The NBER Finally Says So!
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In This Issue..

* RBA cuts 100 BPS...

* It IS a recession!

* Paulson to ruffle feathers?

* Yen to rally hard?

And Now... Today's Pfennig!

The NBER Finally Says So!

Good day... And a Terrific Tuesday to you! Quoting one of my all time fave Christmas songs, Baby, it's Cold Out There! Winter has arrived, and I had to drag out the big heavy winter coat this morning. So... The seasons pass us, which is a good thing, because without winter, we couldn't have spring, and spring training!

OK... Right out of the starters blocks this morning, the Reserve Bank of Australia (RBA) pulled the rug right out from under the "high yield status" of their economy, with another HUGE rate cut overnight... This time, the RBA cut 100 BPS, to an internal cash rate of 4.25%. This brings the total since September to 300 BPS! WOW! Talk about effectively unwinding seven years of tightening! The statement following the rate announcement leads me to believe that the RBA is probably finished cutting rates for now... It will be a wait-n-see what happens globally, before the RBA entertains any talk of further rate cuts... At least that's my opinion!

Had a long talk with the legal beagles yesterday... The just don't like what / how I say things. This all stems from complaints we've received that claim that, "I give investment advice". Of course when the currencies were going up, up, up and away, in my beautiful balloon, for 6 years, we didn't hear of any complaints or claims that I was "giving investment advice"... Any way... It is what it is... I call it "Market Commentary"... And everything I say is "Chuck's opinion" not that of EverBank's and the last time I looked... Opinion is: not to provide investment advice or to manage your money - THOSE ARE DECISIONS THAT YOU HAVE TO MAKE.

Well... Now that I've said all that... Guess what finally happened yesterday, that I've said was the case since January? Yes, the National Bureau of Economic Research (NBER) finally came clean and said that the U.S. has been in a recession since December, 2007. Here's where I could go totally sophomoric on you and say, "I told you so!" but I won't, no wait, I already did! But, that's not my intention. I only carry on about his because recently I've had a few people tell me that I have no foresight, and that I merely react to things... Hmmm... I said this was a recession 11 months ago, long before the un-dynamic duo of Paulson and Bernanke would admit it, and long before your friendly neighborhood economist would admit it, and way before the NBER, the official arbiters of this call, admitted it.

The currencies remained in a very tight range yesterday with a bias to buy dollars, with the Huge stock sell off... The stock jockeys didn't fall all over themselves on this news, and that surprised me... Here's why... You see, most times, in the past, by the time the NBER gets around to calling a recession, the recession is either over or about to be over. So, knowing this, I figured the stock jockeys would be falling all over themselves, calling out that the light at the end of the tunnel could be seen...

The problem with that mentality is that not all recession calls by the NBER have signaled the end of the recession. Take... The recession that started in July 1981, which was announced in January 1982, and that recession ended 10 months later in November 1982. That's the scenario I'm afraid that we are going to revisit this time. I've already said that I believe 4th QTR GDP will show a negative -5% figure, so that's right now, and there's no way, the economy rebounds from a negative -5% drop in a heartbeat... This is going to be a long, protracted recession, but then, the song remains the same here for me... I've said that for a long time now!

We heard from Federal Reserve Chairman Big Ben Bernanke yesterday... Big Ben said "further interest-rate cuts are "certainly feasible," but he warned there are limits to how much such action would revive an economy likely to stay weak well into next year."

Mr. Bernanke also said the "Fed's powers don't end with the federal funds rate, and its ability to inject liquidity into markets through its balance sheets "remains effective."

I guess, that was the wink and nod that interest rates are going lower, and that... The Fed is going to continue to take in toxic securities on their balance sheet...

OK... There's a story on the news wires this morning that according to the charts at the Bank of Tokyo, yen could push to 79.75 VS the dollar. WOW! I think these chartists should go back and check their angles again, because that's a phenomenal move in yen, and I can't believe the Bank of Japan (BOJ) wouldn't be in the markets intervening (selling yen) to keep that from happening... But for what its worth... There you go!

Today, we'll see U.S. Treasury Sec. Paulson speaking about the U.S. / China economic strategy... Hmmm... I wonder if old Hank, will ruffle a few Chinese feathers with his speech, or will he go quietly? I think that after yesterday's .75% drop in renminbi, followed by a "regular" .30% drop last night, which puts renminbi at a 5-month low, that Paulson will be in a feather ruffling mood, especially, given the thought that he only has about a month left on his Treasury Sec. watch...

Remember about a month ago, I told you all about the early part of this decade, when the global economies were all fighting with recessions, and that the currencies were getting rewarded whenever a Central Bank cut rates to promote growth? I said then, that we could very well relive that scenario, and each time the RBA gives us one of those "mega rate cuts" I notice the A$ rallies... I guess, after we get through the next two weeks of Central Bank rate cuts, we'll have a better idea if this is going to play out again, but for now, it sure is beginning to look like it will...

Looks like the airlines are "hurtin' for certain" as I saw two different ads in the weekend paper for $49 flights... Southwest and American Airlines were promoting those discount flights... Of course there were tons of "terms and conditions" but the key here is the offer of discount flights...

I see from the U.K. Telegraph that AIG is beginning to sell off assets in an attempt to pay back the $153 Billion "loan" the Gov't gave them. And I see where JP Morgan Chase is going to lay off 9,000 employees. And that there are rumors that Britain is entertaining thoughts about joining the euro again... They can forget about that! The people of Britain are NOT going to vote for that to happen... At least that's how I see it from the cheap seats.

And yesterday... The piece of data that "told me" we were in a recession, the ISM (manufacturing) Index printed... And the index number fell by a greater margin than the "experts" forecast, and brought it to the lowest level (36.2) since 1982! Again, folks, this is a very "telling" piece of data, and confirms my belief that we're in for a long, protracted recession, as this looks like the early 80's recession and not those willy nilly ones of the 90's and 2000's!

The only data we'll see today, is the vehicle sales, which is expected to fall again... I see where Ford is going to announce that they are going to change their focus to small, fuel efficient cars instead of Trucks and SUV's, hoping that will "win over" Congress to give them a loan... I also see where Ford is offering "employee prices" plus a rebate for a select group of their cars... (that "employee pricing" is a bunch of bunk if my opinion any way!)

So, there's a collection of some of the items that's will drag on the U.S. economy... And eventually the dollar, once we get past this credit crisis...

Next on the rate cut block is the Reserve Bank of New Zealand, (RBNZ) who meets tonight... I think the RBNZ will play a game of poker with the RBA, and say..."I'll see your 100 BPS, and raise you 50 BPS"... That's right, I think we'll see 150 BPS rate cut from the RBNZ... Like I've said a few times now, rates are going lower all over the world folks, we should all get ready for this!

I sure ruffled a few feathers yesterday when I printed a comment from someone else about the Energy Dept... Folks... The point was simply that we don't need the Gov't operating private businesses, like banking... That's all it was...

The Retail folks are "happy" with the sales figures from the first weekend of Christmas sales... But, "happy" isn't "giddy"... And that's going to be a problem for the retailers this Christmas... They'll see sales... But they won't be "giddy"... And wasn't that a shame in NY where a Wal-Mart worker lost his life in a store opening stampede? That's a shame, it really is... It's not like Wal-Mart was giving stuff away free! I'll stop there, the story is sad enough...

Time to head to the Big Finish...

Currencies today 12/2/08: A$ .6480, kiwi .5345, C$ .8040, euro 1.2670, sterling 1.4940, Swiss .8290, ISK 230, rand 10.38, krone 7.0875, SEK 8.3175, forint 206.35, zloty 3.0160, koruna 20.2860, yen 92.20, baht 35.50, sing 1.5285, HKD 7.75, INR 50.14, China 6.8875, pesos 13.55, BRL 2.30, dollar index 86.85, Oil $49.23 ( I paid $1.84 for premium gas this morning, YAHOO!), Silver $9.44, and Gold... $778

That's it for today... My little buddy, Alex, was writing a paper on the Revolutionary War last night, and we were talking about "taxation without representation", and thought for a moment before going to bed, that, I kind of feel like that's what we're receiving now, today! Today is my long time friend, Ed Bonawitz's, birthday! Happy Birthday Ed! Ed and I began working together at the old First National Bank of St. Louis in 1980... I don't think the Dead Sea was even sick yet, then! There's a HUGE black out here in the St. Louis area this morning... We have electricity here are work, otherwise I would have turned around and gone back home! But, there will be a few people here affected by it, and the kids in those blacked out areas are jumping for joy this morning, as schools are closed where there is no electricity. Not my kids... My two oldest, Dawn and Andrew are teachers in the school district that they attended as youngsters, and my little buddy, Alex, goes to the same school district... And it's not affected! I can hear Alex complaining now! Oh well... Time to go... Hope your Tuesday is Terrific!

Chuck Butler


EverBank World Markets



Posted 12-02-2008 10:16 AM by Chuck Butler