After all, the economies in both China and India are apparently continuing to grow at a fairly rapid pace, and those countries’ demand for transportation and other forms of energy are thus likely to keep pace. For some minerals, the period of high prices from 2005 to 2008 has produced a surplus. But no such effect has been seen in the oil market, as large new discoveries are hard to find.

If we’ve learned anything in the last few years, it’s that political risk is very important in oil investments. It’s not just a question of outright nationalization – as is true in Venezuela. Other greedy countries, like Nigeria, boosted the royalties payable when oil prices were high, and have shown little willingness to reduce them again now that they have declined.

Hence, it’s once again time to look at investments in the one important energy source whose friendliness to the United States and decent quality of governance can be assured.

I’m speaking, of course, about Canada.

Canadian oil-and-gas investments are attractive for three reasons.

• Canada’s political stability makes it a buffer against turmoil from less-stable oil sources.
• The country’s conventional oil-and-gas sources add substantial capacity at reasonable prices to U.S. domestic oil production; these sources are profitable at almost any plausible oil price.
• And Canada’s tar sands in the Athabasca region represent a potential source of oil, with approximately 1.6 trillion barrels of theoretically recoverable reserves. That’s potentially larger than the Middle East, but with two major problems: The cost of production is high and the environmental impact could be substantial.

That last point – and the two major problems it identifies – is key. At low oil prices, both factors make tar sands problematic; it is politically more difficult to overcome environmentalist objections if secure oil sources do not appear a priority. However, at high prices, environmentalist problems go away, although they may add to extraction costs. However, if prices escalate rapidly, extraction costs also tend to escalate, so oil-shale-producers reaped less of a bonanza than they might have in 2007-2008.

Now that oil prices have stabilized, the cost increase has slowed, so that (for example) Suncor Energy Inc.’s (NYSE: SU) tar-sands-production costs in this year’s first quarter rose only 6% from the previous year, hitting $28 per barrel. Since oil prices are currently around $58 a barrel, that leaves plenty of profit margin.

The Canadian oil business is still rather more entrepreneurial than the international majors – Calgary is that kind of place. I remember an instance when I was working as a banker back in the 1980s. I’d spent the weekend in New York with my girlfriend, and then turned up for a scheduled Monday lunch with some oilmen at the Ranchmen’s Club. Not thinking, I’d ordered my normal urban cocktail, an Apricot Sour. This was quite rightly treated with great derision, and I was firmly presented with a bullshot (vodka and beef bouillon) – in a pint beer mug!  Got the deal, I’m proud to say, but was pretty worthless for the rest of the day.

The message: Investing in Calgary oil is a little like dining at the Ranchmen’s Club; you have to have certain qualities of fortitude and stamina!

Canadian oil companies you might look at include the following (when looking at earnings, the first quarter of 2009 is a good guide; 2008 is all over the place because of the bizarre behavior of oil prices):

Canadian Natural Resources Ltd. (NYSE: CNQ): Primarily a conventional oil producer, this company’s operations are centered on Western Canada, the North Sea and offshore West Africa (Gabon), though it is also building an oil sands plant north of Fort McMurray, Alberta. It is trading at about 14 times earnings when you strip out misguided risk management, and about 80% above book value. It’s over-leveraged, too. Conclusion: A decent company, but pricey.

EnCana Corp. (NYSE: ECA): North America’s largest natural gas producer and conventional oil producer, with operations in Western Canada, offshore Nova Scotia and the Western United States. It is a leader in oil recovery through steam-assisted natural drainage. Based on first-quarter earnings, its Price/Earnings (P/E) ratio is about 9, and its Price/Book (P/B) ratio is about 1.7. It has only moderate leverage. Conclusion: This one looks like a decent value; it even pays a semi-respectable dividend, yielding 2.8%.

Imperial Oil Ltd. (NYSE: IMO): Majority-owned by ExxonMobil Corp. (NYSE: XOM). Even though it’s now headquartered in Calgary, Imperial is the least Calgary-ish of Canada’s oil majors. It owns 25% of Syncrude Canada Ltd., the oldest tar sands project, and also explores for and produces conventional oil in Western Canada and in the offshore Atlantic provinces. Imperial also refines and markets petroleum, owning a chain of service stations and convenience stores, and produces petrochemicals. It experienced a sharp drop in first-quarter earnings, its P/E based on the lower first-quarter results is about 40, with the stock trading at four times book value. Conclusion: Overpriced.

Nexen Inc. (NYSE: NXY): The former Canadian arm of Occidental Petroleum Corp. (NYSE: OXY), it owns 7% of Syncrude and another (Long Lake) start-up tar sands project, and has oil producing operations in Yemen, the North Sea, the Gulf of Mexico, Colombia and offshore West Africa. Its P/E is about 20 based on first-quarter results and it is very over-leveraged. Conclusion: Given the non-Canada risk, not very attractive.

Suncor Energy Inc. (NYSE: SU): A major tar sands play, Suncor has now agreed to merge with Petro Canada (NYSE: PCZ), a deal that’s expected to close in the third quarter. Suncor also produces natural gas in Western Canada and operates refineries. Petro Canada has tar sands, natural gas, pipeline and retail operations. It is priced at about 30 times annualized first-quarter operating earnings, but oil prices are up about $10 since then (which should boost its earnings), and its tar sands production is ramping up. Conclusion: At 2.3 times book value, with a respectable balance sheet, it’s a decent bet on oil’s growth sector.

Talisman Energy Inc. (NYSE: TLM): The former BP Canada (NYSE ADR: BP), it was spun off in 1992, grew through acquisitions, and now has a diversified portfolio of holdings. It’s active in Western Canada, the Western United States, the United Kingdom (including a wind-farm operation), Norway, Colombia, Peru, Algeria, Tunisia, Indonesia, Malaysia, Vietnam, Australia and Qatar. It has sold $2.5 billion worth of operations to raise cash. Talisman has a P/E ratio of about 8, based on its first quarter, or 11, based on continuing operations in that quarter. It has a P/B ratio of about 1.4, and only moderate leverage. Conclusion: An iffy company in terms of quality, but cheap, and is thus worth a look.

Source: The Six Ways to Play Canada’s Oil Sector

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This from Steve:

The complete inability of the banks to offer any solution to their current problems, other than to have the taxpayers pay for their bailout is the best case for some form of government intervention.

Nationalization is a disgusting word to me, but even I have reached the point of believing something needs to be done to pull us out of this mess.

Bankers have always been a strange group to me. They are the first and loudest to scream about welfare and people taking responsibility for their actions, and they are the first and loudest begging for a bailout from a situation they are responsible for creating, at least in part.

These people absorbed the entire first half of the TARP money and made no appreciable change in their lending. They have acted as if the TARP money is theirs and not the taxpayer’s.

They created and bought mortgage-backed securities they knew were garbage and expected the U.S. Government to make good on them. It’s another form of welfare.

It’s hard to believe the best and the brightest didn’t know what they were buying, with other people’s money, of course.

The obvious solution to this problem is to have the banks work openly with mortgage holders and rework these problem loans, sell off the garbage, take the loss and get this show on the road.

They haven’t done this because I believe they have no ability, or lack the willingness, to see beyond the balance sheets and recognize that this is a unique situation. The solution requires imagination, creativity and stepping beyond the normal banking parameters.  Bankers are not known for their creativity.

Bankers cannot solve the banking mess. They have offered no solution other than to wait.

The best proposal, with the greatest probability of success, looks like this: a government group takes over the asset base of the zombie banks.  The group separates the good assets from the bad, values them as accurately as possible, sets up a sale mechanism similar to the Resolution Trust Corporation to get something for the dead wood and then turns the cleaned up operation back to the bankers.

The banks take a loss, but the good assets become available to be used as reserves for lending.  We can finally stop guessing and actually know exactly what we have.

There is money to be made in this nightmare, but you’ll have to do your best imitation of not thinking like a banker to take advantage of it. Here’s my recommendation.

There appears to be no way banks, or their stock, will recover from their current situation unless something radical is done. If the limited intervention concept wins, and I think it will, we will see bank stocks drop to something similar to an AIG scenario, the stocks will be near worthless until there is a resolution of their balance sheets and asset woes.

So the obvious play now is to short or buy puts on individual bank stocks or the S&P Select Financial Spyder ETF (NYSE:XLF). Yes, I know, they are already in the toilet, but take a look at the XLF puts for Sep 09 or Jan 10 and you’ll see some real profit potential.

Also, JPM and WFC have not been immune to the beating the markets have been handing out lately. While these are the two banks with the smallest problems, they are not immune to the coming slaughter. There is lots of room for a downside play here.

If the markets react as they always have, we will have a period of severe bleeding following the government intervention, which is why this strategy will work. This should be followed by the usual waiting period to allow the street to adjust to the change and then I see a big upward move in what I call “resolved banks.” Time frame? 18 to 36 months.

How do you make money now? Look further out than the end of your nose, imagine what we could do to turn this mess around, and don’t sit around waiting for the government to send you this month’s welfare check.

Keep your eye on the horizon.

Source: Short The Banks Again For A Huge Gain

Mr. Dodd, a man who pontificates on any and every subject under the sun and never lets real knowledge of a particular subject area stand between him and the nearest microphone decided to try out the “N” word – Nationalization! Traders viciously dumped the dollar on Dodd’s “deliberation.”

Dodd Speaks, the Dollar Sinks

And of course the games continue!

The dollar was sharply lower on opening in Asia last night with nationalization of U.S. banks ruling the headlines. But of course the U.S. isn’t the only one flirting with bank nationalization. Take a second look at Europe and Japan (and just about anywhere you care to look) and it’s ugly!

The euro has already reversed 200 pips from its high overnight, likely due in part to Mr. Trichet’s weighty assessment that Europe’s financial system is under huge strain. I say weighty because one should never confuse Trichet’s statements with anything dribbling from the constantly flowing font that is Dodd.

We were of the opinion U.K. banks would beat others to the race toward complete bank nationalization. But it’s probably splitting hairs as de facto nationalization seems the order of the day. Why buy financials in your 401(k) when you own them anyway?

I used to tell people that currency analysis was like being the judge at an ugly contest – the least ugly wins. But now, there is little that separates the degree of ugliness among all competitors. Thus, we have gold printing over US$1,000 and who knows where from here.

Gold has soared against the euro, pound, Aussie and U.S. dollar; though it hasn’t made a new high yet against the buck.

Gold Has Already Climbed Against the Aussie, Euro, Pound and Buck

We’re still sticking to our story that the world reserve currency will be buoyed at a time like this. But I have to admit that I’m covering my eyes when I see the U.S. government’s supercharged attempts to spend its way out of a debt deflation…ugh.

Replacing public debt to the same or increasing degree in which private debt is written down (public debt really means private debt because the private sector does all the wealth creation – while government mostly destroys it trying to “help” us) is no way to allow the system to cleanse.

But with pontificating pandering politicians never more than two minutes away from a microphone, we seem to be stuck there. And I have to wonder why we aren’t seeing any “traction.” Is it to cry, or maybe time to buy more gold? Maybe both!

Source: Only Gold Is Winning the Ugly Contest

The government currently owns $45 billion in preferred Citi shares, or a 7.8% stake of the company. By converting those shares into common stock, the government would increase its stake to 40% at the expense of current shareholders, whose stock would be diluted. The move would be at no additional cost to taxpayers.

Citigroup officials would prefer the government stake be closer to 25% according to The Journal.

By converting the preferred shares into common stock, Citi would bolster its “tangible common equity,” or TCE.  The TCE is a measure of what shareholders would receive if an institution were liquidated. It is expected to be one of the key components of the new financial stress tests being administered by federal regulators.

Those stress tests are scheduled to begin this week and will determine how much – if any – additional money that large financial institutions receive from the government. This additional step is being taken to address a gap in how the U.S. government – under the original Troubled Assets Relief Program (TARP) – was previously analyzing the health of big banks and other financial institutions, before injecting taxpayer-provided capital. With the stress tests, the Obama administration is aiming to have a better handle on the health of these institutions, and to lessen the odds that additional rounds of rescue money would have to be brought to bear.

Indeed, under this new plan, if the current financial situation deteriorates, the government may resort to take a majority stake in the most troubled lenders. This has raised the specter of bank nationalization, something that has been hotly debated among the country’s leading financial analysts.

The government has already taken controlling interests in insurance giant American International Group Inc. (AIG), and mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE), and now analysts are starting to believe that many financial institutions – Citigroup in particular – are technically insolvent and will ultimately have to be taken over by the government no matter what happens.

“History has shown that those shareholders will likely be wiped out anyway,” Michael Parness, chief executive officer of TrendFund.com, told Cherry Creek News. “Look at Bear Sterns, AIG, Freddie and Fannie Mac. The Fed is trying to be all things to all people and support the system while propping up the stock market.”

Meanwhile, critics have said that nationalization will undermine the entire private financial sector and could cause investors to panic and abandon shares of healthy institutions.

For now, the federal government has given every indication that it will continue to balk at outright nationalization, choosing instead to provide a “temporary” buffer for firms against increased losses during the crisis.

“There’s a very strong commitment on the part of the administration to try to return banks or keep banks private or return them to private hands as quickly as possible,” U.S. Federal Reserve Chairman Ben S. Bernanke said last week.

White House spokesman Robert Gibbs echoed that sentiment at recent press conference.

“This administration continues to strongly believe that a privately held banking system is the correct way to go, ensuring they are regulated sufficiently by this government,” Gibbs said. “That’s been our belief for quite some time and we continue to have that.”

Source:  With Government Talking to Citi About a Larger Stake, Bank Nationalization Still Off the Table

Oil prices dropped more than $1 on Friday as the deteriorating global economic outlook stoked concerns that crude demand will continue to shrink.

U.S. crude futures for March delivery, which expire on Friday, fell $1.13 to $38.35 a barrel by 1228 EDT (1728 GMT), after posting the biggest settlement gain since Dec. 31 in the previous session.

Brent crude fell $1.09 to $40.90 a barrel.

The losses tracked weakness in U.S. stocks, which fell sharply led by banking shares on fears that a U.S. bank rescue plan might lead to nationalization.

Economic news was grim outside the United States as well, with European shares hitting a six-year low as investors fretted about capital increases and bank nationalization on the back of a deepening economic downturn.

The broad Topix index of Japanese shares closed at its lowest level in about 25 years.

A rally in gold, a traditional safe haven for investors, to over $1,000 an ounce, its highest since March of last year, also added pressure to oil prices by drawing investors away from riskier markets, dealers said.

Oil prices had rallied strongly on Thursday, jumping 14 percent after data showing an unexpected draw in U.S. crude stocks. But worries over the health of oil demand have resurfaced, with sentiment dented by sharp falls in equity markets.

“There were some signs (in inventory data released Thursday) that oil may be stabilizing, at least demand. But this morning crude oil is lower and the market is still looking at the weakness of the economy.” said Peter Beutel, president at Cameron Hanover in New Canaan Connecticut.

Crude inventories in the United States, the world’s top consumer, fell slightly last week on lower imports and higher demand, the U.S. Energy Information Administration said, snapping seven straight weeks of builds against market expectations.

Crude prices have fallen more than $100 a barrel from the peaks hit last July as the worsening economic crisis has bitten into oil demand, prompting the Organization of the Petroleum Exporting Countries (OPEC) to agree to deep output cuts.

In the latest indication that OPEC members are complying with the agreed cuts, Kuwait notified at least two buyers in Asia that it will keep curbs of 5 percent below contracted volumes for April-June term crude oil supplies, steady from March, trade sources said.

Source: NEW YORK, Feb 20 (Reuters)

“When the Treasury tells a bank to pay a penny a share versus its old dividend, you know who’s calling the shots,” says Jon Bruss, an old-hand banker and founder of Fortress Partners Capital Management in Wisconsin according to Bloomberg.

“It may not be de jure nationalization but I think it’s de facto nationalization.”

Ignore the italics; state-control by law is coming regardless – soon and everywhere.

Starting in the US, Larry Summers’ letter to law-makers last week guarantees nationalization by default, by making good on the myth that private investors control how publicly-quoted corporations behave. They therefore deserve an absolute loss of capital investment, if not a full public flogging, starting with zero return. And no return means zero risk capital.

Promising to be the very best head of Barack Obama’s National Economic Council he ever could be, Summers vowed to cap and cancel dividends to banking stock-holders if their bank requests two dollops or more of federal assistance. So as the last fortnight’s trade shows, those banks crying “Help!” will only see whatever risk-capital still remains flee…meaning the state will have to step in with more aid again…guaranteeing no return-on-investment to free-market cash…sparking a last panic out of the bank’s issued share capital…leaving the feds to step in and acquire the whole bank.

Private investment isn’t being crowded out, in short, so much as thrown out the window. But it’s not just this capital re-structuring which will surely end with outright state ownership. Standing surety for depositors’ cash makes it a dead-cert as well – or so we guess here at BullionVault – for all but the smallest, most boring (and therefore most innovative!) groups.

Deposit insurance is one thing, and a very fine thing the FDIC represents too – that post-Depression vow of well-meaning bureaucrats to abolish all day-to-day risk in money, creating untold risk instead in home loans, investment banking and consumer credit over the next 60 years. But stumping up hard cash in the event of a bank-run would now be quite another joy-ride entirely. Because one run would beget more runs elsewhere. And meeting the cash call all in one go would bankrupt the entire state at a stroke.

For example, household cash balances at UK banks now total almost £1 trillion ($1.35trn) – nearly twice the London government’s entire 2008 budget. Other financial firms are owed a further £880bn by the banks. Non-financial firms hold £375bn on deposit. So in the event of a banking collapse, full nationalization would seem the cheap option (short-term, at least) ahead of paying out on the FSCS (the UK equivalent of the FDIC). Meeting the statutory promise, with little or no cash cushion to help, the British state would need to find something like 1.8 times a full year’s GDP. A fire-sale of “assets” would only cause a further meltdown in stocks, housing and credit. Trying to raise the cash by selling new gilts would prove risible. (The UK’s going to have trouble raising £118bn for its operational deficit alone in 2009.) Whereas deferring the hit, by taking it onto the state’s balance-sheet for some indefinite settlement, at least keeps the sovereign solvent today.

And what does that world look like? Iceland is first to find out, that tiny island of 305,000 souls. Its banking sector – with risk “abolished” and thus merely transmuted, just like everywhere else – built up what looked like assets worth some €100 billion by 2007 (around $130bn, both at then and today’s exchange rates). Yet the central bank only had €2 billion in foreign currency reserves, as the Wall Street Journal noted last autumn, “meaning it was effectively unable to fill its role as lender of last resort” when foreign lenders – the true deus ex machina for any national economy – baulked at fresh loans.

Come the crunch, Iceland’s banks found themselves without a back-stop. The safety-net of government aid simply didn’t exist…the holes between the strings were too big…and in a nation of just 305,000 people, the problem all governments face became plain to see. Because the Treasury, state, government, sovereign – whatever you want to call that leviathan supposed to exist outside of the day-to-day flux, secure and securing against all possible outcomes – is only ever identical with the population. National resources can never be greater than the nation itself.

Or as Abe Lincoln almost said, “Government of the people, for the people and by the people just keeps coming back to…umm…the people!”

Defending bank savers against bank default means using bank savings as their own guarantee. Because where else will the money come from? Now the risk of default stands so plainly in front of the entire industrialized world, it sure won’t come from that rare beast known as banking-stock shareholders. Those few stock-holders still in are being chased away.

Fancy a loan, comrade?

Source: Broke: No Choice But Nationalization

Good day… And a Wonderful Wednesday to you! The first full day of the new regime… I will say this, it makes one proud to be an American when you can watch a peaceful, even extravaganza, handing over of leadership… It really rips me up when I read that the Wall Street Boys really contributed cash to the inauguration proceedings… Making certain the new President knows who contributed cash to his party… Probably cash they received from the Gov’t in bailout payments! Nah… That couldn’t happen… Could it?

Well… The currencies didn’t really trade outside of a very tight range yesterday, except for the pound sterling, which continues to fall VS the dollar, euro, yen, and probably even the Zimbabwe currency! OK, that’s harsh! But I wanted to paint the picture, so that everyone understood the grave situation the pound sterling is in… The Bank of England has decided to take 70% control of the Royal Bank of Scotland, and nationalization isn’t far behind for that bank, and a few others…

Yesterday, the Bank of Canada (BOC) lowered their official interest rate by 100 BPS or 1%… I told you long ago that the BOC would follow in the Fed’s footsteps, and they have… Canada had it all going for them last year, with gold rising, Commodities like Oil, natural gas, and metals all rising, but that curtain came down hard on Canada and their dollar / loonie. It will be some time before the loonie can recover… but… if my scenario of soaring inflation for the U.S. and rising Commodities again comes to fruition, then it won’t be that long, not in the scheme of things…

There was word yesterday that the Monetary Authority of Singapore (MAS) stepped in to support the Sing dollar after it had fallen to a 6-week low. This kind of intervention works in this case, as the Sing dollar is relatively small in circulation, and the intervention doesn’t have to be of size to stabilize a market… But, they (the MAS) need to know when to get out, and let the markets be… They gotta know when to hold ‘em, know when to fold ‘em….

Gold put in another strong performance yesterday adding $21 as I left for the day. Jennifer asked me during the day if this was a first, with Gold and the dollar rising… I said that I had seen it before, but it certainly doesn’t normally go that way… For Gold is another offset currency to the dollar… Which leads me to believe that it wasn’t so much dollar buying as it was euro selling yesterday…

The Boys and Girls at Morgan Stanley issued a report on Gold recently that called for Gold to reach a new record within the next 3 years. They call for the Gold to “average” higher each of the next three years through 2012, with the average this year to be $900, next year $1,000, the following year $1,050, and $1,075 in 2012… Personally, I believe their call to be quite conservative, something that we’re going to see a lot of in the next few years, as these research teams, back off the “hyper-calls” for assets, as they walk gently over eggshells in an attempt to not garner the spotlight…

At least they’re calling for higher Gold prices… You normally don’t see Wall Street firms going out of their way to talk up Gold… For that thought, you normally don’t see Bankers talking about Gold either… That’s where I’m different! I talk to one radio station quite often and they call me the “un-banker”! That’s right, baby! I’m not even your last choice as a “banker”… I’m a markets guy…

OK, enough of that self-promotion! HAHAHAHAHAHA!

Back to the markets… Well, the Obama bounce didn’t come in the first day of his Presidency, as the Dow sold off by 332 points! UGH! OUCH! That’s going to leave a mark! So far, one piece of the Obama bounce, the dollar, has rallied… But the other, stocks, have fallen on their face…. We’ll have to see what stocks think about the $850 Billion stimulus package that the Obama team is working on…

Here’s the skinny on the package, that could still grow… It certainly isn’t going to narrow! The stimulus plan covers 5 areas of spending and tax breaks… Health, education, infrastructure, energy, and support for the unemployed and the poor. All worthy areas… Unfortunately, we (the U.S.) don’t have the funds to pay for this… Now… If we weren’t already in a huge deficit hole, then a stimulus package to get the economy going might be the answer… But, that’s not the case! I told a radio station a week ago that the Roosevelt plan worked back in 1933, but it could have just as well failed, it was that touch and go, and if it weren’t for the war it might not have… This time, we’re starting in a deep, dark deficit hole… I sure hope it works… I just can’t get my arms around how adding $2 Trillion to our national debt this year helps…

How did I get to the $2 Trillion? Well… The Congressional Budget Office (CBO) has already told us the deficit in 2009 would be $1.2 Trillion. Recall I had a cow over that announcement! Well, the CBO’s budget forecast does NOT include the new stimulus plan of $850 Billion… I’ll tell you what it also doesn’t include… Any new military expenses… And the remaining TARP money that the Obama team just came into…

I just heard, and sang along with, out loud, good thing no one else is here!, one of my all-time face Chicago songs… Hard Habit To Break… Yes, the habit of deficit spending is a Hard Habit to Break apparently… So, where’s the change?

OK, Whew! I really went off on a tangent there, eh? Oh, some of that was from my radio interview, and some of it was from my good friend, David Galland, who recently put out a piece on the spending… David used to take my Review & Focus draft, and make music with it… What a writer!

I see where Christopher Cox, resigned from his leadership role at the SEC… I think back to the election process when John McCain was asked what he would do about the financial mess, and his first response was to say that he would fire Cox… McCain got all kinds of flak for that… But in hindsight, given the failure of the SEC to spot Madoff’s alleged ponzi scheme, that call doesn’t look so bad now, eh? So… According to Harvey Goldschmid, a former Democratic SEC Commissioner, the SEC was “passive” under Cox… Well, you can expect that pendulum to swing swiftly to the other side… As with all things in life… They go too far one way, and when somebody notices, they swing too far the other way… Never finding a “happy medium”…

Someone sent me a note yesterday and said I hadn’t mentioned the Swiss franc and why it had fallen on hard times, after posting a great 3-month return… I pointed back to a previous Pfennig that pointed out that UBS was involved in a bond scandal in Italy, and it reverberated all the way to the franc… Of course since then the euro has fallen from 1.34 to 1.29, and that has even more to do with the recent movement in francs… Remember… The euro is the Big Dog of currencies…

I’m currently reading a research report on China, in my “spare” time I might add! The research plays well with what I’ve been harping about for some time… And that is rising inflation in China, and how the Chinese officials should use a stronger renminbi to combat that inflation… There are a lot of people, researchers, pundits, out there calling for China to slow down their renminbi appreciation VS the dollar… I’m on the other side of that fence, as usual, right? I think the Chinese WILL use the renminbi as an inflation fighting tool… More later, when I have some “spare” time!

For readers of our monthly client newsletter, Review & Focus, you’re in for a special treat in February… The Big Boss, Frank Trotter, submitted a special report called “The March of the Presidents” which goes back to Nixon, and gives grades based on raw data, not sentimental, of “soft stuff” … Strictly numbers… Inflation, unemployment, etc. Look for it at a news stand near you!

Currencies today 1/21/09: A$ .6510, kiwi .5210, C$ .7925, euro 1.2925, sterling 1.3770, Swiss .8750, rand 10.2725, krone 7.04, SEK 8.3250, forint 220, zloty 3.3660, koruna 21.42, yen 89.80, sing 1.5025, HKD 7.7580, INR 49.11, China 6.8375, pesos 13.95, BRL 2.36, dollar index 86.20, Oil $41.29, Silver $11.40, and Gold… $860.70

Source: Gold Moves Higher With The Dollar