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It's All About the Jobs Jamboree
by Chuck Butler

Good day... And a Happy Friday to one and all! A Fantastico Friday! A Jobs Jamboree Friday! Anything else, Chuck? No, I don't think so, I'll stop there... It's all about the Jobs Jamboree today. It's all about finding out just how badly the rot on the labor vine has gotten... The Weekly Initial Jobless Claims yesterday remained above 500K per week, which doesn't bode well for next month's data... But first... November's Jobs Jamboree on the docket!

The "experts" have forecast a 335K drop in jobs for November... But your old Pfennig writer believes that this forecast is low. I think it will be closer to -375K... The reason I say that is the employment piece of the ISM report that printed the other day... The employment index of that report showed some real serious rot on the labor vine... I read a report last night, where an economist was attempting to show how the report should read -750K... As bad as -375K is, I don't think the Bureau of Labor Statistics (BLS) would have anything to do with printing a -750K report!

The currencies rallied a bit yesterday, but settled down for a long winter's nap in a tight range overnight ahead of the Jobs Jamboree data. The euro saw the bright side of 1.28 yesterday, but as I said, the range became tight overnight... You see, no one wants to take a position on either side of the ledger ahead of this crucial labor report this morning. And the fact that Factory Orders in Germany dropped last month isn't helping the single unit this morning after yesterday's rally.

OK, enough on that! Yesterday, I left you with the Bank of England (BOE) and the European Central Bank (ECB) meeting and us waiting for their rate announcements, which came about 1/2 hour after I hit the send button. The BOE cut 100 BPS (1%) from their rates, while the ECB opted for 75 BPS (3/4%)... I really do feel as though the BOE has taken a page from the U.S. and Japan's book on how to deal with all this and is on the road to zero percent rates. I don't feel the ECB will go there... While they may go lower in the Eurozone, I don't think ECB President Trichet has any intention of following the "Japanese model"...

Trichet said something yesterday that made me believe that he won't become Trichet-san... Trichet said that "We mustn't confuse Deflation with Dis-inflation." He went on to also say, "The ECB will NOT get trapped at rate levels too low."

So... We had Australia drop 100 BPS, New Zealand drop 150 BPS, Sweden drop 150 BPS, U.K. drop 100 BPS, and Eurozone drop 75 BPS all this week, and for the most part, none of these currencies got taken to the woodshed for debasing their currencies by such large margins... Normally, a 25 BPS rate cut can cause a currency some major problems... But nothing here... So... Why... Do... I... Think... This... Is... Happening...? Hmmmm... It's probably a case of unconventional measures are seen as not working, so conventional ones have little chance. And... If you really get to the root of the credit crisis problem... It all circles around the fact that the availability of credit, not the cost of credit, is the issue.

But that doesn't stop these central bankers from slashing rates at an alarming pace, eh? I think these central bankers are quite aware of the fact that the markets' focus has become so myopic on the Credit Crisis that they could do a handstand on their desk while sticking out their tongue while announcing a rate cut, and the markets wouldn't notice...

PIMCO (the world's largest bond dealer) issued a report on pound sterling yesterday that's quite interesting... The writer, Myles Bradshaw, a money manager for PIMCO, said in a report yesterday that "if you were shorting the pound, now is the time to reduce those positions"... Hmmm... You see Mr. Bradshaw makes a strong/good point about how interest rates in the U.K. have been brought to levels not seen since Winston Churchill was around. And that may be enough to keep the U.K. economy from falling off a cliff...

Well, that goes against my earlier call that I believe the BOE will follow the Japanese model and cut rates to near zero. I say this because the U.K. has major problems, folks, and I don't think having rates at 1951 levels has anything to do with how bad things will get here...

The China-America talks ended yesterday, with an agreement between the two giant countries to provide $20 billion to fund trade and agreed to deep financial ties... However, the two couldn't leave a meeting without needling the other... U.S. Treasury Sec. Paulson urged China to continue to allow currency flexibility... And the Chinese told the U.S. to "tackle your own problems, such as excessive consumption and debt." You can't believe how that made me chuckle... Our leaders won't talk about excessive consumption and debt (I do, and have for years!), but the Chinese go right for the wound that the U.S. tries to place a band-aid on... And they nailed it!

Did you see this news yesterday on the Fox News website... "Israel is reportedly drawing up plans to strike Iran's nuclear facilities and is preparing to do so without U.S. backing." Now... I'm not going to get into the whats and so ons here... I merely mention this to point out something... After the news story hit the website, Swiss francs rallied strongly, which told me that it still holds the "flight to safety" badge... Unfortunately, though, gold did not rally... Hmmm... Very disappointing...

OK, now that there was some denial of the story, the Swiss franc has given back its gains yesterday...

There was a story reported in the Wall Street Journal yesterday that certainly is a sign of the times, in my opinion... Here you go, and see if you get the same feeling of this sign of the times that I did...

WSJ... "U.S. retailers reported some of the weakest sales figures in years for November, which included the Black Friday kickoff to the holiday shopping season.

"Gap reported a 10% drop in same-store sales, while Macy's fell 13% and Nordstrom dropped 16%. Target reported a 10% drop, worse than expected, though Black Friday sales were stronger than the rest of the month. But Wal-Mart topped estimates on increased store traffic and purchase size."

I've had a lot of questions over the years about PPP... Well... PPP is Purchasing Power Parity, and is most well known in the Economist Magazine's Big Mac Index, where they monitor the price of a Big Mac all over the world, with the idea that if a Big Mac is more expensive in Europe than it is in the U.S., the European currency is overvalued by the percentage of the Big Mac price difference. Well... You know, this is all good on paper, but you have to look at what's going on in a country first... If, for instance, the wages of Europeans are on a whole higher than those of Americans, then their standard of life is "more expensive" and therefore the price increase in the Big Mac means nothing to me...

OK, so, now that I've gone through that exercise, it's still a good thing to check PPP just to make certain things don't get out of whack by too much of a margin... And in that light, my old Corp. FX guru, Ashish, sent me a note about PP yesterday, that showed the euro still overvalued vs. the dollar, but by a far less amount than a few months ago. It showed the pound to be undervalued, along with the Swedish krone... Hmmm... Oh, well, none of these are too out of whack... And... As I told a crowd of people at one of the FX University Tours that I now use the Ipod index instead of the Big Mac index...

The lawmakers in Japan have taken a page from the U.S. book and announced that they are looking at the possibility of allowing tax breaks on profits made overseas and brought back to Japan (repatriation)... You may recall that in 2005, the U.S. did the same thing and really did a bang-up job of propping up the dollar for that year... Should this law pass in Japan, it could very well spell a period of further yen strength. I'll keep an eye on this...

The news from Canada just seems to get worse all the time, which has led to a large drop in the loonie in the past month. This morning, it was their version of the Jobs Jamboree, which showed a much larger than expected drop in jobs... -70K vs. the -25K forecast... Take the commodity price collapse, the low interest rates, the parliament suspension possibility, and now a hickey on the economy with job losses, and you can see why the loonie has dropped by almost 6% since 11/21... UGH!

Speaking of commodity prices... Our friend Jim Rogers was speaking again yesterday and made some great points regarding commodity prices... Here are a couple of quips from Jim Rogers... "Commodities will be the place to be if and when we come out of the downturn. The only thing where fundamentals are unimpaired are commodities. Farmers can't get loans for fertilizer now. Nobody can get a loan for a zinc mine. So we are going to have some serious, serious supply problems before too much longer."

And more importantly for some folks to know... Jim Rogers said that he "hasn't sold any commodities since the bull market began."

We had the TV on the automakers pleas to lawmakers yesterday for bailout money... At one point it was really sad, as one of the Big 3 CEOs, which, by the way did NOT take private jets to D.C. this time as they did the last time and really ticked some people off... This time they took hybrid cars) I think it was Ford's CEO was pleading his case, and the look on his face was so sad, it looked like he was saying, "Please dad, can I have my allowance early, I've got this important date and she expects me to take her someplace nice"... Please dad? It was sad...

Someone in the news said that while everyone is ranting about the bailouts, it certainly seems to be a better course of action than to allow 100's of thousands of autoworkers to lose their jobs... I guess he has a point there... But who's fault is this? Mine? Did I make awful choices the past 30 years regarding cars and how they were built, and what to build? I was telling Ty Keough the other day that I have never owned a Big-3-made car that didn't have a major problem at one point... Transmission, engine, you name it; I experienced it with all three! Maybe I was the exception, the black cloud if you will, but you can see how my view would be shaded here...

What? You didn't think I was going to go to the Big Finish without talking about something controversial, did you? HA!

So... Which way will the currencies go with a nasty Jobs Jamboree figure? Well, in the days before the Trading Theme was put into place... It would have meant "curtains" for the dollar... But with the Trading Theme allowing dollar strength the deeper, darker, and more dangerous the data gets, one would think that we would see more dollar strength, with a nasty Jobs Jamboree figure today.. We'll have to go into the weekend on that note, folks... A nasty Jobs Jamboree...

Currencies today 12/5/08: A$ .6420, kiwi .53, C$ .7755, euro 1.27, sterling 1.4685, Swiss .8250, ISK 261, rand 10.27, krone 7.2050, SEK 8.34, forint 209.90, zloty 3.06, koruna 20.3315, yen 92.10, baht 35.60, sing 1.5220, HKD 7.75, INR 49.60, China 6.8810, pesos 13.65, BRL 2.5380, dollar index 87.03, oil $44.20, silver $9.47, and gold... $769.40

That's it for today... Lots of goings on this weekend... We've got St. Nick's Day tomorrow, the Big 12 Championship Game for my beloved Missouri Tigers, Sunday is Pearl Harbor Day, the first "day of infamy," all this, and I'll be heading to Jacksonville for the weekend! I'll be back in the saddle again on Monday, no worries! I received some very sad news yesterday: my best friend Mike, whom I've known since 2nd grade (that's 1962) called to let me know that his mom had passed away. Yes, she was old, but the thing that was sad was that she was diagnosed with cancer in the fall and didn't make it to Christmas. Again, this hits me hard, because I've been lucky enough, and with the good grace of God, been able to live with this disease. OK... No need to stay down here, it is a Friday, which means the weekend is ahead! Mary Owens just walked in, so I must be late! Time to go, and hopefully have a Fantastico Friday... Hope yours is Fantastico too!

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