A Series of Unfortunate Events Pushes This Traditional “Safe Haven” Currency Back into the Spotlight

By Chuck Butler This is a Banking and Federal Holiday today, so the bricks and mortar banks are closed, and there will be no mail delivery, and of course your friendly neighborhood government worker gets the day off.

I’m here, in the saddle, writing to you like it’s a regular work day, and the boys and girls here at EverBank will begin to wander in about 2 1/2 hours from now. We’ll get all caught up, return some calls and then head home for the day.

Since it’s Veteran’s Day, I thought I would begin today with a snippet of a Veteran’s Day poem by Jared Jenkins…

For every life, there is a soul
For every soul, there is a life
For those who have died, we show great appreciation and remembrance
For those who live, along with them live the horrific memories of battle

Some, memories of defeat
Some, memories of victory

Our veterans were more than soldiers
They were, and still are heroes

ECB Waved a Wand and Now German Confidence is Climbing

Unfortunately, while banking employees are off today, the banking/credit crunch isn’t taking a holiday.

So, on to currencies. The data cupboard was bare yesterday, which means we didn’t see any new economic data. Since today is a holiday, we won’t get our next glimpse at the awful fundamentals here in the U.S. until Wednesday.

In the overseas version of a data cupboard, German investor confidence, surprised on the upside. The index rose in October, according to the think tank ZEW. This index has been on the slippery slope for the past few months.

Analysts are saying this index rose because the European Central Bank (ECB) stepped to the plate a couple of weekends ago, to inject liquidity and fight financial meltdown in Europe.

What Separates These Liquidity-Starved Central Banks

Again, let me say this loud and clear, folks. Not all central bank bailouts are created equal. There’s a HUGE difference between Central Banks that provide liquidity from a position of strength like the ECB and China and the other that does so from a position of weakness (the Fed).

But the good report isn’t doing anything to help the euro this morning. The overnight stock markets didn’t fare too well, which is causing the U.S. index futures to be off this morning. It all points to a rotten trading day today. This will keep the risk takers on the sidelines, and will crown the dollar the King of the Hill again.

It also is good news for the Japanese yen. The Japanese yen is back on the rally tracks! I see this morning that BNP Paribas says that their Elliott Wave chartists believe the yen will trade to 96.85 in the next week.

Of course, you know me folks: I say trends move currencies – not charts. Charts merely tell you or give you an excuse as to why a currency moved in that trend.

In this case, we all know that while the deleveraging is going on during the credit market squeeze, that dollars and yen are the only two currencies to gain (Chinese renminbi goes back and forth).

“Please Sir, We Need Some More” – Fannie Mae

Back here in the Good Old U.S.A., the accountants over at Fannie Mae announced that the US$100 billion pledge to them “may not be enough.”

This announcement came after Fannie posted a record US$29 billion loss. They’re also having more trouble issuing and refinancing debt.

I guess the folks at Fannie thought, Shoot Rudy, if AIG can go back for second helpings of bailout funds, then we can too!

We should all be used to this by now. These bailout funds are acting like cocaine for addicted banks and firms. Naturally, they’ll want more and more

Crisis Management: Don’t Leave Home Without It American Express!

And the Wall Street Journal reported this last night that…

“The Federal Reserve said Monday it will allow American Express to become a bank-holding company, saying “unusual and exigent circumstances affecting financial markets” justified a fast approval of the company’s application. The surprise move would give American Express access to new low-cost financing from the Federal Reserve.”

Before it’s all said and done, we’ll all be one big happy family, no make that dysfunctional family of “bankers.”

Shoot, they may as well bring the automakers into the fold too. They need some of the low-cost financing from the Fed too! I could really go off on a tangent here but, I’ll keep it on an even keel. It’s not like there’s anything I can do about all this, so why get to upset with all these dolts?

So, the bad fundamentals, no make that awful fundamentals, continue to mount for the U.S. to deal with. But before we can deal with the awful fundamentals, we have to deal with the credit markets squeeze.

No ifs, ands or buts. If we can get the lending going again – not between individuals but between banks and corporations – then traders will focus on fundamentals once again.

That’s my story and I’m sticking to it!

Did the Fed Hire the Bear Stearns Guy to Keep Him Quiet?

Yesterday, I told you about my latest “news of the weird.” In case you missed it, the Fed hired the Chief Risk Manager for the now defunct Bear Stearns.

I might add that the Fed hired him to head the group that overseas the Fed’s purchasing of toxic waste bonds. To me, this is like putting the fox in control of the hen house!

Anyway, a long time reader sent me a note regarding this announcement:

“I read somewhere about this appointment in several places last week on the web. One “source” actually suggested perhaps he was hired just to keep his mouth shut as who would better know how really toxic the traded paper is and what really lies out there?”

It’s true that I usually don’t buy into all these Internet rumors. But, this really struck a chord with me. And it appeals to my conspiracy theory blood. Let’s just hope it’s not even close to the truth!

The Next “Crisis Savvy” Currency to Own Through this Market Massacre

Hidden conspiracies, liquidity-starved central banks, another bailout for Fannie Mae, and now even American Express wants a piece of that US$700 billion bailout (hence their new “banking” status)…

Shoot, I know I’m ready for a little good news. How about you?

Well, that’s the nice thing about trading currencies. There’s always a profit story hiding somewhere, even in a disastrous market like this. Yesterday, I gave you the low-down on one my favorite currencies to own ahead of the market recovery: The Norwegian krone.

Today, I want to tell you about another currency that’s in a solid position to profit from this market crisis: The Swiss franc.

The Swiss economy has been stealth-like in its ability to grow even in the face of a global recession, albeit slow growth is better than no growth! And with the Swiss National Bank lowering interest rates in the coordinated round of global rate cuts, stronger growth should be restored in 2009.

Switzerland has always been perceived as a “safe haven currency” in times of geo-political difficulties, and tensions. With all the geo-political problems in the world today, I have to believe the Swiss franc will be an excellent investment choice going forward.

Once the U.S. led credit squeeze is unlocked, fundamentals will return to the markets’ focus, and Swiss franc should be ready to move forward.

With inflation running higher than the Swiss National Bank’s ceiling of 2%, at 3.1%, it’s easy to see they’re involved in the global effort to unlock the credit markets. Therefore, once the credit markets return to normal, interest rates will rise once again, look for the Swiss franc to jump back to the head of the class.

That’s it for today…Sure hope your Tuesday is Terrific!
Chuck

EDITOR’S NOTE: As these unfortunate events play out in the credit markets, a small savvy group of investors are walking away with more than US$20,000 in pure profits. Find out how here.