Chuck Butler

As I left you on Friday, Greece had announced the activation of an aid package, and momentarily, things looked up for the beleaguered Eurozone. The euro (EUR) continued to gain throughout the day on Friday, and well, looked like it was about to “break out”… But that was Friday, and today is Monday… And all the euphoria surrounding Greece on Friday has been thrown out with the bathwater, and it’s back to euro bashing this morning…

I was all prepared to be Mr. Happy this morning about Friday’s price action in the currencies and commodities… But, when I awoke I was mistaken, and I hung my head to cry.

My darling granddaughter, Delaney Grace, sings that song “You are My Sunshine” and then she bows when finished… So darn cute!

OK… So… Things aren’t as great this morning as they were last night when I looked, to get a feeling of what I would write about today… But hey! They aren’t all bad either! I mean, the euro is above 1.33, the Canadian dollar/loonie (CAD) above parity again, and gold is trading above $1,150!

Greece’s problems continued to unfold this morning in Europe with Greek bonds falling in value, and their yields reaching highs that haven’t been seen since 1998! The problem this time comes from this speculation/rumors that Germany will refuse to guarantee an early release of the bailout funds that Greece activated on Friday.

This all came from the German Finance Minister that warned that Germany would not release any funds until Greece agreed to tougher terms… WOW! A lender demanding tough terms… What a novel idea!

OK… Let’s move on, there’s nothing to see here… Australia and New Zealand are closed today for ANZAC Day… The key thing to watch for this week in Australia, is Wednesday’s inflation data (CPI)… The Reserve Bank of Australia (RBA) Governor Stevens has already pinned his colors to the CPI mast, so any indication of future rate hikes in Australia will be tied to this data.. The latest forecasts to this data shows an annual figure of 2.95%, which would be greater than the 2% target, and could lead to a rate hike in May… I would say, a print above 3% would almost guarantee a rate hike in May!

And Friday’s Housing data was very strong… Very strong! But I was reminded of something by Aaron, who’s looking for a house to buy right now and knows all the tricks of the trade… The “new home buyer” and “ existing buyer” tax refunds from the government run out this month… So, just like the “cash for clunkers” you’ll see a flood of business, which does nothing but take away business from the future, all pushed in to a short time period to take advantage of a tax rebate… I’m sure April’s numbers will be strong too… But, sometime in June, when we see May’s numbers, you might want to sit down, because those could show the other side of tax programs.

Well.. I’m going to step away from The Daily Pfennig for a minute here and talk about some very serious stuff, folks…

Last week, I mentioned US deficit spending, but didn’t really get into the numbers like I should have, and when I re-read the Pfennig later in the day, I gave myself a V-8 forehead slap and said, “Chuck, why didn’t you say this?”

Last July, I gave a presentation at the Agora Investment Symposium in Vancouver, BC at that time I told the audience that each US citizen’s share of the national debt had grown to $35,000… Just for grins, I thought I would check on how we’re doing with that… Well, 9 months later, our national debt has exploded! Each citizen’s share of this national debt is now $41,670! OH! But, that’s today… When you take into consideration our liability per citizen when adding in the unfunded liabilities (you know, Social Security, Medicare, Medicaid) it’s a nice $350,700!!!!

So… We can go on with our deficit spending, and sooner or later, love is gonna get ya… And in addition, we’ll be getting our debt rating reduced… Yes… Just ask Japan, who got a warning missile fire across their bow last week by the rating agency, FITCH, who warned that Japan’s debt rating might be lowered.

But, the most important thing to remember, folks, is this… The more you spend, the more you need to borrow and finance… And there are consequences to this… Higher rates, and a cheaper dollar will be needed to attract buyers of our Treasuries, which are used to finance the debt. So, the next time someone from Congress is in your neighborhood, ask them this simple question… How do they expect to pay for their deficit spending? And don’t expect bull dookie answers!

OK… So the other day, I’m watching TV, passing some time, and a commercial comes on with the new CEO of General Motors (GM) and he says… “We’ve paid our debt back in full”… I thought Whoa! That’s impressive, I’m going to have to go back and think about this! I mean, shoot Rudy, GM has paid back the taxpayers? How’d they do it?

But then, there it was… In my Sunday paper… GM’s “paid in full” is short by $53 billion! I knew that claim sounded fishy! Yes, apparently the GM CEO forgot about the $45 billion that the taxpayers gave them, and the $8 billion Canada gave them… According to David Nicklaus, the $53 billion was converted to stock during GM’s bankruptcy… “The only realistic way for GM to repay that money is to do an initial public stock offering (IPO).”

So… The next time that commercial comes on the TV, you can basically say… “Liar, liar, pants on fire!”

OK… Now, if you don’t want to get sick to your stomach, you might want to skip ahead to the Big Finish… But I have to tell you first, just to get a taste of the goings on the past few years on Wall Street… This from Bloomberg

April 25 (Bloomberg) – Fabrice Tourre, a Goldman Sachs Group Inc. executive director facing a fraud lawsuit in the sale of a mortgage-linked investment, said an index that facilitated derivatives trading in the market was “like Frankenstein.”

The so-called ABX index is “the type of thing which you invent telling yourself: ‘Well, what if we created a ‘thing,’ which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price?’” Tourre said in a Jan. 29, 2007, e-mail released yesterday by Goldman Sachs. Watching the index fall is “a little like Frankenstein turning against his own inventor.”

If you think like me, (and heaven help you if you do! HA!) then reading things like this just make you shake your head in disgust… And then wonder why people like that are allowed to walk around free!

To recap… The currencies are a bit stronger this morning, from Friday morning. But weaker than they closed on Friday afternoon. Germany has warned Greece that they need to agree to tougher terms before releasing the funds, and that has pushed back the euro from Friday’s higher figure. The Canadian dollar/loonie has pushed past parity again, and the Aussie dollar (AUD) is back to 93-cents…

Chuck Butler
for The Daily Reckoning

Chuck Butler

Chuck Butler is President of EverBank

  • smithcreek

    Still waiting for GM/Obama to explain how GM paid back their loan while losing 3-1/2 billion in the last quarter of ’09 alone. Oh yeah, they did it with other money they borrowed, but neglect to mention that minor detail.

    “According to David Nicklaus, the $53 billion was converted to stock during GM’s bankruptcy… “The only realistic way for GM to repay that money is to do an initial public stock offering (IPO).”

    That might work, if the company was worth more than a small percentage of that $53 billion. We won’t find out how much we the taxpayer lost on that deal for years, but we’ll be told what a wonderful success it’s been while we wait.

Recent Articles

How to Trade October Volatility

Greg Guenthner

When it comes to the stock market, October gets a bad rap. It's true, there have been some major crashes in October (ahem... Black Monday, Black Tuesday, etc.) but on a shorter timeline this month hasn't been nearly as bad as you might think. Today, Greg Guenthner offers an optimistic look at the month investors love to hate. Read on...


What the Reboot of the US Budget Means for Your Money

Byron King

Big government doesn't come cheap. And right now the U.S. government is one of the biggest in history. So far the budget writers have been able to move money around to keep the machine moving. But as Byron King points out, that will soon become much more difficult. Read on for the full story...


Invest Like a Shark in the “New” Stock Market

Wayne Mulligan

In the late '90s, financial TV personalities like Jim Cramer became mega stars - often drawing more ratings the ESPN. But that was over 15 years ago... That couldn't happen again, could it? Today, Wayne Mulligan details the new flock of personalities that are set to cash-in on a different kind of investment boom. Read on...


One Thing to Consider Before You Become a Whistleblower

Chris Campbell

Being a "whistleblower" is no easy task. Regardless of whom you're blowing the whistle on, there's bound to be a fair amount of risk involved... and that's especially true if you're going after the "powers that be." But there's more to it than that... And as Chris Campbell explains, none of it matters if you can't protect yourself. Read on...


The Number One Threat to the US Above Terrorism

Peter Coyne

As conflict with ISIS looms, the Pentagon appears to be in a pickle... They've got all kinds of things on their "wish list", and they're not likely to get all of them. But they may have found a loophole, and that could mean big bucks for a handful of investors who know where to look. Peter Coyne explains...


How to Spot a Market Top

Greg Guenthner

Last week was a rough one for most of the world's markets. Investors saw red almost everywhere they looked. And that's got a few media outlets ready to declare a top in stocks. Greg Guenthner explains why this line of thinking could be dangerous... and why, if you follow it, you could be doing your portfolio a disservice. Read on...