An End to 2007

Good day… And a Marvelous Monday to you! New Year’s Eve… But before we get to the party favors and champagne at midnight, yours truly will be on CNBC this morning at 11:30 ET, 10:30 CT. The kind people at CNBC asked if I had a different viewpoint for the dollar than those calling for a recovery in 2008. You know me! I said, “Of course I do! Let me tell you all about it!” So… Anyway… Set the recorders! You’ll get to see my big fat bald head, and hear me talk about stuff that I talk about here every day.

So… As we close out 2007, I see that the euro (EUR) has gained more than 11% this year… And my friend David Galland wrote in his weekly letter last Friday, “Gold is heading for Tuesday’s turn of the year with a seventh straight annual gain, and its biggest since 1979, up about 32%. It’s within spitting distance of November’s peak of $845 and its all-time high spot price of $850.

“It’s been the perfect storm for gold nearly all year, as the dollar has swooned against most other currencies, the price of crude has soared to nearly $100 a barrel, and a series of tense international incidents – climaxed by this week’s assassination of Benazir Bhutto in teetering Pakistan – have prompted periodic flights to safety.

“Silver, which is more of an industrial metal than gold, trailed its sister metal this year, as worries over the slumping economy raised fears that demand will slacken. In a reversal of 2006 – in which silver climbed 46% to gold’s 23% – silver was up only about 15% in 2007.”

The Bhutto assassination last week, along with weak data continues to put pressure on the U.S. dollar. Last week, Chris wrote that he believed we were “slip sliding toward recession”, which followed up on my comments that I thought we would see a recession because of the mortgage meltdown…

Speaking of data and the mortgage meltdown… New Home Sales fell 9% in November! OUCH! NOW THAT’S GOING TO LEAVE A MARK! That 9% fall represented the lowest level of sales in over 12 years! Geez… It sure is a relief knowing that Mssrs. Bernanke and Paulson told us not to worry about the mortgage meltdown and that it had bottomed months ago! HA!

This is the kind of stuff that leads to continued weakness in not only the dollar, but the economy as a whole…

There’s a Think Tank out there that tracks these things much better than yours truly… They send me their thoughts from time to time on the economy’s cycle. They do a great job of tracking all the data and plotting it out in quadrants. Anyway… Their current forecast indicates early summer 2008 for the recession.

PIMCO’s Paul McCulley believes the Fed won’t stop cutting rates until they reach 3%… Hmmm… You may recall that I said 3-3.25% some time ago… And I mean some… Time… Ago! Anyway… If the Fed is cutting rates that low again, inflation is going to eat us alive… And that won’t be good for the dollar… Not until the Fed realizes their mistake (again!) and starts raising rates to fight inflation. But I don’t see that happening until later next year.

And there’s further rot on the dollar’s vine with news that the dollar’s share of global foreign exchange reserves fell to a record low in the third quarter as demand for U.S. assets dropped since the start of the mortgage meltdown. And the proof in the pudding that the euro is the offset currency to the dollar comes from the report that while the dollar’s share fell, the euro’s share rose!

On Friday… The dollar slid a little further down the slippery slope, as the euro has really rebounded in the past five days. The currencies have sold off a bit overnight, and today should be interesting in that we only have the existing home sales data to deal with, along with short-handed trading desks. Could be a wild day… Or it could be dead as a door nail.

But it’s not the only currency posting a recovery versus the dollar in the past week… As talked about here, the Canadian dollar/loonie (CAD) rebounded last week, fueled by a rising oil price, which got within spittin’ distance of $98 on Friday. The loonie has reached its highest level versus the green/peachback in over a month! Remember what I told you about the loonie. If oil gets to $100, and gold climbs toward $900, I would look for the loonie to come back strong. This past week’s recovery is just a sprinkling of that idea. Or since we’re talking about Canada… Let’s say… The tip of the iceberg!

I was fearful last week that the Indian rupee (INR) might suffer from the Bhutto assassination… But fear not! The rupee has remained strong through this difficult time in that region.

It’s been a great year for what I used to call the “Euro Wannabes” which consist of Hungary, Poland and the Czech Republic. These three amigos remain on the tracks to become the euro, and so far the speculation that I feared might hurt these currencies, has been a non-factor. Six years ago, at Christmas time, I created what was called… The “Euro-Opportunity Index CD” consisting of these three… We don’t have many holders of the CD any longer, but those that stayed with it, or converted to euros have seen some good returns over the years, for sure!

This is sure short-n-sweet this morning… And it won’t go out later as I warned… Well, let me re-state that… I’ll send it to the list server at the usual time… I had planned on sleeping later today so I could make it to midnight… But I woke up at the regular time and couldn’t go back to sleep… So.. Here I am…

Currencies today: A$ .8790, kiwi .7730, C$ 1.02, euro 1.4720, sterling 2.0050, Swiss .8885, ISK 62.15, rand 6.82, krone 5.4150, SEK 6.40, forint 171.40, zloty 2.4350, koruna 18.06, yen 112, baht 29.57, sing 1.4370, HKD 7.7960, INR 39.41, China 7.3030, pesos 10.90, BRL 1.78, dollar index 76.12, Oil $96.17, Silver $14.93, and Gold… $840

That’s it for today… And this year!

So… As I sit here thinking back on 2007, I have good memories and no-so-good memories of the year. I’ve chronicled my bad memories enough… So here are my good memories…  My precious little granddaughter, Delaney Grace, was born, and has a smile that can light up a room. My little buddy had a great year in football. My beloved Mizzou Tigers finally turned the corner. The health and safety of my family was good. My beautiful bride was by my side through all the bad stuff, And… The thousands, and I do not exaggerate here… The thousands of letters, emails, cards, etc. with thoughts, prayers and get well messages were the cat’s meow!

Doctors, Hawatmeh, Avery, Atkins, and Kriegshauser, all have a special place in my hall of fame… And those wonderful people that took the time to enroll my name in their parish so that even more people would pray for me, are quite special. Judi B., Mary K., Dr. Joe, Dr. Dave, and others… you have been an inspiration to me!

Did you know that Auld Lang Syne literally means “old long ago” or simply “the good old days”? I always wondered when I was young just what it was we were singing about.

Let’s sing together… A one, a two, a three..

Should auld acquaintance be forgot

and never brought to mind?

Should auld acquaintance be forgot

and days of auld lang syne?

For auld lang syne, my dear,

for auld lang syne,

we’ll take a cup of kindness yet,

for auld lang syne.

Should auld acquaintance be forgot

and never brought to mind?

Should auld acquaintance be forgot

and days of auld lang syne?

And here’s a hand, my trusty friend

And gie’s a hand o’ thine

We’ll tak’ a cup o’ kindness yet

For auld lang syne

Happy New Year Folks… And be careful tonight! The amateurs will be out! Don’t stay up too late, so you can get up in time to watch my Mizzou Tigers play in the Cotton Bowl New Year’s Day/morning!

See ya next year!

The Daily Reckoning