Thursday September 27, 2007 - 10:54:53 GMT
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Black Swan Capital - www.blackswantrading.com
US Consumers Stuck, Dollar Bears Rejoice
Â· Peru's Sol Rises to Nine-Year High on Rate Gap; Central Bank Buys Dollars â€“ Bloomberg
Â· Australian Dollar Approaches 18-Year High on Lure of Higher Bond Yields -- Bloomberg
Key Reports Due (WSJ):
8:30a.m. Initial Jobless Claims. Expected: +9K. Previous: -9K.
8:30a.m. 2Q GDP, Final. Expected: +3.8%. Previous: +4.0%.
10:00a.m. August New Home Sales. Expected: -5.2%. Previous: +2.8%.
10:00a.m. August Help-Wanted Index. Previous: 25.
10:00a.m. DJ-BTMU Business Barometer. Previous: Unch.
11:00a.m. Sep Kansas City Fed Mfg Index . Previous: 15.
"When you are content to be simply yourself and don't compare or compete, everybody will respect you."
FX Trading â€“ U.S. Consumers Stuck, Dollar Bears Rejoice
Yeah the Federal Reserve slashed the Fed Funds rate and the discount rate by 50 basis points each. But could investors actually be feeling good about investing in the U.S. right now?
It would seem so if you follow equity markets. The Dow Jones is within striking distance of record highs.
But are such levels warranted, after all, considering recent reports on consumer confidence? If youâ€™re unaware, a measure of consumer confidence was reported to have fallen to its lowest level in two years (99.8 in September, down from 105.6 in August.) Are investors really giving this any credence, or are they just blowing this off before we find out how Americans feel AFTER the Fed has stuck a couple fingers in the pie?
Thereâ€™s no way they can be feeling hot about the Jobs situation (down by 4,000 in August), unless of course they consider the LOSS of workers just an â€śaberrationâ€ť and expect rate cuts solved that little problem. Itâ€™s hard to believe, though, that Fed action so quickly remedied the illness that everyone finds so threatening.
I think weâ€™ve begun to see the wealth effect of a slumping real estate market impinge upon consumers. Existing home sales, down 4.3%, are unsightly; inventories stand at an 18-year high; home prices dropped even further, down 3.9% YOY in July, with further downside expected; and new home sales for the month of August are set to be announced today.
Itâ€™s ugly out there and expectations are for more ugly.
Now I ask: how long before this really starts biting down hard on the consumer? After all, the credit markets seem much less forgiving these days.
Hereâ€™s a little quip I grabbed from Bloomberg.com â€¦
For one thing, higher interest payments on home loans are siphoning consumers' wallets. Monthly payments on adjustable-rate mortgages are estimated to increase by an average of $350 per household with such loans, according to Mark Zandi, chief economist of Moody's Economy.com.
Itâ€™s interesting to wonder what an â€śaverage of $350â€ť per month means to most American homeowners â€“ especially those who are considered to be sub prime borrowers.
The sky is falling on the U.S. consumer. Barring a surprisingly upbeat Jobs report next Friday, itâ€™s hard to imagine they find any shelter.
Upcoming economic data that may give the U.S. dollar any support is hard to spot. A possible dollar bounce rests on the prospects for other major currencies. Unfortunately for the buck, the euro keeps pressing higher, the Australian dollar is ready to test recent highs, and the Canadian dollar is still flirting with parity.
The dollar-bear bus is coming around for a final pick-up â€¦ all aboard whoâ€™s coming aboard.
John Ross Crooks III
Black Swan Capital
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