Job. What Job?
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In This Issue.

* Euro, loonies, krones rally.

* Gold tumbles on jobs data.

* China data doesn't meet expectations.

* Canada posts 2nd best monthly employment on record!.

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

Job. What Job?

Good day. And a Marvelous Monday to you! Another colder than usual for this time of year, and wet dominated weekend, although Saturday was sunny, so we had that going for us. Hurry up, get outside, it's sunny, we don't want to miss it! That's what it feels like around here this spring. Not that you give two hoots about all this, just was on my mind, and therefore I share it with you! That's kind-of funny, right? Oh well, time to quit beating around the bush and get to talking about the strength in the dollar.

Someone, I think it was my darling daughter, Dawn, said to me yesterday, "Dad, I just read Chris' Sunday Pfennig, and he's talking about the strong dollar." To which I replied, well, the dollar isn't really strong. It is "stronger" than it was, but when the euro is still around 1.30, and other currencies slipping into the 90% gain VS the dollar, instead of the 105% gain, I think you'll agree. And that brings us to the $64,000 question. Is this just another of the brief dollar rallied that we've seen plenty of during the weak dollar trend that began in Feb of 2002, or. is it a reversal of that trend, to which we will see a multi-year rally in the dollar?

Hmmm. I guess you can never completely rule out the later of those two scenarios, but I have to say that I still believe in trends, what causes them to start, and what causes them to end, and that a trend is not a one-way street, and it can be volatile, therefore I'll stick with the former of the two scenarios, and put the dollar rally down to people having the wool pulled over their eyes.

This morning, the currencies are getting sold again, except the euro, Canadian dollar, and Norwegian krone, but their gains are miniscule at this point. The selling of the currencies not mentioned here, began Friday with the U.S. Jobs Jamboree. I guess we had better cross that bridge now, eh?

Well. Looky there. The BLS said that 175,000 jobs were created in May. Hmmm. Well. I told you on Friday that I believed that April's number would be revised downward, and it was. but that's as far as my Mr. Know-it-all persona took me. I also said that the jobs created in May number would be 135,000, and the BLS said it was 175,000. Go figure. and the BLS did add 205,000 jobs out of thin air, so we have that going for us.

At first glance the markets said, "we don't believe it" and marked down the dollar, against the euro and Gold. But then, it turned on a dime, and they decided it wasn't too much of a stretch. and the dollar rallied.

And let's not get confused here about what kind of jobs the BLS is creating out of thin air. Apparently: 122,000 jobs were low wage occupations. So, they are smart in how they add jobs, folks. For if they decided to add high wage jobs, then wage inflation expectations would take off! And they can't have that! Just for the record, 26,000 jobs were created, according to the BLS, in the temporary jobs section. the lowest of all paying jobs!

And I always ask myself, why the markets don't punish something for downward revisions. I mean the markets got all lathered up last month when they thought the number of jobs created, no matter how they were created, (see BLS and ghost jobs), was 165,000. So, why didn't the markets say, "hey, the tried to trick us again?" Well, anyway, I'm sure this month's number will be revised downward next month, and no one but me will notice.

So. here I am once again. saying: Job What Job?

The global growth currencies like Aussie dollars (A$) are getting whacked again this morning, this time from the weaker than expected data from China over the weekend. Chinese Industrial Output gained less than expected at +9.2% from a year earlier, and China's economic growth outlook was downgraded by Barclays. Just a note on China. You may notice in the currency roundup that the price of the renminbi / yuan doesn't change for the couple of days, and that's because China's markets are closed through June 12th, for The Dragon Boat Festival.

In my monthly Financial Management Service Treasury Bulletin, I found some interesting stuff on foreign currencies held by the Treasury. And of the foreign currencies held, only the Treasury's position in euros has increased this year. Not Canadian dollars, not Swiss francs, and not Japanese yen. but euros. I think I could come up with more than a few reasons why that would be. and a few of them would come from my conspiracy side of the brain, but I think I'll stick with this one. the Treasury is so astute that they saw the potential for a euro rally this year, and therefore backed up the truck. OK, I'm now laughing so hard I can hardly type!

But remember, I always tell you to follow the money.

The U.S. data cupboard is bare today, but it gets restocked tomorrow and will begin to yield some very important data by Wednesday, like Retail Sales for May. I have to say that I tried to do my best to goose up the May Retail Sales figures, and continued that with some purchases in June, but I doubt that it will be enough to push Retail Sales to the "strong Sales" side of the ledger. But we can talk more about that on Wednesday, God willing and the Creek don't rise.

Other data from around the world this week will bring us Aussie May employment, which is something to really keep an eye on, The Bank of Japan (BOJ) and the Reserve Bank of New Zealand (RBNZ) meet this week, and the German Constitutional Court will hold their hearing on the ECB this week. The BOJ meets tonight, and although I don't think we'll see more calls for additional stimulus, I do believe the BOJ will once again stick their hands in the cookie jar, and believe they can "fix things" with regards to the volatility we're seeing in the Nikkei.

I had to laugh out loud this morning regarding a story title on the Bloomberg. The title read: "No inflation as yield rise belies point of no return view". OK. in modern day English, this means that with what the writer believes is very low inflation, and Treasury yields rising, the thought that has lingered in the markets for so long, that there's no "real return" in Treasuries, is being proved wrong. What? Are you kidding me? Ok. sure, as long as you use the Gov't's trumped up CPI numbers, there's "no inflation". But you, me, and the guy down the street waiting for a bus, all know that the Gov't's CPI is a bunch of baloney. And the Gov't isn't finished "adjusting" their inflation numbers either forks. Treasuries are negative real interest folks. And now they are losing money. YIKES!

I mentioned above that the Norwegian krone was eking out a small gain this morning. That gain is coming from the euro strength, and. a report showing that Norway's CPI beat the expectations to the upside, which shows that the upside surprise in CPI from April was not a one-month phenomenon. Two months of rising inflation is a real pain for the Norges Bank (Central Bank for Norway) and them wanting to talk down the krone's value without cutting rates. And therefore this data is krone positive.

Norway's neighbor, Sweden, which has been one of the better performing currencies in the past 12 months, saw some slippage overnight after they reported that Industrial Production for April, declined unexpectedly. As opposed to the Norges Bank's dilemma now with inflation rising, Sweden's Riksbank will view this data as another arrow for their rate cut quiver. And that's not krona positive.

OK. Back to the Jobs Jamboree for another round. So. What do you think the Fed Heads, most importantly, Ben Bernanke, saw from the jobs data last Friday? Was it strong enough for them to begin removing their bond buying? Personally, I don't think it was. First of all, I don't believe the Fed Heads are fooled by the antics of the BLS (Bureau of Labor Statistics), so they, I think, know the real numbers. If that's true, and I believe it to be, then it means there's nothing here that says, "begin tapering". Instead, I think it says, "continue as is till the end of the year before looking at again".

The problem for the markets is that Big Ben Bernanke doesn't come out after a report like the Jobs Jamboree, and say, "here's where we are today, and how we feel about this report". Lacking this "transparency" the markets, and people like me and you, are left to give our best guess as to what Big Ben is thinking. Apparently, the markets think that Big Ben is ready to begin tapering his bond buying / Quantitative Easing (QE), otherwise the markets would be selling dollars like they were funnel cakes at a state fair!

I know I talked earlier about the BOJ, and their feeling that they need to "fix things". Well, I have to say that what I'm seeing with the yen right now, is a failure to believe that PM Abe, has the will to do what he said he would do, which was bring about growth and inflation. That's why the markets are taking yen to levels that just a month or so ago, you would have thought you wouldn't see again for some time. And the repatriation going on, is pushing the envelope of yen appreciation. But what happens when bond yields stop rising, and the Nikkei turns on investors? It could very well end up being the classic bug looking for a windshield that my friend John Mauldin talks about.

I also talked about the Canadian dollar / loonie posting gains above. Canada received some very good and strong employment data on Friday, which was lost in the euphoria of the media and markets over the U.S. Jobs data. Canada's employment increased 95,000 in May, the second largest one month gain on record! It appears that Canada's labor problems that were accented by a fall in jobs in the first quarter of -25,700, have turned around, and have more than covered that loss.

Gold took it on the chin on Friday after the Jobs data. Losing the $1.400 handle once again. That $1,400 level seemed quite secure on Friday morning before the Jobs data.

And the IMM Futures Positions report from last week, showed that the Net long positions in dollars fell 27,000 contracts, more than unwinding the previous week's increase. Those that hold short positions in euros, reduced their holdings, as did the yen short positions. So, the euphoria that existed for a couple of weeks in building dollar positions here, has faded.

And one more thing before we head to the Big Finish. The number of Americans on Food Stamps has climbed to a new record high of 23,116,441, with each one collecting an average of $274.30 per month. And we as a country wonder why we've lost our "edge"? Debts and Deficits. deal with them, or die from them.

For What It's Worth. You know that things have gone haywire when Big Al Greenspan speaks up and disses the Fed's programs. But that's what he was doing CNBC the other day. So, let's listen in to the former Fed Chairman.

"The sooner we come to grips with this excessive level of assets on the balance sheet of the Federal Reserve-that everybody agrees is excessive-the better," he said in a "Squawk Box" interview. "There is a general presumption that we can wait indefinitely and make judgments on when we're going to move. I'm not sure the market will allow us to do that."

Greenspan said he's not sure the markets will allow an easy exit. "Gradual is adequate, but we've got to get moving."

But if the Fed moves too quickly in reining in its accommodative policies, he added, it could shock the market, which is already dealing with a very large element of uncertainty."

Chuck again. Now, isn't that just like Big Al? He comes out and says that we really need to begin tapering QE now, but.. Then he gives the Fed an out, by saying they can't move too soon. On one hand, do this, but on the other hand don't do this. And you wonder why I used to bang on Big Al like I did?

To recap. It was all about the Jobs Jamboree on Friday, which was trumped up, as far as Chuck was concerned, but overall taken as the BLS presented it, the data was mixed at best, but the markets viewed it as a key to Fed Tapering, which was dollar positive. Canada also printed a strong employment report, posting their 2nd largest monthly gain on record. Gold was the big loser from Friday, and the euro remained well bid.

Currencies today 6/10/13. American Style: A$ .9450, kiwi .79, C$ .9815, euro 1.3220, sterling 1.5540, Swiss $1.0665, . European Style: rand 10.1770, krone 5.7605, SEK 6.5925, forint 225.25, zloty 3.2230, koruna 19.4225, RUB 32.33, yen 98.80, sing 1.2585, HKD 7.7635, INR 58.13, China 6.1620, pesos 12.81, BRL 2.1310, Dollar Index 81.88, Oil $95.67, 10-year 2.16%, Silver $21.80, and Gold. $1,382.85

That's it for today. Eric Carmen's All By Myself, was playing this morning, and I thought, that's what I am here. All By Myself! I was happy to see that my beloved Cardinals won in 10 innings last night. I had gone to bed with the game tied. Taking 2 of 3 from the second place Reds was a good job! Well, today marks the last Monday for my long time friend (back to Mark Twain Bank days) Kathy Glowski. She's leaving us to move to Michigan, where she was originally from, so I guess you Can go back home! Apple is kicking off their developer conference in San Francisco today, I guess they'll introduce the new IPhone. I mean, the "old IPhone" is obsolete now, right? HA! Mine's two -years old, and it does everything I need it to do. Well. I have a bevy of doctor's visits this week, but all should be good, at least that's the attitude I'm taking! And with that. I hope you have a Marvelous Monday!

Chuck Butler
EverBank World Markets

Posted 06-10-2013 6:05 PM by Chuck Butler
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