Monday, January 14, 2008

Fudamentally Euphoric -- Technically Cautious

Dollar Falls to 7-Week Low on Bets Fed Rate to Fall Below ECB's
Jan. 14 (Bloomberg) -- The dollar fell to a seven-week low against the euro as investors bet U.S. interest rates will fall below those of the 15 nations that share the euro for the first time in three years.

The dollar declined for a third week as Federal Reserve officials including Chairman Ben S. Bernanke signaled they favor greater ``insurance'' against an economic slowdown amid the slump in the housing market. European Central Bank council member Klaus Liebscher said he sees ``significant'' upside risks to inflation.

``In terms of the subprime crisis, the U.S. has been the centre of the storm and it will have to pay,'' said Bilal Hafeez, global head of currency strategy in London at Deutsche Bank AG, the world's largest foreign currency trader. ``The euro will continue going higher'' and may trade at $1.55 by the end of the first quarter.

Fed pledges to act to counter market turmoil
NEW YORK (Reuters) - Federal Reserve officials on Friday said falling home prices and financial market turmoil are big risks to the U.S. economy but pledged that the central bank would not shrink from taking bold steps to support growth.
At a symposium in New York, Fed Governor Frederic Mishkin said the central bank "has been acting and will continue to act decisively" to counter rapidly deteriorating financial market conditions.

"The disruption in financial markets poses a substantial downside risk to the outlook for economic growth, and adverse economic or financial news has the potential to cause further strains," Mishkin said.

US November trade deficit up 9.3 pct to 63.1 bln usd
WASHINGTON, Jan. 11, 2008 (Thomson Financial delivered by Newstex) -- The US trade deficit shot up unexpectedly in November, driven by record high oil prices and a slump in the aircraft exports which usually offset rising imports.The Commerce Department reported a 5.4 bln usd, or 9.3 pct increase in the November trade gap to 63.1 bln usd from the unchanged 57.8 bln usd deficit in October.That was well above the small expected increase to 58.6 bln usd and it was the biggest trade gap in more than a year. 'It reverses the positive trend in the current account improvement and suggests Q4 GDP will struggle to rise by 0.5 pct,' said Jeoff Hall at Thomson IFR Markets.

Escalating Losses Force Citigroup to Seek More Foreign Investment
January 12, 2008 Citigroup is turning to cash-rich foreign investors for a second time as it confronts mounting losses on mortgage-related investments.
The financial giant is in talks to sell a large stake to a Chinese bank and several other investors, including foreign governments, in a deal that could raise $10 billion, people briefed on the plan said Friday.
The China Development Bank, which is controlled by the Chinese government, is expected to invest at least $2 billion, these people said. Citigroup is also in talks with the Government of Singapore Investment Corporation and the Kuwait Investment Authority.

Merrill Lynch to write down another $15 billion in subprime losses
Analysts expected Merrill Lynch (NYSE: MER) to write down about $12 billion more in losses from its mortgage investments, but The New York Times reports this morning that it will actually write down $15 billion, or $3 billion more than anticipated when it reports earnings next week. That's in addition to the $8.4 billion write down in the third quarter for a total of $23.4 billion in losses from its mortgage fiasco.

On Tuesday, January 8, 2008, the gold train left the station while the stock markets crossed the Rubicon. Gold has now shattered all nominal price records while the stock markets have just moved substantially past the 10% correction level. Let the golden age of gold begin while the stock markets cross the point of no return as the bloodbath in equities begins. The cartel, showing you once again that gold suppression is JOB ONE at the Fed, has risked all the equity markets in a bid to suppress gold and to keep the resource stock indexes such as the XAU and HUI from setting all-time highs and confirming gold's rise...the US economy, drops into the big financial toilet bowl and gets a "swirly" the likes of which it is never going to forget...The economy and our entire financial system are going into the tank and if the cartel makes any further moves to put the kibosh on gold it is "Good night, Irene" for the stock markets. The cartel's efforts are now fruitless and futile as they attempt to hit gold by manipulating oil prices down and orchestrating phony dollar rally with their central bank buddies. The system is broke and it is not fixable, no matter what the Fed does. As we have said, either they let gold explode, or all the equity markets will implode. Without a weak yen and a strong carry trade, the stock markets are toast and the Republicans can do some yoga by bending over and kissing their derrieres goodbye! And that will give gold the rocket propellant it needs to blast off into outer space!
--Bob Chapman, The International Forecaster

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