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In This Issue..
* Currencies trade in a tight range
* Pound Sterling, the star performer?
* Something smells fishy...
* Do you see trend with Gov. Reports?
And Now... Today's Pfennig!
GDP Does Not Compute, Will Robinson!
Good day... And a Wonderful Wednesday to you! We had a very tight range trading day yesterday in the currencies, which have left them trading in about the same clothes they were wearing when I signed off yesterday! We've got that to talk about, and... Another $2 Billion for the CARS program has been allocated... What a crock! OK, Chuck, slow down, you don't need to get your blood boiling this quickly, this morning!
I'm writing from home this morning, as I have a meeting close to our old office, which means its not far from where I live, which is completely different from our current office location, which is, I'll say... Quite a distance... But, hey! I'm not complaining, just giving you the details...
OK... Well, as I stated in the opening, the currencies have traded in a very tight range for the past 24-hours, with little in the way of data to push them in either direction. That could change this morning when we see the color of the ADP Employment report, and Challenger job cut report. The ADP/Challenger reports are usually a very bad indicator of what the Bureau of Labor Statistics (BLS) print in the Jobs Jamboree (which will print on Friday this week)... But a few months ago, the people at ADP/Challenger decided to change their methodology to mirror that used by the BLS... In other words... They will lie, cheat, and cook their books too! HA! But that hasn't helped them...
I think it to be a better indicator to use the employment component of the ISM Index that printed the other day... The employment component showed that the job losses will be around 350,000 for July... That's close enough for government work regarding the forecast of 325,000 jobs lost by the surveyed economists.
However, the ADP/Challenger report will print, and the markets will make an initial reaction to the report. So, watch for that... If the ADP/Challenger report shows a greater number of jobs lost, it could push the risk appetite to the back of the class once more... At least temporarily!
OK... I was all prepared to talk about this in today's Pfennig, when I saw a note from my friend, John Mauldin, talking about it last night! He beat me to the punch! Oh well, I'm going to continue on with my plans...
What I'm talking about is the GDP report last week... Something smells of yesterday's fish here folks... I'll put it out here very simply... The Gov't tells us that Consumer Spending is only down -2.5%. Which when plugged into the GDP report tells us why GDP was reportedly stronger than expected in the 2nd QTR... Consumer Spending represents about 70% of GDP! But here's where I have a problem with the report... Corporate Earnings are down 15%... Corporate Earnings are down 15% because there's no Consumer Spending! -2.5% doesn't compute when Corporate Earnings are down 15%!
And here's where the cheese begins to bind folks... I believe the Corporate Earnings numbers are true... They are regulated to be so! While the Consumer Spending data is Gov't produced... As the robot in the Lost in Space TV program used to say... "This does not compute, Will Robinson"!
But hey! What do we expect from Gov. reports? Look at the games that people play at the BLS for example! Any old way, I just wanted to throw that out there as food for thought about the U.S. economy / recovery data...
Ty Keough and I had a quick conversation yesterday about Bank Earnings that have been reported... I discussed how disgusted I was with all this yesterday, but left it at that. Ty decided to try and get me talking about this... I know I shouldn't, but I must! These Big Banks that borrowed funds from the Gov't, got to stop marking to market the securities/bonds that had gone bust, which means they then got to sell them to the Gov't at inflated prices, then take the money they Gov't gave them for the inflated securities/bonds and pay back the Gov't! The funds also allowed the Big Banks to post those earnings that the markets got so wound up about! Now... How's that for getting your cake and eating it too!
I shake my head in disgust, folks... But hey! We've got the cartel folks over at the Fed taking care of all of this for us... Isn't that nice? NOT! We had all better be careful or before we know it, the Fed Heads will be doing an Oliver North on us!
Ok, enough of that! The British pound sterling was the star performer again yesterday and last night... The U.K. has seen a plethora of better data recently, and it didn't stop yesterday or this morning... The U.K. manufacturing index unexpectedly rose, and U.K. services expanded the most in 1.5 years in June. Factory output was up .4%, and home values shot up almost double what was forecast for them!
This recent run of better than expected data reports in the U.K. tells me that the Bank of England's (BOE) Gov., Mervyn King has come to an end of his bond purchases... For now... That means Quantitative Easing in the U.K. has ended... Again, for now... And that news , along with the better than expected data has allowed the pound sterling to rally and rally it has!
In the Eurozone, things aren't looking so rosy... Eurozone Manufacturing and services contracted at the slowest pace in the past year, and Retail Sales for June showed a 2.4% drop, year-on-year. However, these things only place a drag on the euro temporarily, as the euro will shine, with every mark down of the dollar...
And then there was this... A long time reader sent me a note yesterday, and said that it just didn't make sense that U.S. Manufacturing was healing while Capacity Utilization was wallowing in the mud (OK she didn't put it like that, I did!)... So... I put on my Sherlock Holmes hat, grabbed my pipe and looked into it, because... Now that she said that, it didn't make any sense to me either!
So, I went to the components of the ISM Index, and found that 9 of the 10 showed improvement... But none so much as the Government Construction Spending component that showed a 3% increase! So... There you have it... Manufacturing, per se, was better, but not as advertised!
So... GDP was not as good as advertised. Manufacturing was not as good as advertised. Jobs data has not been as good as advertised... Do you see a trend here? If not, you might want to go for an eye check up! HA!
OK, I've got to get this and me out the door soon, so I had better head to the Big Finish!
Currencies today 8/5/09: .8440, kiwi .6745, C% .9295, euro 1.44, sterling 1.70, Swiss .9420, rand 7.91, krone 6.03, SEK 7.1415, forint 185.49, zloty 2.85, koruna 18.05, yen 95.30, sing 1.4340, HKD 7.75, INR 47.62, China 6.8310, pesos 13.13, BRL 1.8160, dollar index 77.27, Oil $71.70, 10-yr 3.72%, Silver $14.70, and Gold... $966.70
That's it for today... A better day for yours truly on the trading desk yesterday, not so long! I'll get a late start today though, with this meeting I'm going to right out of the starter blocks. Little Delaney's Birthday pool party was wiped out by the rain yesterday, but not to worry, the family gets to celebrate her turning 2 this weekend! Our new BRIC MarketSafe CD has really caught on with the newsletter writer community, and with investors! Our phones are ringing off the hook once again, which is a very good thing! The BRIC MarketSafe is explained in the "ad section" above, if you haven't already, you should check it out! Ok... Day light is burning, I've got to get moving! Hey! I just realized that I didn't rant about the CARS program... I bet that makes your day!... I hope your Wednesday is Wonderful!
EverBank World Markets
08-05-2009 9:49 AM