A Retail Sales Surprise

Good day… And a Happy Friday to one and all! Front and center this morning, a continental regional plane crashed near the Buffalo airport overnight, and all 48 on the plane were killed, along with 1 person in a home. Not happy news for a Friday morning, for sure… Our thoughts should be with the familes of these people today…

OK… Yesterday, retail sales surprised quite a few people, coming in on the upside, halting a multi-month slide on the negative side of sales. Jen brought to my attention that this happens just about every year. The January retail sales are spurred by after Christmas sales, gift cards, and other “stuff”. So, let’s not get all excited about this one month’s data… Remember what I always say… “One swallow does not make a summer”

The Weekly Initial Jobless Claims didn’t fail to disappoint us, though… 623K new unemployment claims were filed last week, and the previous week’s total of 626K was revised up to 631K. That’s over 1.2 million unemployment claims filed in the past two weeks! UGH! But, as I said above, the dollar rallied on the day… To me, this data is more important than the trumped up 0.1% rise in retail sales, as these people are going to be unemployed, and what will that do to future retail sales? That’s right… They circle the bowl.

Today, the data cupboard only yields one piece of data… The U. of Michigan Consumer Confidence Index, which is expected to remain very low. In fact, I’m surprised it remains as high (at 61) as it does!

Well… The G-7 meeting started this morning… The markets are holding their collective breath waiting to see what G-7 says… But why? This is nothing more than a boondoggle! And now it’s even more so, as G-7’s power has been handed over to individual governments to deal with their problems… Bloomberg had this to say… “The shift in influence to the group, whose membership ranges from the U.S. to China to Saudi Arabia, reflects the fact that industrial nations lack the resources to fix the world’s economic woes alone. That curbs the G-7’s scope to deliver new initiatives this week, say economists and former officials.”

Anyway, the markets do pay attention, so I have to! They have plenty they could talk about… Dollar strength when it shouldn’t be getting any love… The strong Japanese yen (JPY) in the face of Japan’s problems… And the rise in gold…

I think gold traders are running scared in light of what the G-7 might say, as gold has sold off for the first time this week, losing $8 this morning. As Arnold would say about these gold traders… “What a bunch of weak men!” (Ok, you have to do it in “Arnold voice”).

In October 2008, G-7 said they were concerned with the Japanese yen’s strength… Well, actually it was the Japanese that were concerned… And until yesterday, yen had remained quite strong… But the closer we got to the start of the G-7 meeting, the more yen began to weaken… I bet some yen traders got scared of what G-7 might say, and unloaded their positions ahead of the meeting… Scaredy cats!

OK, enough with the G-7 Schmee 7 today! The dollar held the hammer yesterday, and has received permission to continue holding it this morning as Eurozone economic data has really weighed heavily on the euro (EUR). Here’s the skinny on the Eurozone economy as reported by the Wall Street Journal… “The euro-zone economy contracted by a record amount in the last three months of 2008 as industrial output was hit hard by the sharp slowdown in global demand. The decline was led by the biggest quarterly fall in German gross domestic product for more than two decades. Data from the European Union’s Eurostat statistics agency showed euro-zone GDP contracted 1.5% on a quarter-to-quarter basis and was 1.2% weaker on an annual basis, the biggest falls by both measures on record.”

I know that there are those people out there that are pointing a finger at European Central Bank (ECB) President, Trichet, and blaming him for this recession in the Eurozone, for it was Trichet who kept rates from falling as fast as they did in the United States. Look, the Eurozone was going to have a recession any old way, whether Trichet cut rates to zero like his counterpart Big Ben Bernanke, or not! To me, it was the better part of discretion than valor… He squashed inflation, which is the most important thing to the ECB, and he still has some rate cut arrows in his quiver to use, where Big Ben is out of rate cut arrows.

Now, I’ve read where some pundits believe that the euro will lag compared to the U.S. in a recovery, as the U.S. cut rates faster than the ECB… Well, the U.S. isn’t going to see a recovery as long as over 600K workers are filing for unemployment claims each and every week! The banks in Europe are not in as good of shape as we were led to believe a few months ago… But, I always say that at least the ECB/Eurozone is dealing with their problems from a position of strength.

On this side of the “pond” I heard that the new administration was working on a new plan for mortgages… There are reports suggesting that the Obama administration is hammering out a program to subsidize mortgages. In a major break from existing aid programs, the plan under consideration would seek to help homeowners before they fall into arrears on their loans.

That’s nice… You know, years ago, when my beautiful bride and I didn’t have two nickels to rub together, we paid our mortgage no matter what, and at no time, EVER, did I think someone would bail me out! And I know I’m not unlike the majority of people in this country… So, you have to wonder what happened here? The government is stepping in to “help” you… I’ve told you before that Ronald Regan used to say that the scariest thing you can hear is, “Hello, I’m from the government, and I’m here to help.”

OK… The Canadian trade surplus is no more… Canada’s trade balance turned negative last month… Their trade deficit is small at this time, so there’s nothing to get all up-in-arms about. We’ll have to keep an eye on Canada’s this to see if more harm is done here.

You know, I was talking to someone the other day about how Norway has come Ollie, Ollie Oxen Free on all this “bad bank” “large write downs” and bailout stuff… I always talk about how a large surplus allows a country to deal with problems in an orderly manner, and not have to be at the mercy of the foreigners that finance a country’s debt. Norway has been the poster child for this… Canada comes in second… You just don’t hear about Canadian Banks in trouble, which is pretty strange, considering their relationship to the U.S. market.

Coming in third is China… China with all their trillions of dollars sitting around losing their value – and set to lose their value even more in the future – looks to have possibly turned around their recession in a heartbeat. You may recall that China put into place a 4 trillion-renminbi stimulus package a few months ago… And when you deal from a position of strength, you can do these things quickly and with force. So, according to an economist at Merrill Lynch, “China looks set to be the first major economy to recover from the current global meltdown. China is the only economy in the world to see significant growth in credit to corporate and household sectors since September 2008, when the financial crisis worsened to a near collapse.”

Australia is doing better all the time with regard to their problems, and I think once we get past the credit crisis in the United States and the inflation wolf returns, that Australia will be positioned to take off! Australia just approved a A$ 42 billion stimulus package of their own… Of course, the credit crisis in the United States isn’t going to end next week, or next month, and maybe not for a few months.

I told one of the crowds in Orlando last week at the Money Show, that I have a track record of calling things that don’t happen for 6-12 months… But “usually, the markets come around to seeing things the way I see them!”

Did you hear about this? Goldman Sachs held an emergency meeting of hedge fund executives…

Here’s the skinny as reported on Bloomberg…

“Goldman Sachs Group hosted an emergency meeting of hedge fund executives and financial executives shortly after U.S. Treasury Secretary Timothy Geithner’s presentation on Feb. 10, CNBC’s Charlie Gasparino reported.

“Gasparino said the meeting was co-hosted by Goldman’s Gary Cohn and Jon Winkelreid and included Kenneth Griffin of Citadel Investment Group LLC. Griffin said that the mortgages underlying the so-called toxic assets held by banks and other institutions need to be dealt with, Gasparino said, citing unidentified people familiar with the meeting.”

Hmmm… That’s scary, eh? I’m sure that Goldman didn’t have the hedge fund executives in for tea and scones! And… Any time the word “emergency” is used, a sense of urgency follows it.

Here’s something to take us to the Big Finish… Not good news… But, at least these guys are beginning to see things “the way I seem them”! This was reported in the Wall Street Journal.

“Economists in the latest Wall Street Journal forecasting survey, while still mostly projecting growth in U.S. gross domestic product by the third quarter, largely agree that a second-half recovery is looking much less likely now than it did a few months ago. Recent data showing just how sharply growth in the U.S. and abroad has declined in the final months of 2008 have cast a deepening shadow over 2009.”

Currencies today 2/13/09: A$ .6610, kiwi .5265, C$ .8105, euro 1.2875, sterling 1.4525, Swiss .8620, rand 9.9610, krone 6.8070, SEK 8.3675, forint 232, zloty 3.6170, koruna 22.27, yen 91.50, sing 1.5060, HKD 7.7525, INR 48.68, China 6.8335, pesos 14.41, BRL 2.2730, dollar index 85.94, Oil $33.96, Silver $13.40, and Gold… $938.80

That’s it for today… When you travel as much as I do – or even like the Big Boss, Frank Trotter who travels three times what I travel – the news of a plane crash hits you a little harder. OK… Quite a few of you brought it to my attention yesterday that it was Lincoln’s birthday. Well… I had mentioned that the day before, that Thursday would be his 200th birthday; didn’t think I needed to say it again… Well… Tomorrow is Valentine’s Day… Are you ready? I stopped this morning and got heart doughnuts from Krispy Kreme for all the ladies in the office, they are on their respective desks, waiting for their arrival… See? I’m a real sweetheart, right? HAHAHAHAHAHAHAHA! My little buddy, Alex, was all dressed up with a tie on (I had to tie it for him, of course!) last night, as he goes once a week to cotillion. We’re trying to help society! Alex has two basketball games this weekend, so I have that going for me! He wears a plastic mask to protect his nose these days… Looks weird, but he gets to play, and that’s all he cares about! Well, it’s a three-day weekend, as we all celebrate mattress sales… No wait! We celebrate President’s Day… I sure hope your weekend is grand, and your Friday is Fabulous!