Quantitative Easing Averted

Good day… And a Terrific Tuesday to you! I’m staring at all this white space on the Pfennig template, and I absolutely drew a blank… I couldn’t think of, or can’t think of a thing to say! Whoa there partner! That can’t happen! There’s got to be something, anything, to talk about… OK! I’m back now, I really have no idea where that was going, it was an out of body experience! HAHAHAHA!

OK… The currencies traded in a very tight range yesterday, after the dollar had ambushed them on Friday and in the Sunday night trading sessions. It’s been a week since we saw currency strength, other than Japanese yen. So, we should be due for a bounce. There continues to be more whispering about the eventual dollar weakness, but for now, it’s not enough to get us back to where the dollar should be trading on a fundamentals basis.

The euro got a lift this morning when German Investor Confidence as measured by the think tank ZEW, rose to the highest level in nearly two years during April. WOW! The index rose to 13 from a -3.5 in March… Quite the turnaround, eh? It is reported that Investor Confidence rose due to the Gov’t’s efforts to revive the economy. Don’t know if you follow this or not, but European stocks just posted their 6th consecutive week of appreciation… You have to wonder if the stocks are telling us something here… Like, has the financial crisis in Europe bottomed out and is now on the recovery path? Don’t know… And like I always say, one report doesn’t make a trend, just like one swallow doesn’t make a summer.

Sweden’s Riksbank met this morning and surprised the markets (and me) by cutting only 50 BPS (75 BPS was the consensus), and in the other more important announcement… Riksbank Gov. Ingves said, “measures such as buying bonds were not on the cards at the moment”. So, no Quantitative Easing (QE) for Sweden, just yet… But, unless things turn around soon in Sweden, the Riksbank will have to come back to decide on QE at sometime in the future… But for now, the krona is seeing a nice bid, and rallying on the news…

You know… Yesterday I talked about Canada, and how I “believed” that the Bank of Canada (BOC) was going to introduce QE, and IF they did I would mark them off my Hit Parade… But, I didn’t say that the BOC was going to do that for certain! So… They could put it off like the Riksbank did… We’ll just have to wait-n-see! Of course, I certainly fully expect them to go that route now, rather than later… But, I’m just saying, you never know…

Fed Head Kohn, was speaking yesterday, and said something that I sort of agree with… Kohn said the, “U.S. economy may stabilize this year, and begin a slow recovery”. Hmmm… Well… By the end of the year, I see unemployment, by BLS accounting methods, at 10%, maybe 11%… Of course if you count all the people that have seen their unemployment benefits expire, or people that are working part time jobs because they can’t find full employment, the unemployment rate is probably somewhere around 16% now… And heading to 20% when all the heads are counted as unemployed that should be counted as such.

So… With that in mind, I have to wonder how the economy “stabilizes”… Credit will still be hard to find, and so on… But, I do believe that our -6% GDP now, will turn to something better by year-end… Maybe -1 or -2% or, we might even squeeze out a small positive number, which you would then hear the media and politicians claim, that “we’re out of the recession”… HOGWASH! But, that’s just my view on it… But, I liked the fact that Kohn at least sounded a bit worried, and with caution regarding the economy. Apparently he left Big Ben Bernanke’s rose colored glasses at home!

Even with a small gain in GDP, the Fed will keep interest rates at current levels, as they can’t appear to smashing the golden egg too soon…

The high flying high yielders, which basked in the early spring sun during March, have retreated to their dressing rooms, as risk aversion has cast a shadow on the high yielders. Risk Aversion is a result of the earnings season for equities. So, that means the like of Aussie, kiwi, rand, real, are all softer and not looking as perky as they did a couple of weeks ago. But… Once currencies and stocks hit splitsville, and get back to fundamentals, investors looking for any yield, no matter how small, as long as it beats the paltry yields they get now in the U.S., Japan, and most of Europe, will look to these high yielders… So… That could mean that buying them now, when they are cheaper than they were a couple of weeks ago, just might be the ticket! But who’s to say that they won’t get cheaper? Ahhh grasshopper, that’s the dilemma we face everyday with every purchase we make, weather it be the Aussie dollar, or auto tires, or new computers… You see my point, I’m sure…

Speaking of the Aussie dollar… The Reserve Bank of Australia (RBA) just released their minutes of the last meeting, where the RBA voted to cut interest rates 25 BPS… It appears that the decision was a close one between no cut and 25 BPS. RBS Gov. Stevens believes the Aussie economy is well placed to rebound… All this has helped the A$ to remain above 70-cents overnight and this morning.

OK… I’ve been champing at the bit all morning to get to this interview in Barron’s with our long time friend, and investment guru, Jim Rogers… I can’t get to all of the interview, so I pulled out a few quotes that plays well with what I’ve been talking about… Here’s Jim Rogers!

“Yes, politicians are making mistakes. In Japan, the problem has lasted for 19 years. I hope that it doesn’t last 19 years in the U.S. The approach that works is to let them (U.S. banks and automakers) collapse and clean out the system. The idea that phony accounting is the solution (through changes in mark-to-market rules) is ludicrous. And the idea that a debt problem and an excessive spending problem can be cured with more debt and more spending is ludicrous.

It’s laughable on its face, but politicians think they’ve got to do something. Unfortunately, they are doing the wrong things and they are going to make it worse.”

He then talked about something that I’ve been talking about for a couple of months now… The Treasury bubble… Let’s listen in…

“I am anticipating shorting bonds — the U.S. long bond. It’s about the only real bubble around that I can see right now — other than the U.S. dollar. I am not shorting bonds at this moment because I’ve shorted plenty of bubbles in my day, and I have learned that you better wait because they go up higher than any rational person can anticipate. But my plan is to short the long bond in the U.S. sometime in the foreseeable future.”

Isn’t that amazing… I just talked about this again the other day!

So… The Gov’t’s “stress test” results are going to be revealed beginning this Friday… It will be interesting to see what the results are… But, I wouldn’t get too excited about all of this, as I don’t think we’ll get a chance to look under the hood at these financial institutions… Not that I want to or have the time to anyway! But I’m sure there are those out there that would love to get that chance… Buzzzzzzzz, wrong answer! Thank you for playing, there’s a nice parting gift for you at the door!

Yesterday, Leading Indicators for March printed worse figure than forecast, but the previous month’s -.4% initial print was revised to -.2%… March’s figure was -.2%… So… Leading Indicators is still telling us that there will be more pain to suffer through ahead… Hey! That’s why they are called “Leading Indicators!”

The U. of Michigan preliminary reading of Consumer Confidence for the first two weeks of April, printed stronger than expected at 61.9, up from the previous month’s total of 57.3… Of course when this report was compiled, stocks were still in rally mode… Before earnings season, etc. I doubt the final report will be so pie in the sky…

No real data to deal with today in the U.S. or Europe… So… Once again, focus will be on the earnings… We will get some more Fed speak this morning from Fed Head Hoenig… And then mid morning will see U.S. Treasury Sec. Geithner testify before the oversight panel… Would that be oversight on TARP or Tax returns? HAHAHAHAHA!

I did it again last week… I placed the kiss of death on a currency by talking nice about it! This time it was Indian rupees… Last week I talked about how the rupee had performed nicely / stealth like, under the radar… But, the rupee has now given back all that stealth-like gain! In the past, a move like this would have the Central Bank’s hands all over it (with intervention)… But this move might just be associated with the high yielders, and the risk aversion.

Gold rebounded nicely yesterday, up about $15, and has added $3 this morning… Just didn’t see right to see it getting sold like that last week… Maybe calmer, cooler, more intelligent heads took over!

Well… It’s time to head to the Big Finish. We have a birthday girl here today, and I’ve got to get to work on my presentations for Bermuda! UGH!

Currencies today 4/21/09: A$ .7005, kiwi .5540, C$ .8075, euro 1.2950, Sterling 1.4535, Swiss .8555, rand 9.13, krone 6.80, SEK 8.63, forint 231.90, zloty 3.4125, koruna 20.90, yen 98.10, sing 1.5080, HKD 7.75, INR 50.41, China 6.8317, pesos 13.39, BRL 2.2375, dollar index 86.58, Oil $45.87, Silver $12.18, and Gold $888

That’s it for today… Except to say a Big Happy Birthday to our accountant magnificent, Mary Owens… Mary is not only a magnificent accountant, but also a magnificent quilt maker! It’s down to the last 5 hours for my fave show 24… It’s so intense! Did you see the Washington Nationals’ jerseys they had on Friday night? Nationals was spelled Natinals… How embarrassing, and they wore them! That’s a shame, Washington waited so long for a baseball team, and now they have one that can’t win, and a marketing department that can’t spell! Crazy! The NFL Draft is this Saturday. Our Rams have the second pick… I sure hope they don’t blow it! This team needs help! Good luck to our Blues tonight, they are down 3 games to none. Their goal is almost impossible.. Slim and none, and Slim just left town… But… You have to believe! I hope you have a Terrific Tuesday!