Beige Book is Cautiously Positive?

The currencies added to their gains this week yesterday… Albeit small gains, but gains nonetheless. The Fed’s Beige Book was “cautiously positive”… And… Overnight, the Reserve Bank of New Zealand met, and left rates unchanged as suspected. This and more as we begin our Thrillin’ Thursday!

The Big Dog, euro (EUR), has been off the porch chasing the dollar down the street for a week now, one would think that a return to the porch for food and water might be in the cards… But, as I was telling someone yesterday… Even though all signs point to a major stock sell-off, it hasn’t happened, so why stand in front of the stock and risk assets rally bus?

The euro climbed to very near 1.46 yesterday, before falling back to 1.4550 as the day ended… Overnight, the euro has traded within a narrow range. The Aussie dollar (AUD) got slapped on the wrist by traders after it was reported that Australia lost 27,100 jobs in August (consensus was to lose 15,000). The unemployment rate in Australia remained at 5.8%, but the weaker-than-expected data caused the Aussie dollar to slide from the 86-cent handle to 0.8550.

If the heat remains on the dollar the rest of this week, then I would expect the Aussie dollar to rebound from that sell-off last night. Much like the Brazilian real (BRL) sell-off last week… You may recall me saying that it was overdone, and I expected the real to bounce back, which it did, and the bounce was like a Super Ball Bounce!

The Reserve Bank of New Zealand (RBNZ) met last night, and kept rates unchanged as expected… But I really thought the RBNZ would opt to change the wording of their last statement following a rate announcement, in which they talked about leaving rates unchanged for some time to come… Well… They didn’t change… And instead repeated the comment from the previous meeting… “We continue to expect to keep the OCR (Official Cash Rate) at or below the current level through until the latter part of 2010”.

Here we go again with a central bank making statements about rate policy months ahead to time! I don’t see where they have the data to do something like that… But, they do it! I’ll bet a dollar to a Krispy Kreme that the RBNZ has to move rates higher before “the latter part of 2010”, and when they do, they’ll be pushing rates up in 50 BPS clips!

Kiwi also took a slap across the wrist by traders after the RBNZ rate announcement and statement. I’m not so sure about this currency’s ability to rebound, but if the Aussie dollar does rebound, kiwi (NZD) normally hangs on the coat tails of the Aussie dollar.

So… As I look across the screens this morning… I see that the euro and yen (JPY) are the only currencies that are really stronger today than yesterday… So, my statement at the beginning that the currencies had added to their gains this week needs to be tweaked, to say just euro and yen have added to their gains this week!

The Norwegian krone (NOK), was really on a run yesterday, trading below 5.90… But, couldn’t hold those gains. I was reading a story last night about Norway’s inflation rate falling, and how that might push back the Norges Bank (central bank) timetable for a rate hike from late this year to the first quarter of 2010… That thought process is responsible for the pull back in the krone yesterday, and overnight.

Do you see the mental giant (NOT!) thought process that goes through some of these traders? Sometimes it’s all about yield differentials, and sometimes it’s all about economic growth possibilities. Just like a baseball player wishes for consistency from the umpire, I wish for consistency from the markets… UGH!

The Fed’s Beige Book was “cautiously positive” yesterday… And of course, you know me… I want to know why the Fed is positive at all! Let’s see… The Beige Book said that most districts characterized consumer spending as “soft” with a majority reporting retail activity as “flat.” And that the Cash for Clunkers was a positive… HEY! FED HEADS! Cash for Clunkers is over!

On the real estate component… Both residential and commercial real estate markets were described as “weak”… So… Do you see anything in here that spells “positive” for the Fed Heads? I sure don’t!

I’ll stop there… These guys at the Fed drive me up a wall, and cause me to go over to the walls and scream at them!

One thing the Beige Book didn’t contain was the report yesterday that foreclosures in the US jumped above 300,000 for the sixth consecutive month! RealtyTrac Inc. reported that a total of 358,471 properties received a default or auction notice or were seized last month, which is 18% higher than it was a year ago!

And then add in those details I gave you yesterday about the Option ARMs that will reset in the next three years, and this is getting ugly, folks.

Doesn’t it seem as though the “people in power” have turned their backs on this problem? I mean, don’t get me wrong, I don’t want the government sticking their hands in everything, but they already started down this road, and then turned around and headed down a different road… That’s the government’s way, isn’t it? My football coach used to describe someone not giving everything to a play as doing it half-a**ed… Well, that’s what the government does… I don’t want you sticking your hands in the private sector! But! If you’re going to do it, do it right and until it’s fixed!

The Bank of England (BOE) and the Bank of Canada (BOC) both meet today… The BOE’s meeting is going on as I write, while the BOC meeting will take place later today. I look for both central banks to remain steady at the wheel. The BOC will really tick me off later today when they repeat their earlier statement that interest rates will remain at near zero until June of 2010… The BOC also talked about the strong Canadian dollar/loonie (CAD) in their last statement, as “significantly moderating growth”… As if a strong currency is a “bad thing” – which it certainly is not! But here’s an opportunity… If the BOC doesn’t talk about the strong currency this time out, we could see a “relief rally” in the loonie…

Today, the US data cupboard has July’s trade balance, and since it’s Thursday we’ll see the latest Weekly Initial Jobless Claims. The trade balance is a misnomer, as far as I’m concerned… It should read… The trade deficit! And while this trade deficit isn’t as bad as it once was, due to the depression, it remains a bugaboo.

And talk about sticky! Those darn Weekly Jobless Claims! Last week they printed 570,000 new claims, and this week is expected to be 560,000 more! I wonder when these people will be counted as “unemployed” by the Bureau of Labor Statistics (BLS)! OK… You know me… The BLS is one letter too long, as the “L” should be removed!

And… Before I recap… Is it just me? Or does anyone else see stock market bubbles all over the world? I’ve already talked till I’m blue in the face about the US stock market being overbought… But there was news yesterday that Asian stock index hit a 1-year high… And that the FTSE, London’s stock exchange, returned to the 5,000 level for the first time in a year! Bubbles Greenspan should be in hog-heaven with all these bubbles floating around!

OK… Let’s recap… Euro and yen have added to this week’s gains, while other currencies have seen profit taking. Central banks in the UK and Canada meet today, while New Zealand’s central bank was a disappointment. US Beige Book is “cautiously positive”, and foreclosures are greater than 300,000 for the sixth straight month!

The Daily Reckoning