A Huge Jobs Revision.
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In This Issue.

* Jobs Jamboree disappoints.

* That won't stop the Fed from Septaper.

* Chinese exports beat expectations...

* What would Chuck do? .

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

A Huge Jobs Revision.

Good day. And a Marvelous Monday to you! I almost didn't make it in this morning, as I woke up with stomach problems. I had them very badly on Friday afternoon, and then again this morning. It's a chemo thing, so no worries, it will come and go, with the hopes that it goes more than it comes! But, I'm here! And not a happy camper I must say! I was "talked to" on Friday about some of the things I said in Friday's Pfennig. Apparently, the folks in Jacksonville, want an "even kinder and gentler" Chuck. I liken this to all the rules that have been placed in football to "protect" players. Pretty soon, the players will get flagged for a two-handed touch!

So. Friday was all about the Jobs Jamboree, and what did it bring us? A lot of garbage. bad numbers and stuff that doesn't make sense. On the outside, the U.S. created 169,000 net jobs in August. That's less than the forecast of 180,000, and the Unemployment rate fell to 7.3% from 7.4%... OK. I'll be about as kind and gentle I can with these numbers and those that present them. Front and Center, how can the markets put in faith in the BLS's numbers? I submit for your inspection, that July's number of 162,000 was revised down in the secrecy of dark, to 104,000. ARE YOU KIDDING ME? Now, remember, last month when the 162,000 number was announced, the markets felt all giddy and bought dollars. But when the sheets are pulled back we see that they had nothing to fell giddy about. Now, that's what I call being cheated, but it's the markets' own fault. Why do they continue to put faith in the BLS numbers? It's a survey that's full of hedonic adjustments, that's all.

Then the Unemployment rate falling to 7.3% is a real interesting thing, for the drop is all about a contraction of the workforce, and NOT about more people going back to work. I mentioned to the desk on Friday after the jobs data printed, that the Labor Participation Rate is at a 35-year low, but yet, the population in the U.S. is far greater in numbers than it was in May 1978, when the Labor Participation Rate was this low. 63.2%...

This is the question the markets and the Fed Heads (wait. maybe Fed Heads is too harsh, I had better come up with something else!) anyway, what these boys and girls have to come up with is an answer to this conundrum.. Is the drop in the Labor Participation Rate a structural thing that's never going to be reversed, or. if this is just an ugly trend, that will be reversed at some time. I would put my money on the former.. As I tell the audiences that have been reduced to small gatherings at shows (except the Vancouver show!) 10,000 Baby Boomers retired yesterday, 10,0000 will retire today, and 10,0000 tomorrow, and every day for the next 18 years! (it started out as 19 years, but I've been saying this for a year now!)

OK. We've sufficiently run the Jobs Jamboree results through the wringer this morning. What did the markets think of the data? Well, the stock jockeys weren't sure what to make of the numbers, and the currencies rallied somewhat. The talk in the markets remains centered on the Fed beginning their tapering of Quantitative Easing (QE) this month. One dealer even called it "Septaper". I thought that to be creative, and you know me, I love creative minds.

This morning, the currencies are mixed and Gold is off by $4 right now. The Aussie dollar (A$) looks to be the best performer overnight. The A$ got goosed by the good news from China, so let's take a look at what's going on in China that goosed the A$... China' exports for August were stronger than expectations, and inflation remained below the Chinese Gov't target rate. Exports grew at a 7.2% clip, and the expectations were for a 5.5% growth rate. So, exports not only exceeded the forecast, they raced past them! I think this is just another notch in the recovery belt that the Chinese are wearing these days. China's Trade Surplus in dollar terms was $28 Billion.

The A$ was also feeling a bit perky on the news from the elections this past weekend that saw the center-right Liberal/National coalition winning a majority from the ruling Labor Party. Remember it was the Labor Party that killed the Goose that laid the golden egg, with their treatment of the mining sector. From my "boots on the ground" contacts in Australia, the people there couldn't wait to change governments.

Canada also printed their latest jobs data on Friday, and they showed a huge rebound in August from July's negative number. August job creation in Canada was +59,000. A very good showing for our neighbor to the North. The Canadian dollar / loonie received a nice boost from the data, and continues to add to those gains this morning.

On Friday, the New Zealand dollar / kiwi was holding on tightly to the A$'s coattails, and before you could say "Ooh baby, baby it's a wild world" Kiwi was trading at 80-cents! A rate / level it had last seen on 8/19. I truly expect to see what happened then to weaken the currency, happen again, and that is Reserve Bank of New Zealand (RBNZ) Gov. Wheeler dissing the currency. I think he breaks out in a body rash whenever kiwi gets above 80-cents. So, be careful here, yes, the currency looks good on the outside, but it has the central bank Gov. lurking inside ready to push the currency's value down. (I originally typed that the central bank Gov. was evil, so I had to erase that because it's the new "more" kinder, gentler Chuck! So, I took that out. can't be calling him evil! )

I said above that the price of Gold was off by $4 this morning. And now $5. The shiny metal had a good day on Friday after the Jobs Jamboree disappointed. The $5 loss this morning, could be tied to the news that the S. African miners have accepted the 8% increase that was offered to them, have gone back to work. Not all the miners have accepted this increase, as it's still far below what they were looking for, but for now, some are going back to work, and that's what's probably behind the $5 loss in the price of Gold this morning.

There's a story on the Bloomberg this morning about how the Perth Mint in Australia reported that Gold sales in August fell by 46%... The analysts at the Perth Mint said that physical demand was "frantic" when the price was down, but as it has recovered, the demand has faded. Interesting, eh? I asked our Metals Trader, Tim Smith, on Friday what he was seeing, and he told me that he's still seeing plenty of demand for physical Gold. (& Silver of course!) So, we're not seeing this drop in physical Gold demand. The folks that bought paper Gold, have really been jumping ship in droves. Holdings in Gold ETF's have shrunk 26% this year.

I had a meeting with our managed currency guy, Joseph, on Friday. We talk about the managed currency portfolio and if there's anything that needs to be done, the outlook and the fundamentals of the holdings. But most of the talk centered around the Fed, and tapering. And, as I told you when we started this month, that the tapering talk would become a 24/7 thing soon enough. And it appears that "soon enough" is now!

On Friday, we saw a rally in the Treasuries after the Jobs Jamboree numbers. I think this rally will prove to be short-lived, as once again, let me say that I truly believe that the Fed will begin to taper no matter what the economic data tells them. 10-year Treasury yields are 7 basis points stronger than they were on Friday morning, but 8 basis points weaker than they were at the beginning of last week. So. when the 10-year Treasury yield got close to 3%, like it did last week, the markets panicked. I would like to say that the Fed probably panicked, but I don't know that to be the absolute case, and I don't even think I can "think those things any longer"..

You know, if I were an Emerging Markets Country and I saw what the Fed's tapering talk had done to my currency, you know what I would do? I would call all of my Emerging Markets buddies, and say, "let's dump our Treasuries" that ought to serve them right for leaving us drowning out here! But that's just me. I'm not saying this is what the Emerging Markets will do, or have even thought about doing. You know me, always thinking out loud. (an most times getting into trouble!)

The Brazilian Central Bank (BCB) had taken a different approach, and they have decided that they had seen enough of a drop in the real that they were going to do something about it. Recall that they announced a $60 Billion line that would be used to defend the currency, by selling dollars and buying real if needed. I think one day in the market intervening was all it took to make the markets see the BCB was serious, and now the threat of using that $60 Billion line is enough to deter the real sellers. This currency has become the new S. African rand. very volatile, and one that drives me crazy!

But ever since falling to 2.4550 on 8/21, the real has recovered to 2.3065 this morning. That's a 6% gain in the past couple of weeks since the BCB changed horses in the middle of the stream. But what's the line in the sand for the BCB? They apparently didn't like the currency below 2, which it last saw last March, and they didn't like it above 2.45. Is this going to become like a trading band for the real? Sure looks like it.

Did you see that Tokyo was named the location for the 2020 Summer Olympics? They beat out Turkey. So, you can see the Olympic organizers sitting around the table, and saying, "we can choose to have in a country that could have riots and a civil war going on like the rest of the surrounding countries, or we can have it in a country like Japan, and hope that all the radiation fallout from the Fukishima nuclear meltdown has been cleaned up" You're telling me that there wasn't another choice? (I know that Madrid was in third) Oh well, by 2020, who knows what will be going on in Japan..

I do know what's going on in Japan now. And that's a plan by the Bank of Japan and Finance Minister to introduce inflation into the economy, and weaken the yen. So, far, the plan has worked in spurts. the yen has been a tough row to hoe, but has still lost 21% in the last year. I think the BOJ would love to see this loss be much greater, and eventually they'll get their wish.

For What It's Worth. I saw this in the Washington Post. and it plays well with the stuff I've been telling you about for some time now. "For American workers and the U.S. economy, autumn could be scary. In fact, polls show more than half of U.S. workers believe the United States is still in a recession. And it warns that the economy is facing a bundle of headwinds this fall that could prove particularly tough for poor and middle class Americans."

The story goes on to say, "Consumer spending is a lifeblood of the U.S economy and data show declines in July, indicating the world's largest economy was off to a slow start in the third quarter, Bloomberg explains.

And some are skeptical about seeing improvement in consumer spending when the August data is released.

With household budgets already showing signs of strain, Americans are facing the prospects of rising fuel costs as they move toward the cooler months. Generally, Labor Day marks the end of high summer gas prices.

However, USA Today says drivers should not hold their breath expecting the typical September savings any time soon." - Washington Post.

Chuck again. Just trying to get this out so that people can invest / save/ spend accordingly. Not trying to be a negative Nellie.

To recap. The Jobs Jamboree was especially disappointing to Chuck, as the previous month was revised from 162,000 down to 104,000. Now that's quite a revision, eh? The Labor Participation Rate is at a May 1978 low of 63.2%... But that's not going to stop the Fed from their appointment with tapering this month. The currencies rallied on the Jobs number, and Chinese export data this weekend has some of the global growth currencies stronger this morning.

Currencies today 9/9/13. American Style: A$ .9205, kiwi .8008, C$ .9630, euro 1.3195, sterling 1.5685, Swiss $1.0680, . European Style: rand 10.0110, krone 6.0890, SEK 6.6340, forint 227.50, zloty 3.2375, koruna 19.5665, RUB 33.28, yen 99.50, sing 1.2720, HKD 7.7550, INR 65.23, China 6.1642, pesos 13.18, BRL 2.3050, Dollar Index 82.09, Oil $110.23, 10-year 2.90%, Silver $23.60, Platinum $1,488.70, Palladium $694.80, and Gold. $1,384.70

That's it for today. A great sports weekend for us here. The Rams won their first game, My beloved Missouri Tigers won on Saturday, and those Cardinals swept the then 1st place Pirates to move back into first place! My darling daughter, Dawn, used to room at college with a lovely young lady named Kat, who came to visit us yesterday. Kat is getting married next month in Columbia Mo, (home of the Missouri Tigers!) Congrats to Kat and Mark! Thanks to those of you who sent along congrats notes regarding Alex being named an Outstanding Academic All-American! Looks like an ugly day outside, the sun hasn't come up and it's all gloomy, and dark. Oh well, they all can't be chamber of commerce! Thank you for reading the Pfennig, and I hope you have a Marvelous Monday!

Chuck Butler
EverBank World Markets

Posted 09-09-2013 11:17 AM by Chuck Butler
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