Spending More Money...
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In This Issue..

* Turn back the clocks to 1950...

* Currencies rally on the day...

* Bank of Canada to cut rates today...

* Fed Funds to zero?

And Now... Today's Pfennig!

Spending More Money...

Good day... And a Terrific Tuesday to you! It's raining like cats and dogs outside, and that rain is supposed to turn to snow tonight, so we've got that going for us! Always love that rain to snow bit, as it puts a nice layer of ice under the snow!

Well... It looks like the new president wants to spend more money... Yes, President-elect Obama, presented his economic plan yesterday, and before doing so, issued a warning that the economy is going to get a lot worse before it gets better. His plan calls for a pledge to spend the most on infrastructure since the 1950's... Now, let me say this... The Big Boss, Frank Trotter, and I talk about this all the time... To spend money on Financial Institutions and things that don't get used more than once like bullets and bombs, isn't our "fave" way to spend money... But building something that could be used over and over again, well, that makes sense... However, this spending could be coming at the absolute most awful timing, as the Deficits are exploding in front of our eyes, and it certainly isn't as appealing as watching the fireworks display in Vancouver!

Yes... So, Obama's call that the economy will get worse before it gets better, plays well with his pledge to spend more money...

This spending pledge really helped the currencies yesterday, otherwise I wouldn't have spent 30-seconds talking about it! You see, the markets are slowly coming back to the fundamentals, the risk takers are slowly coming back too, and when that happens in earnest, we should see the end of this stupid Trading Theme that has gone on far too long for my taste! But back to the markets' reaction to the announcement... Of course, you have to remember that we still have over a month before Obama takes office, and unless he's going to pound this message in everyone's heads every day until then, this could all be forgotten soon... And then we'll be able to tell if the Trading Theme is a thing of the past, or if we have to continue to live with this for some time to come.

So, the currencies rallied throughout the day yesterday, but saw some consolidation overnight, and then very tight trading ranges this morning in Europe. The euro traded briefly with a 1.29 handle yesterday... This morning, German Investor Confidence as measured by the think tank, ZEW, unexpectedly rose for a second month. Apparently, Investors like the European Central Bank (ECB) rate cuts, eh? While this repot on the outside would appear to be positive for the euro, the markets are still focused on the Credit Crisis... So, it has had little to no impact.

The Bank of Canada (BOC) meets to discuss rates today... I'm sure they will cut them, why wouldn't they follow the rest of the world's Central Banks in a race to zero percent? The rate announcement will come around 9 am this morning, and the "experts" are forecasting a 50 BPS rate cut. But I say, why go so low? They can point to the rest of the world and say, see, we're just keeping up with the Joneses... So... Yours truly expects 75 BPS... Canadian Housing Starts fell 22% last month! So... This, larger rate cut, won't hurt or help the loonie, as the markets "just don't care!" anymore... You can hear them singing... I don't care anymore... I don't care anymore... I don't care, what you do...

OK, If I can't play, then I'm taking my bat and ball and going home! Yes, the famous tantrum thrown by millions of kids over the years, looks like it's being played out again over at the Brokerage that owns a bull... Yesterday, I told you about Merrill's CEO John Thain, in a tiff over a $10 million bonus with the compensation committee. Well, yesterday Mr. Thain, according to the Wall Street Journal, said "no mas" , forget about it! He has announced that he will not accept a bonus this year. "That's right, if I can't have $10 million, I won't take anything!" OK, the last quote was mine, but that's what I hear him saying... Hey! Why not take the $10 million down to the Salvation Army!

Yes, I know, that's all is "stuff" and not of currencies... So I digress...I couldn't pass it by though, you know me!... So, I apologize! So, back to the currencies and economies, eh?

Well... It didn't take the people that bought Anheuser Busch long to begin their cost cutting... The Anheuser-InBev people announced yesterday that 1,000 of my fellow St. Louisans will be cut from the payrolls... You can see them in the boardroom frothing at the mouth when the Jobs Jamboree was printed on Friday... This is how I see this going down... "Hey, did you see that 533K jobs were lost in November, Carlos? Yes, I did, and that gives us a chance to move up our job cutting to now, as we can point to the "economy" as the culprit in the job cuts."

Hey, did you see the "Money and Politics Show" on TV last night? (I didn't, as I'm sure I was in bed!) But, the former CEO of Bear Stearns, Alan Greenberg, was interviewed and he said that, "There's no more Wall Street. That model doesn't work because it's at the mercy of rumors. The entire make-up of Wall Street has changed forever."

Hmmm... Interesting take, don't you think? Or could be just sour grapes, as his company was forced to sell at bargain basement prices to JP Morgan.

Are you following the hearing on the fall of Fannie and Freddie? Well, the Washington Post says that the House Committee on Oversight and Gov't Reform will hear that... "Internal Freddie Mac documents show that senior executives at the company were warned years ago that they were offering mortgages that could pose dangers to the firm, hurt borrowers and generate more risky loans throughout the industry."

There will also be a memo that circulated Freddie... "former Freddie chief enterprise risk officer David Andrukonis wrote that the company was buying mortgages that appear "to target borrowers who would have trouble qualifying for a mortgage if their financial position were adequately disclosed."

I could really go into a tailspin right here, and head down the road that points fingers and calls for public hangings and that sort of thing, but I'll stop right there! No need to rehash this stuff!

But doesn't hearing that stuff just get your blood boiling!

The Tribune Company did indeed file for bankruptcy yesterday, as the rumors said they would.

OK... I was looking at a rate screen on the Bloomie yesterday, and noticed something that really struck me as interesting. The Fed Funds rate is 1/16th... But wait! Didn't the Fed cut the Fed Funds rate to 1% at the last meeting? Yes, they did grasshopper, but... The people in the trenches are trading Fed Funds to each other at 1/16th... Does that tell you something? Well... It tells me that my inclinations that the Fed is going to move rates to near zero, are bang on! These daily transactions wouldn't be trading this low, unless rates were going there! Bernanke-san... Just call him Bernanke-san, as you sing, I'm turning Japanese, yes, I turning Japanese, I really think so!

For new readers, that whole production is all about the fact that I believe that the U.S. is following Japan and Japan's leaders in how they dealt with the decade of economic mess... If you go back to the mid-90's you'll find the Japanese economy circling the bowl, and the Japanese Gov't and Central Bank, issuing stimulus package after stimulus package, building huge amounts of Gov't debt, and cutting interest rates to zero... Now... Ask yourself, what country / Central Bank does that remind you of in 2008? By Joe, you've got it! You sank my battleship! It's the U.S. / Fed!

Still no word on the Gov't's answer for the Big 3 automakers here in the U.S. We're waiting for the final answers if you will on whether the Big 3 get bailout money, how much, and will they get a "Car Czar" to oversee them... The stock jockeys liked the news yesterday that it looked like a thumbs up for the Big 3... Until then... We wait.

The Chinese renminbi is back on the rally tracks VS the dollar after some hemming and hawing over the Paulson / China talks... I still don't expect much from this, but slow positive moves are better than none!

Currencies today 12/9/08: A$ .6555, kiwi .5415, C$.7960, euro 1.2860, sterling 1.4775, Swiss .8245, ISK 261, rand 10.19, krone 7.12, SEK 8.17, forint 205, zloty 3.0590, koruna 20.03, yen 92.60, baht 35.45, sing 1.5040, HKD 7.75, INR 49.59, China 6.8734, pesos 13.46, BRL 2.4780, dollar index 86.16, Oil $43.45, Silver $9.88, and Gold... $770.50

That's it for today... Whew! What a long day yesterday! I was beat when I left last night! No worries, I'll make up for that long day yesterday, today! My little buddy, Alex, was up almost all night, sick. I felt bad for him, as I've been there before, and it's not seashells and balloons for sure! Just hope he doesn't pass it on to me or my beautiful bride. A lot of the people in Jacksonville, that read the Pfennig, and had heard all this talk over the years about my beautiful bride, finally got to meet her Saturday night... I'm sure they walked away, saying, "that Chuck was bang on with that description!" Finally rounded up the kids to go and cut down Christmas trees this Sunday. This is always a "family event" (except last year, when I couldn't go because of my leg), and if my little buddy, Alex, has anything to say about this, it will always remain just that! He, wants the family to decorate the house together, cut down the tree, etc. I tell people all the time that he is so eerily like I was at his age. And this stuff is right up my alley! OK, I carried on too much here, time to go, and finish up yesterday's work! I hope your Tuesday turns Terrific!

Chuck Butler


EverBank World Markets



Posted 12-09-2008 10:14 AM by Chuck Butler