Daily Pfenning - 9/8/09

http://www.dailypfennig.com/

"...euro has stretched that move to the 1.4480 level! WOW! Looks to me as though the deficits that the dollar drags around are not looking to sharp to investors...

Chinese stocks were up 2% overnight, so that has led to even more risk taking this morning in Europe...

You know when the dollar is not faring well, when not only the usual suspects of euro, Aussie, kiwi, loonies and francs are taking liberties with the dollar, but also the Japanese yen... And THAT folks, is an indication to me that maybe, just maybe, cause you never know, fundamentals could be coming back to the head of the class. Oh! And one other thing, that puts a nail in the dollar's coffin is, last night I checked the price of Gold too... Then it was $999. This morning... It's $1,005!!!!!!

So... We've got euros kicking tail and taking names later, and Gold kicking the dollar when it's down. We've seen this type of rout on the dollar before... They used to take place at least once a week before the financial meltdown in August of 2008... And before the collapse of Lehman Bros. That's when the markets, traders, and investors, all had their eye on the fundamentals ball, and whacking the dollar out of the park whenever another piece of bad data came the dollar's way.

If this is the beginning of another period like we saw pre-August 2008, then get strap yourself in, and make certain to keep your arms and legs inside at all times during the ride! If it's a false dawn, it sure is a strong false dawn!

One of the best writers for a newspaper, that I've come across is Ambrose Evans-Pritchard, and I came across an article he did this weekend... This news could also be one of the reasons the dollar is getting sold across the board this morning. Here's a snippet of the story...

"Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive, said Beijing was dismayed by the Fed's recourse to "credit easing"... He went on to say, "If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies."

So... According to a top member of the Communist hierarchy... The U.S. Federal Reserve's policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy... Shouldn't that be enough to compel other owners of dollars to do the same? I would certainly think so, folks... I would certainly think so!

And in a not so wide spread story... The United Nations (UN) is talking about creating a new global reserve bank to issue a new currency to protect emerging markets from the "confidence game of financial speculation... HEY! The UN said this... Not me! So... Those of us who have read the book, The Creature from Jekyll Island, have the conspiracy chills going down our collective spines right now...

Isn't this the second time this year that we've heard about a "global reserve bank"? The first time we heard about it, the IMF was to assume that role and issue special drawing rights (SDR's) as a global currency... Now, we hear something a big different, but it's the same folks... I'll tell you right now what they are doing... The "powers to be" are "getting us used to hearing about this" by releasing stories here and there... That way, when the time comes for them to unveil their plan to have a global currency, they'll be able to say..."We've been talking about this for a long time, and no on had a problem with it then!"

OK... Enough of the conspiracy stuff...

Speaking of jobs... The U.S. Jobs Jamboree on Friday held a couple of surprises... 1. the number of jobs lost in August was smaller than expected at -216,000... And 2. the unemployment rate rose to 9.7%... Oh! And the previous month's number was revised up from -247,000 to -276,000... Sneaky how that do that, eh? The media is all over the better than expected -216,000, and forgot to mention the upward revision to the previous month's number, which wasn't small potatoes either!

For many years, I've tried to get people to look at the revisions, the Weekly Hours worked, and the Avg Hourly Earnings to get the "real" beef from the Jobs Jamboree report... We just talked about the revision... The Weekly Hours Worked and Hourly Earnings were a non-event, with nothing to tell us that the economy is growing stronger, or that it's getting weaker... So, to me... The Jobs Jamboree was a washout except for the revision!...

Speaking of the renminbi... The Chinese allowed the currency to gain VS the dollar by a wide margin overnight. This is the first significant move VS the dollar in some time...

And with all these strong currency moves... The dollar index has fallen to a low for the year at 77.24... This is a significant move, folks... Because... In the 1st QTR of this year, the dollar index got down to 77.40, and bounced higher from there... And here we are again... It was thought that the 77.40 figure would prove to be a resistance figure... But the dollar slid right past that figure... I would think that having the index remain below 77.40 for the day and overnight would be HUGE!

... Let's recap... The dollar has fallen big overnight... The Chinese are not happy with the Fed printing dollars... The UN is talking about replacing the dollar with a global currency that is issued by a "new global reserve bank"... And all the currencies along with Gold and Silver are rallying on these things... "

Financial stability depends on more capital By Timothy Geithner

Just read the whole thing. More govt. control on international level. I know I don't understand all this stuff deeply but where's the capital going to come from? Print more money? - MBC

http://www.ft.com/cms/s/0/638b9eb2-98ba-11de-aa1b-00144feabdc0.html

Obama May Need Sense of Crisis to Revive Health-Care Overhaul

Be interesting to see if this is an accurate forecast of how the Administration plays this one. - MBC

http://www.bloomberg.com/apps/news?pid=20601087&sid=a5HawfX.Mxt8

"...Obama returns to Washington next week in search of one thing that can revive his health-care overhaul: a sense of crisis.

...Obama must recapture the sense of urgency that led to passage of the economic rescue package in February, analysts said.

...said Stephen Wayne, a professor of government at Georgetown University in Washington. “You do need a crisis to generate movement in Congress and to help build a consensus.”

...Emanuel said the administration made unprecedented health-care progress in eight months.

‘Not There Yet’

“We gave Congress a charge, we gave them broad outlines, which is the reason we are farther along than any of the five presidents that have tried,” Emanuel said in an interview yesterday. “We’re not there yet, and this speech is intended to finish the job.”

...“There is a problem in our health-care system today, and we need reform; it’s not a crisis,” said Ed Gillespie, White House counselor to President George W. Bush. “It’s just people saying this is way too much, way too fast, we don’t know where this money is going and we don’t know where it’s coming from.”

The CBS survey of 1,097 Americans Aug. 27-31 found Obama’s approval fell 12 percentage points from a high of 68 percent in April to 56 percent; the error margin is 3 percentage points.

A survey of 4,518 likely voters by Zogby International Aug. 28-31 put Obama’s approval rating at a record-low 42 percent;..."

Wells Fargo to Repay TARP Without Raising New Equity (Update2)

I should control my cynicism but it just gives me such a thrill to see another bailed out financial institution doing so well. It's nice to see Mr. Buffett speak so highly of how things are being handled by this Administration, he doesn't have any vested interest - right?! - MBC

http://www.bloomberg.com/apps/news?pid=20601087&sid=aorL3gHBnGsI

"...Wells Fargo & Co. plans to repay the U.S. bank bailout program “shortly” without raising equity, a tactic that would protect the value of stakes held by investors including Warren Buffett’s Berkshire Hathaway Inc.

“We will pay it back, but we’re going to pay it back in a shareholder-friendly way,” John Stumpf, president and chief executive officer of the San Francisco-based lender, said today in an interview on Bloomberg Television, referring to the TARP funds. “We are now earning capital so quickly, organically, we don’t want to dilute our existing shareholders.”

The U.S. Housing Market’s False Dawn

http://www.moneymorning.com/2009/09/01/u.s.-housing-market/

"...New home sales jumped almost 10% in July, while the Case-Shiller home price index rose for the second successive month. Yet luxury homebuilder Toll Brothers lost $493 million in the quarter ending July 31, considerably worse than analysts had expected.

Housing stocks are certainly acting as if a recovery must be on the way... Yet all of these companies are still racking up quarterly losses, according to their most recently released earnings reports...

In terms of house prices, it would seem unlikely that a bear market bottom has been reached. Yes, the average house price is now back down around its long-term average of about 3.2 times average earnings, or only a little above it. But history suggests that markets don’t bottom at their average valuation: In fact, after such a huge excess to the upside, they overshoot on the downside.

The Case-Shiller 20-cities index is still 42% above its January 2000 level, having outpaced inflation during the last 9½ years. Yet January 2000 was not the bottom of a housing depression – far from it, in fact. That was actually close to the top of the dot-com bubble, when valuations of all assets were at all-time highs. So an average price over the whole country that – even now – remains 42% above the average price recorded at the very top of a huge economic boom does not seem like a market bottom to me.

You also have to remember that the U.S. federal government is hugely subsidizing the market. Interest rates are artificially low, and the U.S. Federal Reserve has bought more than $1 trillion worth of housing debt. Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) have been rescued by the government, and provided with more than $100 billion of taxpayer capital. And Ginnie Mae (the Government National Mortgage Association), directly a government agency, has provided almost $1 trillion of mortgages that require a 3% down payment.

And that’s not all.

The government is spending additional billions helping homeowners avoid foreclosure. First-time buyers are given a tax credit of $8,000 towards the down payment on their house – this credit currently runs out on December 1. So the current overall market bottom is propped up artificially. Even if the proposed tax-credit extension is approved, at some point, those props will be removed...

From a nationwide standpoint, the most likely path for the housing market is for a modest recovery, with some later slippage as subsidies are removed. Housing is likely destined to once again become a highly regional market, as it always was prior to the 2001-2006 market boom, with the cycles in each market being very different..."

Daily Pfennig 9-3-2009

http://www.dailypfennig.com/

"...briefly talk about the SEC, who made an announcement yesterday that they had done an investigation of the Madoff audits, and did not find any fraud... Just mistakes... Really? Mistakes? That's what they call them? Even Bernie Madoff himself says that he was "astonished" that the SEC failed to shut him down after interviewing him in 2006!..."

"...The Fed is tossing around the idea of removing pieces of the stimulus... Treasury Sec. Geithner, a.k.a. the cheater... doesn't agree and has stated that he believes it to be "too early" to exit stimulus strategies... Geithner is getting ready for the G-20 meeting of finance ministers and Central Bankers beginning tomorrow in London, and had this to say... "We've come a very long way but I think we have to be realistic, we've got a long way to go still."

Well... That's the most intelligent thing I've heard him say so far!

Hey did you see that bond king, Bill Gross of PIMCO, chimed in on this... "To the extent that we have had a trillion dollars worth of stimulus, from the standpoint of deficits, and more, the government basically has to continue to do that and to add to that in order to keep the economy chugging along," he said. "To the extent that that's limited, to the extent that they pull back on some of those stimulus programs -- 'Cash for Clunkers' and those types of things -- then the double dip moves into the realm of possibility."

Yes... Double dipping... It's my call for this economy..."

"...yesterday's data cupboard printed a stronger than expected Productivity number here in the U.S. So, doesn't that make you feel better, that you probably had to work longer hours at the same wage, because 1 in 5 American workers are out of jobs, and you have to take up the slack? That's the root of Productivity folks... Sure there are other things like technology, etc. but at the root... It's all about you...

That's why I don't like this report..."

"...Last week, I told you that the U.S. had to deal with another large amount of Treasuries to auction off... Last week it was $197 Billion... And no word of problems dealing with these... But, have you noticed that the 10-year yield, which just a few weeks ago was 3.80%, has fallen to 3.34%? Hmmm... I wonder how that happened? It means that the price of the 10-year has been rising, which would only happen if there was a truckload of buying... Hmmm... I had better go to the Big Finish here before I blow out a gasket!..."

Students Borrow More Than Ever for College

Imagine the future with these kids coming out of school, strapped with this kind of debt. They'll be unable to afford homes, marriage, etc... and many will likely default. The economic implications are pretty clear but the moral and social implications are myriad. Increased stress levels will reflect in increased health issues and likely in crime too. Don't bet on any tuition decreases until it's too late to have any impact. - MBC

http://online.wsj.com/article/SB10001424052970204731804574388682129316614.html

"...New numbers from the U.S. Education Department show that federal student-loan disbursements—the total amount borrowed by students and received by schools—in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion... two-thirds of college students borrow to pay for college, and their average debt load is $23,186 by the time they graduate..."