Scaredy Cats!

By Chuck Butler, Daily Pfennig

Good day… And a Wonderful Wednesday to you! Hurricane Ike moves into the Gulf… Which way it goes from here isn’t good for anyone. We had another day of watching the euro rally during the day, only to see it fizzle out by the end of the day. I go home each night and think all the way home about all this stuff going on, and wonder just who in their right minds would be buying dollars right now… Scaredy cats, that’s who… So… Here you go… Deep Thoughts by Chuck Butler…

Here’s the skinny on that thought… Ever since the Fed, Bank of Japan (BOC), and European Central Bank (ECB) intervened in their coordinated, covert operation, market participants and traders are scared to death to short dollars, for fear of more intervention that could wipe out their trades and post losses for them. Come on… These aren’t the currency traders that I grew up with! Those traders took any central bank intervention as a “challenge” and would laugh in the face of central bank intervention! Central bank intervention usually meant it was a desperate measure to shore up a currency, and that was like blood in the water for a shark… Currency traders would hit that currency even harder!

But not these scaredy cats! That’s one thing I think about… And then there’s this…

The government’s decision to bail out Fannie and Freddie and place them into conservatorship may shore up the mortgage meltdown in the short term… But to me, this is just another in the line of things the Fed and Treasury have done in an attempt to bring calm to the financial markets… (Bear Stearns, mortgage bill, money supply, low interest rates, and dollar intervention, stimulus checks, and more!) But, when you step back and look at all this, none of it, and I mean NONE of it had done anything to alleviate the pressures on rising home inventories, falling home prices, upside-down mortgages, unemployment, the deteriorization of the financial markets (see the “dead man walking” list of banks that are in deep dookie), and that doesn’t just mean banks… The major brokerages are standing on the street corners with their hands out, begging for any sovereign wealth fund that might give them a capital infusion… I started to describe them standing on the street corner in different light, but remembered this is a family newsletter!

And all that brings me right back to my call several months ago, and one that has been on the opposite side of the markets… And that is that the Fed will come back to the rate cut table before they go to the rate hike table. Read more….