A Jobs Jamboree Friday!
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In This Issue.

* Draghi throws a cat among the pigeons.

* Euro gets slammed but recovers.

* Will the BLS make an "adjustment?".

* BOC gets new Gov..

And, Now, Today's Pfennig For Your Thoughts!

A Jobs Jamboree Friday!

Good day. And a Happy Friday to one and all! Can you believe that tomorrow is the Kentucky Derby? Man, did that sneak up on me! The Kentucky Derby, to me, has always been an indication that spring is finally here. Of course, the people out west getting hammered with a snow storm won't agree with that! The one year that I lived in Des Moines, IA it snowed in May, and I said, I'm not sticking around here any longer! The weekend is here! So that means that the rain is also here! But I'm not going to complain. much! HA!

Well, yesterday was quite the eventful day, given the European Central Bank (ECB) rate announcement and then the cat that was thrown among the pigeons by ECB President Mario Draghi. There's a lot to talk about here, so let's go to the tape! OK. Yesterday morning, I told you that I thought the ECB was about to tear a page out of the book by the U.S. and Japan on how to ruin your economy for years to come, and cut rates.. Well, that's what they did, cutting rates 25 basis points (the repo rate), and leaving deposit rates at zero. And this is where the rubber meets the road.

Right after the rate cut announcement the euro popped up over 1.32 and looked like it would not be stopped. But then along came Mario Draghi, he of the famous words that saved the euro, when he said the ECB would do anything to support the euro. Well, he must have forgotten that statement, and made an offhand comment about the possibility of a negative deposit rate. The euro dropped like a rock! And didn't stop falling as the sells mounted until. ECB member and Austrian Central Bank Gov. Nowotny, told the markets that they had "over interpreted the comment and that a negative rate is not an option that is relevant in the near future."

The euro then bounced and soon gained back the 1.31 figure, and has since settled in to a bias to buy pattern. I have to take issue with Draghi on this folks. he really blew it. What was he thinking? There's no way the Eurozone can deal with negative deposit rates at this time. OK, was he greasing the tracks for something down the road? I don't think so, I just think he thought he would show everyone how smart he was by saying that the ECB could always make deposit rates negative. So. "Mr. Euro" stuck his foot in his mouth. How's that taste Mario? I remember the old football coach telling us to keep our mouths shut. He would say, "it's far better to keep your mouth shut and let people think you are a fool, than to open it and remove all doubt"

So. The "spin doctors" in the Eurozone, did their best to reverse the damage that Draghi threw at the euro's feet. And it appears that they have achieved that goal. For now, at least!

Well. It's a Job Jamboree Friday. I see that the so-called "experts" have a consensus forecast of 145,000 net jobs created in April. Recall that March's job creation was very disappointing at just 88,000. I saw a story last night when I was doing some research, that was written by someone that wears rose colored glasses to bed at night. The writer was talking about how even though the 88,000 number for March was low, it was still positive, and that the trend is still for an improving labor market.. Hmmm. I wanted to dial him up and point out that the 6 month average through Feb was for 197,000 jobs created. I would say that falling to 88,000 was not continuing the trend. But then, I don't wear rose colored glasses.

So. what do I think about today's Jobs Jamboree? I think the number will once again be disappointing compared to the consensus. But then there's always the wild card, the one-eyed Jack in the deck. The BLS (bureau of labor statistics) What "adjustment" will they make to the number? So. without the BLS' adjustment, I would say the number will be around 125,000. Which won't be dollar friendly. at least that's what I think, I could be wrong.

But the Jobs data isn't the only data we'll get today. The March reading of Factory Orders will print, and should not be very dollar friendly. I say that because remember what I've been telling you about the March economic data prints. 65% of them have missed the consensus forecast to the weak side. That's flipped from February when 65% of the data reports beat the consensus forecast. So, I don't see why this report for Factory Orders in March will buck the trend of weak economic data.

OK. There's got to be other things to talk about besides economic data! Economic data can get boring in a heartbeat, which is why I try to keep it at a minimum. Yesterday, I told you how the Chinese renminbi has seen a very strong appreciation overnight. Well, last night, the Chinese probably realized that they had gone overboard, and adjusted the previous night's appreciation back. However, the weekly gain for the renminbi / yuan has been positive, which marks the 9th consecutive week of gains for the renminbi.

The price of Oil had been slipping this week, until today. We began the week with the WTI crude price at $93.35, and saw it slip to $91.40 and then recover to $94.13. So for the week, Oil gained in price. Remember what I always tell you about Oil. That it's an "anti-dollar" investment. It's not just traded amongst oil dealers any longer. Moms and pops can buy Oil contracts these days. I met a guy about 10 years ago, named Steve Belmont, who gave a presentation on buying Oil contracts. I sure wish I had listened more closely to him then! And then my friend, the Mogambo Guru, believes that "this investing stuff is easy" buying only Gold, Silver and Oil.

And last spring at the Casey Conference in Weston Florida, I heard Casey energy guru, Marin Katusa bet a guy claiming that Oil would be $40 within a year, that it wouldn't. I sure hope Marin got paid off, because he was on the right side of that bet! Of course, we would all love to see Oil at $40. But. just because we now know how to get it out of the ground using new methods, it doesn't mean those "new methods" are cheaper to buy and use! The cost of getting Oil out of the ground remains high.

So. Did you see that the Bank of Canada (BOC) has a new Gov.? Stephen Poloz, the former chief executive officer of Export Development Canada, a trade financing agency is the new BOC Gov. OK. Front and Center on this announcement. did you notice that he was formerly involved in the trade financing agency? Does this ring a bell or set off alarms for anyone besides me? As head of the trade financing agency, I bet he found life difficult with a strong currency. and that scares the bejeebers out of me, folks. I see this as a real problem for the Canadian dollar / loonie. Let's hope I'm barking up the wrong tree here, eh?

In Australia overnight, the markets just ignored the 1st QTR GDP print, and continued to focus on the Reserve Bank of Australia's (RBA) meeting next week (Tuesday). The markets are pricing in a rate cut for next week and that's all they have on their minds right now. They didn't want to notice that Australia beat the previous reading for GDP, as the 1st QTR GDP printed at 1.6% y/y VS 1% the previous month. Now, does that look like an economy that's in need of a rate cut? I guess it doesn't matter to the markets right now. they've got it in their thick skulls that a rate cut is needed, and they won't stop until they get one.

Hopefully, calmer heads prevail at the RBA. Oh, and the wholesale inflation for the 1st QTR bumped up to .3% from .2%, no big shakes, but still, something that I would say indicates that the economy is not in need of a rate cut. Some analysts and economists are calling for the A$ to slip back below parity on the rate cuts they see coming in the next 6 months. While I wouldn't put it past the markets to get what they want here, the A$ remains a good alternative to the U.S. dollar, euro, and yen.

So. Yesterday, I talked about the Canadian Trade Balance that was going to print, and said that I thought it would narrow. And it did! And, believe it or don't, Canada's Trade Balance turned to a Surplus in March! WOW! OK the Surplus is only $200 million, but come on! A Surplus is a Surplus folks! And I'll get back to this in just a minute, but first, let's skip over the border to the U.S. Trade Balance, which for March also narrowed. From $43.6 Billion in Feb to $38.8 Billion in March. So, good show, both countries, right?

OK. We keep coming back to the March data, which has been quite weak, remember the other day, I told you about how U.S. Consumer Spending fell from +1.1% in Feb to +.2% in March. So, we weren't buying as much, and voila the Trade Deficit narrows. but it's more than that folks. A quick look at the currency returns so far year to date, from Asia, where a large portion of our imports come from, shows that over ½ of the Asian countries, including China saw gains VS the dollar. (excluding Japan that has seen an over -11% loss so far this year) So, the dollar was weaker, which makes imports more expensive, thus a huge part of the narrowing of the Trade Deficit. Doesn't makes sense? Well, think about it like this. If things that people want to buy are more expensive, they don't buy them. and thus, we see a drop in spending, which we've seen, and a drop in import sales, thus a drop in the Trade Deficit. And going back across the border, guess what the Canadian dollar has done year to date? It's down 1.60%... So the C$ was cheaper too and their imports more expensive, and the same medicine is applied to the Canadian Trade Balance.

I don't mean to harp on this over and over again, but the authorities of all countries know all too well, that a cheaper currency can lead to better numbers in Trade Balances. The problem that arises from driving your base currency down in order to shore up your Trade Balance, is that by doing so, the country has reduced the purchasing power of their consumers. And while it's no skin off the country's back, it sure plays hell with moms and pops trying to buy a Toyota.

Then There Was This. actually I have two things today. one is a quickie video with James Rickards author of the book Currency Wars. you can view it by clicking on the link here, but if you can't get it to work, Mr. Rickards says that he believes the bad stuff for Gold is over, and that it will move sideways for most of the remainder of this year, but eventually get to $4,000 an oz. Here's the link: http://www.cnbc.com/id/100701561

And Then There Was This. I saw an article that was sent to me yesterday by my friends over at Casey Research. The article talked about the next Fed Chairman. it was nicely written, and in my style, which I truly enjoy the flow, if you get my drift. I had planned on talking about this, so this pushed me toward that goal.

The reason I was going to talk about it, was that recently it was announced that Big Ben Bernanke would NOT be attending the Jackson Hole Fed boondoggle this year for the first time in 25 years. The Fed Chairman has always given the keynote address at the boondoggle for Central Bankers, economists, and others that get on the list. My invitation seems to always get lost in the mail. which is good because I would probably be looking for the suicide hotline if I were made to sit in on those speeches! But getting back to BBB not attending this year. I thought to myself that this was unusual, and Then I was sent this article. I found it to be just what I was thinking! Here's a link to it. Remember, it came from Casey Research. you should check them out! http://www.caseyresearch.com/cdd/bye-bye-bernanke-hello-timmy

To recap. The ECB cut its repo rate 25 basis points yesterday to ½%... Sort of ridiculous in my book, but they did it. And ECB President Draghi threw a cat among the pigeons by talking about a negative deposit rate, which sprung the trap door under the euro, and the euro didn't stop falling in price until the spin doctors of the Eurozone saved it. Today is a Jobs Jamboree, and Chuck spends an inordinate amount of time talking about Jobs. The BOC has a new Gov. and the loonie had better watch out.

Currencies today 5/3/13. American Style: A$ $1.0255, kiwi .8515, C$ .9890, euro 1.3130, sterling 1.5555, Swiss $1.0730, . European Style: rand 8.95, krone 5.7975, SEK 6.50, forint 225.45, zloty 3.1525, koruna 19.5185, RUB 31.09, yen 98.05, sing 1.2335, HKD 7.7595, INR 53.93, China 6.2152, pesos 12.17, BRL 2.010, Dollar Index 81.98, Oil $94.13, 10-year 1.64%, Silver $24.27, and Gold. $1,481.26 And with it being a Fantastico Friday, let's take our usual FF peek at the U.S. Debt Clock. click here: http://www.usdebtclock.org/index.html

That's it for today. Big wins for both our Blues and Cardinals last night! The Blues game didn't start until 8:30 CDT. There'll be a lot of people calling in late this morning across St. Louis! And a GREAT BIG CONGRATULATIONS To my son Andrew, who yesterday was named as the conference's Water Polo Coach of The Year! And good luck to Andrew and his team, which includes youngest son, Alex, as they start the state playoffs tomorrow. I know Andrew enjoyed coaching this group of kids this year, and see what happens when you do something you enjoy doing? The water polo team will be at my house tonight, as we feed them a good luck in the playoffs dinner. These kids may be slight of build, but because they're swimmers they can put away some food! OK. I guess it's that time. Thanks for reading the Pfennig. and I hope you have a Fantastico Friday!

Chuck Butler
EverBank World Markets

Posted 05-03-2013 11:22 AM by Chuck Butler
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