It's All About the Jobs
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
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
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
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
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
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
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!
EverBank World Markets