Buffett Still Believes

Good day. And a Happy Friday to one and all! Today is my last day in the saddle for a week, as I head out on spring break. Chris will be back to write for you next week, his spring break was this week! Yesterday, the dollar swung a mighty hammer and I believe this will be short and sweet (sort of like the book on what men know about women) as I am dragging the line again this morning…

Boy, were the forecasters wrong about where existing home sales would print! Recall that yesterday I said the forecasters were talking about a fall in existing home sales that would mark the sixth straight month of posting losses. Well, that didn’t happen. Existing home sales shot through the roof in February versus January’s effort (but it still fell below last February’s total!). I’m reminded that a star burns the brightest right before if fades out.

So, the markets took that data on home sales and really ran with it. Rates are going higher, they said. Oh, the humanity! The dollar must get stronger, they said – and stronger it got! We saw it strong against everything: cross currencies, base metals, gold. I reached for a soft, cushy ball that I use to throw at the screens, and couldn’t find it. So, I just got up, and took a walk to cool down. Everyone was here, so I couldn’t scream at the walls like I do when I’m alone in the morning!

Madness, I tell you! The current account needs to attract almost $3 billion a day in foreign capital to finance its huge deficit. The budget deficit continues to grow daily, and somewhere on the books that the government doesn’t show us, are the war expenses -which, by the way, aren’t ending any time soon, gauging from the President’s rhetoric this week! In my opinion, and that of George Soros, the U.S. economy is heading for a recession, but don’t let all that get in the way of grinding the dollar higher! No.

Did you see Warren Buffett’s latest comments on the dollar? He still believes the dollar is going to weaken further.

Today, we’ll see durable goods orders for February. You may recall that January’s durable goods data was absolutely awful, posting a -10.2% showing. February’s showing is expected to gain 1.3%, far too short of covering last month’s debacle. So, more muddle through for us for sure!

Next week, we’ll get that next rate hike from the Fed to celebrate Big Ben’s first FOMC meeting at the helm, but I would have to think that the rate hike has already been priced into the markets. That would mean that Big Ben needs to give us something in the statement following the meeting, otherwise, we trade with no direction, no rudder, no steering wheel…you get the point!

The rhetoric coming from Senators Schumer and Graham during their visit to China borders on humorous! Yesterday, Schumer had these little ditties to say: “SENATE’S SCHUMER SAYS YUAN MAY BREAK 8 YUAN BARRIER NEXT WEEK” and “SCHUMER SAYS CHINESE REALIZE CURRENCY SHOULD EVENTUALLY FLOAT.” Brilliant! A new Mr. Obvious! Schumer really backed off his attack on the Chinese currency policy while there. In my opinion, I think he walked into a room all ready to pound his chest and the Chinese had a graph on the board of the amount of U.S. Treasuries they own – and simply pointed to it.

Anyway, the day after Graham and Schumer leave, the renminbi loses ground to the dollar! I find that to be downright funny. All the time the two Senators were in China, the renminbi gained ground versus the dollar, and as soon as they leave…HAHAHAHA! No worries. The renminbi will get back on the rally tracks versus the dollar soon enough. I think the Chinese just want to talk trash with the Senators, and this was their way of doing so!

The kiwi is really getting kicked around these days and dragging Aussie dollars with it – on a much smaller scale of loss. I have to say this about kiwi: While I thought it was going to see rough times, I didn’t think it would sell off so quickly. I really thought the highest interest rates in the industrialized world would underpin kiwi and keep the depreciation to a slow and steady pace, but that’s not what’s happening.

One diversification investment, silver, didn’t succumb to the dollar yesterday, as it continues to get a lot of airplay from the fact that a Silver ETF will soon be announced. I have to tell you though, I can’t believe that the silver “pooled” account that EverBank offers isn’t a better deal. There are no storage costs!  

So on that note, I’ll head to the big finish, and my spring vacation!

Currencies today: A$ .7080, kiwi .61, C$ .8550, euro 1.1970, sterling 1.7330, Swiss .7590, ISK 73.50, rand 6.34, krone 6.66, forint 221.50, zloty 3.26, koruna 24, yen 118.10, baht 39.02, sing 1.62, China 8.03, pesos 10.92, dollar index 90.55, silver $10.67, and gold $550.30

That’s it for today. Well, I guess in the end, it wasn’t as short and sweet as I promised! I never know for sure when I start with a blank screen every morning! Still working on an energy MarketSafe CD. Thanks for being patient. Did you hear that the Atlanta Investment Conference is making a comeback? Well, I’ll be there! April 3-5, 2006, is when that is happening. I’ll see you there! Or…if you can’t make that one, I’ll also be in Las Vegas for the Money Show, which is May 15-18, 2006. Have a great Friday and weekend!

Chuck Butler
March 24, 2006

The Daily Reckoning