And Japanese yen is “getting bought!” Yen is trading in the 93 range this morning… Strong, very strong!

When this all began, I truly believed that it would last through the elections and on to the end of the year… Then the magnitude of the problems were revealed, and I changed that to lasting probably through to spring. The longer it takes the “boys” Paulson and Bernanke, to get this credit market crisis unlocked, the longer it will take before we return to the fundamentals that continue to get worse by the day.

On Friday, Chris printed some thoughts I had left him regarding the data that printed on Wednesday, wasn’t that just downright scary? I know that a ton of you all had the day off on Friday, and didn’t see the Pfennig that day, so for those of you that missed class on Friday, here’s what I had to say about the data prints from Wednesday…

New-Home Sales Sink 5.3% to Lowest Level in 17 Years U. Mich. Confidence – new low since ‘80
Chicago PMI collapses Consumer Spending Fell to 7-Year Low in October (manufacturing for that region)
Americans’ Food Stamp Use Nears All-Time High

And can’t imagine what in the world the people that make the official call on a recession the NBER (National Bureau of Economic Research) are thinking… I called this a recession back in January, and they have yet to make the call… Amazing!

Of all that bad data, the only one that will have a good outcome in the end, is the Consumer Spending falling to a 7-year low. We’ve gone on with this spending more than we make, for far too long! Now, if we could just get the Gov’t to do the same!

Now onto this week… So, as I said above, the risk aversion theme is back… There will be a ton o’ data print this week with it all culminating on Friday with the Jobs Jamboree… Just peeking ahead at Friday, the “experts” believe the job losses for November will be 320K, with the unemployment rate moving to 6.8% from 6.5%. That’s downright ugly folks.

Speaking of ugly… Today, we’ll see the color of the Nov. ISM (manufacturing) Index, which collapsed to 37 last month, and is expected to have fallen to 32 in Nov. All this “bad data” does is put the Trading Theme front and center even more…

OK, The Chinese renminbi has fallen .73% overnight, which is the largest drop for the currency since dropping the peg to the dollar in July 2005. I find it interesting that the banking officials allowed the renminbi to drop by that large of an amount right before, U.S. Treasury Sec. Paulson is about to visit… Can’t you just hear the Chinese saying something like this to Paulson… “See, Mr. Treasury Sec. we can play games with our currency too, and so now if you’ll just get yourself back on that plane, and leave us alone, we’ll see where the currency goes next.”

The Chinese have their own problems right now, and making sure their currency continues to strengthen isn’t one of them! China has shifted from “inflation fighting” which requires a strong currency, to “promoting growth” which doesn’t! And with exports set to collapse next year, given the U.S. recession, a currency strengthening just isn’t on their agenda any longer.

There will be a truck load of Central Bank rate meetings this week, beginning with the Reserve Bank of Australia (RBA) tonight. The Reserve Bank of New Zealand (RBNZ), Bank of England (BOE) and European Central Bank (ECB) are all expected to cut rates this week, and then next week, we’ll see rate cuts from the Bank of Canada (BOC) and the Fed Reserve…

Global rates are going lower and lower folks, we had all better be prepared for this, as it is going to happen, no doubts. For instance, I fully expect the RBA to announce a 75 BPS rate cut tonight or tomorrow, whenever they do it…

Now… Enough rate talk… How about we visit the goings on with the bailouts? Oh, goodness gracious, no! I don’t want to go there! My blood pressure is doing just fine today! Oh? I have to? The little guy on my right shoulder is telling me to not go there, and the little guy on my left shoulder is telling me to do it, NOW! Hmmm… Ok, I won’t do it, but what I will do is give you a thought from a reader, who is an investment advisor regarding all of this and the Gov’t taking ownership of banks… Let’s listen in…

“Does anybody out there have any memory of the reason given for the establishment of the DEPARTMENT OF ENERGY during the Carter Administration? Anybody? Anything? No? Didn’t think so. Bottom line .. . we’ve spent several hundred billion dollars in support of an agency the reason for which not one person who reads this can remember. Ready? It was very simple, and at the time everybody thought it very appropriate. The Department of Energy was instituted 8-04-1977 TO LESSEN OUR DEPENDENCE ON FOREIGN OIL. HEY, PRETTY EFFICIENT, HUH? AND NOW IT’S 2008, 31 YEARS LATER, AND THE BUDGET FOR THIS NECESSARY DEPARTMENT IS AT $24.2 BILLION A YEAR, THEY HAVE 16,000 FEDERAL EMPLOYEES, AND APPROXIMATELY 100,000 CONTRACT EMPLOYEES AND LOOK AT THE JOB THEY HAVE DONE! THIS IS WHERE YOU SLAP YOUR FOREHEAD AND SAY ‘WHAT WAS I THINKING?’ Ah yes, good ole bureaucracy. And now we are going to turn the Banking system over to them?”

Now, that’s one of those things you say, Whoa There Partner! I’ve warned about this Gov’t sticking their hands into banks and acting like owners before… But that’s exactly what’s happening folks…

OK, enough… Let’s talk Gold a bit… Mark O’Byrne, executive director at Gold & Silver Investments, has his attention on the open interest numbers.

Comex gold futures open interest—the number of outstanding contracts—declined sharply this month, falling to 289,700 contracts in the week ended November 18, according to the Commodity Futures Trading Commission. That’s down 9.3% from a month ago.

What the low open interest means is “that nearly all the speculative froth has been liquidated and remaining longs are ‘strong hands’,” O’Byrne says. “This will encourage more long interest to enter the market and should contribute to markedly higher prices in the coming weeks.”

OK… But… We need to see the markets return their focus on the fundamentals to weaken the dollar before we get any “real traction” in Gold… At least that’s my opinion, although Gold did have its best month in 9 years in November, gaining 11%…

Well, the good news from the weekend was that the Black Friday retail Sales were stronger than expected… But what’s going to happen when, as I said above, job losses post a 320K figure at the end of the week? I think it takes the wind out of those sails in a heartbeat!

I’ve gone on a bit this morning, but there’s lot to talk about, and that means an Iceland update! Reuters reported on Friday that… REYKJAVIK, Nov 28 (Reuters) – Iceland’s parliament passed legislation on Friday to curb currency outflows and the central bank vowed to restrict credit as authorities moved to restart trade in the collapsed Icelandic crown.

“The bank will maintain tight control over the access of banks to central bank credit until exchange market stability has been achieved,” Sedlabanki said on its Web site.

It said temporary currency restrictions, which had been necessary for Iceland to function at a basic level, would be lifted in stages.

“A considerable proportion of crown-denominated securities are owned by foreign investors. Lifting restrictions by stages will make it possible to unwind their crown-denominated positions in a systematic way, as the external balance permits, without undue impact on the exchange rate.”

There have been quite a few individuals that have ripped us for our handling of the Iceland meltdown, but as you can read above, there WERE CURRENCY CONTROLS in place…

One industry that’s not experiencing slowing sales… Guns… Barack Obama apparently is the best salesman the gun industry has had in years! With many buyers worrying about higher taxes or limits put on guns and ammo, sales are quite brisk since the election… I sure wish I was talking about home sales being brisk, or computers, or something like that…

Currencies today 12/1/08: A$ .6425, kiwi .5355, C$ .8045, euro 1.2675, sterling 1.5040, Swiss .8285, ISK 230, rand 10.25, krone 7.0280, SEK 8.1825, forint 207.35, zloty 3.0425, koruna 20.2330, yen 93.90, baht 35.75, sing 1.5285, HKD 7.7518, INR 50.29, China 6.8842, pesos 10.25, BRL 2.3735, dollar index 86.71, Oil $52.07, Silver $9.94, and Gold… $794.00

Source: Back to Risk Aversion

Copper ended the week on a down note, wrapping up the biggest weekly loss in a month as the strengthening dollar made the metal less attractive to investors holding foreign currencies.

“A firmer dollar appears to be playing a role in base (metals), and with relatively elevated base metals prices, thin trade and no sign of any urgent consumer demand, only renewed US dollar weakness or further production disruptions will keep metal prices supported,” said UBS analyst John Reade.

The reallocation of capital is also playing a clear role, as traders place bets that equities have made their bottom.

“Equity markets are trading in the black this morning as investors increasingly gravitate towards the view that the worst of the financial markets difficulties are behind the main players,” said JP Morgan analyst Michael Jansen.

“A view that the credit market crisis is fading would be broadly U.S. dollar-supportive and help to chip away at the gains made in commodity prices,” Jansen added.

Nevertheless, fundamentals watchers see the bull market running on. “We expect 2008 to be another year of sluggish supply growth,” Barclays Capital analysts wrote yesterday.

And there will inevitably be disruptions such as are now occurring in Chile. State-owned Codelco, the world’s largest producer, has already closed two mines because of strike-related violence, and more closings may follow, the company says.

If “we see a clear risk to people’s lives and safety, we are going to have to halt operations, not just at the request of union leaders but as a management decision,” said Codelco vice-president Daniel Barria.

Oh, good, I was worried there for a minute. But the government says it’s going to make sure we never have another mortgage crisis. Hoorah!

And how, exactly, is it going to do that? Well, Treasury Secretary Mark Paulson has an idea: Shuffle oversight entities around to cut out redundancy.

Yes, dear friends, we don’t have to worry about securitization or evil banks trying to turn a profit when you borrow money from them ever again because Paulson is making sure that the SEC joins forces with the Commodities Futures Trading Commission (CFTC), and he wants to unite the Office of Comptroller of the Currency and the Office of Thrift Supervision to fight crime and inhibit the amassing of wealth.

Office of What?

If you’re like me, you didn’t even know we had an Office of Thrift Supervision. And isn’t an office full of salaried employees all there to ensure thrift contrary to the object of thrift?

Maybe I don’t understand the true purpose of this office. But I find that I don’t really have a desire to learn its function. Generally speaking, when I find out about the everyday functions of a government organization, I find myself more annoyed at the waste than illucidated into passive acceptance.

According to Paulson, combining the offices will actually cut down on redundancy in government. In fact, we may only have one regulator covering each regulation after he gets done.

Congressional approval

Unfortunately, to do his little regulatory shuffle, Paulson will have to ask Congress for approval. And efficiency doesn’t get you reelected. But pointless grand gestures and adding more useless doodles and curlicues on top of our economic regulations during a market crisis does (Just look at the farcical waste of Congress’s time and our money that happened with the defense bill “debate” before the last general election if you want to know what I’m talking about.).

Senators, representatives and presidential candidates have been busy calling for more government oversight of the financial industry. And maybe Congress will settle on Paulson’s idea as its “savior” in the current camera-mugging opportunity. It could actually save money and provide a simpler system for companies trying to follow the ornate business laws already in place in the U.S.But I’m afraid the public, or at least the public as it is seen by the press and elected government, will require a whipping boy after watching their home values collapse and inflation destroy their savings. Someone must be slapped about by a Congressional committee or, preferably, jailed in a comfortable resort-like low-security prison for several months to satisfy the blood-lust incited by the real estate collapse.

We’ll have to wait and see if Paulson can win the day or if we’re in for a nice thick layer of new regulations spread on top of the country’s financial laws in coming months.