A "New and Improved Stimulus Package"
Good day… And a Thunderin’ Thursday to you! Well… The Fed kept rates at near zero, as if they had any ability to raise them, the House sent the stimulus bill on to the Senate, the dollar rebounded on all these two items, and I have some very strong quotes for you at the end of today’s lesson… So, get your coffee, or OJ, or V-8, sit down, and let’s go!
OK, I had better start with the dollar reaction to the two items yesterday, as what looked like an end to this dollar strength mess was about to take place as the euro (EUR) pushed to 1.33, taking the other currencies along for the ride… But that was just a head fake… The dollar had more strength to show us, after the Fed kept rates unchanged, and the House passed the stimulus bill.
You see, it’s very simple… Or maybe I mean to say it’s simple-minded people… Nah, I won’t go that far! These dollar bulls are thinking, it’s simple… With the Fed greasing the tracks with ZIRP (zero interest rate policy) – and now with the ability to buy Treasuries – that everyone else wants to sell, because of the paltry yields they receive on them, and… With another “NEW AND IMPROVED” stimulus bill, the economy is going to flourish, and it will be all seashells and balloons from here on out… So… Why not buy the dollar, eh?
I’LL TELL YOU WHY NOT! First of all the Fed is out of control, doing whatever they want to do with no one to stop them… And they are NOT making the best decisions. They are following the same footprint that Japan made a decade ago! But don’t let that get in the way of the euphoria the dollar bulls have going for them right now!
And second… Now this is really going to get my blood boiling, but with the newest stimulus bill… Another almost $900 billion is on the red side of our ledger… And for what? The same graft and cronyism that went on in the ’30s with the WPA, and spending on people that if you give them money, what incentive will they have to work on that bridge or highway that needs to be repaired? I’m really sick in my stomach about all this, folks… I really just don’t know how the media is taking this hook, line and sinker!
I know that the House approved $819 billion, but I believe that by the time the Senate gets finished with it, the bill will have grown to $890 billion, or close to $900 billion as I sate above! When it’s all said and done, I bet there’s some pork there… And some money allocated to things you wish you knew about and could vote on before it was passed… But wait, we can’t vote on these things, we can only vote for the dolts that passed the Bill… Hey… It’s your representative, folks… We The People put them there!
OK, I had better stop there… Let’s talk about the Fed… Well, the Fed’s FOMC decided to keep rates unchanged, which was the consensus view, and made a statement that the “economy has weakened further”. NO DOOKIE SHERLOCK! What a bunch of dolts! We ALL KNOW THE ECONOMY HAS WEAKENED FURTHER… WHAT WE WANT TO KNOW IS… WHAT ARE YOU GOING TO DO ABOUT IT? Well, for that, we go to our correspondent on the scene… Hello? Are you there? Yes, I’m here, and I’m with Fed Chairman Ben Bernanke… Mr. Chairman, the folks at home want to know what the Fed is going to do to stimulate the economy, as apparently, cutting interest rates to near zero hasn’t done the trick… Ahem… Let me clear my voice, because I want the folks back home to hear this clearly… We, at the Fed, are prepared to buy long-term Treasuries, to get private interest rates down, which we believe will reduce the spreads in Treasuries and mortgage-backed securities. If we can get mortgage rates even lower than the multi-decade lows we are now seeing, then we believe we’ll have stimulated the economy… Thank you Mr. Chairman for you time…
Well… I’m of the opinion that should the Fed begin buying long-term Treasuries, which in reality, I believe they have been doing all along, through their offshore accounts (this is all conspiracy thoughts folks, this does not exist according to our leaders)… But… If they do come out in the open and do it, then I believe we should move to abolish the Fed!
And… I told you yesterday that it would be nice if the Fed spilled their guts, and told us everything… What they were doing, how they were going to do it, how much of it they will use, and how they will monitor it… But that didn’t happen, of course! Keep us in the dark, right? Because we’re not as intelligent as them, right Fed Heads? Well, I don’t know what schools they attended to learn their economics and communications… But, my small little local school taught these things better than theirs!
OK, I had better go on to other things before I get in trouble with the legal beagles. The Reserve Bank of New Zealand (RBNZ) did cut rates yesterday, as I suspected they would… But the went even further with their rate cut than I had forecast. Recall, that I said earlier this week that the RBNZ would probably cut 100 BPS? Well, they cut 150 BPS! WOW! Talk about cutting into a fat hog! That puts the total rate cuts since July 2008, at 475 BPS! RBNZ Governor Bollard had a lot to say afterward, and I don’t have the time or space to give you everything he said, so… Here’s a snippet…
“Globally, there has been considerable policy stimulus put in place and we expect this to help bring about a recovery in growth over time. However, there remains huge uncertainty about the timing and strength of a recovery.”
The news knocked the stuffing out of kiwi (NZD), which had rallied yesterday to 53+ cents… Kiwi, is now at 52-cents…
All of the currencies are off their levels from yesterday, as the dollar strength has hit every currency…
OK… I just read an interview that Jamie Dimon, CEO of JP Morgan Chase gave at the World Economic Forum in Davos, Switzerland. This is interesting stuff folks, and I wasn’t planning on coming across this, so the Pfennig is going to be a bit longer today than usual, by the time I highlight Mr. Dimon, and then the other “quotes” I promised at the start… So… With no further ado… Here’s Jamie Dimon…
“Banks gave consumers weapons of mass destruction by loading them up with debt.” WOW! OK, there’s more… “We gave them the weapons of mass destruction to borrow too much. I don’t blame them, I blame the CEO’s of their own businesses.” Then there’s this… And this is the good stuff…
“To policy makers, I say where were they? They approved Basel II that didn’t work,” (these were the rules governing how much capital banks hold to back their loans) “they approved all these banks. Now they’re beating up on everyone, saying look at these mistakes, and we’re going to come and fix it.” And he ended with this ditty… “God knows, some really stupid things were done by American banks, and by American Investment Banks.”
WOW! Mr. Dimon probably won’t be getting a Christmas card next year from his fellow Bank CEO’s! But I love that he’s doing his best Aaron Neville, and telling it like it is… Don’t be ashamed to let your conscience be your guide.
Of course, I have to say right here, right now, that the bank I work for, EverBank, did not and does not fall into that category of American Banks that Dimon was talking about! We didn’t “play the subprime, creative loans game” and we didn’t get in bed with these guys either! And… I’m sure there are quite a few American Banks that are in our category… But the spotlight always gets shined on the “bad apples”.
OK… Now that I’ve completely gone off my pre-typing path… Let me get back on that path, and go to my two quotes for today… I believe that I ran this Thomas Jefferson quote before… But the Marx quote is a real zinger!
“If the American people ever allow the banks to control the issuance of their currency, first by inflation, and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property, until their children wake up homeless on the continent their fathers conquered… I sincerely believe that the banking institutions having the issuing power of money are more dangerous to liberty than standing armies.”
And then this…
“Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism”
–Karl Marx, Das Kapital, 1867
Boy oh boy! This is getting very strange, eh?
And then there was this… I can’t understand why the public isn’t gathering their pitchforks and rakes on this one… Or maybe, the media didn’t tell them about this… Hmmm. That’s probably more like it… Any way… Here’s what I’m talking about…
Bloomberg reported this… American International Group Inc., the insurer that nearly collapsed because of losses on credit default swaps, offered about $450 million in retention pay to employees of the unit that sold the derivatives, according to two people familiar with the situation.
About 400 workers at the financial products unit may get the money in two installments, said the people, who declined to be named because the payments were confidential. The business was responsible for about $34 billion in write-downs since 2007 as the market value of swaps AIG sold to banks plunged amid the subprime mortgage market collapse.
The payments bring to more than $1 billion the amount AIG has committed to keep its employees from leaving. The New York-based insurer took a federal bailout in September to avoid bankruptcy and is selling units to repay the government. AIG disclosed the existence of the unit’s retention program in regulatory filings, including a quarterly report in August.
Geez Louise! I’m going to go yell at the walls right now! Serenity Now!
OK, I’m back now… Hey! I don’t want to be like this! I’m really a fun loving person! But since you don’t get this stuff on your cable news or national news or even local news, I’m here to deliver that! I can’t help but get all caught up in the doltness of these people!
We’ll get more data today here in the United States… Weekly Initial Jobless Claims, and Durable Goods, and New Home Sales… None of this will be good for the economy…
Currencies today 1/29/09: A$ .66, kiwi .5210, C$ .8235, euro 1.3120, sterling 1.4320, Swiss .87, rand 9.9220, krone 6.7150, SEK 8.02, forint 218.40, zloty 3.3325, koruna 20.9050, yen 89.60, sing 1.5025, HKD 7.7566, INR 48.98, China 6.8380, pesos 14.02, BRL 2.2580, dollar index 84.59, Oil $41.09, Silver $11.78, and Gold… $878.70
That’s it for today… The customer call-in conference yesterday went well… We didn’t have that many callers… I guess people didn’t want to hear what I had to say! My poor little buddy, Alex, had to spend most of yesterday and into late last night, in the emergency room at the hospital, as he did a number on his nose in a sledding accident. He’ll be fine… Nothing new for boys! That will put the kyboshes on basketball and wrestling for this year though… He won’t be happy about that! Don’t know what I was thinking the other day when I said, “6 more weeks till pitchers and catchers report for spring training”… We’re about 2 weeks away! YAHOO! Now that sounds better than 6 weeks! Then… Before we know it, March will be here, and my annual sojourn to Florida… YAHOO! OK… I’m doing well on time this morning, so I must have been typing faster than normal! HA! Anyway… Time to go, I hope your Thursday is Thunderin’!