Greenspan Sounds a Warning
"And now, just like the stock market bubble, when margin percentages weren't reigned in, the bubble has grown like a big monster…and when it's over and you'll say, 'Hey…I warned you!'"
by Chuck Butler In This Issue… - Targeting houses…
- Who created this mess?
- A Chinese press conference…
- A full data cupboard…
--- Advertisement --- Not sure which currency is right for you? Visit the Currencies Research Center at www.everbank.com for handy research tools. Or, give the Everbank World Currency Desk a call at 800.926.4922. --------------------- And now…today's Pfennig! Greenspan Sounds A Warning… Good day. Well, I hope your weekend was grand…and if you live along the Gulf Coast, New Orleans area, I hope you have moved somewhere safe. My friend Tillie lives in the French Quarter. Be safe! A pretty strange trading day on Friday, as the euro traded up to 1.2350, and then down to 1.2265 at the end of the day. Pretty strange in that there was nothing going on except a Greenspan speech at Jackson Hole, Wyoming that should have sent the dollar to the wolves…I'll put it down as profit taking! In the overnight markets, the euro has traded back above 1.23, as oil has hit $70 per barrel with Gulf Coast operations shut down due to the hurricane. What I really want to concentrate on this morning though is the Greenspan speech. First of all, these Jackson Hole shindigs every year seem to generate Big Al's clearest message. And this year was no exception…he said two things that the markets should have been all over like a cheap suit! The most important for you and me is that the Fed is going to target asset prices… Did he mean gold? Stocks? Commodities? No…he meant houses! And the housing bubble that I've been ranting about for over two years. This was a quote of Big Al's…read this carefully: "History has not dealt kindly with the aftermath of protracted periods of low risk premiums." Hey Big Al…who created those "protracted periods of low risk premiums"? YOU DID! And now, just like the stock market bubble, when margin percentages weren't reigned in, the bubble has grown like a big monster…and when it's over and you'll say, "Hey…I warned you!" In addition, he had this to say about housing prices, "What they (you and me) perceive as newly abundant liquidity can readily disappear. Any onset of increased investor cautions could cause house and stock prices to drop." Thanks for those words of wisdom… I, no wait… I'm going to get down from my soapbox now, before I say something about this situation that could get me in hot water. The other thing he commented on was a message aimed at U.S. policymakers: "The huge U.S. Trade and Budget Deficits threaten the long-term health of the economy." Well, here he sounded like Warren Buffett. You recall Mr. Buffett's last statement regarding the deficit policies and the fate of the dollar don't you? Ahhh, grasshopper… Come sit… Here's Mr. Buffett… "The policies that we're following are likely to lead to a weaker dollar over a long period of years. It's not a forecast for next week, or next month, or even next year." Now, I'll get back to the program…China's central bank sent out a note this morning that they will hold a press conference regarding the renminbi tomorrow. The central bank did not elaborate, and this has led currency observers to believe that the next move to revalue the renminbi could come at that press conference. I'm not buying that…but there is smoke here. And you know me - where's there's smoke…there's fire! The renminbi has traded to it's highest level vs. the dollar overnight @ 8.0954… The profit taking we saw late on Friday, really affected the other currencies. Aussie, kiwi and Canada all took on water, and that reversed a strengthening pattern for those three that had developed last week. We'll have to see if they can come back this week…I would think so, with oil going so high, and the rest of the commodities rebounding. I don't see the dollar getting any relief trading from the data cupboard this week, as we start out the week with Consumer Confidence. Last Friday's U. of Michigan gauge on Consumer Confidence didn't work out too well, with the index fall to 89.1 VS a July reading of 92.7, and was forecast for 92.5. If August Consumer Confidence remains above 100(it was at 103.2 in July) then the government needs to sell those "cooking books." Those sales could go to help the Budget Deficit! We'll also see Factory Orders today for July, and they are expected to fall 2.3%… Not a good thing… Then as the week goes on, we'll see Personal Income and Spending, once of my favorite to beat on, the ISM Manufacturing Index, and end the week with a Jobs Jamboree Friday! Currencies today: A$ .7560, kiwi .6965, C$ .8380, euro 1.2311, sterling 1.8040, Swiss .7955, rand 6.46, krone 6.425, forint 199.90, zloty 3.30, koruna 24.11, yen 110.40 (Koizumi's lead in the polls narrowed over the weekend) baht 41.20, sing 1.68, China 8.0954, pesos 10.85, and gold… $440.20 That's it for today. While I'll be home for the month September, I head back out on the road in October, with stops on Long Island, San Francisco for the Money Show, and New Orleans for the New Orleans Investment Conference. I'll have more on those shows as we draw closer to October. They are saying on the TV, that Katrina has made landfall, so once again my thoughts are with those in the path of that hurricane. Have a great Monday, and week! | 
