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In This Issue..

* Currencies trade in a tight range...

* China...

* Commodity prices to blame...

* "Safe" Treasuries?

And Now... Today's Pfennig!

Automakers Say They Need Funding Now...

Good day... And a Wonderful Wednesday to you! Well... I went "shopping" yesterday evening... At least I can say I did my bit to keep the economy afloat! HA! Thanks to all who sent along notes to me yesterday with kind words. I truly appreciate the kind words, you are all too kind! The automakers made their pleas to Congress yesterday, and they claim they are in deep dookie! GM says they need $4 Billion right now! And... The original $25 Billion figure has grown to $35 to $40 Billion...

The currencies were lifeless yesterday, with only a blip up in euros to 1.2740, only to give it back overnight. Aussie dollars (A$) rallied on the Huge 100 BPS rate cut news from the previous night, but at the end of the day, that was all but forgotten... It was as if the currencies did a Hans and Franz... Got all pumped up... But then turned into 100 lb weaklings again as the day turned to night.

Hey! I've written a bit about China this week, and the renminbi, and I must have scared quite a few holders of the currency, because, my trading screen is lit up with nothing but renminbi sell trades... Interesting... For the last couple of years, I tried to illustrate a picture that would show that owning Japanese yen, was a far better choice than Chinese renminbi... But, that fell on blind eyes... I see that UBS (Union Bank of Switzerland) believes that there "limited scope" for renminbi to drop much further, while Morgan Stanley believes we'll see a 10% drop in renminbi...

I think I will pin my colors to the UBS mast on that one... I just can't see why China would want all the negative press that would go along with allowing their currency to drop VS the dollar by 10%... The UBS research team said that, "Depreciation would likely invite criticism that china is a adopting a beggar-thy-neighbor type of policy, leading to possible protectionist responses from China's major export markets."

The NBER call on the recession brought out a lot of economists that are saying, "they knew it all along"... Yeah, right... However, there was one particular economist / analyst that has been saying the U.S. was in a recession for years! That's our old friend, John Williams of Shadow Statistics (shadowstats.com) I would love to show you the chart, but the Pfennig template doesn't allow me to do that... So, you'll just have to read about it!

Shadowstats.com uses a methodology that calculates GDP "old school" and when using this methodology, Showstats.com says that beside a brief blip into positive growth in 2004, the U.S. economy has been in negative GDP growth since 2000! I guess, John Williams won't be asked to be the keynote speaker at the NBER holiday party, eh? HA!

The U.S. data cupboard gets restocked today as we build to a crescendo on Friday with the Jobs Jamboree. Today, we'll see the ADP employment report, which as I've explained in the past, is a good indicator as to what we can expect in the Jobs Jamboree numbers. ADP is forecast to show a negative -200K job loss in November. Right now, the Jobs Jamboree is forecast to show a negative -325K job loss in November, so the ADP report is no sight for sore eyes over at the Bureau of Labor Statistics (BLS), who count the beans on the Jobs Jamboree. (and quite poorly, I might add!)

The "stupid" Productivity data for the 3rd QTR will also print... The old Fed Chairman, Big Al Greenspan, used to think the world of Productivity... He thought is was the "end all" in the "new economy" and the reason inflation stayed low, and he could keep rates low... Well, it wasn't the "end all", and the "new economy" was a bust, inflation wasn't really low, it was just "adjusted with changes to the CPI basket of goods to make inflation figures look low, and keeping interest rates so low, is the root of all evil for us today, now weren't they...

The awful fundamentals continue to mount for the U.S. and the dollar... But, as I've said over and over and over again, this dance is gonna be a drag... No wait! I have no idea where that Dave Clark 5 song came from! But, as I've said before, and will say again... These fundamentals are being swept under the rug and ignored, as long as the Credit Crisis has a tight grip on the markets. But, in my heart of hearts, I truly believe that all this bad data will come back to haunt the dollar, if the Credit Crisis can get some WD-40 applied to it, and unlock it.

The Reserve Bank of New Zealand's rate cut announcement should be coming forth this afternoon. Yesterday, I said I thought the RBNZ would cut 150 BPS... They very well could go more than 150 BPS, as their internal cash rate was the highest in the industrialized nations before all this rate cutting began in September.

I saw a piece of data that pointed out that Commodity Prices are down 18% YOY. OUCH! This is the worst performance for Commodity Prices since 1991. This is the main culprit in the poor currency performances of the Commodity Currencies like: A$, kiwi, loonies, rand, and real... (Australia, New Zealand, Canada, South Africa, and Brazil) This, and the unwinding of the Carry Trade, which hurt the high yielding Commodity Currencies, A$, kiwi, rand and real. So, a double whammy hitting these guys...

So... You have to ask yourself this question... Do you believe the Commodities are finished? Is this the end of their bull market that lasted only 7 years? Remember, our friend, Jim Rogers has documented that for over 200 years, Commodity Bull Markets averaged 17-22 years in length... And you might be saying but Chuck, you just said that Commodities were down 18% this year... Doesn't that tell you that it came to an end? Ahhh... Grasshopper... This Bull Market is a Trend, and trends are not "One-Way Streets" they have volatility, and they can see losses... But in the end, the underlying fundamentals return and the trend continues.

This is exactly what I tell you about the currency trends all the time... We had dollar weakness from 2002 thru 2004, then dollar strength in 2005, only to return to the underlying fundamentals in 2006, 2007, and 1/2 of 2008. Was the dollar strength in 2005 the "end of the weak dollar trend"? No! it wasn't... And I truly believe that the dollar strength since July this year will prove NOT to be the end of the weak dollar trend now!

You know, one of the things fueling dollar strength right now is the flight to safety in U.S. Treasuries... Oh by gosh, by golly, it's time for mistletoe and holly, and some straight talk about Treasuries. Everyone and their brother is buying Treasuries, which pushes the prices of the asset higher, and the yield lower... Big Ben Bernanke must be getting a bonus at the end of the year, for the Treasuries he sells... I say this because he announced the other day that the Fed is "considering" to buy long term Treasuries. (when you see "considering" just figure that it's a done deal!) Well, the Fed hasn't bought long term Treasuries since I was a kid, the Beatles were new, and I had hair!

For your troubles... A 3-month T-Bill will pay you 6 BPS... Folks, after the broker takes his pound of flesh to do the trade, you are paying the Gov't to hold your money! Want to go out further on the yield curve? OK... How about a 10-year Treasury? 2.70%, which again, will barely pay you anything by the time the broker charges you to do the trade. And those "long-term Treasuries" that Big Ben is "considering" buying? Where do I sign up for 3.2% yield in a 30-year Treasury... NOT!

It's crazy! I don't see the appeal... Especially considering the fact that when the Credit Crisis in unlocked, the unwinding in these "safe" Treasuries should be quite swift and push the price of those bonds down quickly, which will cause some investors to book losses, while paying the Gov't to hold their money...

These are just my thoughts... Market commentary...

OK, before I head to the Big Finish, someone asked me to talk about Swiss francs, as they think that Swiss Banking is going to cause a Big problem for the franc. Hmmmm... Could be, but I would think the Swiss, being a rich nation, would be able to deal with the problems that UBS and others have without causing too much of a problem for them and the franc. I still think of Swiss francs as a very good alternative to euros... Along with Norway, Sweden and Denmark... All surplus / positive balance of payments countries...

Oh, and this one last thing... I saw where mortgage applications more than doubled last week. This is probably the result of the announcement that the Fed will begin to buy mortgage backed debt directly... Yes, that's right folks... The Gov't may very well own your mortgage in the future... Now, as inviting as having a Gov't guaranteed loan might sound... Does anyone else find this arrangement to be creepy?

Currencies today 12/3/08: A$ .6435, kiwi .5295, C$ .7985, euro 1.2645, sterling 1.4735, Swiss .8265, ISK (no quote yesterday), rand 10.2825, krone 7.0850, SEK 8.2675, forint 207.25, zloty 3.03, koruna 20.18, yen 93.20, baht 35.55, sing 1.5290, HKD 7.7515, INR 50, China 6.8820, pesos 13.61, BRL 2.4190, dollar index 87.07, Oil $47.29, Silver $9.43, and Gold... $776.75

That's it for today... You know it's the Christmas season when Rudolf the Red nosed Reindeer is on TV... And tonight, it will be on TV for the 44th year! WOW! That's a looooonnnnngggg time! We're supposed to get our first "accumulation" of snow this afternoon. Since I walk with a cane these days to offset all the stuff they did to allow me to keep my leg, snow is no friend of mine... But, just another obstacle for me that I take in stride... We had a "full desk" yesterday, WOW! Everyone was in their places with bright shiny faces! This Saturday is St. Nick's Day... This is a great tradition in our house. My older kids, Dawn and Andrew, still put their shoes out side their room door until they moved out of the house! Saturday night is the Big 12 Championship. This will be the second consecutive year that my beloved Missouri Tigers play the Big Bad Oklahoma Sooners who have scored 60+ points in their last 4 games... I will be somewhere Saturday night, and not able to watch the game, which is probably a good thing. I'll record the game... Just in case... You never know! Time to go... I hope you have a Wonderful Wednesday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837





Posted 12-03-2008 8:54 AM by Chuck Butler