Daily Pfennig - 8/21/09

http://www.dailypfennig.com/

"...leading indicators climbed for a fourth straight month and the Philadelphia fed reported a big jump in their gauge of activity, but the initial jobless claims unexpectedly rose. Unemployment in the US will continue to be a drag on the economy, slowing any recovery and possibly pushing the US back into recession (or as some predict a depression). Today we will get some news on the housing market, and while the media will pump up the fact that month on month sales continue to rise, another report released yesterday showed mortgage delinquencies hit a record high in July. The proportion of homeowners delinquent on their mortgage or in foreclosure rose to its highest levels in four decades. An ominous sign for the US economy is that the problem loans have shifted away from the subprime borrowers to those driven into delinquency by unemployment. More than half the mortgages in the foreclosure process during the second quarter were prime loans..."

"...European markets took the Euro higher against the dollar after reports showed German services and French manufacturing unexpectedly expanded in August. Another report showed an index of German services industry grew for the first time in more than a year. This data confirms that the largest nation in the EU is pulling itself out of recession...composite index of both services and manufacturing for the 16 nations sharing the euro moved to 50 from 47, another strong indication that Europe is starting to grow again...recovery in Europe, on the other hand, is being fueled by increased consumer confidence and internal private sector demand...Currency traders got excited about these European data releases and took the Euro back above 1.43..."

"...Mohamed El-Erian, who is the CEO of bond giant PIMCO was on the news wires with suggestions for the central bankers meeting in Jackson Hole. He apparently is worried about the disjointed approach these central bankers have taken in their intervention with the markets and believes the approach will lead to volatile markets and slower global growth. He also believes we are in for a drop in the value of the US$. "The question is not whether the dollar will weaken over time, but how it will weaken," said El-Erian. "The real risk is that you will get a disorderly decline." According to El-Erian, the euro will rise to $1.60 by the end of 2010 and the Canadian dollar will appreciated to 1.01..."