More Losses!

Good day… And a Terrific Tuesday to you! It was a long day of travel for yours truly, who saw two gate changes and two plane changes along with 1.5 hours of delays. I ran into a reader on the plane who said, “Hey! Aren’t you Chuck Butler?” I could see all the people sitting around me thinking they should know who Chuck Butler was; he must be a celebrity! HA! Little did they know, it’s just little ol’ me, the Pfennig writer!

Well… The currencies had a good day versus the dollar, as the euro (EUR) was able to gain well into the 1.59 handle. Part of my presentation to the main stage crowd tomorrow (900+) is going to ask the question, “Where are all those people that claimed the weak dollar trend was over last month, when the Fed stated they were going to be inflation fighters? They are no-where to be found! That’s where! I seem to recall that even a big name guy at the Royal Bank of Canada flatly stated the weak dollar trend was over… Where have all the naysayers gone? Long time passing.”

The single unit is trading just below 1.59 this morning. There are so many profits being taken these days, and I fully understand that, but why create a taxable situation, when all you’re going to do is buy the asset right back and wait for it to go higher again? But, like I always, always tell you Tutor Turtle, it’s not a profit until you’ve taken it!

Running on empty, running on… And no I’m not talking about your gas tank, because you just don’t want to pay $4.25 for gas! No… I’m talking about the checkbooks of U.S. consumers. I get this from the same-store sales data… Here’s the skinny…

Yes, the data showed a 2.5% rise on an annual basis for the first part of July. This is the biggest gain since December… But… The majority of the sales were generated at Wal-Mart. Doesn’t that tell you something? It tells me that U.S. consumers are shifting their buying to “get more” out of their tax rebates! By the way, those checks were mailed from May to July 11th. I say, that this is the end for consumer spending… But, that’s just me!

Tomorrow, Australian CPI (inflation) prints, and there are a ton of rumors going around that this piece of data collection is going to face a change in how the numbers are gathered. Uh-Oh! Do you remember in the early ’90s when Big Al Greenspan thought that inflation wasn’t getting calculated correctly and forced a revision to the numbers that we now are stuck with? I put a huge piece together on this in a Review & Focus a couple of months ago. I detailed the changes and just how stupid they were… And now, Australia is thinking that their inflation data needs changing? I just shake my head, and wonder what the heck is going on down there!

The Wall Street Journal is reporting this morning that Wachovia has posted an $8.66 billion loss in the second quarter versus a profit of $2.34 billion last year! OUCH! Now, that’s going to leave a mark! They also cut their dividend, announced job cuts of 6,000, and decided to exit the wholesale mortgage business.

Washington Mutual will announce their second quarter numbers a little later today. I don’t expect their numbers to be anything that they will be proud of either. The losses just keep mounting folks… And, the “risk takers” just keep taking risks! Sort of like a baseball pitcher who has a good fastball and a killer curve, and faces a hitter that’s sitting dead red, (fastball), and the pitcher knows he can’t hit the killer curve… Does he take the risk and throw a fastball? Well.. That would be stupid, right? Well… The risk takers are being stupid in my mind… These numbers this morning by Wachovia should smack the risk takers right in the face… But… I doubt they will. What’s that saying? “You can’t fix stupid”?

We’ll get some Fed-speak this morning from a Fed Head that’s a hawk. Fed Head Plosser will be speaking this morning, so look for some love for the dollar from his words. U.S. Treasury Secretary Paulson will also be speaking on the economy… I wonder what kind of lies and videotape he’ll try to pull over our eyes! Oh, I see it now… Paulson is telling people that he expects the Fannie & Freddie bill to pass… If it were to pass, some risk would be taken out the markets, and that’s why the dollar has gained some ground versus the euro as I go along this morning.

In Canada, where I am this morning, retail sales printed a nice 0.4% rise… But that was less than the previous month’s 0.6%, and that has the Canadian dollar/loonie (CAD) stepping off terra firma… But that won’t last long. This economy is stronger than the naysayers think it is and that will underpin the loonie!

Three years ago… I was here. And when I returned I coined the term that the Canadian economy was “juiced”. Coal, natural gas, oil… They were all going great guns, and you would have to be blind to miss the “electricity” of the people here. Well, in Western Canada that is… I was in Montreal a few years ago, and fully expect to never return! That’s another story, but you get the drift… In Western Canada it’s all happening! Recall, that last fall I ran into a long time friend Brad Malcolm, who lives in Calgary… I said then that Brad had told me the Calgary area was hopping!

Speaking of oil… Are you tracking the tropical storm heading toward the Texas coast? Tropical storm Dolly is expected to be upgraded to Hurricane status today. You’ve just got to cross your fingers when these reports come along. I’m just wishin’ and hopin’ and thinkin’ and prayin’ that this storm misses the oil production areas of the Gulf Coast!

Hang on to your hat today… The ill winds of mortgage losses are blowing.

Currencies today 7/22/08: A$ .9745, kiwi .7615, C$ .9945, euro 1.5880, sterling 2, Swiss .9810, ISK 79.50, rand 7.5270, krone 5.08, SEK 5.9730, forint 145.25, zloty 2.0450, koruna 14.75, yen 106.80, baht 33.33, sing 1.3540, HKD 7.7965, INR 42.70, China 6.8215, pesos 10.12, BRL 1.5825, dollar index 72, Oil $129.50, Silver $18.59, and Gold… $971.60

That’s it for today… Short, I know, but like I’ve said before, when I’m on the road, I just can’t duplicate what I do when in the saddle at home! I got to have dinner with Ian Mathias, of 5 Minute Forecast fame last night. Ian and I had exchanged emails for a couple of years, but had never met… So that was a treat! Traveling here was a super pain, but it’s over and I’m here, so I won’t whine and complain. The weather here is incredible! If you’ve never been to Vancouver, and love the wide-open, clean air, lots of parks, and a diversity of people, then you need to visit here! I understand that they have a rainy season in the spring, so I’m glad I don’t come then! OH! And I got a “private screening” of the I.O.U.S.A. movie that will be shown to the crowd this evening… Great stuff! WOW! I remember getting interviewed for this project, and I was glad to see that the interview was left on the editor’s floor! Well… I hope you have a Terrific Tuesday!

Chuck Butler
July 22, 2008

The Daily Reckoning