mostly about debt

Good morning. The unemployment numbers (new filings) were even worse than expected today, at +58,000 to 573,000. But this post isn't about all that, I've got a shred of a theme and I'm trying to stick to it.

The dollar move down that started yesterday has continued, smashing through the 50-day moving average and effortlessly through November's recent lows. We're now in the middle of mid-October's large run up. This looks head-and-shoulders-y to technical traders, which implies a return to around 77-78. A falling dollar makes US treasuries negative outright for foreign investors. Keep in mind how that affects US government debt financing.

Shipping continues to pick up a bit - at least in some sectors - with the Baltic Dry Index back over 700. That's still a very low number by recent terms, but back from the precipice. Capesize ship rates - these are the largest dry bulk class, freighters which cannot use the Panama or Suez canals and as such must traverse the capes - have been the source of most of the rise over the last few days. Many ports can't serve vessels of this size, which probably indicates something about market segments. (Here's a summary of the different sizes; it leaves out Supramax, but wedge Supramax in as a class covering the top-end of Handymax and low end of Panamax.)

One wonders whether this is related to the TED spread falling below 200 bp for the first time in some time a the LIBOR has made a substantial move down. It's possible that the largest concerns are becoming more easily able to access shipping lines of credit. That's speculation, of course, but it would be one of the few active signs of increased lending in any field.

Marketwatch reports that total household US debt fell in the third quarter for the first time since at least 1952. The phrase "at least" is in there because that's as far back as the records go. They're reporting it as "pay down" in the headline, and the story says, "Households paid off more mortgage debt than they took on for the first time on record. Mortgage debt fell at a 2.4% annual rate to $10.54 trillion." But I wonder - no, that's not strong enough. I strongly suspect that this is due to walkaways and foreclosures. Note that all other debt classes increased. I don't think much if any of this decline is true "pay down;" I think it's just eliminated debt, which means eliminated money, which does not mean good news, contrary to the headline spin. Either way, it indicates essentially the formal end of the mortgage-equity-withdrawal/house-as-ATM phenomenon, which appropriate ramifications for consumer spending.

Also, total US debt per capita soared, thanks to bailouts: "Total U.S. domestic nonfinancial debt increased at a 7.2% annual rate, boosted by a postwar record 39.2% increase in debt taken on by the federal government."

Anyway, I don't know where they're running up those credit card balances, but it's not in malls; General Growth Properties, the second largest operator of malls in the US, is on the verge of bankruptcy due to the spending slowdown and credit collapse. Not in this article is that their interest payments exceed their gross income (according to an unlinkable source, sorry) and that they have a debt deadline to meet by Friday midnight; this implies strongly that they're done.

December sales figures are going to be interesting. January is going to be difficult.

Something is happening. Possibly several somethings.

Good evening.

The dollar is through the floor against the Yen, trading at US$1=円90.545. I don't know why. There's speculation it's related to the collapse of the GM/Chrysler bailout bill in the Senate tonight. There's other suggestions that it's related to FannieMae.

That Yuan devaulation story keeps not going away, with analysts now saying that China will "let" the Yuan trade downwards over the next six months.

Since I started typing this, the dollar has fallen to 円90.270. This is a huge shift. Nikkei is stairstepping down after lunch, bouncing off limit stops. Overnights (futures) on the S&P 500 are down 40ish points, and that's off lows.

eta: US$1=円89.090. Um, yikes. Shit be goin' down. I checked again after typing that sentence: 円88.935. These are monstrous moves down for the dollar in the only open Dollar Index currency. Brace for impact.

eta2: 円88.410 before bouncing, at least for a moment. I've never seen anything like this. This is a 4.5% swing in 24 hours.

eta3: Courtesy gfish: "There are no incentives to buy the dollar right now," said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust and Banking Co. in Tokyo, a unit of Japan's largest brokerage. "U.S. politicians can't even agree on stopgap measures for the auto industry." Despite that, back up to 円89.405 and generally recovering at least some of the lost ground. I have no idea what tomorrow looks like. None.

eta4: This is the second craziest overnight I've ever seen. Seriously, that US dollar drop was time-to-put-the-baby-in-the-rocketship scary. CNN is reporting that TARP funds might be used to bail out the Detroit automakers, without conditions. Yen/Dollar trade seems to be stablising as the Nikkei leveled off and closed for the day down 5.6%. (Seriously, it looked like it was going to be much worse, for a while.) Hang Seng (Hong Kong exchange) is still open and down a bit over 6%. US dollar is dropping against Pound Sterling, Euro, Swiss Franc even as those currencies also drop against the Yen - but the drops are small. Are Japanese and Chinese investors are taking their money home? Remember: Yuan/Renminbi are not freely convertable. Yen are.

Edited original forex link to a source actually showing what happened; Yahoo's charts aren't working right for unknown reasons.