Checks for Everyone

Good day… And a Happy Friday to one and all! Another Fantastico Friday, I hope! Yesterday saw the euro (EUR) once again be volatile during the day, but for the most part it was on a rampage versus the dollar – and at one point in the day, I said it was on a rampage against the people on the desk. The charts say 1.4710 is a line of resistance… Soon after that the euro went through 1.4710 and just kept climbing higher! So much for those charts, eh?

OK… Did you see the political parade of stars putting on happy faces and telling everyone that the stimulus package is just what we need! HOGWASH! You and I know it too! But, don’t let that get in the way of a political grandstand!

I was doing a radio interview with a station in Pittsburgh yesterday evening (from home no less!) and the interviewer asked me if the stimulus package was going to work. Was it going to help avert a recession? NO! First of all… The stimulus package is too little too late… We’re already in a recession for one… And two… By the time you receive your check it will be late May or early June. That’s five months away. Can you imagine the collateral damage that will be spread across the country in the way of defaulted debt, foreclosures, and past due payments by then? The first thing most people will do is sign that check over to the credit agency that’s hounding them for payment… That won’t help the economy!

Or… They, (probably non-Pfennig readers), might go out and spend the check now, in anticipation of receiving one later. Ooooh… Where do I sign up for that program? NOT! Anyway… Stimulus, shimulus… It’s not going to help! Want some real help? How about tax cuts? Big fat tax cuts!

OK… So for the first day since two Mondays ago, the euro led currencies across the board (except yen (JPY), just like old times!) on a rally versus the dollar. I know that people that have been calling for a collapse of the euro were squirming in their seats yesterday, watching it climb to 1.4770… But the year is young.

The catalyst for yesterday’s move was two pronged… First the news I brought you yesterday morning that German business confidence had risen… And then, the latest housing data. Existing home sales fell further than expected in December. Uh-Oh! Not even falling home prices could help sales. You know you’re in trouble when you can’t give stuff away! With December’s numbers in the books, the tally for 2007 was done. And it turns out that 2007 was the worst year in decades for home sales!

The MarketWatch people had this to say, “The median sales price of an existing single-family home fell for the first time in the 40-year history of the survey, dropping 1.8%. Although no hard data are available, most economists believe median home prices hadn’t fallen since the Great Depression of the 1930s.”

So… Here we are… One foot in the recession muck, the dollar doing the two-step, and something just not seeming right. Stocks aren’t falling off the cliff… But then remember, a star burns brightest right before it burns out. The outlook for stocks is shaky though… Remember a week or so ago when I told you about how I used to run a margin department at a regional stock brokerage? Well… The margin “guys” run a brokerage’s operations, and have their finger on the pulse of the markets if they are paying attention.

Well… Margin debt is a great way to tell how strong the market is… And when margin debt is falling, people are taking money out of stocks. They are running away from “risk”. Well, it was reported yesterday that margin debt, after reaching a high in July of $381 billion, has fallen each month since – to $322 billion. This is just a piece of the puzzle folks. But don’t be surprised if this indicator holds true to form!

OK… Back to stuff I really know about! I did two radio interviews yesterday, and an interview with the Wall Street Journal! Hopefully, we’ll see some of what I said in the weekend Journal. Today, I will be on the radio in Wausau Wisconsin, on WSAU at 9:45 AM ET… And then later today on the Oregon station I told you about yesterday.

I’m not trying make myself sound important with these announcements… Readers have asked me to tell them when I will be speaking on the radio, just in case they can catch it!

Everyone so far, has been very gracious with my call that the United States is already in a recession. I also try to get across, the lack of credibility in Bernanke and Paulson by saying… They told us in July that subprime wouldn’t extend into the rest of the economy… And they were WRONG! They also told us in August that the housing meltdown had “bottomed”. And they were WRONG! So what gives anyone a warm and fuzzy about what they think now?

The data cupboard is bare today… So, we’ll have to deal with the markets on their own.

Last night, Japan reported the fastest inflation gain in nine years! Japanese inflation doubled to 0.8% in December. We all know what the culprit was there… OIL! But food prices also showed an increase, which doesn’t help things. The question is… Will this be enough to get the Bank of Japan to get off their duffs and hike interest rates? I doubt it. They are too darn comfortable on their duffs!

And another old fave saying of my father’s was… “Good as gold”. That saying would really be popular these past five years as gold has done its impersonation of the Phoenix bird and has risen from the ashes to these lofty levels. The dollar weakness got gold going again yesterday, and then overnight, we had news from Africa of an output halt due to a power shortage, which really pushed gold up past $900 again!

So, you had about one week to take advantage of the sub-$900 price in gold. Did you partake?

Yesterday, I told you about China’s phenomenal growth of +11% in 2007, marking the fourth consecutive quarter of +11% growth. I forgot to mention at the time that this news would light a fire under the base metals, which had recently slumped. And it did, it did, it did see a putty tat! So the usual partners in crime, led by copper were all up nicely yesterday on the China growth news.

China is the world’s biggest consumer of metals… I would have thought the U.S. was, but no, that title belongs to China! And with them growing at a strong pace, and metals kicking up the dust that had settled on them, the Aussie dollar (AUD) should be able to push higher… We’ll see, eh?

While I’m in Asia… The Singapore dollar (SGD) continues to move higher and higher. Last night it reached a decade high versus the green/peachback… And, the Indian rupee (INR) has been steady at the wheel during all this dollar strength in the past 10 days. I’ve said this over and over again, this dance is gonna be a drag. No wait! I’ve said over and over again that I like the Indian rupee over the Chinese renminbi (CNY)… I know, I know, the renminbi is already up 1% in the first three weeks of this year… But, at least the rupee floats… And the interest is better… And U.S. lawmakers aren’t beating on it all the time! It’s rupees for me, rupees for you, let’s gets some rupees for my big brown shoe!

OK, I got a little carried away there… You never know what kind a tangent I’ll go off on, when these fat fingers get flying over the keyboard!

I had a nice conversation with a trader from Morgan Stanley yesterday. It’s always nice to hear what the BIG BOYS say their research “teams” are forecasting. In this case, he agreed with me that the Asian currencies are the undervalued currencies versus the dollar, and should be poised to move higher versus the dollar in 2008. They have a research “team”… EverBank has… ME!

Speaking of which… I’ll be in Orlando at the World Money Show in two weeks. The Big Boss, Frank Trotter, and I are going to be doing a “Town Hall Meeting” for EverBank customers… This is your chance to ask us questions in a smaller venue. So, if you’re an EverBank customer, and you are going to the World Money Show, check out the schedule for the EverBank Town Hall Meeting! We’ll see you there!

It’s my Friday! Yahoo! Time to go to the Big Finish!

Currencies today: A$ .8840, kiwi .7725, C$ .9920, euro 1.4730, sterling 1.9810, Swiss .9150, ISK 65, krone 5.45, SEK 6.42, forint 174.50, zloty 2.4550, koruna 17.50, yen 107.70, baht 31.40, sing 1.4210, HKD 7.80, INR 39.37, China 7.2120, pesos 10.89, BRL 1.78, dollar index 75.88, Oil $89.83, Silver $16.55, and Gold… Drum roll please for the new record level for Gold… $918.50!

That’s it for today… Well… I went back on the cancer meds this week, so far, no biggie. But I know what’s coming… I’m feeling fine… My leg is still swollen all the time, but I guess it’s to be expected given the blood clot that doesn’t seem to want to go away… But I carry on… No reason to sit around and mope! It’s so darn cold here. As I was waiting to go on the air with the Pittsburgh radio station last night, I could hear their weather update, and it was warmer in Pittsburgh than here! What gives with that? I noticed the Meramec River that flows through my tiny city that I live in, has ice on it… That’s the first time I’ve seen that in years! The January “thaw” is coming though… I can feel it in my bones!

So… Two radio interviews today… And hopefully some good stuff in the Wall Street Journal this weekend… I’m everywhere, I’m everywhere! Now, that’s a scary thought! HA! I hope you have a Fantastico Friday! And your weekend is top notch too!

Chuck Butler
January 25, 2008

The Daily Reckoning