Consumer Borrowing Collapses…What’s up with sterling? Option ARMs get ready to reset…Gold falls back to below $1,000…And Now… Today’s Pfennig!

Good day… And a Wonderful Wednesday to you! Well… The currencies, for the most part, kept the heat on the dollar throughout the day and in the overnight markets. The euro, did rise to 1.45 and change yesterday, while it is hovering right at that figure this morning, so it did give a little bit back.

There were no big announcements last night like we saw on Monday, so the currencies didn’t have anything to push them further. In fact, there may be a “letting the dust settle” period of time, with the Big Dog, euro, before we see any further advancement, given the euro’s huge gains yesterday…

We did have “Mr. Yen” Sakakibara, tell a crowd of people that he

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There has been a lot said and written lately about the failure of asset allocation, supposedly proven by the large losses experienced in 2008.  We don’t believe asset allocation failed.  We believe asset allocation practitioners failed in their execution.

Too much slicing and dicing had crept into the working definitions of asset classes — pushing granularity beyond reasonable limits.  Categories were being confused with classes.  Just because two categories sound different, doesn’t mean they are different in the asset class sense.

Assets are primarily aggregated into classes, and classes distinguished one from the other, based on the correlation of their returns.  Diversification, while important to minimize issue selection risk, is not allocation.  Allocation is putting assets into asset category groupings that do not respond to economic and other conditions in the same way, to the same extent, at the same time as each other — that mean’s low correlation.  Merely different category

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In our last post we discussed our views on deflation and how it will  be around  longer then most investors think.  Most people are stuck on the idea that hyper inflation is just around the corner and that you must be buying gold, most other commodities, and Asian stocks and at the same time short the US Dollar, Japanese Yen, US Treasuries, and US stocks.  Eventually this may be the right stance, but for now we think, along with the market, that it is the wrong view for the short and medium term.

The main issue stems from the idea that because the government has printed a gazillion dollars that we MUST have hyper inflation tomorrow.  The reality is that until that money is actually in circulation it will not cause inflation.  If you look at the financial situation of most banks it is obvious that

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651K jobs lost in Feb…  Dec. and Jan Job losses revised up…  Talking Norway, Canada, Australia… Brazil stealthlike for 3 months… And Now… Today’s Pfennig!

Well… Our Fantastico Friday was interrupted by that horrific Jobs Jamboree number that printed Friday morning… 651K jobs were lost in February, which let me remind you is a couple of days shorter than other months. So, it could have been worse! Hard to believe that could be the case, but it’s true. The unemployment

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By Claus Vistesen Copenhagen

Japan is still hanging on it seems, but for how long? This is what I will try to clarify in this entry. In the following I will thus continue my ongoing analysis on two months' worth of data as well as loads of timely analysis from other sources where, as usual, Ken Worsley and Takehiro Sato/Feldman from Morgan Stanley have my complete attention. In accordance with tradition four overall themes will form the backbone of the analysis; trends in prices, domestic demand figures, industrial output/exports, and finally the JPY which as ever is the subject of much attention in currency markets and beyond.

When it comes to prices it could seem as if Japan's quick return to inflation in the core-of-core index was nothing more than a blip. As can consequently be observed from the graph below Japan is once again stuck in

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The Nikkei had a rough go last week indeed, losing 3.6% and the 14,000-level (13,973.73); TOPIX fell to 1,371.57 after a short-lived recovery of 1,400 two weeks ago. No worries though, as Chicago Nikkei 225 futures not only held 14k, but added 140 points to the upside (14,220) setting the stage for a gap up on Monday (Osaka N225 futures: 13,980). The Bank of Japan held its benchmark rate at 0.5%, as expected; meanwhile, the yen has eased to its weakest level against the dollar, ¥108/$1, since late February. Inflation and U.S. i-bank earnings will weigh heavy on sentiment this week. Lehman (LEH: 25.81 +13.70%) leads off on Monday, 6/16, Goldman (GS: 178.29 +6.92%) is up on Tuesday, 6/17 and Morgan (MS: 41.04 +6.93%) reports on Wednesday, 6/18. Circuit City (...

That was an ugly jobs report. I anticipated bad news, but I thought the employment hit would really start in earnest in next month’s report, as there is some lag in employment numbers but seeing this level of degradation in the employment picture shows us that “the bad” is coming sooner. Not only was this month’s number bad but downward revisions in previous month’s numbers as well.

This scenario was outlined in Et tu, September

That is a chart of the US dollar versus the Romanian leu.

Romania is a deficit country that relies on foreign investment, really it is at the mercy of foreign investment. In fact foreign investment is vital throughout the region. The only country nearby that might be in generally rougher shape is Latvia, but the lat, as it is known, has only weakened by about 1% compared to almost 10% for ron.

This article from MarketWatch gives a good recap of what is going on including some detail about a recent report from S&P that says Romania, Latvia, Iceland, Bulgaria, and Turkey are most vulnerable to adverse market conditions. The overnight rate in Romania is 7% and has been heading lower since February.