RBNZ Cuts Rates

Good day… And a Thunderin’ Thursday to you! It’s not so Thunderin’ for me this morning, as I must have eaten something that didn’t agree with me last night… Therefore I was up most of the night sick… This will be ever so short-n-sweet, and then I’m going back to bed, I’ve got a presentation this afternoon with Addison Wiggin, I’ve got to be in tip-top shape for that!

The dollar swung its mighty hammer again yesterday, bringing the euro (EUR) to the 1.56 handle, with all the other usual suspects falling in line behind the euro. The markets are ga-ga with news that leads them to believe the “worst is over” in the credit crunch. I beg to differ on that, but then, I’m just one guy, one voice, one letter.

The Reserve Bank of New Zealand (RBNZ) did indeed lower their Official Cash Rate (OCR) yesterday afternoon, dropping it 25 BPS. UH-OH! Remember what I told you about what would happen when rates went lower in New Zealand… It’s all happening at the zoo… I do believe it… I do believe it’s true. In case you don’t recall what I’ve said at least a dozen times, or missed class those dozen times (shame on you!), New Zealand has a debt problem that, in percentage terms, is larger than that of the United States. (Of course, the state of Texas might have a larger GDP than all of New Zealand, I think… But in percentage terms, it’s horrible.). But… The markets all swept this under the rug, because of the sensuous allure of higher interest rates here. Well, when the interest rate differential begins to go away, the ugly stepsister gets brought out to the front of the house for everyone to see, and gasp at! That’s what will happen here, and is already happening, as kiwi (NZD) gets hammered after the announcement yesterday.

The House of Representatives passed the GSE bailout bill yesterday, and the bill now moves to the Senate and then the President for approval. I’ve got a lot of bad thoughts about this, but in an attempt to not be so negative all the time, I’ll pass! But doesn’t this scare you as a taxpayer?

This morning, the Weekly Jobless Claims printed for last week, and recall how I said the report that showed everything was beautiful, was “distorted”? Well… This week’s report spiked to 406K for the week. This isn’t seasonal stuff, folks… This is really negative news for the U.S. economy… But still the dollar bulls swing the dollar’s might hammer. Makes you want to scratch your head and wonder why, eh?

We’re expecting to see the color of the latest Existing Home Sales data this morning… Still, even counting the foreclosure sales, I expect this data to show significant weakness and for the housing meltdown to continue well into the night!

The Fed’s Beige Book was also released to the public yesterday, and it was very grim. But, still the dollar swings it’s mighty hammer. It’s just all the dollar bulls getting to dance in the streets folks; they’ll soon go back to the wallboards from which they came!

The price of oil is way down, as it was reported yesterday that gasoline consumption is way down… Good! But, when will we see oil’s lower price reflected at the gas pumps?

Today, we’ll get to hear the NY Fed’s Geithner and the SEC’s Cox testify before the House. I have to tell you that if we really have “fee markets”, then the SEC’s Cox really threw a spanner in that process with his “no naked shorts” rule. It’s never been a problem before, right? These speculators and hedge funds have done this to good companies for years… But when it becomes a quasi-government agency corporation, now that’s a horse of a different color! But that’s all I have to say about that!

Also today, Ford reported an $8.67 billion loss in the second quarter. But not to worry, my friends over at Ford… You never know! Wachovia posted a nearly $9 billion loss the other day, and their stock went up! So, don’t you fret, cause you ain’t seen nothing yet!

I have to get back to sleep, so here we go to the Big Finish….

Currencies today 7/24/08: A$ .9605, kiwi .7410, C$ .9915, euro 1.5680, sterling 1.9850, Swiss .9640, ISK 80.35, rand 7.6110, krone 5.1675, SEK 6.0310, forint 148.20, zloty 2.0580, koruna 15.06, yen 107.65, baht 33.45, sing 1.3610, HKD 7.9660, INR 42.05, China 6.8290, pesos 10.03, BRL 1.5760, dollar index 72.86, Oil $125.55, Silver 17.53, and Gold… $925.80

That’s it for today… Haven’t heard from my beautiful bride, as to how my little buddy Alex did at his Swimming conference finals last night. We had the most wonderful time last night, as we hosted an event at The Boathouse on the water here, and then were allowed to sit in the grandstands to watch the fireworks display, which was truly awesome! Every year, Vancouver hosts this fireworks tournament, if you will, between countries that come and do their fireworks display. Very cool! And I was able to have dinner with people like Dan Denning. What a super nice guy Dan is! Truly a gem! There are far too many others there to name them all, but it was quite a crowd! Kudos to the big boss, Frank Trotter, for putting that all together! OK… I hear the bed calling me… The “Do Not Disturb” sign is hung on the doorknob… Hopefully, I’ll feel better when I awake! Thanks and have a Thunderin’ Thursday!

Chuck Butler
July 24, 2008

The Daily Reckoning