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In This Issue..

* Jobs Jamboree gets a lift...             
* The real numbers...           
* The dollar comes back with vengeance!                             
* RBNZ to meet this week...                                                      

And Now... Today's Pfennig!

Who's Foolin' Who?        

Good day... And a Marvelous Monday to you! You know the Jobs Jamboree data that printed on Friday, and created some HUGE euphoria among the media types that love to just "read the news" and not actually do the research to report it? Yes... It was a very good number, on the outside... Not that losing 345,000 jobs in a month is a good thing, but it is far better than the near 700,000 jobs lost a couple of months ago.

So... I've got that to talk about today... And the rebound by the dollar that has taken the euro to the 1.38 handle and looking as if it is going to go lower... And, then finally, I have to get on my soapbox again, because I don't think I want my President calling me names! So, all that and more as we begin this 2nd week of June...

OK... Well... Did you get all caught up in the euphoria of the Jobs Jamboree on Friday? I know the 2 different cable news stations we have on here in the office, sure took the number, hook, line and sinker. The markets all reacted violently to the number too... At first... You see, when the number was reported, which was -345,000 for May, the euro took off, and the dollar selling was incredible, but the flurry only lasted about 1/2 hour, then someone with an ounce of gray matter, looked closer at the number. It was like a game of Who's foolin' Who?

So... Here's the skinny... If the jobs losses were really just -345,000 in May it would have signaled a bottoming of the job losses, and a bottoming of the recession / depression, which would feed right into the inflation story, albeit a lot sooner than anyone would have expected... And with that thought, the dollar got sold. But... A funny thing happened on the way to the forum, and the currencies were soon to reverse their recent trend, and it all came back to the Jobs Jamboree...

First of all... The Bureau of Lying Statistics, I mean Labor Statistics, reported on their website that 220,000 jobs were created in May through the Birth / Death Model... And 43,000 of the 220,000 "ghost jobs" were Construction jobs... Really? You've got to be kidding me! But if you think that's all... That's just the tip of the labor iceberg... The number of unemployed persons actually increased by 787,000 in May! The number of long-term unemployed (those jobless for 27 weeks or more increased by 268,000 over the month to 3.9 million and has tripled since the start of the recession.

Not that I'm trying bum you out on a Monday morning, I just think you "should know" the score... The total number of unemployed persons is 14.5 Million... In January of this year 5 months ago it was 11.6 million... And... Oh, by the way... The 9.4% Unemployment Rate? It's probably nearing 20% in "real terms"...

The thing that gets me is that people, investors, traders, hedge funds, etc. all react to data and make investment decisions based on the data when it prints... I guess this will teach them to wait until all the dust settles and the numbers have had a chance to be exposed to the daylight! I just think it's a shame that we have to deal with these liars, and cheats, just to make us all "feel good"...

So... Eventually the truth comes to the top, because the truth... Is out there! So... Why is this bad for the currencies? Well... In normal times this news would be manna from heaven for the currencies... But these aren't normal times, as the President, U.S. Treasury Sec. and Fed Chairman all remind us at least once a week... And the trading pattern for this type of bad news, is that the inflation picture everyone was thinking of last week and the week before, just isn't going to come that fast... So... The currencies gave back gains that they had made in the last two weeks...

Whew! I typed all that "non-stop" and have to give my fat fingers a chance to rest here for a minute!

The euro also has had to deal with the Irelands rating was lowered by S&P to AA... But, I do have to say that since I've come in this morning, the bias has been to sell dollars, and buy euros... But, the move has been very small...

There's not much in the data cupboard this week, until Thursday when the May Retail Sales report prints... The Butler Household Index (BHI) tells me to expect stronger Retail Sales in May. Wednesday we'll get the May Budget Statement, which will be around a deficit of -181 Billion... Did you all get that notes I wrote last week about the month of April and the Budget Deficit... Did it hit home with you? Maybe I should repeat it just for GP...

Here's what I said on Thursday... The Budget Deficit this April was $20.9 Billion, the first deficit in this "tax-paying" month in 26 years! Can you imagine that? In April when taxes are paid, we recorded a deficit? That's pretty amazing folks... April 2009 tax receipts dropped 44% compared with those in April 2008.

And Here's what I said on Friday... And I also believe that we will return to the underlying Weak Dollar Trend for good in the 2nd half of this year... Because... By then... the U.S. Budget Deficit, which has already breached 5% of GDP (late last year), will be heading beyond 10% of GDP this year. So... Do you want to own a truck load of dollars when the markets are staring at a Budget Deficit of greater than 10% of GDP? I don't think so!

And... Then this week we get the actual data to tie it all together in a nice bow!

I just saw a news story flash across the screen quoting the President... Hmmm, seems President Obama believes that his "stimulus package" will create 600,000 jobs... Well, that should be in the bag, right? I mean if it's not people being hired to take the census, then the BLS will just create them out of thin air, and the President will be able to say... "See! I told you I would create 600,000 jobs!"

I shake my head in disgust... I really do folks... And speaking of the President... I don't know about you... But I'm tired of him apologizing to other countries... And I really don't like him calling me names... OH! He's calling you names too!

OK, back to regular stuff... The Reserve Bank of New Zealand will meet this week, and I'm on the fence regarding what they will do... I'm leaning toward leaving rates unchanged, but jawboning for further rate cuts... Which is about the same as actually cutting them! So... Just cut the darn things! Quit beating around the bush!

And... U.S. Treasury yields continue to climb higher, and that means further losses to holders... The 10-year U.S. Treasury yield hit a seven-month high this morning... Treasuries have to deal with more supply this week. Hmmm... I have to blow my own horn here and tell you that I told you a couple of months ago that this would happen... That the deficit spending would create a monster, and that monster would be the need to issue more Treasuries than ever before, and the more you issue, the less the value of those outstanding become... So, to sell them, you have to allow the markets to let the yields rise to attract investment, and... As the yields rise, those previous issues lose value, in the secondary markets... Sure, if you hold them to maturity, there's no principal loss... But how many of those Treasuries were bought last year in the flight to safety, to hold until maturity? I don't have an answer, but my guess is... Not many!

See? Deficits Do Matter! And these days it's the Budget Deficit that's taking the hits... The Trade Deficit, which used to be the Big Kahuna, is no longer adding $700 Million to the Current Account each year. In fact, the Trade Deficit will print this week for April, and is expected to remain below $30 million... Not a Surplus, but still, much better than the $65 million figures we used to see every month! As I've explained before though this is simply, not the preferred way to reduce one's Trade Deficit... To have a recession! No, it would have been far better to have our exports be competitive...

And in the "here we go again" category... Saudi Arabia, Bahrain, Kuwait and Qatar signed an agreement to create a Persian Gulf monetary union, committing themselves to working toward a common currency despite the withdrawal of the United Arab Emirates and Oman.

These "oil states" threaten to do this about once a year... Kuwait finally go tired of waiting and dropped their peg to the dollar over a year ago! But, an oil monetary unit? Now that would really put a dent in the dollar's armor, eh? Just don't go hanging your hat on that happening any time soon!

I think that we've seen some real profit taking in the past few days... A reversal of the risk taking that was going on... And... The feeling that we went too far too fast... This move back in the euro and other currencies does give all those that were sitting on the sidelines and just couldn't pull the trigger on the rally that began in March, an opportunity to get in at cheaper levels than the past two weeks...

And with that... I'll head to the Big Finish!

Currencies today 6/8/09: A$ .7870, kiwi .62, C$ .89, euro 1.3850, sterling 1.59, Swiss .9130, rand 8.1850, krone 6.4470, SEK 7.8645, forint 207.35, zloty 3.2810, koruna 19.50, yen 98.55, sing 1.4585, HKD 7.7520, INR 47.57, China 6.8372, pesos 13.40, BRL 1.9615, dollar index 81.30, Oil $67.45, Silver $14.96, and Gold... $951.02

That's it for today... Another year at the ball game for the crowd here and another loss! I don't believe we've ever seen a winner when we go as a group! UGH! But a good time was had by all any way! Jazz camp begins this morning for my little buddy Alex. He's not just a rock-n-roller! He's one heck of a guitar player that's for sure! Better than I EVER was! My beloved Cardinals couldn't hit their way out of a wet paper bag right now, but that will change, hopefully this afternoon! Another full week on the desk... I can tell the folks here are growing tired of me being around every day! But, I'm here until I go to Vancouver for the Agora Financial Investment Symposium... It's the 10th anniversary of the Symposium... And Vancouver in July is awesome! Any way, I've got to get to work, it's a Monday, and I'm running late! I hope your Monday is Marvelous... And you have a Wonderful Week!

Chuck Butler
EverBank World Markets

Posted 06-08-2009 12:17 PM by Chuck Butler
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