Good day… And a Happy Friday to one and all! Today is Patriot Day in the U.S. and a day that brings back memories of cowardly attacks on our country 8 years ago. I remember the shock and horror on everyone’s faces, and that image will remain with me to the grave. I also remember trying to write the Pfennig the “day after”… It just didn’t seem that important of a thing to do, but a reader told me that to keep things as “normal” as possible was the best thing I could do… So… I wrote…

OK… The currencies, and this time I mean the majority of them not just euro and yen, added to their gains this week VS the dollar yesterday… The Big Dog, euro, is once again knocking at the door to 1.46… Who’s that knocking at the door, Who’s that ringing the bell? Do me a favor, open the door, and let ‘em in…

The dollar index has really tumbled this week… Recall when I told you how the dollar index was put together, that euros were really overweighed in the index, which means that even yesterday morning, when the dollar had rebounded a bit against the commodity currencies, the dollar index still lost ground, due to the euro strength… So, once again, I tell people that the dollar index isn’t a currency… To get real currency exposure, you must own the currency… And yes, you can buy all the ETF’s at Gary’s Stocks and Bonds you want, you can’t get the currency out of an ETF… So, if things come to push and shove, you may just want to have the ability to own the currency, eh?

Ok, I really went off on a tangent there… What I was working toward with the comment about the dollar index tumbling is that today marks the 6th consecutive day of the index falling in value, the longest such streak for the dollar index since March, when the dollar began going into the tank once again. And a lot of traders and such use the dollar index as an indicator… Well, fellas… That indicator is telling you something!

But I didn’t need the dollar index to tell me the negativity toward the dollar had begun growing again, and that risk assets are the king of the hill right now… And what is being used as the “funding currency” to purchase these risk assets? That’s right… The dollar!

The Japanese yen has joined its currency brothers and taken up the fight against the dollar… For the longest time, dollars and yen traded in tandem… But this week, things have changed, and yen is gaining VS the dollar… In fact, yen just went below 91! A stock company in Tokyo issued a report last night that said, “if the yen falls below 90 it may spark a downward spiral”… Hmmm…

The thing I pointed out to the boys and girls on the trading desk was that it was almost like “the old days”… The U.S. printed some bad data, and the dollar got sold! Now, that’s the way it used to be! The data I’m talking about is the Trade Deficit for July, which registered its biggest increase in more than 10 years in July, as surging purchases of oil caused an unprecedented jump in imports. The deficit widened by 16.3%, its largest percentage increase since February 1999, to $31.96 Billion. That’s up from the $27.49 Billion Deficit figure in June.

The trading pattern for a long time now was to buy dollars when bad data printed, (safe haven, they thought!) and the currencies would suffer… But, yesterday that changed, at least for that piece of data it did. Like I always say… One swallow doesn’t make a summer… In this case, one “fundamentals trading day” doesn’t make for a new trend… But it could be a start, and one that I would welcome with open arms!

We’ll see how that holds up today… On this Friday, the 11th of September, Patriot Day, we’ll see the Monthly Budget Statement, which should be quite a doozy, and the U. of Michigan Consumer Confidence… Probably split down the middle as far as negativity toward the dollar, unless that is, the Consumer Confidence surprises on the downside… But with the stock market kicking rear and taking names later, I would be shocked if Consumer Confidence was weak!

The Monthly Budget Statement, read Deficit! Is forecast to print a whopping addition to our already eye-popping Budget Deficit, of $140 Billion! Recall that we all thought last month’s deficit of $111 Billion was bad… Well, we’ll see your $111 Billion, and raise you $29 Billion!

That’s just shameful folks… We, as a country, continue to spend what we don’t have, and print money, and do all the stupid things that got us to this place to begin with! Pursuing the same stupid policy of excessive spending, debt expansion and monetary inflation can only compound the problems that prevent the required corrections. Doubling the money supply didn’t work, and neither will any amount of money supply!

I read this somewhere, forgive me but I don’t recall where, and it stuck in my head… “Buying up the bad debt of privileged institutions and dumping worthless assets on the American people is morally wrong and economically futile.”

The Chinese see what we’re doing folks… And they don’t like it one iota! Why does that matter, you may ask? Ahhh grasshopper… Come, sit… Did you ever borrow money from your parents, grandparents? (I didn’t, but I know how it works) Well, in the presence of the people you borrowed money from, you are thrifty, and show that you are doing what it takes to pay them back… Hmmm… Think of China as the parents that have lent money to the child, the U.S. They see us as doing harm to their money…

I know, that I’ve talked about this so many times before that you’re tired of hearing about it… But, China is the gate keeper folks… We were stupid enough to get to this place, with all our deficit spending, and now… As my mother used to say… You made your bed, now lay in it!

Well! Someone opened the door and let the euro in! The single unit just traded above 1.46! You, are my shining star! Well, wait a minute here, Chuck… There are a lot of shining stars in the sky for us to see, especially when you get out into the country away from the city lights! In the case of currencies being shining stars… Aussie, kiwi, real, loonies, Swissie, krone, are all up there in the sky to shine for us all!

I know that a lot of people do not believe in the Chinese economic growth story… That’s OK… But without it, we wouldn’t be having this rally in risk assets… So… I tend to go along with it, until somebody can prove to me that the Chinese data is bad… For instance, last night, China reported that their Industrial Production rose 12.3% in August VS a year ago. I told you long ago that China would be the first country to come out of the global recession… And they have proved that to be bang on!

I received a note yesterday that put a smile on my face… The note was from the “Audit The Fed Coalition”… I’ve made such a stink about the need to audit the Fed, and to support Ron Paul’s HR 1207, Bill that calls for such an audit, that these people have made me an honorary member of their coalition! Any way… The note said that House Financial Services Committee Chairman Barney Frank has officially agreed to hold hearings on HR 1207! The hearings are tentatively scheduled for Friday, September 25 at 9:00 am.

This doesn’t mean we’re home free here… It just means the Bill will take the next step toward giving the American people the ability to see the man behind the curtain, and where the money is going, etc. in other words, the Fed would have to defend itself to the American people…

And this has nothing to do with currencies and economies, but I have to get this off my chest… I read where U.S. Treasury Sec. Geithner, has proposed that bankers get paid in equity, something that can be “clawed back” if the bank doesn’t perform. This reminds me a Gov. we had here in Missouri years ago, he said he wouldn’t raise taxes without a vote of the people… But after being elected he raised the taxes without a vote by the people… But he also then put in place a law that prevented any other Gov. from ever doing that in the future… This is the same thing with Geithner… He would have stomped and whined for days years ago if they told him his pay would be in equity rather than cash…

OK… I’m back now… Hey! Gold is back above $1,000! Yesterday, it was $984, when I went through the currency round-up… And I had told you all that my new thing was to look to buy on the dips below $1,000… BTW… I wrote my Gold piece I told you about the other day, the Publisher rejected it! YIKES! Back to the drawing board!

OH! I almost forgot! The Bank of England (BOE), and the Bank of Canada (BOC) both kept rates unchanged as expected… The BOC, which I took to the woodshed yesterday morning, maintained their “conditional” commitment to keep rates at .25% until near the end of 2010… Again, I just don’t see how they can make that statement… The data in Canada lately has shown signs of a nascent recovery… I would think the BOC would have to move earlier should this recovery get legs…

And… Finally, I’ve complained for years about this guy and his jawboning and dissing his own currency, and he’s at it again… Reserve Bank of New Zealand’s (RBNZ) Gov. Bollard, said, “the currency’s gains are undesirable and unhelpful for an export-led recovery”… Now, that’s true in one sense… But, not completely true! Look at the euro! It’s strong, and Germany’s exports are rivaling China’s! I feel bad for kiwi… It’s just not right for a Central Banker to talk about wanting his country’s currency to be weaker! Where have you gone, Don Brash?

Don Brash, was the Gov. of the RBNZ years ago and understood the “perception” that a strong currency gives to a country! I met Don Brash years ago, and in fact have a picture of him with me! Oh well… A little history never hurts!

So… Let’s recap… We have a strong currency rally going on, after the U.S. printed an awful one month increase in the Trade Deficit. The euro has scratched and clawed its way back to 1.46 this morning, and we’re holding our breath for the Monthly Budget Statement today…And Gold is back to $1,000!

Currencies today 9/11/09: A$.8650, kiwi .7085, C$ .9295, euro 1.4615, sterling 1.67, Swiss .9655, rand 7.57, krone 5.91, SEK 6.98, forint 186.66, zloty 2.86, koruna 17.44, RUB 30.73, yen 90.80, sing 1.4210, HKD 7.75, INR 48.46, China 6.8290, pesos 13.41, BRL 1.81, dollar index 76.59, Oil $72, 10-year 3.35%, Silver $16.88, and Gold… $1,002

That’s it for today… American Flag on the house today for Patriot Day… And tomorrow, it gets changed to my BIG M Flag… M for Mizzou! Or for those of you out of the state… The University of Missouri! Tomorrow is my little buddy Alex’s first football game of the year… He’s in 8th grade now, and the size difference of these boys at this age is amazing! Alex is on the small side, but so was I when I was his age! I don’t worry about him out there, because he has a bulldog attitude, with a motor that doesn’t stop on the Football field… I wonder where he got that? HA! Speaking of which, I watched some of that football game last night, the first NFL game of the year, and Troy Polamalu was something! OK.. Gotta go.. Just one last cheer for Old Mizzou, and those Lindbergh Flyers 8th grade team! Now… Let’s get working on making this a Fantastico Friday!

Source: Patriot Day…

Too much exuberance? Last October we were wondering if there would be a run on the banks. Now it’s too much activity.

This complete lack of an ability to remember any bad news has a backside, you knew that was coming. The backside is that we also are blinded by the short-lived bad news.

For four months, almost every editor at “The Daily Edge” described the market this fall as the best buying opportunity of our lifetime. Virtually no one paid any attention.

The only thing more deficient than our memory is our ability to buy when things are cheap, stocks and bonds. We love to pay way too much for our investments.

Take bonds. Despite the fact that bonds are virtually immune to the day-to-day swings of the stock market, no one took advantage of bank bonds that dropped 50 percent and more during the insanity of last October and November. AAA, AA and A rated bank bonds were being given away.

Bank bonds that were recommended by The Bond Trader have returned 25 to 50 per cent in about three months. This was while your stock portfolio was being flushed away.

It wasn’t just bank bonds either. Companies that had nothing to do with the banking or brokerage crisis dropped like rocks, too.  AAA and AA bonds were there for the picking at prices we may never see again. No one jumped in.

Here are two examples of bonds The Bond Trader recommended that have made huge returns. You can check the prices at a website called, investinginbonds.com. Just enter the CUSIP and check the trades during the months of September through November.

National City Corp.(NYSE:CYN) This is a small operation, relatively speaking, that does not rely on retail or mortgages for their business. They announced before the bailout was even approved that they did not need it, they were fine. Still their bonds dropped like a rock. The Bond Trader recommended it at 90 and again at around 60. (That’s $900 and $600 for those unfamiliar with bonds) CUSIP 634902LM0.

Right now, you can sell the bond for about $960 to $980. That’s in about three months. That’s a 62% return on an investment grade bond in a couple months. Fewer than 30 people bought it when it was recommended.

Here’s another one that went through the roof– Fifth Third Bank. The Bond Trader recommended it at 66, $660; today it’s worth around 97, $970. CUSIP 31677QAP4.

A great bank, that wasn’t really having any huge problems, was available for a song. Almost no one bought it.

Right now corporate bonds are running up in price so fast it’s not impossible, but it is getting difficult to find bargains.  Yet very few are seeing it.

Americans have no trouble buying a car or SUV for $30,000,  $40,000 even $50,000 that is guaranteed to be worth 20% less as soon as they drive off the lot, and 50% less in two years. Guaranteed! But they cannot see a bargain in the bond market when there is less than a 2% chance they could loose money.

That’s the 85-year average default rate for investment grade bonds, less than 2%. That means they win 98% of the time compared to a guaranteed 20% to 50% loss for a car. You know which one we love to do.

Finally, the most disturbing characteristic of the All American Investor is his willingness to insist he or she can make returns that are completely ridiculous. Read on.

Recently on CNBC, a guest commentator stated he felt investors were to blame for the Madoff scandal. My initial reaction was one of complete disbelief. How could a professional in our business say something so dumb? Hold the investors responsible for a $50 billion loss in a Ponzi scheme?

When I had time to think about it, he was right. It seems Madoff made insane claims, returns that no thinking adult could believe. Most legitimate trading houses on the street would have nothing to do with him. Yet investors lined up, even begged him to take their money. And take it he did.

Obviously Madoff is less than honest, but come on. How can you think one guy is that much better than the rest of the street? Too good to be true.

Yet investors did the “follow the big numbers” dance, once again, and got what everyone who thinks and acts this way always gets. You know the word for it.

We love big numbers, the more unbelievable the better.

The next four to six months will be rough, very rough, and the markets will continue to spit out the uninformed at the same rate they did for all of 2008. If you’re part of the pack that’s just now getting in, keep your perspective. Look to the second half of the year before things begin to settle down.

Let’s hope for a better informed 2009.

Source: The All American Investor

Yes, I’m talking about money and the Federal Reserve once again. There are few more important local or global topics. Especially since the Fed is now playing out an end game scenario.

You’ve heard my description of the Fed as the “ultimate franchise.” You’ve seen their mechanisms of reaping where others have sowed. Today, you’ll get a glimpse of their harvest. This editorial can be considered Part 15 of the series that so dismayed colleague Andy Carpenter when he thought it ended. I hope he wasn’t being facetious.

Economists of all stripes describe the national debt of $9 trillion as having little importance. They say this is because “we owe it to ourselves.” That is far from true.

The following chart is from Mike Hewitt’s excellent DollarDaze article entitled “Who Do We Owe and How Much?”

This chart demonstrates all incurred debt in the US during the brief time frame of 2001 to 2006 – individual, corporate, and government. It totals $10.73 trillion. Do not confuse this with the $9 trillion – listed “official” national debt accumulated over a much longer period of time.

My key point in this essay is to demonstrate exactly who the money is owed to. It is definitely not to “ourselves.” Look at the top figures in the green chart above. More than $3 trillion is owed to foreigners. $2.4 trillion is owed to commercial banks.

$1.19 trillion is owed to the Federal Reserve!!

Remember, the Fed is a private corporation. A large portion of its owners are also elitist banking foreigners.

If you add what is owed to the Fed with what is owed to commercial banks, you get the grand sum of $3.65 trillion. This is 34 percent of the total borrowed amount of $10.73 trillion. The Fed’s $1.19 trillion is 11 percent of the total borrowed. Nice pay for six years of “work,” no?

What exactly did the Fed do to earn this money? They didn’t even have to go to the trouble of printing it. They just make digital entries on the master computer and the “money” appears.

They “monetize” political promises (lies), cow chips, failed mortgages, or whatever they choose. We owe them this sum! That, my friend, makes you a serf. Pay up.

At some point the national debt is similar to the debts owed by a bankrupt individual on a last-minute spending spree. Right before the plastic is cut into pieces. Broke is broke – might as well go out in style. Maybe the U.S. can find further funding to continue exponentially expanding its debt, but that is exceedingly unlikely.

Someone (individuals, institutions, or nations) has to continue loaning money to the U.S. When it becomes blatantly obvious to all that the money cannot be repaid, the loans will stop. There will be demands for repayment of existing loans. Game over.

Don’t forget – the federal debt is only a tiny portion of total U.S. debts. You have to add in the presently unfunded liabilities. Try $48 trillion and counting. Do you think it’s possible to honor this escalating debt? Regardless, the Fed masters couldn’t be more pleased.

The US has been plagued by central banks from inception. We presently do not have financial independence. Where are the patriots?

Do not have unprotected finances.

Invest Resourcefully,

Rusty

P.S. To let me know what you thought of today’s article, send an e-mail to: feedback@investorsdailyedge.com.

[Ed. Note: Dr. Russell McDougal has dedicated years of study and investing in the natural resources exploration sector. During that time he has closed out DOZENS of gains of 500%... 1,000%... 2,000% and more! Currently he is sitting on multiple thousand percent winners, including one stock that is up a whopping +5,000%. And for a select group of investors, Rusty has agreed to share his secrets of success... and his top stock recommendations. Click here to learn more... ]