Grasping At Straws!

Good day. And a Happy Friday to one and all! No latte’ Friday for me this week, as my latte-Friday buddy, Michelle (head of our operations group) is on vacation. I’ll survive though, no worries! The currencies backed off the run versus the dollar yesterday, but for the week, the dollar has lost ground once again.

It sure looked as though the dollar was really headed to the woodshed yesterday morning after leading indicators for July showed more rot on the economy’s vine, posting a negative 0.1%. But then, along came the Philly Fed Index, which is a snapshot of manufacturing in the Philly region that usually doesn’t garner much attention…except this time.

The Philly Fed Index more than doubled the forecast number and printed an index figure of 18.5, versus 6.0 in July. This turned things around for the dollar very quickly, and remained that way overnight, too. Here’s my view on this (you knew this was coming!): as I said, this data doesn’t normally garner much of the market’s attention, but it did this time. I think that dollar bulls are grasping at straws. Trying to squeeze the remaining drops of dollar strength from this turnip. Or, simply rearranging the deck chairs on the Titanic!

OK! That’s my take on what happened yesterday. As I look at the data docket for today, I see the University of Michigan consumer confidence is due to print. Hmmm. While this isn’t the “national” consumer confidence, which prints on August 29, 2006, this release does capture the markets attention. So, the forecast for the data tells us that the “experts” see consumer confidence falling. Hmmm. Really? It’s about time!

As long-time readers, you know that I sit here each month and shake my head and even resort to screaming at the wall, because these confidence reports keep telling us that U.S. consumer confidence is strong. I wonder, over and over again, how that could be, given the things going on around them.

But, hey, I don’t let it get me down; it’s only castles burning.

Anyway, the dollar will have a difficult time garnering any strength to end the week, should the experts’ forecast for a slumping consumer confidence hold true later this morning.

It certainly looks to me as though the currencies are gearing up for a strong run at the dollar. The two props (HIA Repatriation Act, and interest rate hikes) have been removed and the dollar can find no other support. That leads me to believe we’ll see the currencies begin to really build strong cases to revisit their previous highs achieved at the end of 2004. Of course, that’s my viewpoint/opinion.

Yesterday, in the Pfennig, I was talking about not being able to get my arms around any notion that the commodities bull market was over. And then, in yesterday’s Daily Reckoning I saw this quote from “Mr. Commodity” himself, Jimmy Rogers:

“You can’t have a bubble when the media have only begun to pay attention to commodities in recent months after years of disinterest. We’re now only in the early part of a long-term commodity price boom that has years to run and will likely see dozens of raw material prices make new highs. Even crude oil and copper have a long way to go, even though they recently set price records.”

Gold got whacked yesterday, but as I said in yesterday’s Pfennig, I would look at these dips as buying opportunities.

I put the finishing touches on the September issue of the Review & Focus yesterday, and included some thoughts from two friends, Joe Losos and Doug Casey, on debt and deficits. I wanted to share something from the Doug Casey piece for you here, as I just love the illustration it provides:

“Adding Social Security, Medicare and all the other unfunded obligations of the U.S. governments, the current debt actually comes in at over $60 trillion – an amount so large, not one person in a million has a real sense of it.

“A trillion is 1000 X 1000 X 1000 X 1000, or a million millions. In his first address to Congress, President Reagan, himself a profligate spender, accurately pointed out that a stack of $1,000 bills 4 inches high makes you a millionaire, and that a trillion dollars would be a stack of $1,000 bills 67 miles high!”

On that note, I think I’ll head to the big finish!

Currencies today: A$ .7610, kiwi .6420, C$ .8925, euro 1.2830, sterling 1.8850, Swiss .8110, ISK 69.30, rand 6.6875, krone 6.30, SEK 7.18, forint 216.18, zloty 3.03, koruna 21.90, yen 115.65, baht 37.50, sing 1.5710, INR 46.44, China 7.9736, pesos 10.80, dollar index 85.01, silver $12.07, and gold $616.67

That’s it for today. Cards and Cubs this weekend; time for the Cardinals to break their 0-for with Chicago this year! Sunday is my darling daughter Dawn’s birthday; she is such a sweetheart! Hard to believe she is going to be…no wait, I had better not announce her age! HAHAHAHA! She thinks she’s already getting old! HAHAHAHAHA! Anyway, have a great Friday and weekend!

Chuck Butler
August 18, 2006

The Daily Reckoning