Chuck Butler, regular analyst at The Daily Reckoning, offers an analysis of why the ‘Audit the Fed’ amendment to a $200 billion deficit plan spooked the currencies markets this week.

Chuck Butler (The Daily Reckoning): As I checked the currencies throughout the day yesterday, I noticed that as the day went on, the non-dollar currencies were stronger, led by the Big Dog, euro (EUR)… But then late last night, and I mean late last night, I checked them, and those gains had been wiped out.

So, when I arrived here this morning, I had one thing on the top of my list of things to do, and that was to find out what happened… Come on, I said to myself, it had to be more than the “risk on, risk off” stuff that’s been hanging over the markets like the Sword of Damocles! But, when you

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This recovery is wonderful in every way, except the important ones. It is like a shiny new airplane. It has glossy aluminum wings. It has plush seats in the first class section. Trim stewardesses serve drinks. Movies are available on demand in all sections…

A majority of those polled by Bloomberg think it’s great; 61% said they thought they economy had taken off and was flying high. Stocks are up. Commodities are up. And here’s another Bloomberg headline: “Global investors give Federal Reserve Chairman Ben S. Bernanke top marks…”

The recovery has won the approval of economists and the public. It has almost everything going for it. It just won’t fly!

Comes news this morning that the US economy is still on the runway. This report from the AP explains why:

“WASHINGTON (AP) – Consumers slashed their borrowing in July by the largest amount on record as job losses and uncertainty about the

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This is a guest contribution by Damien Hoffman, editor-in-chief of the very popular Wall St Cheat Sheet blog. Make sure to put this site on your must-read list.

Nouriel Roubini and His Acolytes

Following the incredible popularity of my post “Is Nouriel Roubini a False Prophet?“, I’ve decided to do a little introductory lesson for those more interested in avoiding charlatans …

Cold Reading is a primary set of techniques employed by phony psychics and market prognosticators. When cold reading, the primary objective of the sender is to ensure that the recipient perceives the statement/prophecy to be a hit. Here are a few classic techniques used by Ms. Cleo and Nouriel Roubini:

TECHNIQUE 1. The “Rainbow Ruse”: Indicate one trait

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This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• Andy Xie (Caijing.com.cn): New bubble threatens a V-shaped rebound, August 20, 2009. Instead of a V-shaped recovery, we may instead get a W curve. A dip next year, although perhaps not statistically deep, could deliver a profound psychological shock. Financial markets are buoyant now because they believe in the government. The second dip would demonstrate the limits of government power. The second dip could send asset prices down - and keep them down for a long time.

• Economist.com: U, V or W for recovery, August 20, 2009. The world economy has stopped shrinking. That’s the end of the good news.

• Ambrose Evans-Pritchard (Telegraph): There’s no quick fix to the global economy’s excess capacity,

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At the end of the second quarter, 4.3% of all residential mortgages were in some part of the foreclosure process, up from 3.85% at the end of the first quarter and 2.75% a year ago. In addition, on a seasonally adjusted basis, 9.24% of all mortgages were delinquent (behind by at least one payment), up from 9.12% at the end of March, and just 6.41% at the end of June 2008. Both were records since the Mortgage Bankers Association (MBA) started keeping track back in 1972. On a non-seasonally-adjusted basis, the delinquency rate was not quite as bad at 8.86%, but still a record. That means that 13.16% of all residential mortgages (NSA basis) are in trouble. With about 51 million houses with mortgages in the country, that means 6.71 million bad mortgages out there. With the number of people out of work still rising, the problem is ...

Today is a day to give thanks. I know it’s a little early for Thanksgiving, but I’m talking about being thankful to Uncle Sam and the U.S. government for the bountiful opportunity they have given us to make huge loads of money in a relatively short amount of time. I’m talking about shorting U.S. debt via 2 specific, but very risky vehicles:

Ultrashort Lehman 20+Year Treasury Proshares (NYSE: TBT)
Direxion Daily 30 Year Treasury Bear 3X Shares (NYSE: TMV)

Since the collapse of the yield curve late last year when people were panicked in the market such that they were willing to take NEGATIVE returns on their money via U.S. Treasuries to ensure some type of safety, things are starting to normalize now, and in fact swing the other way.

This has given us one of the biggest opportunities in the last 50

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Risk Assets soar!  German Investor Confidence surprises!  High yielders kicking tail…  Who’s afraid of the SNB? And Now… Today’s Pfennig! OK… Speaking of patience… I think that’s what we’ll all have to possess a lot of going forward with these currencies and stocks… Here’s what I’m talking about… Yesterday morning it looked as though the recent rally in stocks was over, complete, pack up the bags, get on the bus, Gus… And with the trading theme of throwing all risk assets in the same bag and trading them alike that’s been in place since last July, this would seem to be

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he economic news continues to bring bad tidings…consumer bankruptcies were up 33% in 2008…The financial crash is causing an economic crash, which will cause a worse financial crash…and around and around we go…Who will spend their savings in ‘09?…the CBO puts the budget deficit at $1.2 trillion for this year - and that’s not counting stimulus programs…and more!

“Psst…we’re breaking out of this joint…Saturday night…pass it on….”

Yes, dear reader…we’re breaking out… We’re not going to let these prison bars stop us. A whole generation of American investors is being fattened for slaughter…we’re not going to be among them.

Let’s look at yesterday’s headlines just to see what is going on.

The Dow rose 62 points yesterday. Oil held steady at $48. Gold went up $8. Yields are rising…but you still get paid nothing when you lend money to the U.S. government.

The economic news tells us that things are getting worse. Alcoa said

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The US Federal Reserve yesterday pulled out all the stops in a frantic effort to save the US economy from collapse and stem the deflationary forces. The Fed funds rate was slashed from 1% to a target range between 0 and 0.25% – the lowest the central bank’s key rate has been since records began in 1954.

In reality, the Fed is simply aligning its target rate with the effective rate and thereby pushing monetary policy into an era of Zirp, i.e. a zero-interest-rate policy.

The Federal Open Market Committee’s (FOMC) statement said the “outlook for economic activity has weakened further” from its previous meeting in late October, indicating that the “Federal Reserve will employ all available

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The number of Americans filing new claims for jobless benefits rocketed to a 26-year high last week, surpassing already gloomy forecasts, as the U.S. economy sinks deeper into recession.

Initial applications for jobless benefits climbed by 58,000 to 573,000 in the week ended Dec. 6, upwardly revised from 515,000 the previous week, the U.S. Labor Department reported yesterday (Thursday).  The figure was the highest since 1982, and far exceeded the median projection of 525,000 put forth by 39 economists surveyed by Bloomberg News.

The increase was due, in part, to a bounce from the week before, which was shorter because it included the Thanksgiving holiday. Government offices were open only four days that week.

Nevertheless, the four-week average, which smooths out fluctuations, stood at 540,500.  That’s the biggest number of jobless claims filed since December 1982, when the economy was also mired in a deep recession. By

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