Jobs Jamboree Friday
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In This Issue..

* Range trading currencies...

* ECB leaves stimulus in place...

* If Chuck were king for a day...

* Happy Labor Day!

And Now... Today's Pfennig!

Jobs Jamboree Friday

Good day... And a Happy Friday to one and all! It's also the Friday before a 3-day Holiday Weekend! YAHOO!, So... That in itself makes it a Fantastico Friday! The East Coast is getting hit by Hurricane Earl, so that really throws a spanner in the works for their Holiday plans...I sure hope everyone is safe! But here in the Midwest, the smell of charcoal, and of rubbed down meats, will be filling the air this weekend... I Love it!

It was a ping-pong day for the currencies, back and forth over the net... The net being the "level of the day"... For instance, the Aussie dollar (A$) played over the 91-cent net all day, and the euro played over the 1.2820 level all day...

The data on Thursday was all over the board, which may have acted as the paddles for the ping-pong day... The Big news was that the European Central Bank (ECB) kept their stimulus in place and did not even mention any "exit plans" for that stimulus. You may recall that the last time the ECB began to remove stimulus, it just happened to run into the exposure of the deficit dilemma in the Eurozone... Obviously, that stimulus removal was stopped at that time.

The ECB did revise upwards their growth forecasts for the 2nd half of the year... That's kind of cheating don't you think? I mean, 2 of the six months in the 2nd half have already posted their growth figures! But, they did revise them upwards, which is more than I can say for... Oh, never mind, I'm not going to open that wound on a Friday!

So... I've been in the saddle at my desk for about 40 minutes right now, and from what I've seen in the currencies is that the game of ping-pong will continue to be played today... That is, of course, unless we get a Big Surprise in the Jobs Jamboree this morning...

Yes, it's a Jobs Jamboree Friday, and here's the skinny on what I see happening today... First of all, you've just gotta love the way the Bureau of Labor Statistics (BLS) now breaks out the "private payrolls" from the overall figure, so that people can see the census workers getting cut... Just think back when all those census workers were being added, there was no "breaking out" of those numbers... No way! The BLS, Gov't and media happily talked about all the "jobs that were being created"... Disgusting I know, but it's a Friday before a Holiday Weekend, so I'm going to leave that laying right there...

So... Here's what I see... The Overall number of jobs lost in August will total -100,000... But when the "private payrolls" are broken out, we see that the U.S. probably created around 40,000 jobs... And the Unemployment rate will probably tick up .1 to 9.6%...

Let's accentuate the positive here... And say, YAHOO for the 40,000 jobs created, right? Yes, we should... However, 40,000 isn't anywhere close to the number of jobs that need to be created to sustain a strong or recovering economy... So... How will the markets view this report, for that, my friends is the rubber hitting the road this morning.

All I keep seeing on the TV's this morning are rumors that the White House is thinking about new ways to stimulate the economy... Can you say Japan circa 1997? I can, because I was there, trading currencies and remember it very clearly... Japan suffered a bubble popping in the early 90's, their stock market basically crashed, and their economy stumbled, fumbled, and ended up on its face... The Japanese Gov't tried everything... They did multiple stimulus packages... They cut interest rates to the bone... They implemented Quantitative Easing...

This went on for a decade, and still no gains in their economic growth, deflation had settled in all around them, and as the Japanese turned the calendar on a new millennium, all they had to show for all they tried to implement was a national debt to beat all national debts, ever!

Now... Hopefully, you now see why I've said for almost 8 years now, that the U.S. was turning Japanese... Yes, I really think so!

Just want to be perfectly clear on that, for someone told me yesterday that the Pfennig was "totally incomprehensible" ... I had a good laugh at that one!

So... Don't be surprised if in the next couple of weeks you hear about a "new and improved" stimulus package... Of course, if the stimulus money that's already been spent had been put to work properly, and not on pork projects, we might have seen some results, but even then I doubt it, for the Gov't has to get its hands out of the cookie jar! The Gov't needs to cut spending, stop manipulating the markets, and shrink... Now, those would be worthy things to do to help the economy... That, and taking the governor off small businesses...

OK... Of course that's what I would do if I were "king for the day"... Along with many other things that if you ever want to spend a day talking to me about them, you'll find out what I'm talking about!

Gold, has had a good week overall, but the last two days have been very choppy... Up $5 one minute, and down $3 the next... I would have to think that today's Jobs Jamboree outcome will give Gold a boost... That is unless there is a surprise. But as soon as the Jobs data is printed, I can see the NY trading desks clearing out, with the boys and girls heading to the Hamptons... And then the volume in markets gets thinned out, and by early this afternoon, the activity in the markets will be null and void of anything!

So... Any follow through on the morning's trading will not happen today... So be careful out there today, when you have thin markets, the volatility can be wild and crazy.

Like I said at the top... The Aussie dollar (A$) went back and forth over the 91-cent net yesterday, and that's all I've seen it do this morning, since I came in. Notice how all the talk about the election outcome that filled the news from Australia a couple of weeks ago, and weighed on the A$, has faded, and allowed the A$ to recover... This is what I was talking about last week when I said that the markets lose their focus too quickly these days... But in the case of the A$ and the elections, this was a good thing!

The Canadian dollar / loonie has lost its mojo for now, but it might find it next week when the Bank of Canada (BOC) meets (9/8)... Recall, that the markets have given up on a rate hike from the BOC, while I went out on the fat limb, and said I was keeping the light on for a rate hike from the BOC at their 9/8 meeting.

Should the BOC go ahead and hike rates, as I expect them to do, and not see the BOC talk down the rate hike, then the loonie could very well get is mojo back, yeah ba-by! (in my best Austin Powers voice)

The Brazilian real took off yesterday, and never looked back! The real began to rally in the morning with the other currencies, but as the other currencies began to back off and play ping-pong, the real continued to gain ground VS the dollar. Now... The question is this... Can the real hold on to these gains, and not give them up, like they've done all year... Have a good month, and then sell off... Have a good month, and then sell off...

Overall, year-to-date, the real is only up 1%, but then add in their high interest rate, and the overall return isn't anything to throw out with the bath water. The Japanese yen, has gained 10% year-to-date, but has no yield, but again... Not to be thrown out with the bath water!

Then there was this... The Economist ran a story that caught my eye... The magazine notes that "a return to recession is possible for the U.S., especially if Congress won't act to prevent reduced government spending and the Federal Reserve can't bring itself to offset contractionary forces in the economy. Another way of putting this is... That the risk of a double dip is entirely political in nature."

Hmmm... Chuck here... This is one of those times that I'm going to disagree with the Economist... The cards have already been played, so anything the Gov't does now, is too little too late... And... The Gov't needs to get out of the markets and stay out! Oh! And what's up with the Economist not wanting the Gov't to cut spending? Makes no sense to me... But, you see now, that even the Economist can be on the other side of the fence from me!

To recap... It was a day of tight ranges for the currencies ahead of the Jobs Jamboree this morning. Chuck thinks that 40,000 jobs will have been created but overall 100,000 jobs will have been lost, when taking in the Census workers. This is not the kind of jobs report that a recovering economy wants to see... And it's up in the air as to how the markets will react to this report... There was a day, long ago, when I could say without a doubt, that job creation would be good for the dollar, and job losses would be bad for the dollar... Not any longer... The mental giants in the markets have seen to that!

Currencies today 9/3/10: American Style: A$ .91, kiwi .7160, C$ .9480, euro 1.2840, sterling 1.5405, Swiss .9860, ... European Style: rand 7.22, krone 6.1425, SEK 7.25, forint 221.40, zloty 3.0790, koruna 19.2235, RUB 30.67, yen 84.50, sing 1.3455, HKD 7.7720, INR 46.63, China 6.8030, pesos 13.04, BRL 1.7255, dollar index 82.39, Oil $74.71, 10-year 2.63% (rising!), Silver $19.68, and Gold... $1,252.80

That's it for today... No game last night as all the rain made the fields unplayable... Back in "the day"... That would not have ever happened! But it did, so, no first game... And we went out to dinner instead! Tomorrow will be a fun day, as I gather the family, and we head downtown to watch our beloved Missouri Tigers play Illinois... My two older kids, Dawn, and Andrew, both graduated from University of Missouri, so they bleed black and gold like their dad! And then Sunday is the annual bar-be-que at the Butler house... Family, friends, good food (the smell all day of smoking pork), will be all around, and that makes me happy... The Cardinals will be on the radio... Shoot, can we do it today? HA! So with that, I bid you farewell... Thanks for reading the Pfennig, and I hope you have a Wonderful Holiday Weekend, but first, a Fantastico Friday!

Chuck Butler


EverBank World Markets



Posted 09-03-2010 10:22 AM by Chuck Butler