Cash for Trash

Good day… And a Tub Thumpin’ Thursday to you! Well… The President sure painted a rosy picture for the U.S. economy last night, didn’t he? NOT! Whoa there partner! With words like “collapse” and “danger” and “panic”, President Bush was telling the country that we’re in deep dookie! In telling the public that the government must put $700 billion of taxpayer’s money at risk to bailout the financial system, he said, “We’re in the midst of a serious financial crisis. Our entire economy is in danger. America could slip into a financial panic.”

Now… Those are some serious statements, folks… And were followed up by the comments by the chairman of the House Financial Services Committee, Barney Frank, who said, “Whatever you think about whether or not there was a need for a bailout… Once the president, secretary of the Treasury, and the Federal Reserve Chairman have announced that if you don’t do this, there will be a collapse, there’s probably going to be a collapse if you don’t do it.”

Wow! Those are grave words there folks… But don’t you feel like snake oil salesmen are selling us a powerful medicine that if we don’t take it we’ll die? Why all these grave words now? Where has this been for the last year, as the credit wound tighter and tighter, house values spiraled downward, oil reached $145, and the dollar continued to lose purchasing power? It’s all related… And if these bozos on Congress can’t see that, we’re in deep dookie whether we pass this $700 billion bailout package or not! There are two guys that see the light… Ron Paul, and Jim Bunning.

So… The markets are waiting for the bailout package to be passed, and it does look as though they are close to reaching an agreement on the amendments to the deal… But, until they pass it, the markets are basically standing still. The dollar did receive the McLovin’ I talked about yesterday, as Big Ben Bernanke and Treasury Secretary King Henry filled the halls of congress with more lies and videotape… You see… No one is talking about the fact that this $700 billion doesn’t do anything to improve spiraling house prices. Nothing to improve the recession… Nothing to improve energy prices… And so on, and so on… I will say this about the package… I call it… “Cash for Trash”. And nothing’s going to change my mind!

Overnight, the dollar has given back the small gains it took yesterday. I can’t see why foreigners who make investments in the United States – and are needed to do so to finance the Current Account Deficit – could feel a warm and fuzzy about the prospects of the U.S. economy, and thus the dollar denominated investments they would make.

I would think that passage of the package would put risk back on the table, and allow the high yielders and alternative to euro currencies to move to the front of the class. Aussie (AUD), kiwi (NZD), Norway (NOK) and Sweden (SEK) fall under those headings.

There’s news this morning that our friends (NOT!) at OPEC are telling people that the price of oil may have to gain, as investors hedge against the dollar. Very astute observation! But one that will not be welcomed by most Americans. I say “most” because there are those that don’t deal with automobiles, and then there are those, like a friend of ours at EverBank, that is an oil man… He’s been walking around with a smile on his face like a Cheshire Cat for the past five years, and why not? Oil has slipped overnight to $104.60, from $109 yesterday morning. So… No need to panic yet!

There’s also a story regarding the FDIC, and how they will probably need at least $150 billion next year to deal with bank closings. OUCH! Now that’s going to leave a mark! And one that will be quite ugly to see!

Yesterday, I told you how Citgroup’s FX people were calling for parity in the Aussie dollars once again… Well, shortly after I hit the send button, I saw where Citigroup is also issuing a “buy” recommendation for euros (EUR). Citigroup’s insight here is based strictly on “dollar weakness”… Which is very close to what I’m always talking about with the euro, as the euro is the “offset currency” to the dollar. Dollar weakness will be first seen in euro strength.

It’s a good thing this has been a slow week for economic data in the United States as it would have probably been ignored had it printed anyway! The markets have become myopic with the bailout package. But nonetheless we have data printing today that would normally play well with the currencies, keeping their hands to themselves! August Durable Goods, Weekly Initial Jobless Claims, and August New Home Sales will all print this morning. None would give any McLovin’ to the dollar anyway… So, I’ll just sit here on the dock of a bay, watching the tide go away, wasting time… Ah, Mr. Pitiful on a Tub Thumpin’ Thursday!

A reader sent me a note yesterday saying that he had seen the 3-month Treasury Bill yield actually go negative yesterday morning! That’s crazy stuff! As I look at the yield curve right now, a 3-month Treasury Bill will yield you 67 Basis Points (BPS). Of course after the bond dealer takes a fee, it probably is negative, or it might as well be!

Well… As I was getting ready to head to the Big Finish, I looked over at the currency screens and saw the dollar rallying again. The euro, which was 1.4716 when I came in, is now 1.4665. A tight range, sure, but, I just wonder what caused that slippage. I’ll go check and be back in a minute.

I’m back now, did you miss me? HA! Anyway… There’s nothing on the news wire regarding the slippage in euros, or the strength of the dollar, either way you look at, we’re void of news… So, off I go to the Big Finish, are you coming with me?

Currencies today 9/25/08: A$ .8360, kiwi .6845, C$ .9665, euro 1.4670, sterling 1.8545, Swiss .9215, ISK 93.10, rand 8.1850, krone 5.6375, SEK 6.5975, forint 164.02, zloty 2.2715, koruna 16.62, yen 105.80, baht 33.95, sing 1.4220, HKD 7.7710, INR 46.16, China 6.8170, pesos 10.83, BRL 1.8590, dollar index 76.75, Oil $104.59, Silver $13.36, and Gold… $885.25

That’s it for today… Cardinals decide to start winning after they’ve been eliminated! That’s pretty much how the season has gone for my beloved redbirds. My little buddy, Alex, tried out for the jazz ensemble (guitar) the other day; he sure has come a long way with his guitar playing ability in the past year and half. Don’t know how he’ll be able to juggle football and jazz band if he makes it, but that’s his problem to deal with! I go to see my oncologist and blood doctor today, to game plan the next phase of being a cancer beater. I realize that I had it once, and the cancer wolf is always at the door, but I can’t begin to tell you how good I feel, not having to take that medicine that made me so sick and tired. I can taste food again, and that alone is priceless! But, I’m here… And if the medicine had anything to do with that, and I’m sure it did, then I’m very grateful to have had the opportunity to take it no matter how sick it made me! I’m sure the next phase will include an attempt to lose some weight. I usually only have bad luck with losing weight. That reminds me of that silly song on Hee-Haw… If it weren’t for bad luck I’d have no luck at all (with weight)! Now, that made me smile, thinking of Saturday nights and my mom and dad watching Hee-Haw! Now, that just made it a Tub Thumpin’ Thursday! Hope yours is Tub Thumpin’ Too!

Chuck Butler
September 25, 2008