In This Issue.
* A Jobs Jamboree surprise .
* Italian politics pull down the euro.
* Commodity Currencies rally.
* Asian flows continue to soar.
And, Now, Today's Pfennig For Your Thoughts!
There's No Blaming Sandy For This One!
Good day. And a Marvelous Monday to you! Well. How about our Rams? 3 wins in a row for the first time since 2006! The game / win wasn't pretty, but. a win on the road in the NFL is a good thing! I have no illusions of them making the playoffs, not this year, but. what a strong foundation to move forward from next year! We had all three grandkids on Saturday night, and we celebrated my wife's father's birthday yesterday. So, what I thought was going to be a weekend with nothing to do, was not to be! But that's OK. it's all good!
OK. another week has gone by, and nothing but finger pointing and drama from Washington D.C. regarding the Fiscal Cliff. Now, both sides are accusing the other of wanting to go "cliff diving". What's next? Oh well. And Friday, saw a very suspicious Jobs Jamboree. And all of this is good for the dollar. Stranger than fiction, right? Well. I told you before that if our lawmakers sent the economy over the Fiscal Cliff, that the so-called flight to safety of dollars and treasuries would be the trade du-jour, at least short-term, until someone realizes just how stupid that trade is. And if the lawmakers do find a way to kick the can further down the road, then the dollar would be sold like funnel cakes at a state fair. So. on Friday, and again this morning, the outlook for can kicking is dreadful. and the dollar rallies.
On Friday, the Jobs Jamboree produced a total of 146,000 jobs created in November, soaring way past the forecast for 85,000. Hey! You didn't hear anyone blaming Sandy for the jobs numbers did you? And I can't make a Big Deal out of the Birth / Death model adjustment this month, because, the BLS actually took 29,000 jobs away! See the games they play here folks? Last month they added 90,000 jobs to a report that was very weak to make it look better, and this month, with the number looking stronger (not strong, but stronger) they took some away, in hopes that nobody noticed. But let me remind you, that 146,000 jobs are not what a strong or growing economy is in need of. And. as always, I'll remind you that the BLS doesn't tell us what kind of jobs these 146,000 were.
OK. enough on the Jobs Jamboree. Except to say that one of the things I look for in the jobs data is the Avg Hourly Earnings, to see if we can detect any wage inflation. The year-on-year increase here is only 1.7%, so move along, these are not the droids you're looking for!
Did you see the Consumer Credit data from Friday? OMG! The so-called experts forecast a number of $10 Billion for October. But the actual number was $14.15 Billion, and September's number was revised upward to $12.19 Billion.. Now, what about these numbers gives me the willies? Are you kidding me? First, we're spending more than we make, and then a large portion of that spending is on credit. I'll look for credit card stuff this week, just to make the point sharper.
There's no data in the U.S. data cupboard today, so. let's move along the shoreline here to see what other kids of shells we can find. And the first one we find has the weakness of the euro all over it. Late last week, Italy, was in the news, and basically folks, whenever the countries of Club Med (as I've called them back to the early days of the Pfennig), are in the news in recent years, it's not a good thing for the euro.. And Friday's news was that embattled Italian politician, Silvio Berlusconi was back again. Italian PM Monti, announced that he was going to resign after the current budget is passed. And all this political sawdust on the floor, left the markets uncertain as to which direction the Italian politics will go after Monti resigns and a new election is called (within 70 days of the resignation, by law).
With the euro in the dumps, the rest of the currencies, for the most part, found it difficult to gather any wind in their respective sails. And all that has carried over to this morning's trading. The bias is to buy dollars on the so-called safe haven trade, and there are only a couple of currencies in the plus-side of the ledger VS the dollar this morning, so let's talk about them!
The Commodity Currencies of Aussie dollars (A$), New Zealand dollars / kiwi, and Canadian dollars/ loonies, are all stronger VS the U.S. version of the dollar this morning. There's a story on the Bloomberg about how Currency traders who sold these currencies when commodities tumbled earlier this year are now the most-bullish ever as economic data in China are turning around. The A$ is knocking on the $1.05 door once again this morning, with kiwi pushing past 83-cents, and the loonie pushing past $1.0125.
After reading that story on the Bloomie, I got to thinking about how the market participants are finally seeing the forest through the trees with regards to China. And as China rebounds so does the commodities and the Commodity Currencies. But, you have to pause here for a minute and not get too lathered up, because, you know how fickle these traders can be, and all China needs is to print a report that's not so rosy, and these traders will jump off this bandwagon faster than you can read the book on what men know about women!
I had a reporter from the Wall Street Journal call me last week, and ask me what I thought about the C$ / loonie's chance to rally on the latest Merger & Acquisition (M&A) news. I said that the markets like M&A news, and usually reward the currency of the company being bought. However, with the loonie already above parity, and knowing how much the Canadian Gov't dislikes the loonie at or above parity, that the gains from any M&A could be muted. I don't think this is what the reporter wanted to hear, for I didn't see me quoted, and she sounded let down. I think she wanted me to wax glowingly about the prospects of a soaring loonie on the M&A news.
New Zealand saw some stronger forecasts for dairy payouts this year, and that's a good thing for the New Zealand economy, as farmer's income is worth about .2% of GDP. But in reality folks. I doubt the markets would have noticed this news if China wasn't pushing the envelope on economic recovery right now. It's all about China.
I saw that vehicle sales in China were the strongest they have been in 2 -years. Another sign of domestic demand for the Chinese economy. I think that there's still plenty of work to be done in the domestic demand arena for China, but, at least there's a stronger pulse. 6 months ago, the pulse was very faint. But now, it's strong again.
Remember last week, I told you about how the markets were taking the Chinese recovery and flows into China over to India? The Indian rupee has been one of the best performers the last week, but it has a lot of ground to make up considering just how awful of a performer it has been this past year. (-4.52%)
I've noticed that the other Asian currencies have been picking up investors too. The S. Korean won is stronger, as the other currencies in the region also gain. (most of those are not tradable in a liquid manner)
Well. the Fed's FOMC meets this week (Wednesday). I think we'll see them discuss what they are planning to do when Operation Twist expires at the end of this month. But don't expect anything else. The Fed can't extend Operation Twist because they've run out of bonds to sell. so, will they just put this to bed and talk about how it was successful, or will they carry on about the need for something else? I think it will be the former, here. It's too soon to talk about the need for something else.
Gold is up $9 this morning, after a very ugly week of takedowns. And Silver has regained the $33 handle. I saw this note this past weekend on Silver. There's one bullion bank (can't name them) that holds 36,500 Comex short futures contracts in Silver. The total position of the non-commercials is 117,651 contracts, which means this one bullion bank is short more than 31% of the entire Silver market. Come on CFTC! Doesn't this appear to be a bit excessive? To me, it's as obvious as a man with a hatchet in his forehead! (OK no one was hurt here)
Then There Was This. from the Washington Post. "The federal government borrowed 46 cents of every dollar it has spent so far in fiscal year 2013, which began Oct. 1, according to the latest data the Congressional Budget Office released Friday.
The government notched a $172 billion deficit in November, and is already nearly $300 billion in the hole through the first two months of fiscal year 2013, underscoring just how deep the government's budget problems are as lawmakers try to negotiate a year-end deal to avoid a budgetary "fiscal cliff."
Higher spending on mandatory items such as Social Security, Medicare and interest on the debt led the way in boosting spending compared with the previous year, which also highlights the trouble spots Congress and the President are struggling to grapple with."
Chuck again. We're at it again folks. The fiscal year for the U.S. began on October 1st. and so far this fiscal year 2013, the government has spent $638 Billion and taken in only $346 Billion. That's not a good start to 2013, eh?
To recap. The Jobs Jamboree put wind in the dollar's sails on Friday, and that has carried over to this morning for most currencies. The euro has been dragged down by Italian politics, but the Commodity Currencies are rallying on increased interest in China's recovery by the markets. The FOMC meets this week, and our deficit spending habits just won't go away.
Currencies today 12/10/12. American Style: A$ $1.0485, kiwi .8335, C$ $1.0130, euro 1.2915, sterling 1.6060, Swiss $1.07, . European Style: rand 8.6965, krone 5.6775, SEK 6.6840, forint 219.55, zloty 3.1925, koruna 19.5425, RUB 30.77, yen 82.20, sing 1.2220, HKD 7.75, INR 54.50, China 6.2382, pesos 12.83, BRL 2.0775, Dollar Index 80.40, Oil $86.48, 10-year 1.60%, Silver $33.33, and Gold. $1,713.00
That's it for today. Well.. I received some sad news on Saturday. the daughter of a longtime reader and someone I considered a friend, wrote me to tell me her father had died. Lyle Robert Francis Knudson, aka. The King Denmark, RIP. I had lost track of the lost time between phone calls with Lyle, and my worries about him were justified, as he died back in September. OK. having all three grandkids for a sleepover on Saturday was a real treat! I'm winding down this week and heading toward my annual Christmas vacation. Chris and Mike will have the conn on the Pfennig during that time, but I'm here the rest of this week, so you've got that going for you! HAHAHAHA! And so. another week begins. I hope you have a Marvelous Monday!
EverBank World Markets
12-10-2012 12:54 PM