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Passing Out the Dollars
by Chuck Butler

Good day... And a Happy Friday to one and all! A Fantastico Friday so far, let's keep it going, eh? It is downright cold here. I'm reminded of that one looooonnnnngggg winter I spent in Des Moines, Iowa... This arctic cold was the "norm" for that winter there... I didn't need any other reason to move back to St. Louis, once the spring thaw came around!

Well... Right out of the starters blocks this morning, we have a change in sentiment going on... The risk takers are back in the driver's seat this morning, as the markets are feeling better about things given that the remaining TARP money has been given to the Obama campers to dole out, and Bank of America came away with an emergency lifeline from the Gov't that totals about $138 billion... $20 billion in cash, right here, right now, with the rest spread out between liquidity access and guarantees... And... The TARP money... Given the fact that the Obama people have been itching like they just rolled around in poison ivy, to get their hands on that money... You've got to wonder... Are these guys going to do their best to outdo the previous administration when it comes to piling up debts?

You know where I stand on all this bailout money, and the Gov't sinking their teeth into banks more and more... Besides the fact that the Gov't shouldn't have their hands in the cookie jars that belong to banks; imagine, if you will, just how well run these banks will be with the Gov't pulling the strings... YIKES!

OK, I could go on and on there like the Energizer Bunny, but that would be wasting my time, because the people that make these decisions don't read the Pfennig! But you do, dear reader, so... It's on to currencies...

The currencies, led by the euro, are trading much better this morning, than yesterday morning, when the euro took a blow to the mid-section from the European Central Bank (ECB) after the ECB decided to cut rates 50 BPS to 2%.

The euro has gained this morning even in the face of the news that their trade balance, which turned negative in October, widened to 4.9 billion euros... German export declines led the way to this widening... But shoot Rudy, we're only talking about $6.5 billion dollars worth of deficit... The U.S. chalks that up almost daily!

OK, so we've got a mini-currency rally going the day before a 3-day weekend here in the U.S. You know what that means today, right? Yes, the New York trading desks will be left to the junior boys and girls after lunch, and the volume will basically dry up this afternoon.

Chris reported yesterday about the awful/disappointing Retail Sales for December number (-2.7%) and I just wanted to add my two cents worth. I just wanted to say that I think you can use the ISM (manufacturing) Index and Retail Sales reports to judge just how deep this recession is going to be... And if we have a negative -2.7% Retail Sales in DECEMBER! Then I think we're in for a long protracted and deep recession... But then I've been saying that for a year now!

And what have I been telling you for the past two weeks about the Weekly Initial Jobless Claims? In case you forgot, I said that the reason they had fallen back to below 500K was that the holidays chopped out days that people could file... Well, on the first full week of work... The Weekly Jobless Claims jumped to 524K.... Not that I want to see that large of a number... It's just that the dollar bulls pointed to those reports the last two weeks and said that things were getting better... I knew better than that!

I saw a headline news story flash across my screen at home yesterday, saying that 30-year mortgage rates had fallen below 5% for the first time in history! That's great! Now go out and get your interest rate down on your home loan... NOW! Save money... And I mean save it! I was telling my beautiful bride about all this, and said... "You know what's sad? It's the fact that a lot, and I mean a lot, of homeowners are upside down with their home loans and won't be able to refinance now." Don't know what I mean by upside down? I mean that their loan balance exceeds the home's value...

If the risk takers came out of the walls yesterday, then that must mean the high yielders of Australia, New Zealand, and Brazil are rebounding... But how much of this can someone take? Up, down, up, down, back and forth, like watching a tennis match. WE NEED DIRECTION! Why can't the markets make up their collective minds? It's like they're torn between two lovers... Feeling like a fool... One love is the thought that the U.S. will rebound from all this and be stronger for if it doesn't kill you, it makes you stronger... And the other love is the thought that we just keep building up debt... And soon the Fed will begin their quantitative easing, which means more and more debt and dollars, and that just spells bad times for the dollar.

The Wall Street Journal is reporting this morning that: Citigroup reported a net loss of $8.29 billion, and Bank of America swung to a fourth-quarter net loss of $1.79 billion. Bank of America's numbers includes their purchase of Countrywide Mortgage, but not Merrill Lynch...

Deeper, darker, more dangerous... More and more everyday, that's where this economy has hanging over it like the Sword of Damocles!

Well... The euro has inched up one tick at a time since I came in and turned on the screens this morning, so we've got that going for us, eh? We've seen these mini-rallies get wiped out in one day, though, recently... So, I'm just looking for some direction and hope the market participants and traders finally get over their first lover and realize the only lover for them is the second one... (see above, if that confused you!)

And finally... With the risk takers back (for today at least), gold has pushed higher overnight, adding $11 bringing its price to $828.90... Store of wealth, folks... Look how well gold has held its store of wealth, while the dollar has continued to lose its purchasing power for years! Something to think about as we head into the weekend.

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