I call them the “zombies,” the institutions being propped up by government bailouts. Companies like Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC), General Motors Corp., Chrysler LLC, etc. On an operating level, these walking dead are sucking the life out of the recovery.

Unlike in previous downturns, huge resources have been devoted to propping up entities that should have been taken out of the picture.

Of course, it’s easy to avoid zombies directly. No one is going to force you to take a position in GM. But if you really want to know where to look for the bargains – for companies that have the greatest potential for serious growth in real numbers and real markets – you need to look for what I call “zombie-free zones.”

Unfortunately, the United States and the United Kingdom are not “zombie-free” zones – and thus offer the worst hunting ground available right now.

If you’re looking for something solid, there are only three places to aim your portfolio. In fact, my top three picks are…

Germany, Korea, and Canada.  All have an abundance of companies you can invest in with at least a good chance of not being forced to compete with the undead.

The Problem with Zombies

You see, the problem with zombie banks and companies is that they soak up resources that should be devoted to living banks and companies, while providing unfair competition that makes their competitors unsound.

It’s difficult to see this effect at the moment, because the U.S. Federal Reserve is propping up the banking sector. It’s much clearer in the automobile sector, where the zombies GM and Chrysler make it more difficult for Ford Motor Co. (NYSE: F) to compete. There’s no question that the continued existence of Chrysler after its first non-bankruptcy in 1979 drastically weakened Ford in the 1980s and 1990s.

There’s the effect on wages too. The United Auto Workers (UAW) union is a huge supporter of the GM and Chrysler rescues, partly because they keep UAW members employed at above-market wage rates. One certainly can sympathize with the great many American autoworkers that have lost their jobs, but by keeping the sector over-employed, the government is driving up wages and hurting businesses – particularly Ford, the only member of Detroit’s “Big Three” to not ask for a bailout.

The same effect can be seen in the banking sector. The bonus pool at JPMorgan Chase & Co. (NYSE: JPM) is partly inflated by the continued employment of all the Citibankers who should have lost their jobs. Since banking pay scales got over-inflated during the bubble, it is reasonable now for them to come back down to earth, but that’s not going to happen while banks are in their current undead state.

Turning to the international market, it is immediately clear that Britain has the same problem as the United States, only on a larger scale. Royal Bank of Scotland Group PLC (NYSE ADR: RBS) and Lloyds Banking Group PLC (NYSE: LYG), two of Britain’s largest banks have been kept open by the government. (Though, to be fair, Lloyds only got in trouble because the government made it acquire another failing bank, HBOS.)

Financial services is a huge part of Britain’s economy, which needs to diversify, but it won’t be able to diversify if so much of its talent is locked up in banking, and its best graduates are sucked into the high-paying dealing rooms of the City of London.

Japan has the same problem. Here the zombies are really ancient, cobwebbed skeletons left over from the 1990 collapse of Japan’s bubble. Some of them were put out of their misery by Junichiro Koizumi, the reformist prime minister, in 2003. Yet just this week we learned that many Japanese retailers face losses because of competition from The Daiei Inc. and Ito-Yokado Co. Ltd., gigantic retailing companies that were effectively bankrupt in 1993 but have been propped up by Japan’s banks. If you’re afraid of zombies, Japan is really creepy!

Historically, Europe is the continent where investors have suffered most from zombies propped up by governments. Certainly some countries, notably Italy, are attractive only for investment necrophiliacs.

Where to Find “Zombie-Free Zones”

There are some exceptions. Germany has only a few relatively small zombies. Both Sachsen LB and IKB Deutsche Industriebank AG, the banks that got in trouble buying U.S. subprime mortgage-backed bonds, have been sold to other buyers – Sachsen to a larger Landesbank and IKB to the private equity group Lone Star Funds. Whatever their subsequent fate, those banks are currently being managed on a profit-maximizing basis.

There is a large older zombie, Hypo Real Estate Holding AG, the former Bayerische Hypothekenbank, which got in trouble in the late 1990s lending to real estate in the former East Germany, but that appears an isolated example. Industrially, Germany has been admirably rigorous in cleaning up its dead companies, and with its new pro-market government looks attractive for zombie-fearing money.

In Asia, South Korea is probably your best bet. The country had a big zombie problem ten years ago, but that problem has been cleared up with the bankruptcy and reorganization of several conglomerates and much of the banking system. This time around, there have been few major casualties and so the economy looks relatively zombie-free.

Finally, there is our northern neighbor, Canada. Canadian housing never became as over-extended as U.S. housing, and the Canadian bank bailout was correspondingly smaller, with none of the banks facing bankruptcy. Canada had a bad zombie problem fifteen years ago from decaying heavy industry, but today those zombies are long gone and the Canadian economy is resilient. The most recent bankruptcy, Nortel Networks Corp. (OTC: NRTLQ) in Jan. 2009, is being handled in a thoroughly market-oriented fashion, with its assets being sold off piecemeal. So your money is safe in Canada – lots of snow, but no zombies!

Source: Why You Need to Look at these Three ‘Zombie-Free Zones’

We challenge you to find the “green shoots” in this picture. It shows the severity of the financial crisis in terms of corporate profits.

As we’ve said before, you may be able to have a jobless recovery, but we seriously doubt you can have a profitless one. Unless the negative trend line of this chart changes direction, you can forget about a sustainable rebound in stocks.

What you’re looking at is by far the biggest decline in earnings on record (the data goes back to 1936). It shows that 12-month as-reported S&P 500 earnings have declined over 90% over the past 20 months (with over 90% of S&P 500 companies having reported for Q1 2009). (Hat tip to The Big Picture.)

This decline will not be fixed by Team Obama “phony money” solution. At best, the complete abandonment of sound fiscal principles will put off the great credit unwinding. And there is evidence in current stock valuations that it is having an effect on investor sentiment. But as recent experience has taught us, credit expansion cannot go on forever. And a bubble in treasuries is no exception.

Here’s what RBS chief credit strategist Bob Janjuah has to say about phony money. (Apologies to the grammar police: Janjuah isn’t one for the finer points of syntax and spelling.)

As absurd as the shrill chorus that is busy spinning that fact that coz central banks are going print-tastic, this means stocks are going higher and higher. Have folks learnt NOTHING!! The events of the last few yrs highlight the difference between ILLUSORY wealth/growth and REAL wealth/growth. The illusion can win out for a while, but ultimately REALITY WILL BITE HARDER the longer the illusion persists. But somehow this shrill chorus is given air-time and column inches – I am stunned by this. Be Warned – reckless central bank printing has NEVER succeeded over any meaningful investment horizon as a means of delivering real grwth and real wealth gains, and it is NOT going to wrk now. In fact, if the REFLATION/NOMINAL GRWTH policy trick does get legs, it will be simply setting up the next even more nasty balance sheet recession, from which the road back to normality will be horrible and much worse than what we have now.

]]> http://www.contrarianprofits.com/articles/obamas-phony-money-wont-fix-economy/16834/feed 0 http://www.contrarianprofits.com/articles/are-europe%e2%80%99s-banks-next-to-be-stressed/16478 http://www.contrarianprofits.com/articles/are-europe%e2%80%99s-banks-next-to-be-stressed/16478#comments Mon, 11 May 2009 15:45:11 +0000 William Patalon III http://www.contrarianprofits.com/?p=16478 Now that the results of the U.S. bank stress tests are finally in the books, the extent of the capital shortfalls are known and – in many cases – are actually being addressed.

But there’s now another problem looming – one that could ultimately weigh down the global financial system.

The problem: Europe’s banks.

As economies slow in other parts of the world, rising joblessness and plunging housing prices and escalating loan losses are putting banks under pressure. That’s especially true in Europe, where consumers and companies are continuing to run into trouble.

Royal Bank of Scotland PLC (NYSE ADR: RBS), now 70% state-owned, fell to a loss in the first quarter and wrote down $3.17 billion in risky assets after its bad debts quadrupled…

A collapse in exports and industrial overcapacity are the two main factors dragging on China’s economy. The 6.1% expansion follows growth of 6.8% in the previous three months and 9% for all of 2008.

The global financial crisis has obliterated overseas demand for Chinese goods and factory closures have force millions of migrant workers back to the countryside. But still other data suggests that this could be the low point for China’s economy.

Industrial production expanded by 8.3% in March from a year earlier, up from 3.8% in the first two months of the year. Retail sales rose 14.7% – an indication that domestic demand is picking up. Auto sales jumped 10% in March from a year earlier, and 27% from February, to 772,400.

Even the decline in exports is slowing. After tumbling by 25.7% in February, exports fell 17.1% March.

Also, a 30.3% surge in urban fixed-asset investment – China’s benchmark measure of capital spending – is proof that the nation’s robust $585 billion in stimulus is beginning to take effect.

Beijing continues to assert that it will reach its growth target of 8% annual growth. And while independent analysts remain skeptical, they still foresee stronger growth for the Asian juggernaut going forward.

The Organization of Economic Cooperation and Development (OECD) forecasts 6.3% growth for China’s economy this year, compared with a 4.4% contraction in the United States. Royal Bank of Scotland Group PLC (ADR: RBS) has raised its forecast from 6.5% to a range of 7%-7.5%.

“The stimulus policies – both fiscal and credit expansion – led by the government is certainly the main driver of the rebound. The full impact of those stimulus policies will be shown in the coming months,” UBS Securities economist Wang Tao told The Wall Street Journal.

Wang estimated that first-quarter GDP grew around 7% from the fourth quarter on an annualized, seasonally adjusted basis, and she expects sequential growth of 12% in the second quarter.

Source: China’s Growth Slows but a Rebound May be on the Way

This controversial proposal – and the support that it’s getting – also underscores China’s continued emergence as a growing global force in both the financial and political arenas. That’s a trend that successful global investors won’t be able to ignore.

The recent torrent of criticism to swirl around the dollar began with remarks by Chinese Premier Wen Jiabao.  Speaking last month at a press conference leading up to the recent Group 20 meeting in London, Premier Wen voiced his concern about the value of China’s large holdings of U.S. Treasuries.

“We have lent a huge amount of money to the United States,” he said. “Of course, we are concerned about the safety of our assets. To be honest, I am definitely a little bit worried. I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

Of China’s $2 trillion in foreign currency holdings, about $1 trillion is invested in U.S. Treasuries and notes issued by other government affiliated agencies, such as Fannie Mae (FNM) and Freddie Mac (FRE).

“They are worried about forever-rising deficits, which may devalue Treasuries by pushing interest rates higher,” JP Morgan & Co. (JPM) analyst Frank Gong told The Associated Press. “Inside China, there has been a lot of debate about whether they should continue to buy Treasuries.”

Earlier this year, the Congressional Budget Office (CBO) projected that the U.S. budget deficit would nearly triple from last year’s $455 billion – and would reach a staggering $1.2 trillion. And that was even before U.S. President Barack Obama unveiled his $787 billion in stimulus, bank-rescue and anti-foreclosure plans. And that massive projected shortfall also doesn’t include other fix-up initiatives that are sure to surface in the months ahead.

But rather than sit idly by and watch the value of its reserves be eroded by the U.S. government’s economic policies, China is trying to lay the foundation for future change.

China and the SDR

On the eve of the G-20 summit, Zhou Xiaochuan, governor of the People’s Bank of China, released an essay entitled “Reform of the International Monetary System” on the BOC’s Web site.

Without explicitly mentioning the U.S. dollar, People’s Bank Gov. Zhou asked what kind of international reserve currency the world needs in order to secure global financial stability and facilitate economic growth.

According to Zhou, the dollar’s unique status as the world’s primary currency reserve has resulted in increasingly frequent financial crises ever since the collapse of the Bretton Woods system in 1971.

“The price [of relying solely on the dollar] is becoming increasingly higher, not only for the users, but also for the issuers of the reserve currencies,” Zhou said. “Although crisis may not necessarily be an intended result of the issuing authorities, it is an inevitable outcome of the institutional flaws.”

Zhou called for the “re-establishment of a new and widely accepted reserve currency with a stable valuation” to replace the U.S. dollar – a credit-based national currency. The central bank governor noted that the International Monetary Fund’s Special Drawing Right (SDR) should be given special consideration.

Created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system, the SDR was redefined in 1973 as a basket of currencies. Today, the SDR consists of the euro, Japanese yen, pound sterling, and U.S. dollar.

“The SDR has the features and potential to act as a super-sovereign reserve currency,” said Zhou. “Moreover, an increase in SDR allocation would help the Fund address its resources problem and the difficulties in the voice and representation reform. Therefore,efforts should be made to push forward a SDR allocation.”

Zhou proposed the following actions to move the SDR in a direction that could better accommodate demand for a more stable reserve currency:

• Set up a settlement system between the SDR and other currencies. Therefore, the SDR, which is now only used between governments and international institutions, could become a widely accepted means of payment in international trade and financial transactions.

• Actively promote the use of the SDR in international trade, commodities pricing, investment and corporate bookkeeping. This will help enhance the role of the SDR, and will effectively reduce the fluctuation of prices of assets denominated in national currencies and related risks.

• Create financial assets denominated in the SDR to increase its appeal. The introduction of SDR-denominated securities, which is being studied by the IMF, will be a good start.

• Further improve the valuation and allocation of the SDR. The basket of currencies forming the basis for SDR valuation should be expanded to include currencies of all major economies, and the GDP may also be included as a weight. The allocation of the SDR can be shifted from a purely calculation-based system to one backed by real assets, such as a reserve pool, to further boost market confidence in its value.

China Rallies BRIC Allies

While China has been the most vocal proponent of a new – less-dollar-oriented – global currency system, other countries around the world have taken up the cause.

Russia, as Thursday’s videoconference illustrated, is working with China to push for an overhaul of the current currency system. In fact, the creation of a new reserve currency to be issued by international financial institutions was one of the measures Russia proposed to the G-20 on March 16.

Russia and China have also been joined by India and Brazil. Representatives from each of the four BRIC countries met in the weeks before the G-20 summit, and an unnamed source told Reuters that a shift away from the dollar was discussed.

“They (China) did not formally put forward their position for the G-20 summit but unofficially they had distributed their paper regarding the same ideas (the need for the new currency),” the source told Reuters, speaking on condition of anonymity.

Shortly after the G-20 meeting, Russia proposed that the IMF or G-20 study the creation of a new international reserve currency.

“The new global reserve currency has not been discussed at the summit. We only discussed it at several bilateral meetings,” Russian President Dmitry Medvedev’s chief economic aide, Arkady Dvorkovich, told a news briefing.

Weeks later, China agreed to a $10 billion (70 billion yuan) currency swap with Argentina.  That deal will allow China to receive yuan, instead of dollars, for its exports to the Latin American country.

Including the latest deal with Argentina, Beijing has signed about $95 billion (695 billion yuan) of currency deals with Malaysia, South Korea, Hong Kong, Belarus, and Indonesia over the past few months.

These deals undermine the status of the dollar as the world’s leading trade-and-reserve currency, but they also broaden the status of the yuan – something policymakers in Beijing see as being vital to China’s economic success, particularly in light of the current financial crisis.

“Beijing has its eye on raising the status of the yuan,” Ben Simpfendorfer, an economist at the Royal Bank of Scotland Group PLC (ADR: RBS), told The Associated Press. “They are the world’s second-largest exporter and the third-largest economy, so it is in their interest to handle trade in the yuan.”

While it continues to push for reform, China is also realistic about a timetable for achievement.

“”When a problem comes up, it’s always better to discuss it than not. But important reforms take more than one or two days,” Sun Zhongtao, a professor of international strategy at the Central Party School in Beijing, told the AFP. “Under the new system, the dominance of the dollar is set to be challenged. But it’s impossible to reach consensus on such issues overnight.”
But for many analysts, the support that China has been able to drum up in just a short matter of time is evidence of the nation’s growing economic and political clout.

“In the Asian financial crisis, China kept a relatively low profile and it didn’t assume any kind of leadership role at that stage,” Brian Bridges, a political scientist at Hong Kong’s Lingnan University, told the AFP. “Now the contrast is very significantly different in terms of China being much more open and involved in the financial system.”

For Bridges China’s determination to flex its financial muscle and expand political influence is what sets it apart from other would-be success stories, like the Japan of 1980s.

“In the case of China, you have a power which is almost simultaneously both becoming a rising economic power and also [becoming increasingly] involved in political and security issues around the world,” said Bridges. “It’s slightly different from the Japan model, because Japan was first an economic power and there was expectation it would become important in political and security issues. But it never actually fulfilled that role.”

Source:  China Flexes its Muscles and Finds Support in a Bid to Dump the Dollar as the World’s Main Reserve Currency

• Warren Buffet’s Berkshire Hathaway Inc. (BRK.A, BRK.B) is investing 3 billion Swiss francs ($2.6 billion) in Swiss Reinsurance Co. (ADR: SWCEY ). Swiss Re, which is expecting a net loss, said it is also seeking another 2 billion francs on the capital markets, the Associated Press reported.

• Renowned global investor Jim Rogers said he’s keeping his money out of weakening Russia – saying there is “a good chance Russia will continue to disintegrate into more than one country” in a Bloomberg Television interview. “I am not optimistic about the continuous stability of Russia,” Rogers said.

• Ford Motor Co. (F) is talking with China’s Geely Auto Holdings Ltd. (PINK:GELYF) about unloading its unprofitable Volvo unit, several sources told Bloomberg. Ford has also contacted China’s Chery Automobile Co. and Chongqing Changan Automobile Co. about Volvo, the people said.

• LVMH Moet Hennessy Louis Vuitton SA (ADR:LVMUY) said net income dropped 4.2% to $1.5 billion (1.14 billion euros) in the six months ending in December, missing analysts’estimates for second-half profit, Bloomberg reported.  The world’s largest luxury-goods maker said higher handbag sales failed to offset slumping demand for Hennessey cognac and Moet champagne. The financial crisis has crimped demand for even the most expensive luxury goods, eroding sales in the $230 billion (175 billion-euro) luxury goods market.

• U.K. Prime Minister Gordon Brown signaled he won’t block bonuses to executives at Royal Bank of Scotland Group Plc (ADR: RBS) as lawmakers stepped up pressure to adopt a U.S.-style plan capping pay. While he told reporters he supported President Barack Obama “strongly” on the need to change the way bankers are rewarded, he twice refused to say he’d ban bonuses at RBS, Bloomberg reported.  The U.K. government is taking a 70% stake in RBS after the Edinburgh-based institution tapped part of the Treasury’s 50 billion-pound recapitalization fund.

• U.S. mortgage rates jumped to their highest levels since December this week, frustrating efforts to bring mortgage rates down to levels that will spur demand and help the hard-hit housing market begin to recover, Reuters reported. Interest rates on U.S. 30-year fixed-rate mortgages rose to 5.25% for the week ending February 5, up from the previous week’s 5.10%, according to a survey released Thursday by home funding company Freddie Mac (FRE).

• The National Retail Foundation said current economic stimulus legislation might not do enough to spur consumer spending and repeated its call for a series of temporary sales tax holidays. The retail trade group estimates that the proposed tax holidays would save consumers about $20 billion, or $175 per family, reported. The U.S. government would reimburse states for the lost revenue.  The proposal comes as the NRF forecasts a 2.5% drop in retail sales in the first half of 2009.

Source:  Global Investing News Briefs Friday, February 6th, 2009

“Right now, given the concerns that we have over the size of this package and all of the spending in this package, we don’t think it’s going to work,” Rep. Boehner said yesterday (Sunday) on NBC-TV’s “Meet the Press.” “And so if it’s the plan that I see today, put me down in the ‘No’ column.”

The plan – detailed in a Money Morning report last week – could potentially pass the Democrat-dominated House without Republican support, The New York Times reported. But the stimulus plan will face major opposition when it comes before the U.S. Senate, U.S. Sen. John McCain, R-Ariz., told “Fox News Sunday.”

If at least two Republicans don’t approve the bill, the proposal won’t be able to achieve the majority vote of 60 it needs to be filibuster-proof. McCain said he also plans to vote “No” unless the stimulus bill is changed.

“We need to make tax cuts permanent, and we need to make a commitment that there’ll be no new taxes,” McCain said. “We need to cut payroll taxes. We need to cut business taxes.”

Added McCain: “We need to have a commitment that after a couple of quarters of [gross domestic product] growth that we will embark on a path to reduce spending to get our budget in balance.”

McCain lost the November presidential election to Obama.

That’s not all that’s taking place in what figures to be a busy stretch this week.

The economic calendar will heat up this week as economists get their initial look at U.S. gross domestic product (GDP) data for the 2008 fourth quarter. Needless to say, the results are not expected to be pretty, with analysts predicting a 5% contraction during that final three months of the year.

The report is due out Friday.

The United States has already been in a recession for a year, the National Bureau of Economic Research (NBER) reported in early December. This downturn – and the bigger-than-usual job cuts that have resulted – could generate a much-bigger financial crisis “aftershock” than many experts realize. Only two of the last 10 recessions to take place since the Great Depression have lasted a full year. But this one could last well into 2010, many economists fear.

The U.S. economy shrank 0.5% in the third quarter, marking the slowing pace since 2001 and continuing a still deepening recession that has wrung the markets since last year. GDP advanced 0.9% in the first quarter of last year and 2.8% in the second quarter, Bloomberg News reported.
Dana Saporta, an economist at Dresdner Kleinwort Ltd. in New York, told Bloomberg projects a 5.4% overall contraction in the fourth quarter. Analysts expect the malaise to carry over well into this year.

The stimulus packages – money spent by the newly departed Bush administration, as well as one planned by the newly installed President Barack Obama – will have a lot to say about how long the U.S. economy stays down. As the Republican opposition comments demonstrate, with Congress (the Democratic members, at least) promising a stimulus package by President’s Day (February 16th), Obama will have his hands full initiating some “give and take” from the dissenters of the current plan.

On Wednesday, U.S. Federal Reserve Chairman Ben S. Bernanke also leads the first Fed policy meeting of the Obama administration though he and his policymaking cohorts have no more wiggle room when it comes to cuts in the benchmark Federal Fed rate.

But the Fed statement should provide insight into the additional measures the central bank has in its arsenal to help jumpstart the economy.

Earnings season also moves forward with energy companies prepared to show the ill-effects of the drop in oil prices.  Exxon-Mobil Corp. (XOM) and Chevron Corp. (CVX) announce late in the week, as does consumer products giant Procter & Gamble Co. (PG).  Amazon.com Inc. (AMZN) also reports quarterly earnings during the week and analysts are speculating whether investors will cheer its results a la Google Inc. (GOOG) or frown along the lines of eBay Inc. (EBAY).

Market Matters

Last Tuesday, Barack Obama took the oath of office (for the first time) and became the 44th president of the United States.  In his inaugural address, President Obama called for “action, bold and swift – not only to create new jobs, but to lay a new foundation for growth.” He then acted “boldly and swiftly” by freezing the pay of high-ranking members of his administration.  One of those potential members, U.S. Treasury Secretary-nominee Tim Geithner, faced the wrath of Congress for his role in the mis-handling of the banking bailout plan and for his failure to pay a mere $34,000 in taxes.  Since the treasury secretary oversees the Internal Revenue Service, certain “rule sticklers” in Congress frowned upon his “careless mistakes.”  Still, he was approved by the Senate Finance Committee and is expected to be confirmed – just in time to oversee the distribution of that next round of Troubled Assets Relief Program (TARP) money.

While Obama begins a new job and tries to “faithfully execute the office” (rather “execute the office faithfully”), a few financial execs are headed for the unemployment line.  John Thain, formerly of Merrill Lynch & Co. Inc. fame/infamy, stepped down or was forced out from his role at Bank of America Corp. (BAC) after failing to disclose dramatic losses prior to the shareholder approved acquisition.

In an effort to stop the negativity – and no doubt to try and protect his own job – BofA Chief Executive Officer Kenneth D. Lewis and several cronies bought more than 500,000 company shares, a move that earned a collective yawn from investors.

Citigroup Inc. (C) will be replacing Chairman Win Bischoff with ex-Time Warner Inc. (TWX) CEO Richard Parsons, and also announced its intent to sell Japan’s Nikko Cordial Securities, a move that confirms that brokerage will no longer be considered a core business.  In other financial news, State Street Corp. (STT) reported a far-worse-than-expected quarter from its asset management business; U.S. Bancorp (USB) announced that profits fell to the lowest level since 2001; Capital One Financial Corp. (COF) posted a huge loss in the quarter and predicted that credit card defaults will only grow in 2009.

Across the pond, Royal Bank of Scotland Group PLC (ADR: RBS) forecast an annual loss above $40 billion which would be the largest ever reported in the United Kingdom.  On the heels of that news, the British government introduced new measures to its bailout plan, including a form of insurance to limit future loan losses.  Investors were hoping that earnings from non-financials would fare better, but Microsoft Corp. (MSFT), eBay, General Electric Co. (GE), Advanced Micro Devices Inc. (AMD) and Xerox Corp. (XRX), among others, disappointed with weak results as well (though Google and Apple offered some bright spots).  Time Warner, Intel Corp. (INTC), and Clear Channel (among others) announced layoffs, proving that most sectors of the economy are hurting.  Non-government arranged deals still exist as Pfizer Inc. (PFE) attempts to acquire pharmaceutical rival Wyeth (WYE) and Mexican billionaire Carlos Slim. Carlos Slim plans to invest $250 million into The New York Times Co. (NYT), The New York Times reported.

Economically Speaking

A rather slow week on the economic calendar last week allowed investors time to focus on the earnings data.  Housing starts fell for the sixth straight month and building permits, a predictor of future activity, dropped to the lowest level ever reported.

The never-ending layoff announcements continued to hinder the labor picture as jobless claims surged far more than expected.  In China, GDP rose by 6.8% in the fourth quarter, a number that would have prompted parades in this country. In China, however, those numbers confirm dramatic slowdowns in the world’s third-largest economy.

The “weak” report means that growth for all of 2008 came in as 9%, the first year since 2002 that China’s growth rate fell below double-digits.

Weekly Economic Calendar

Source: Financial Crisis Challenges Escalate as Republicans Announce Plans to Oppose $825 Billion Obama Stimulus

A nasty day in the currencies yesterday, except Japan of course. The Dow jumped 290 points yesterday, maybe an Obama bounce? You all know that I subscribe to an Obama bounce for stocks and the dollar in the first part of this year… But given what I know about, and what you now know about, after I drew it all out yesterday, the additions to the deficit that Obama will make, the focus on the fundamentals should return by late spring, early summer… That’s my story and I’m stickin’ to it!

Well… As I said in the opening, the currencies led by the Big Dog, euro, suffered through a nasty trading day, with the euro touching below 1.29 for a good part of the day. The risk takers are nowhere to be found. Where have all the risk takers gone… Long time passing… A Reuters reporter asked me yesterday if I was still of the opinion that the yen had more to rally or was it overbought? I said, that as long as the risk takers are nowhere to be found, yen should continue on its path higher VS the dollar, euro and sterling. The RSI (Relative Strength Index) for yen, shows that it is a tad overbought, but that’s not enough to change my mind. Nor is it enough to change the mind of a currency trader at the Bank of New York (BONY), who believes yen may rise to 85 VS the dollar by midyear… Another currency trader at the Royal Bank of Scotland (RBS) believes the Bank of Japan will step in and intervene to stem the yen’s rise….

That may be, but there’s been no sign of the Bank of Japan (BOJ) to date… Of course that could be the kiss of death that I just bestowed on yen… But I somehow doubt it… Yen hasn’t been a moon shot since reaching 88… In fact it has bounced between 88 and 91…

In the overnight markets, the euro rallied all the way up to 1.3080, but since I’ve come in it has been falling and now is barely hanging on to 1.30… The rally just doesn’t seem to have legs and is fizzling out…

OK… Our long time friend, Jim Rogers, was talking again about the currencies… Let’s listen in to see what this very well respected analyst / investor was talking about…

“In a Bloomberg video interview, Jim Rogers said the U.K. is “finished.” According to Rogers, oil sales from the North Sea were the only thing supporting its economy, and the oil is running out. London, a global financial capital, is also a “disaster” because many of the current economic problems originated there. Bankers and money managers left the U.S. to operate with less regulation in London. Rogers has sold all of his pounds sterling.

And with the pound and U.S. dollar under scrutiny, where are currency traders putting their money? In the countries with the largest trade surpluses – Japan, Norway, and Switzerland. European banking giant BNP Paribas forecasts the yen will appreciate about 14% against the dollar by June. Norway’s krone is one of Goldman Sachs’ top picks for 2009 (it’s one of Jim Rogers’ top picks, too). And Bank of America says the Swiss franc will gain against every major currency.

Maybe as speculations, these are good ideas. Me? I prefer gold to any paper currency.”

Yes… Gold… The shiny metal broke its recent trend of rallying along side the dollar yesterday, but the sell off was small… Negligible at best… But a breaking of the trend nevertheless. I believe that Gold will get caught up with the currencies in the Obama bounce, but that will be a temporary thing…

OK… I’ve beaten the pound sterling sufficiently for some time now… But a U.K. reader sent me a note that he saw regarding Barclays Bank… He saw this on CNBC… “The Daily Telegraph and Times newspapers reported on Thursday that any attempt by Barclays to raise extra capital could trigger a clause that would deliver control of the bank to Middle Eastern investors. Barclays opted to raise funds privately last year rather than take part in the British government bailout. Qatar’s sovereign wealth fund and Sheikh Mansour Bin Zayed Al Nahyan, a brother of Abu Dhabi’s ruler, invested up to 5.3 billion pounds in the bank.

According to The Daily Telegraph, a clause in the agreement states that if at any time before the end of June Barclays raised more capital at a price lower than 153.276 pence per share, the Middle Eastern investors could take their stake at that lower level.”

Now that would throw a real spanner in the works for the U.K. if they truly want to go down the nationalization path for their banks… They already own majority stakes in Royal Bank of Scotland, and Lloyds… And they had to take over Northern Rock last year…

I don’t know what nationalizing the banks does to the pound sterling, but the image of this happening can’t be a good thing… Not in my opinion anyway…

So, did you see that China’s 4th QTR GDP grew at a 6.8% clip? Now, compared to the plus 10% growth rates China was posting for the past few years, 6.8% looks pretty measly… But! Let’s look around the world right now and see who has a GDP that even compares? Well, that roster would be pretty small… In fact, I can’t think of anyone other than China that has GDP of 6.8%! This 4th QTR drop puts the annual growth rate in China for 2008 at 9%… Again… I’m from Missouri, you’ll have to show me a country, other than China that posts a figure that strong!

In the whole scheme of things, this is pretty significant for China though. And all the reason I believe the Chinese officials will continue the slow appreciation of the renminbi… This is going to put a lot of people, investors, traders, into a lull regarding renminbi, as everything around the world slows down… But in China, inflation is still a problem, and that can be dealt with by allowing the renminbi to continue its slow appreciation…

Well, I came across something yesterday, I saw it, Kristin sent it to me, and then Chris sent it to me, so it hit a nerve with all three of us… Our friends over at Casey Research, did a chart, that I can’t put in the Pfennig, but I can tell you what is showed us…

Since August, banks have built their cash position in the form of Treasuries, agencies and deposits at the Fed by $865 Billion, while their loans and leases have increased by only $325 Billion. So you can imagine the chart with one line for cash position rising, and the other line for loans falling… Here are the people at Casey Research’s thoughts…

“In other words, rather than lending the billions of dollars received from the Treasury’s Troubled Asset Relief Program (TARP), as was originally intended, the recipient banks have squirreled away the bailout funds in order to shore up their balance sheets.

Concurrently, the Federal Reserve is exchanging its excess reserves for toxic waste from the financial institutions.

The combined affect is a “circular bailout” with the Treasury borrowing… in order to lend money to banks… that then lend it back by purchasing more Treasuries. Of course, the expense of this entire bailout scheme ultimately falls onto the back of the tax-paying public.”

>>>> back to me… We finally get a couple of data bones thrown to us today, as the data cupboard gets restocked with Housing Starts, and Building Permits for December, the House Price Index for Nov. and the Weekly Initial Jobless Claims… None of this will be good, bright, or even a warm and fuzzy, so prepare for more rot on the economy’s vine…

And don’t look now, but the price of Oil has pushed higher this week… Now trading at $44.50

Oh, and one more thing… Singapore officials have announced an economic stimulus package, which has been well received by the markets, and has allowed the sing dollar to bounce off the lows we’ve seen this week… Ok! Off to the Big Finish…

Currencies today: A$ .6565, kiwi .5275, C$ .7940, euro 1.30, sterling 1.3785, Swiss .8650, rand 10.0750, krone 6.9625, SEK 8.22, forint 217.85, zloty 3.3390, koruna 21.30, yen 88.80, sing 1.4950, HKD 7.7590, INR 49.16, China 6.8370, pesos 13.79, BRL 2.3190, dollar index 85.77, Oil $44.50, Silver $11.30, and Gold… $850.88.

Source: Euro Rally Fizzles Out

And don’t expect that market to thaw out anytime soon. Even with the country’s energetic new president, Barack Obama, now ensconced in the White House, consumer and business confidence is virtually non-existent and worries continue to churn that the U.S. banking sector would endure a complete meltdown.

The bottom line: The M&A market has all but disappeared.

“Beyond ‘almost none,’ there is really no story at all,” said Ryan Krueger, founder and Senior Portfolio Manager of Krueger & Catalano Capital Partners LLC, a Houston-based money management firm and a hedge fund manager collectively managing more than $150 million in assets.  “With credit markets frozen, there is no M&A. Or, at least, very little.”

Krueger takes a more optimistic tone about opportunities that may present themselves in the future (if not already) based on lower valuations, but believes the timetable on deals could be rather lengthy as would-be buyers feel no need to rush into transactions at this time.

“I [recently] sat down with a banker who pitched me on a company where I could pay 30 cents on the dollar for their cash alone,” said Krueger.  “I also looked at a gold mining company with proven reserves whose share prices are so low that you could buy the entire company for a little more than $400 an ounce for their gold.  Remember, without a ticker symbol attached, gold is fetching more than $800.  There are already some amazing stories and deals to be found.  Patient acquirers with cash will truly benefit.”

Let the Good Times Roll?

Following a stellar 2007 – a year in which global deal volume reached $4.5 trillion – 2008 started out with a lot of promise. Sure, certain segments of the economy were showing some of the ill effects of the housing collapse. And the dreaded “I” word – inflation – had crept into many water cooler conversations as oil prices pushed past the $100 a barrel level.  Still, cash-rich companies seemed prepared to take advantage of distressed situations, as valuations began to look more attractive following a negative 2007 fourth quarter for stocks.

“Early in the year, companies were in acquisition mode as much of the economy appeared vibrant and business prospects for the future were bright,” said transactions expert Steve Albert, a partner with UHY Advisors Inc., the twelfth-largest accounting firm in the United States, and a member of the executive committee of the firm’s Texas practice.  “As details of Candidate Obama’s tax plan made their way onto the campaign trail [last year], people began to see the prospect of higher capital gains taxes for 2009 as a real possibility.

“Sellers of businesses had hoped to close transactions before the end of 2008 to take advantage of lower capital gains before new higher rates took effect in the following year,” Albert added. “This incentive quickly dissipated with the sudden downturn in the economy in the fall. The financial crisis that emerged reversed the sentiment that President-elect Obama would raise capital gains taxes as now unlikely since his plate would be full dealing with all these other national economic issues.”

The expected follow-through in M&A activity from 2007 never materialized as the credit crunch turned into a credit crisis, which then turned into an outright credit collapse.

Through mid-November, Thomson Reuters Corp. (TRI) reported that deal volume had declined more than 30% from the 2007 levels. In fact, the reduction would have been even greater had it not been for a rash of transactions involving financial institutions – with three of the biggest getting finalized right as 2008 came to a close.

Bank of America Corp. (BAC) purchased one-time behemoth Merrill Lynch & Co. Inc. for about $24 billion, although the deal was initially priced at about $50 billion before BofA’s share price underwent a drastic decline. In the other two other deals, Wells Fargo & Co. (WFC) acquired Wachovia Bank for $15.1 billion and PNC Financial Services (PNC) bought Cleveland’s National City Corp. for $5.52 billion, in moves that allowed the acquiring institutions to receive sizable tax breaks from the losses they were assuming.

The federal government’s bailout initiative – the Troubled Assets Relief Program (TARP) – also led to additional acquisitions of ailing financial companies. In early December, Capital One Financial Corp. (COF) announced its intent to purchase Maryland-based Chevy Chase Bank FSB for $520 million, and a number of life insurance companies looked to acquire small thrifts in order to access some of the TARP money.

According to Bloomberg News data, the world governments had a major hand in more than one-third of the largest deals of the fourth quarter.

The Ones that Got Away

In reality, 2008 will be known more for the “deals that weren’t” than the “deals that were.” According to data from UBS AG (UBS), almost one-third of all transactions that had been announced in 2008 never closed because funding failed to materialize, valuations plunged after the initial announcements, or buyers simply got cold feet in this challenging environment.

“Completion risk is on everyone’s mind,” claimed Cary Kochman who co-manages M&A for the Americas at UBS. “We are, on a historical perspective, amid the lowest level of deal completion.”

While the proposed $45-plus billion acquisition of Yahoo! Inc. (YHOO) by Microsoft Corp. (MSFT) went sour due to founder ego, greed and internal shareholder disputes, other significant transactions were scrapped because of credit concerns and weak economic conditions.

Historically, M&A activity has declined during recessionary times. That makes intuitive sense as companies avoid taking on much additional risk, regardless of the attractive valuations.

Examples abound this time around. For instance, BHP Billiton Ltd. (ADR: BHP), the largest mining company in the world and the subject of a recent “Buy, Sell or Hold” story here in Money Morning, walked away from its $66 billion offer for Rio Tinto Group (ADR: RTP).  Likewise, Canadian telephone giant, BCE Inc. (BCE), was unable to complete its $42 billion sale to a private equity consortium.

Looking Ahead

Many experts expect the declining level of M&A activity to continue through this year – and perhaps even beyond. Barclays Capital Group (PGD) expects deal valuations in 2009 to fall by another 30% to about $2 trillion, levels not seen since 2005.

Barclays acquired the investment banking arm of Lehman Brothers Holdings Inc. (LEHMQ) after the firm declared bankruptcy in September, a development that turned out to be a major catalyst for the current credit crisis and equity market collapse.

According to the Bernstein Research arm of Alliance Bernstein Holding LP (AB), M&A volume will fall by another 25% this year with a total drop-off in activity of 45% from peaks levels in 2007 to 2010.

Even so, Bernstein expects that counter-cyclical industries such as healthcare may see a flurry of activity, as cash-rich companies seek to take advantage of their struggling competitors.

Larry Slaughter, co-head of European M&A for JPMorgan Chase & Co (JPM), believes that most of the deals that do close here in the New Year will be smaller, since the credit markets remain sluggish despite the coordinated government efforts to stimulate lending.

“You are less likely to see deal sizes beyond the $20 billion mark in 2009,” Slaughter said.  “The balance-sheet capacity of the banking system will make it tough to finance much-bigger transactions.”

UHY’s Albert believes we are in a buyer’s market and that companies that are flush with cash may be able to gobble up the ones that find themselves struggling or in distressed situations.

“In the spring of 2008, transactions were being priced at multiples of 8 [times] to 10 times earnings or cash flow,” Albert said. “Suddenly, after the downturn, multiples are more in the neighborhood of 3 to 4 and sellers are, quite frankly, not very excited about the new valuations.”

According to Albert, “with no access to the credit markets, many companies will not be able to finance their transactions – this situation will create a huge advantage for firms that have maintained substantial cash stockpiles on their balance sheets and would be able to consummate deals without having to access the credit markets. Typical companies included in this group with large amounts of cash are Exxon [Mobil Corp.] (XOM) and Microsoft and such corporations could prove to be winners in the current environment in terms of buying up undervalued firms.”

UHY’s Albert sees opportunities for acquisitions within the energy sector, as struggling smaller companies face additional stress with oil trading in the neighborhood of $42 a barrel, meaning they won’t be able to financially justify drilling activities with crude prices so low.

Albert also noted that a talk of a higher capital gains tax could resurface, should the Obama administration economic plan begin to stimulate growth this year, meaning companies would have incentives to close deals before the new tax rates take effect.

Predicting M&A in 2009

Albert also believes that large companies may look to sell off non-core businesses or even international arms as they streamline and downsize operations.

“More than ever, management must play to their strengths and some may look to unload non-critical operations, particularly those that require substantial cash flow to manage,” Albert said.

Krueger & Catalano’s Krueger suggests that the current challenges will create future opportunities.

“As a result of the deepest most violent collapse in asset prices of all flavors, we are now planting the seeds for future deals,” Krueger said.

By dropping interest rates to historically low levels, he said that the government is practically begging investors to consider mergers and acquisitions again.

“Bottom line, capital will seek a return and risky assets like businesses will look better and better as long as risk-free Treasuries promise less and less in return,” he said.

Of note, Krueger believes companies that possess hard assets represent unusually good values in this environment.

“Materials companies catch my eye for many reasons and I am looking in some cases at multiples of 2 or 3 times cash flow and very little debt,” he said. “A related industry that serves many of these companies is engineering where we are finding backlogs of signed contracts whose value is more than three times the total value of every single share of its stock.  Potential acquirers may find attractive valuations here, especially since the Obama stimulus plan focuses on infrastructure enhancements.”

Would-be buyers also may emerge from abroad as foreign companies attempt to take advantage of the domestic challenges and enter the United States’ marketplace in various industries. Recently, Electricite’ de France SA offered $4.5 billion for a chunk of the nuclear power business of Constellation Energy Group Inc. (CEG), outbidding a unit of Warren Buffett’s Berkshire Hathaway Inc. (BRK.A, BRK.B) in the process. Completion of the deal will enable the French company to participate in the U.S. nuclear industry. Regulatory issues may be drawing out completion of the Constellation nuke group buyout.

Richard Griffiths, director of the Hong Kong-based M&A unit of the Royal Bank of Scotland Group PLC (ADR: RBS) thinks that China and Japan may emerge as significant M&A players this year.

“Japan is likely to continue to [figure] highly in outbound M&A, as it benefits from a lower cost of borrowing and a stronger yen,” said Griffiths. “China remains a key draw for investors and a source of outbound M&A.”

Perhaps Krueger summed up the situation best with the following analogy.

“Mergers and acquisitions right now to me look a lot like my four- and six-year-old kids on the top step of our monkey bars in the backyard,” he said. “They are looking at each other with an unusual combination of smiling mouths and terrified eyes. Neither is going to move an inch until they see the other one flinch and then I have to run over there because they’ll move so fast to grab the same bars they’ll collide.”

In other words, the same financial crisis that froze the M&A business will ultimately set the stage for the next round of dealmaking to flourish.

Source: The U.S. Market for Deals Remains in a Deep Freeze

Editor’s Note: With the New Year under way, Money Morning will continue to help investors look ahead, and will continue to run installments of our “Outlook 2009” economic forecasting series.

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