Daily Pfenning - 8-18-2009

Interesting that Germany is World's largest exporter although predicted to soon be overtaken by China in 2010. Germany at $1.465 trillion - China at $1.428 trillion U.S. dollars last year. Not good re short-term Treasuries not really a surprise either. Have to imagine this means bad news for the dollar looming at some point. Speaking of looming issues - these failing banks are something to watch. - MBC

http://www.dailypfennig.com/

"...Last week, I told you how the German GDP had posted a positive number, and therefore the economy had exited the recession. I don't believe the German economy to be "out of the woods" yet though... There are still things that go bump in the night that could very well drag the economic growth down... But for now... The Eurozone's largest economy is basking in the sun of not only exiting a recession but a strong Investor Confidence report..."

"...The TIC's data for June that printed yesterday was quite strong... For Long-Term Treasuries, that is... The short end got ambushed and was so weak that the positive for the Long-Term Treasuries was wiped out by the selling on the short end...

This probably (upset) all those people that bought short term T-Bills last year in what they thought was a "flight to safety"... I'm sure they exited with some red in the numbers... They basically gave the Gov't a loan, paid the Gov't for that loan, and lost money... Great "flight to safety" I'd say... NOT! Safe Haven? What Safe Haven?...

There's no information right now about what games the Gov't played in these figures... I think that for now though we can believe in our heart of hearts that they are playing games, which means the question at heart is... When the Fed winds down their buying of Treasuries, what happens to yields... And in turn what happens to borrowing costs... And finally the economy. My opinion? It won't be pretty... But neither will the monetizing of debt that the Fed keeps performing... So, it's a case of pick your poison... I would prefer the quantitative easing / monetizing of debt to stop, and let's take our lumps on the economy that the Gov't has been so hell-bent in attempting to stop... Get it over with, and live to see another day, rather than prolonging all this bad stuff...

For instance, last week, I read an article that talked about how the Big Banks are still in trouble... That just stinks! See what I'm talking about here? If they had been told to close their doors a year ago, we would be probably be pulling our selves out from that mess now... But nooooooooo! Instead the Gov't spent hundreds of Billions of dollars to prop them up, and a year later, they still have problems! That just stinks!

So far this year, and I know, these aren't the Big Banks, but ones that have caused significant damage to the funds of the FDIC, there has been 77 banks close... 77 Banks folks! One of the banks that closed was sold to another bank, but with the Gov't guaranteeing that the buying bank didn't experience any losses... Well, that would be a big wouldn't it? If the closed bank didn't have losses, it wouldn't be getting closed! My friend and excellent writer, David Galland, had this to say about these back door deals for closed banks...

"Note that bit about the government “agreeing to shield acquirers from certain losses on assets of the failed bank.” This sort of guarantee has become a popular backdoor way for the government to deal with various elements of this crisis, without the more overt method of writing a check to cover losses or, heavens forbid, actually letting the equity holders bear the brunt for having made a bad investment in a poorly run bank.

Instead, the government jiggers things to hand off the good assets of a bad bank to one of their buddies, while agreeing to shift the liability for the poor assets onto the backs of taxpayers – with the IOU due and payable at some point down the road."..."

"...other piece of data that printed yesterday was the NAHB Housing Market Index, which printed a digit higher than the July print of 17... So, 18 is the index number, what does that mean to us? Well, first of all, the Index represents a survey of Home Builders of Single-Family detached homes, and is comprised of three surveys... 1. Present Sales 2. 6-month expectations 3. traffic of buyers. The index has a range between 1 and 100, with 1 being bad, and 100 being excellent... A figure above 50, suggests that survey participants are seeing good economic conditions for Home Sales.

So... Now that we've learned that in class today, who can tell me what an index reading of 18 represents? You, over there in the corner, please take the IPOD ear-phones out of your ears and answer the question! Yes... It means we have a LOOOOOOOONNNNNNGGGGG time to go before we get back to 50..."