will cause the dollar to be weakened, for an inflated currency is one that is having its value eaten away by inflation…

And then there was this… All my ranting about the Gov’t getting more involved with the markets, and our private lives, led a couple of people to question me regarding this… You see, I keep harping about the Gov’t getting involved in regulatory matters in the markets… Some thought that I was saying that there should be no regulations in the markets… I never said that! I said I didn’t think having the Gov’t involved in the regulatory matters in the markets was a good thing… I mean, we now have a Gov’t that can… Sell you a car, maintain that car, finance that car, and provide you insurance on that car… It’s all just beginning…

Yesterday, The Senate Banking Committee questioned U.S. Treasury Sec. Geithner about these plans to regulate the financial markets… And his answer is something that I’ve told you over and over again would be the answer to everything… “Our economy has been brought too close to the brink for us to let this moment pass.” It’s just more of the old…”these are extraordinary times, and they call for extraordinary measures” talk…

OK… I know, I know, I’ve written the Pfennig for 17 1/2 years, and tried to stay out of politics the best I could… But to see what’s going on now, and now say something is beyond my control!

Of course long time readers will remember me taking the Bush administration to the woodshed too when they placed tariffs on steel earlier this decade, and the spending… So, I’m not just “picking” on this administration!

Errors and omissions… Yesterday I said that Ty Keough’s dad (Harry) had played on the U.S. national team that beat Great Britain in the 1950’s World Cup… It obviously wasn’t Great Britain… It was England… I apologize for that error… And someone also chastised me for calling it soccer… Hey! That’s what we call it here in the U.S!

And then one final note… I guess the Fed wasn’t in buying Treasuries yesterday, as the yield on the 10-year spiked higher to 3.82, from 3.69 yesterday morning…

Currencies today 6/19/09: A$ .8065, kiwi .6415, C$ .8875, euro 1.3935, sterling 1.6440, Swiss .9225, rand 8.11, krone 6.3910, SEK 7.8725, forint 200.50, zloty 3.24, koruna 18.9150, yen 96.80, sing 1.4550, HKD 7.75, INR 48.11, China 6.8363, pesos 13.35, BRL 1.9720, dollar index 80.39, Oil $72.25, 10-year 3.82%, Silver $14.32, and Gold… $937.82

That’s it for today… Well, Sunday is Father’s Day… And the first day of Summer! Speaking of Fathers… I lost my dad in 1995 to cancer. I still think about him every time I’m at a ballgame and the national anthem is played. He always told me to stand tall, and sing loud! He was a great patriot, and father… The Detroit Tigers finally won a game at our new stadium, as they kept my beloved Cardinals from sweeping them last night. It’s less than a month away from the All-Star Game here in St. Louis. I am beginning to get geeked up about this! When my tickets arrive, I’ll really be geeked up! I’m sitting here yawning my head off. I woke up an hour before my alarm was to go off this morning, and couldn’t get back to sleep! UGH! As if, I don’t already get up earlier than farmers! OK… It’s hotter than blazes here, but that shouldn’t stop us from having a Fantastico Friday and Wonderful Father’s Day Weekend!

Source: A Sustainable Economic Recovery?

• JPMorgan Chase & Co. (JPM) will eliminate 2,800 jobs at Washington Mutual through attrition, Bloomberg reported. In December, the company slashed 9,200 jobs at WaMu, which it bought for $1.9 billion last year.

• General Motors Corp. (GM) posted a loss of almost $31 billion in the fourth quarter, and said its auditors will likely doubt its viability. The company burned through $5 billion during the quarter, and warned that its pension plans were underfunded by $12.4 billion, Reuters reported.

• Hong Kong’s January exports sunk 21.8% from a year earlier, the biggest decline in 50 years. “It’s not just Hong Kong, the financial crisis is dragging down the whole of Asia,” Wang Qian, an economist at JPMorgan Chase & Co. in Hong Kong, told Bloomberg. “The trade environment is going to get worse.”

• Tech giant IBM (IBM) retained its full-year earnings outlook, saying that service contracts are grew in January. “Recognizing that it is still early in the quarter, the company expects double-digit growth in long term signings, and growth in total signings in first quarter 2009,” IBM said in a regulatory filing, Reuters reported.

• The number of Americans filing initial claims for unemployment insurance spiked the week ended Feb. 21, as 667,000 Americans filed initial jobless claims, up 36,000 from a revised 631,000 the previous week, the Labor Department reported.

• Oil prices jumped for a second straight day yesterday (Thursday) with light, sweet crude for April delivery jumping $2.72, or 6.4%, to settle at $45.22 a barrel on the New York Mercantile Exchange.

Global Investment News Briefs Friday, February 27, 2009

OK, front and center this morning, yesterday I printed a quote from Karl Marx. This had been sent to me from a source that I didn’t feel as though I needed to research first. Unfortunately, as MANY of you let me know… The quote had some major errors in it. So… I apologize… I hope I didn’t burn any confidence in me with that error… I’ll do much more due diligence in the future!

The euro saw a huge sell off yesterday, and it wasn’t a case of “lets buy the dollar and sell the euro” it was a case of “lets sell the euro”… I think the latter is the worse… Here are the reasons I saw that caused this selling of the euro, and further down the line with the other currencies as well.

1. Soros says euro may not survive crisis without global plan…
2. There’s a potential for a ‘buy American’ rider in the stimulus package sparking debate on the impact on global trade
3. There was a rumor going around that the four largest pension funds in Netherlands saw their assets drop by euro 72 Billion due to the credit crisis, all are allegedly under funded.
4. The Risk Takers are hiding under rocks again…

This is the Obama bounce I’ve been talking about folks… Stocks may still be taking it on the chin, but the dollar part of the bounce is front and center!

How many people follow Glenn Beck? As you know, last summer, I wrote an article for his website on the dollar, and the loss of purchasing power. He had heard about me, when reading Craig Karmin’s Biography of the dollar, which has a chapter on me! Well… I believe that Glenn has taken my stuff and run with it… Last night, he did a great job of showing everyone the money supply that has gone off the charts since last September. He got the data from the St. Louis Federal Reserve, so it’s not like he made the stuff up! I love what he’s calling our money supply and debt situation… “An Inconvenient Deficit” Obviously, it’s a spin-off of Al Gore’s movie…

The deficit and money supply is really getting out of hand folks… I know, I’ll have a few readers send me notes telling me that the money supply stuff is wrong… But, I’ll stick with the data from the St. Louis Fed…

This un-dynamic duo of deficit and money supply, only has one ending folks… And it ends up in tears for the dollar…

But in the meantime, the dollar bulls have the dollar moving higher once again, with the euro trading all the way down to trade with a 1.28 handle.

Well… In the data yesterday, the Weekly Initial Jobless Claims, which were forecast to be below 500K, repeated the previous week’s high of 585K, with an increase to 588K! UGH! I’ve never figured out why these figures don’t feed into the monthly Jobs Jamboree numbers… You would think that you take the weekly figures by 4, and voila! But, that’s not how it works, boys and girls… The Bureau of Labor Statistics (BLS) gets to put their hands in the cookie jar and act like they know what they’re doing!

In other data, New Home Sales fell 14.7% in December to 331,000. Now, that might not sound too bad on the outside…(apparently it wasn’t to the media, for they “forgot” to include this part when reporting the data yesterday) But, when you figure in the fact that the latest 15% plunge to 331K now takes New Home Sales to the lowest since the series began in 1963, breaking below the previous low of 338K in 1981. Add to that the fact that… Sales are down 75% from its peak in mid-2005. And to finish this data set off… Something that leads me to believe we have more suffering in housing to go… The month’s supply of homes reached a new record high of 12.9 months (the 20-year average is 5.7). Can you say… inventories remain too high?

And finally, durable-goods orders decreased by 2.6% in December… UGH! The economy just continues to show more rot on the vine… Even more than most economists had forecast, for sure… There was one economist that was the front runner to all this mess, forecasting it, and being cast as a doom and gloom guy. But now receiving vindication… That’s Nouriel Roubini, who’s in Davos Switzerland this week at the World Economic Forum… That’s where the great quotes from Jamie Dimon came from yesterday… Let’s see if Nouriel Roubini threw us a bone or two…

Roubini said yesterday, that “the worse lies ahead. Banks face bigger credit losses than they realize, more financial companies will require state takeovers and the world economy will keep shrinking throughout 2009, he says. The consensus is catching up with me, but it’s still behind,” Roubini said in an interview in Davos. I don’t know what some people are smoking.”

We’ll get some inkling of the depths the economy has fallen to this morning, when 4th QTR GDP prints… The forecast is for a negative -5.5% to print… And when we see the “makeup” of the growth, and see that without the Gov’t spending it would have been much worse… Somebody had better think twice about suggesting this recession will be “V” shaped…

Oh… And my friends over at Critical Factors research, (they track recessions, and confirmed my call last year at this time that we had moved into a recession) sent me a note about the Leading Indicators data that printed the other day. You may recall that I was surprised to see the Leading Indicators rise? Well, looks like there’s an explanation for that… And to that explanation I turn to my friends at Critical Factors…

“Yes, The Conference Board reported that the Leading Economic Indicators increased 0.3 percent, but note this quote from their press release: “The LEI rose modestly in December, mainly due to the continued and very large positive contribution from real money supply.”

>>>> yes, there’s that “money supply” thing again!

In Germany this morning, inflation bumped higher last month to 1.1%, but still below the European Central Bank’s (ECB) ceiling target of 2%… With Oil prices being pulled up from the ashes, I’m sure the ECB ministers are watching it closely. One thing to remember when thinking of the ECB, and the euro… The ECB has a MANDATE from the Maastricht Treaty, the document that formed the European Union, to provide price stability… That means they are inflation fighters in earnest… Not just guys that decide to become one when it becomes fashionable… Read Fed Reserve…

OK… I want to go back to the Soros statement above that ripped the euro yesterday… Don’t you just love the media? They report this, when Soros probably was dissing the dollar for an hour and casually mentioned that without a global plan the euro is in trouble… Of course he could have said any currency for that matter! I think you have to take what a George Soros says with trepidation… He’s a sly fox, and only says things to move markets that he’s trading in… He’s made millions with this practice… So… For all we know, he could have been short euros, and needed the price to get lower to cover the short! Nah… He wouldn’t do something like that would he? Hmmmm… Check out 1992, and the British pound…

Hey! Jimmy Mack! When are you coming back? Did you see the move in Gold yesterday? It soared $21 on the day… And in the overnight markets it has gained another $13, to $922! I was listening to our metals traders, Jen and Kristin, the other day, and they were quoting prices for minted coins that were so far above spot, I had to stop and ask what was going on…

They proceeded to tell me in so many words, that it wasn’t any of my business and to go back to the currencies! HAHAHAHAHAHAHA! No, not those two sweet ladies! They told me that the demand for coins is still at last fall’s highs, and that the dealers, and minters are charging outrageous fabrication fees… That thought was confirmed by HSBC, (Hong Kong Shanghai Banking Corp), one of the biggest metals dealers in the world… A trader friend of mine there sent me this note…

“One of HSBC’s bullion customers is a large coin manufacturer – we learned today that the demand for investment coins continues at an astonishing pace – the order book for Q109 has already surpassed C2008. The main order flow is European.”

So… There you have it! Gold is hot!

I had a reader send me a note yesterday telling me to be more professional, and compared me to Jim Cramer! ARRRRRGGGGGHHHHH! The horror! The humanity of it! Not Jim Cramer! The reader didn’t say how long they’ve been reading, and maybe yesterday’s rant was their first go at the Pfennig… I’ve got to hope so! I did get a little carried away yesterday, didn’t I? Well… That’s just me. I can’t sit idly by and watch this all unfolding before my eyes and not say something… Oh well… That’s the beauty of this newsletter, A Pfennig For Your Thoughts, It’s FREE! You can always just delete your subscription! But… You’ll be sorry…. HAHAHAHAHAHAHA!

Currencies today 1/30/09 (Christine’s birthday): A$ .64, kiwi .51, C$ .8125, euro 1.2860, sterling 1.43, Swiss .8655, rand 10.14, krone 6.9280, SEK 8.2525, forint 232, zloty 3.4750, koruna 21.72, yen 89.60, sing 1.5075, HKD 7.7555, INR 48.87, China 6.8615, pesos 14.43, BRL 2.30, dollar index 85.82, Oil $41.88, Silver $12.55, and Gold… $921.85

Source: The Dollar Comes Back!

U.S. stock index futures fell on Thursday, pressured by a weak earnings season and worries that the $825 billion economic stimulus package could still face a bumpy road.

Shares of widely held Dow component Exxon Mobil were down 2.1 percent at $77.55 before the opening bell after Goldman Sachs removed the company from its Americas Buy list, saying it saw better investment opportunities among energy companies.

The U.S. House of Representatives passed President Barack Obama’s stimulus package late on Wednesday but despite the new president’s goal of bipartisanship, every Republican who voted opposed the bill. The Senate begins debate next week.

“It’s clear the Republicans don’t want to play ball with the Democrats, they want to do it their way,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

“Any slowdown in the stimulus package is not going to be good. The market wants to see this passed, done, signed, in the bank and let’s move on to the next problem.

Investors were also watching for initial weekly jobless claims, due at 8.30 a.m. (1330 GMT). Worries over mounting job losses have been in the forefront this week as more companies have announced massive cuts as they attempt to stay afloat.

S&P 500 futures fell 9.20 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures were down 79 points, and Nasdaq 100 futures lost 4.75 points.

A gain in Ford Motor Co helped futures trim losses after the ailing automaker posted a loss but saw a lower cash burn rate than expected and reaffirmed it plans to go ahead without government loans. Ford was up 6.9 percent at $2.17.

Starbucks Corp (SBUX) was the latest company to say it will slash jobs when it reported lower quarterly profit after the bell on Wednesday as sales fell globally. The coffee chain’s shares were down 3.6 percent at $9.30.

Stocks rose on Wednesday as financial stocks soared on optimism the Obama administration was making progress on a plan to relieve banks of money-losing assets.

The Wall Street Journal reported on Thursday that government officials looking to revamp the financial bailout have discussed spending another $1 trillion to $2 trillion.

With Wednesday’s advance, the benchmark S&P 500 capped its fourth straight day of gains, its longest run-up in two months. Year to date, the benchmark S&P 500 is down 3.2 percent, a marked improvement from a 6.4 percent loss seen at Tuesday’s close. After starting 2009 up more than 20 percent from its Nov. 21 bear market low, the S&P is up 16.2 percent from that significant low.

NEW YORK, Jan 29 (Reuters)

The numbers offer more evidence of the dismal economic conditions facing President Barack Obama’s administration.

The news confirms a relentless downward spiral for home builders, who have all but shut down building projects as home values plunge and potential buyers stay on the sidelines.

“What you’re seeing is capitulation by home builders,” John Lonski, chief economist at Moody’s Corp. (MCO) told The New York Times. “The news you got today reinforces the view that stabilization of housing starts is well off into the future.”

Housing starts fell 15.5% to a seasonally adjusted annual rate of 550,000 units from an upwardly revised rate of 651,000 units in November, the lowest on record, the Commerce Department reported yesterday (Thursday).

The pace of new-home construction in December was 45% below its levels from a year ago. For all of 2008, the government estimated that 904,300 housing units were started, down 33% from 2007.

A Labor Department report spelled more bad news for the housing market, as the number of Americans filing first-time unemployment claims matched a 26-year high in the week ended Jan. 17. Initial jobless claims increased by 62,000 to 589,000, greater than economists had expected.

“The worst is not over,” Lonski said. “Rising unemployment and tightening credit conditions are worsening the prospects for housing, which by itself suggests that we could be surprised at how poorly the economy performs in the early part of 2009.”

As Money Morningsaid in its 2009 Housing Forecast, skyrocketing unemployment acts like a 1000-pound ball and chain around the neck of the real estate market.

Builders, whose shares have lost 76% of their value over the last three years, are slashing prices to compete with a record number of foreclosed homes coming onto the market, Bloomberg News reported.

“Homebuilders have no choice,” Ryan Sweet, an economist at Moody’s Economy.com, told Bloomberg. “The market is bloated with excess supply and demand is weak. The pace of housing starts will remain depressed until 2011.”

Big homebuilding firms like D.R. Horton Inc. (DHI), Lennar Corp. (LEN) and Toll Brothers Inc. (TOL) are limping along, bleeding cash and fighting for survival. But the downturn isn’t just hurting only big builders anymore.

The malaise is spreading now to the smaller mom and pop builders. Approximately 20% of the nation’s homebuilders have closed their doors.

Hammered by collapsing prices and banks scrounging for cash, even the industry’s brightest stars are finding themselves with their backs against the wall.  Banks are now yanking credit lines from small and mid-size homebuilders even before they miss a single payment, The New York Times reported.

Lenders, for their part, are demanding more collateral to mitigate risk.

That’s what happened to Brown Family Communities, a well-known builder in the Phoenix area. Despite never missing a payment, JP Morgan Chase & Co. (JPM) demanded millions in cash for land on the outskirts of town that had fallen in value. Brown balked and lost the property, ultimately closing his doors.

“The real estate market is gone,” Brown said.

Banks like JPMorgan loaned builders hundreds of billions of dollars to buy up vacant land. Now that buyers in some areas can pick up previously constructed homes for less than it costs to build a new one, demand for new homes has plunged. That means builders’ are no longer able to turn a profit.

Obama’s National Economic Council Director Lawrence Summers said last week the president intends to use between $50 billion and $100 billion of the remaining half of the $700 billion bank bailout fund enacted last year to address foreclosures and bring stability to the housing market.

Source: Homebuilders Give Up as New Housing Starts Hit 50 Year Low

Today is the day the Gov’t prints the December Jobs Jamboree, and if Wednesday’s ADP report did what they said it was going to, and that is change their methodology to mirror the BLS (Bureau of Labor Statistics) then this morning’s Jobs Jamboree will be a nightmare. Of course not the kind of nightmare that the over 2.5 million people that lost jobs in 2008 had! I was once in those numbers, as our old Bank, Mark Twain Bank, was bought by a bigger bank, Mercantile Bank, and Mercantile decided after a few months to perform ethnic cleansing of Mark Twain employees… I called it “my retirement” but with a 3 year old at home and on my lap most of the day, “retirement” couldn’t last too long! My point is that you don’t know the emptiness and failure you feel when they show you the door… So my thoughts are always with those that lose their jobs…

OK, back to the Jobs Jamboree… Earlier in the week the “experts” were forecasting a -500K in job losses… But as the week has gone on, that forecast has inched up to -515K and then -523K… It’s like the BLS is setting us up for a BIG number, but wants the media to carry on their charade of reporting the jobs numbers by saying they came in “just above the forecast” (as if the forecast wasn’t bad!)

The other thing to think about prior to the print is the shenanigans the BLS plays with the jobs numbers… I’ll tell you this… Given what we know about the state of the economy, should the Jobs Jamboree print lower than the -525K that’s now forecast, then you will know in your heart of hearts that the BLS “cooked the books”… That’s all I’ll say about that…

The Weekly Initial Jobless Claims came in under 500K for the second week in a row… I would put this down to the Holidays… I fully expect this to catch up next week! UGH!

So… The currencies yesterday rallied hard, sold off, rallied hard again, sold off, and this went on for the bulk of the day. As I signed off yesterday, the Bank of England (BOE) cut rates 50 BPS, and sent the pound sterling higher… I know, I know, that shouldn’t be, but it is, and the mental giants that are running these trading desks, reward countries that debase their currencies!

But in the end… The euro was higher on the day, along with yen, and Swiss francs… The high yielders took one to the chin, as risk takers have gone back under the covers to get warm, as the chill in the air got to them!

I had more than a few people send me a story that appeared in the NYT that played well with my screaming from the rooftops about the Budget Deficit announcement from the day before… Here is a snippet, of the story that can be read in its entirety here.

“In the last five years, China has spent as much as one-seventh of its entire economic output buying foreign debt, mostly American. In September, it surpassed Japan as the largest overseas holder of Treasuries.

But now Beijing is seeking to pay for its own $600 billion stimulus — just as tax revenue is falling sharply as the Chinese economy slows. Regulators have ordered banks to lend more money to small and medium-size enterprises, many of which are struggling with lower exports, and to local governments to build new roads and other projects.

All the key drivers of China’s Treasury purchases are disappearing — there’s a waning appetite for dollars and a waning appetite for Treasuries, and that complicates the outlook for interest rates, said Ben Simpfendorfer, an economist in the Hong Kong office of the Royal Bank of Scotland.”

OK… Back to me… So… If, what President-Elect Obama said regarding “expecting Trillion dollar Budget Deficits for several years” is to come to fruition, then what pray-tell will we do with all the Treasuries we issue to pay for the debt?

Uh-oh! Spaghetti-o’s! The Gov’t will have to ratchet the yield on these bonds up so high to attract investors… OR… Allow a general debasing of the dollar to allow those purchases of Treasuries to be made at a discounted clearing price. I’ve said this all along folks… Over and over again and over again until I’m blue in the face… Or was I holding my breath again? Both! I hold my breath in hopes that it is all a nightmare!

I have to tell you all, especially new readers that haven’t heard me screaming from the rooftops about the direction of this country, to socialism, that this is all getting completely out of hand! The Fed is well down the path to controlling the markets, taking the term “free markets” away for good… And do we expect anyone to stop them? Not unless it’s us… We The People…

Ty Keough sent me a note yesterday from James Quinn on investmentrarities.com… “As the politicians scurry to “save” capitalism through the use of communist measures, more Americans are becoming disheartened. The definition of communism according to Webster’s is:

A system in which goods are owned in common and are available to all as needed.

George Bush, Henry Paulson and Ben Bernanke have decided to seize money from the vast majority of Americans who lived within their means, utilized debt sparingly, and worked hard to get ahead, and give it to the most appalling failures in our society. They have shoveled billions to banks that operated their businesses like gambling parlors. They have shoveled hundreds of millions to people who bought houses with no money down, interest only mortgages and fraudulent loan applications. They are now rewarding automakers who made the wrong vehicles, pay 30,000 workers per year to not work, and have only been able to “sell” cars by giving them away with 0% financing to any schmuck who could sign on the dotted line. These acts fit the definition of communism. We are now more communist than China.”

I spent a long time with a Wall Street Journal reported yesterday… The reporter, who has interviewed me before, going back to 2002, was interested in my take on Gold as an inflation hedge… I know there are people out there that will dispute this, but if you go back to where Gold was issued when Nixon closed the Gold window in 1971 ($34), and not from it’s previous high in 1981, you can see it not only is an inflation hedge but a store of wealth, and as people that own dollars look at the loss in purchasing power of their dollars, and look at the store of wealth Gold has held… It makes abundant sense to have Gold… I wonder if this will get printed in the WSJ….

And Savers… I’m a saver, are you a saver? Yes, I spend money, just like a lot of people, but I also save… And that’s what ticks me off these days! The Fed has lowered rates to 0%, so there’s no incentive to save if you only look at yield… But, if you look at the fact that saving has to start somewhere, then maybe the Gov’t will get the hint / clue, and stop overspending! But doesn’t it tick you off that the Fed has lowered rates to 0% and have basically told you, the saver, to go out and seek risk to offset that loss of yield? They don’t want us to save, people… So… You know me! SAVE, SAVE, SAVE! And then SAVE some more!

And that… Leads me to a book, that a reader sent me, that he wrote! The title of the book is: Debt is Slavery… And 9 Other Things I Wish My Dad Had Taught Me About Money… The author is Michael Mihalik… I think most people don’t believe they have a debt problem… But… If this financial meltdown continues at its current pace, I think they’ve got a rude awakening coming. Just like the U.S. and their debt problem… It’s relatively the same ordeal…

So… The Bank of England (BOE) did cut rates 50 BPS yesterday, which puts their total of the last three rate cuts at 300 BPS… And what did the pound sterling do? It rallied! These are strange times, my dear reader friends… But in my humble opinion, I would view this rally as an opportunity to look to sell at these higher levels, because my view on the pound is not good… The U.K. has the same problems as here in the U.S. (not the deficit problems, but they could get there in heartbeat should they continue to bail out institutions) just on a smaller scale… And in the end, that will be enough to push pound sterling down… My long time friend, Joe Losos, asked me if he could write a piece for the next monthly newsletter to clients of EverBank World Markets. Of course I said yes… And he came back with a piece on the prospects for the pound… So look for that in the monthly Review & Focus at a newsstand near you, sometime in the future!

The Japanese yen is back on the rally tracks, as the risk takers have gone AWOL… Yen is back to below 91, trading with a 90 handle, and looking perky… Should the Jobs report in the U.S. today be rotten, yen should have a field day VS the dollar. Now there’s something to look for!

The Brokerage House that owns a Bull, issued a report that said, “Dollar would slide if U.S. loses more than 700,000 jobs”… They really went far out on the limb with that one, eh? HAHAHAHAHAHAHA! No, I’m not taking a shot at our friends there, just pointing out that even the Big Boys right now, don’t have a strong conviction on the direction of the markets right now… So, they tip-toe through the tulips…

Canada will also print their employment data this morning… About 1/2 hour before the Jobs Jamboree. I also didn’t like hearing what the Canadian Finance Minister had to say yesterday about Canada seeing a “substantial deficit later this year”… The Finance Minister, Flaherty will present his budget on April 1… Let’s hope he’s setting us up for an April Fool’s Day joke! Unfortunately, I don’t think these Gov’t people have a sense of humor, so I think it’s safe to rule that thought out right here, right now!

I’ll finish this up with a brief snippet from a report by one of my fave writers, William Pesek of Bloomberg… Mr. Pesek’s complete piece can be found here: http://www.bloomberg.com/apps/news?pid 601039&refer columnist_pesek&sid aHOuXTmCv61Y

Here’s William Pesek… “Beijing bookstores would be wise to stock up on Johann Wolfgang von Goethe. His work will help Chinese officials understand the “Faustian bargain” in which they are engaged with the U.S.

The reference here is to a compromise of principles for fleeting gains. In literature, Goethe’s Faust is a mythic German alchemist who made a deal with the devil. And that, in a nutshell, is where China, the biggest foreign holder of U.S. debt, finds itself as America re-inflates its economy.

Treasury Secretary Henry Paulson isn’t the devil, yet on his watch the U.S. has morphed into a huge debt-issuing machine. The Congressional Budget Office says the U.S. deficit will more than double this year to at least $1.18 trillion, the biggest since World War II.

Barack Obama has even bigger plans. The CBO’s estimates don’t include the cost of the president-elect’s stimulus package, which will probably add at least $750 billion to the total over the next two years. Last year’s shortfall totaled $455 billion. The U.S. needs China’s money more than ever.

“I spent most of the first two quarters of 2008 marveling at the pace of Chinese reserve accumulation,” Council on Foreign Relations economist Brad Setser in New York wrote on his Web log this week. “I expect to spend the first few quarters of 2009 marveling at the size of the U.S. fiscal deficit.”

Currencies today 1/9/09: A$ .7065, kiwi .5920, C$ .8435, euro 1.3710, sterling 1.5260, Swiss .9150, rand 9.69, krone 6.9350, SEK 7.8350, forint 201.70, zloty 2.9575, koruna 19.3150, yen 90.75, Sing 1.4790, HKD 7.7570, INR 48.25, China 6.8355, pesos 13.76, BRL 2.2980, dollar index 81.65, Oil $41, Silver $11.18, and Gold… $853.50

So… Hold on today… The Jobs Jamboree could be earth shattering as far as the markets are concerned.

Source: A Jobs Jamboree Friday

Normally, the first Friday of a month is Jobs Jamboree Friday, but with most Gov’t workers on holiday, the Jobs report won’t print until next Friday. The Weekly Initial Jobless Claims dipped below 500K last week at 492K, but you would have to think that the dip had more to do with the holidays and offices being closed than any reversal of the job loss trend. But you know the mass media, they were all over this report, smiling like Cheshire Cats, as if… As if 492K job losses the previous week was something, to, smile about! UGH! These guys… And gals… I tell you, they must go home at night and either they are brainwashed, and feel good about what they do each day, try to make the U.S. Consumer feel good… Or they go home and vomit!

OK… I’ll go onto something else, that commentary was not going in the right direction! Wait! I just read the Economic Calendar incorrectly for today! We will get some data… The ISM (manufacturing) index will print for December, and is expected to fall even further from the previous month’s 36.2 print… Remember, of for those new to class, an index reading below 50 represents contraction in the industry… One below 45 for two consecutive months is a lock on indicator of recession… So, that’s where we are here in the U.S. dealing with a recession and we keep wishing, and hoping, thinking and praying, that it will not turn into a depression.

As I told you on Wednesday, it looked as though a return to Risk Aversion, was creeping into the markets once again. And that return to Risk Aversion, has had a different affect on the currencies this time. This time, Japanese yen has not blossomed / rallied on the Risk Aversion. (recall that Risk Aversion causes Carry Trades to be unwound, thus supporting yen) Yen has traded back to 91 and change this morning…

But again, the price action this week can’t be used as any indicator as to what will happen when everyone returns to the desk with bright shiny faces next week. I think that you need to re-read Wednesday’s “Chuck speak” to get a handle on what to expect the first 3 months of this new year… You can always read archives along with the current Pfennig at: www.dailypfennig.com

So… It looks like 13 will become 14 in 2009, as the Czech Republic, once viewed as being on the fast track to euro adoption, will adopt the euro on November 1 this year. It’s about time! The other two countries viewed as being on the fast track to euro adoption, Hungary and Poland, have really run into a tough row to hoe, but they’ll get there eventually… In fact, I’m still of the thought that the Eurozone / euro will grow to 25 members in the next 10 years… Of course there are those “Chicken Littles” running around squawking that the Euro won’t be around next year, much less 10 years from now… Just shows to go you just how different I think from “others”!

And what about Gold in 2009? Well, first of all that was some roller coaster ride that Gold had in 2008, reaching for the stars of $1,000 only to fall back $250, and then rebound $130 to close the year at $880… Well… Going back to my thoughts about an “Obama bounce” in the first quarter of this year, I would have to think that Gold will not have much support given that scenario… But… If my thoughts about the second half of the year hold true, then Gold should have a smashing 2nd half to 2009… So… The “play” in the 1st half of the year, and especially the 2nd QTR, is to look to buy the dips… But that’s only if you believe my scenario for 2009… If you don’t, then steer clear of Gold and every other commodity!

I see more and more calls for $2500 Gold… WOW! I think to myself, that, would mean that the U.S. economy is really suffering, and if Gold would every reach those “crazy” levels, the dollar must be just about at its intrinsic value… (get it?) So… In my mind, I have to hope the price of Gold doesn’t go to $2500, because then we would have a worthless dollar… And I know that there are some out there that truly believe that I “want” the dollar to be worthless, that’s not the case… I live here, I need dollars for gas, groceries and giggles…

Well, it didn’t take long for another Central Bank to get back to the rate cut table in 2009, as India’s Central Bank cut 50 BPS to 5% this morning. With a lot of Central Banks around the globe now pretty much with rates cut so close to the bone, I don’t know that we’ll continue to see rate cut after rate cut in 2009… For instance, the Reserve Bank of Australia (RBA) could very well be finished with rate cutting… I guess the real question on everyone’s mind is how long will the U.S. Fed keep rates close to zero? I would only hope that the answer to that question is “not very long”! But you know the Fed, they most likely will leave them too low for too long, thus fueling the next bubble, whatever that might be…

Of course, the other day I said that U.S. Treasuries were the next bubble to pop, so Treasuries can’t be the “next bubble” as they are already a bubble! Just think about all that Treasury issuance that’s going to be needed in 2009 to finance the Gov’t’s goings on…

Speaking of the Gov’t’s goings on… My friend, Bill Bonner, always has a unique way, and one that I totally enjoy by the way, of explaining things… And here’s Bill talking about the current recession and what the Gov’t has been doing about it… (www.dailyreckoning.com)

“The bad news is that government meddlers all over the world are making the situation much worse. They don’t have any choice. They have to react. And the only things they can do are the usual claptrap remedies. More government spending. More giveaways. More bailouts. All they are doing is trying to avoid the ‘creative destruction’ that a real economy needs… and postponing the inevitable adjustments and corrections that must be made.

“But it gets worse. Because the world’s main debtor – the USA – is also the custodian of the currency that most of the world’s debts are denominated in. And Ben Bernanke is hell-bent on making sure that the US does not follow the Japanese example…or the example from the U.S. in the ‘30s. He won’t stand for deflation. He’ll wants to fight it in the worst possible way, because he wants to go down in history as the first and only central banker to beat it. What’s the worst possible way to fight deflation? Print money.”

I went back to January 2008 to see what I had said last year at this time just for grins… This is somewhat interesting, folks… I talked about how we could see a dollar rally taking the euro back to 1.40 (it was around 1.48), and that Gold would hit $900 soon…

I’ll finish up today’s letter with a snippet from the NYT that Chris Gaffney sent me on Wednesday… I read it and said… “sounds like this writer, reads the Pfennig!” I bet you’ll think the same, but here it is….

“he answers to those questions will depend on the availability of credit in all its forms — home mortgages, personal and business loans and bonds sold by corporations, states and municipalities. For now, many banks are hoarding money rather than lending it. Their holdings of cash have nearly tripled to just over $1 trillion in the last three months, according to Federal Reserve data.”

All of the money supply the Fed has pumped into the markets is currently being held by the banks. The Fed just keeps pumping out more money supply trying to get the banks to open the tap. But the pressure behind the tap continues to increase; and once the banks crack it open I think we could see a huge flow of funds back out into the markets. The banks won’t be able to close the taps, and we will see the inflationary flipside of this temporary deflation.

The Fed says it will be able to ‘pull back’ some of the excess liquidity it is pumping into the markets, but it will be like trying to stop the flow of water after a damn breaks.”

OK… Onto the Big Finish for this first working day of 2009!

Currencies today 1/2/09: A$ .6950, kiwi .5810, C$ .82, euro 1.3950, sterling 1.45, Swiss .9395, rand 9.44, krone 6.9650, SEK 7.78, forint 190.50, zloty 2.99, koruna 19.22, yen 91.20, sing 1.4550, HKD 7.75, INR 48.75, China 6.83, pesos 13.74, BRL 2.3160, dollar index 81.47, Oil $42, Silver $11.12 and Gold $870

Source: Currencies Range Trade with a Bias to Buy Dollars

U.S. stocks were set for a mixed open on Wednesday, which ends one of Wall Street’s worst years and raises hopes that a new year and fresh policy initiatives will stave off a deepening recession.

The Federal Reserve on Tuesday pushed forward with its effort to drive down mortgage costs, setting a target of buying $500 billion in mortgage-backed securities by mid-2009.

The move could bolster optimism as investors have been heartened by signs that the Fed is fighting aggressively to cushion the downturn, including dropping interest rates to near zero.

“Things haven’t improved but at least the Fed has stopped things from appreciably worsening,” said Barry Ritholtz, chief market strategist at Fusion IQ in New York.

“Clearly most investors this year were not prepared for what happened and I think there’s a sigh of relief from those that were blindsided that the year is finally over.”

The number of workers filing new claims for jobless benefits fell much more than expected to 492,000, but seasonal factors likely contributed to the drop and the labor market remains very soft.

S&P 500 futures rose 3.40 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures climbed 14 points, while Nasdaq 100 futures were off 3.25 points.

The broad S&P 500 looks set to end 2008 down about 40 percent for the year, though it has recovered almost 18 percent since hitting an 11-year low on Nov. 20.

Markets around the world have been pummeled as the collapse of the U.S. housing market evolved into a global credit crunch and economic slowdown which infected everything from financials to automakers to retailers.

The U.S. casualties include the bankruptcy, acquisition or government takeover of such household names as Bear Stearns, American International Group , Washington Mutual, Merrill Lynch and Lehman Brothers.

AIG, which was rescued by the government soon after the collapse of Lehman, is prepared to ask the Federal Reserve to relax rules on its more than $60 billion disposals program to allow bidders to use a greater proportion of shares to pay for its assets, the Financial Times reported.

On the housing front, demand for U.S. mortgage applications was unchanged during the Christmas holiday week, holding the highest levels in more than five years with loan rates near record lows, an industry group said on Wednesday.

Bernard Madoff, alleged to have run a decades-long $50 billion Ponzi scheme, faces a Wednesday deadline to tell regulators how much he is worth and where his money and other assets are.

The Madoff scandal, which came to light earlier this month, has added to already negative sentiment in the markets. Scores of wealthy people, banks, universities and charities around the world say they are victims, but so far the exact amount of money lost is not known in what could be the largest fraud in Wall Street history.

On Tuesday, stocks climbed after the government expanded its bailout of the auto industry, encouraging hopes policy-makers will continue to take steps to minimize the severity of the year-long recession.

NEW YORK, Dec 31 (Reuters)

• FedEx Corp. (FDX) mixed bad news with good in its latest quarterly report. After posting a profit for its second fiscal quarter, the package delivery giant also said it’s suspending pension contributions, freezing new hires, cutting its CEO’s pay by 20% in order to cut $800 million by the end of its fiscal 2010, Reuters reported.

• Wal-Mart Inc. (WMT) store representatives told Bloomberg that the world’s largest retailer would begin selling Apple Inc.’s (APPL) iPhones by the end of the year. The move is seen as positive for both companies, as it gives Wal-Mart a hot new item and Apple a gigantic new sales outlook.

• General Motors Corp. (GM) denied a report yesterday (Thursday) that the company reopened merger talks with Chrysler LLC. The report first appeared in The Wall Street Journal. “We have had no talks with them since we announced during our third-quarter earnings call that the talks had been suspended,” GM spokesman Tony Cervone said, Reuters reported.

• Credit card firm Discovery Financial Services (DFS) added itself to the list of companies applying to become a bank holding company, thus making it eligible for federal TARP money. The company also reported a $432 million profit in its fiscal fourth-quarter, up from a $56 million loss the previous year, MarketWatch reported.

• The Labor Department said yesterday (Thursday) that the number of filings for initial jobless benefits fell to a seasonally adjusted 554,000 from an upwardly revised figure of 575,000 the previous week. Still, claims remain near the highest level since 1982.

• Goldman Sachs Group Inc. (GS) has agreed to share its 29% in Sanyo Electric Co. Ltd. (OTC: SANYY) to Panasonic Corp. (ADR: PC) for at least $6.4 billion, Reuters reported. The purchase will make Panasonic Japan’s No. 2 electronics manufacturer after Hitachi Ltd with $120 billion in annual sales. Goldman had previously rejected two other offers from Panasonic.

• The U.S. economy will begin to rebound late next year or early in 2010, IMF Managing Director Dominique Strauss-Kahn told Spanish newspaper Expansion. He based this view on the likelihood that the housing market will soon bottom and demand will follow the recent wave of fiscal stimuli. Though he added: “We recognize, however that the possibility of a recovery is plagued with uncertainty.”

• Carnival Corp. (CCL), the world’s largest cruise operator, reported a 4% rise in fourth-quarter earnings yesterday (Thursday), but lowered its 2009 outlook as consumers will likely cancel or delay vacations for the next year. The company’s quarterly revenue rose 6% to $3.3 billion.

Source: Global Investing Roundups Friday, December 19th, 2008