CBO Makes A Rounding Error.
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In This Issue.

* Currencies remain in tight ranges .

* A$ breaks out on good data prints!....

* Gold & euros play up downs all day! .

* ADP says 175,000 jobs created.

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

CBO Makes A Rounding Error.

Good Day! And a Tub Thumpin' Thursday to you! Well, the snow has moved on, and left some brutal cold temps. I dislike cold weather more than anyone you know, and this winter is about to drive me batty! I gotta go where it's warm! But until then, it's bundle up and look like Quinn the Eskimo, for when Quinn the Eskimo gets here, everybody is going to run to him!

Well, another day of trading in the currencies and another day of trading in tight ranges. The only breakout currency overnight was the Aussie dollar (A$), which saw some good economic data, to help overcome the threat of another rate cut by the Reserve Bank of Australia (RBA). Recall, I spent a lot of time covering this yesterday, so I won't go into it again, the story this morning is how Aussie Retail Sales for December rose .5%, the December Trade Balance printed a large upside surplus of A$ 468 Million (forecasts were for a deficit of A$200 million), and November's previously printed deficit was revised to a surplus! So, it was all sunshine, lollipops and rainbows for the A$ last night.

Some additional data printed last night that was quite interesting given all the talk that China is slowing down, and that will hurt Australia. Australia/ China 2-way trade rose 21% in 2013. Exports to China rose 29.5%, with iron-ore shipments leading the way. So, it's not all gloom and doom for these two, countries folks.

Yesterday's price action in euros and Gold was very interesting, as both would get wind in their sails and jump higher, only to get whacked back down, then rise up again, only to get whacked back down again, and this went on all day. It was as if they were in boot camp doing up-downs all day! And when the day ended, the two assets were sitting about where they were when the day began.

The Bank of England (BOE), European Central Bank (ECB) and Bank of Canada (BOC) are all meeting today, with the BOE and ECB meetings in progress as I type away with my fat fingers. I think that the BOE Gov, Mark Carney is going to keep playing his game of chicken with the markets, telling them that rate hikes are coming, but leaving his powder dry for as long as he can. The ECB's President, Mario Draghi, has the toughest job in that he has an economy that has been in a recession and is teetering to fall back into a black hole. The markets want Draghi to do something to stimulate the economy, and he, as he has explained to us many times in the past, has many options at his disposal. But, so far he has resisted bowing down to the markets' wishes.

And I don't think today's meeting will yield any of those options being implemented. The euro might see some selling either way today, just based on the markets' sentiment. Draghi and his euro will be damned if he does, and damned if he doesn't. But the selling should be limited, as I just don't see the markets getting all lathered up over what the ECB does or doesn't do today.

And the BOC. I don't expect anything from BOC Gov. Poloz, today. So move along, these aren't the droids you're looking for. Which, will probably not be a good thing for the Canadian dollar / loonie, which in the past couple of days has recovered a bit.

Well, here in the U.S. we're down to 2 days. Today and tomorrow, and then the Debt Ceiling's temporary suspension expires. I told you earlier this week what I thought the lawmakers had up their sleeves regarding the Debt Ceiling, so I thought I would check out what the ratings agencies are saying about this whole process. Moodys said, "we don't expect the U.S. obviously to not pay its obligations. Even so, in our view, putting into doubt the full faith and credit of the U.S. is something that does or can have a detrimental effect on the U.S. economy, confidence in investing in U.S. Treasuries and the U.S. dollar."

WOW! That sounded like me talking! Remember, those "extraordinary measures" that Treasury Sec. Lew, used last year? Well, he's going to tap into those "extraordinary measures" or as my friend, the Mogambo Guru would say, "EM". once again. And they could get us to the end of the month, before things get hairy once again. Stupid pet tricks is what I would categorize all this as.

Yesterday, the ADP Employment Report for January printed and showed that 175,000 jobs were added in January. Recall last month, the ADP report showed 238,000 jobs added in December, but the BLS (bureau of labor statistics) only showed 74,000 jobs added. Of course, for those of you confused by this discrepancy, one is actual data by the company that processes paychecks for just about every business in the U.S. and the other is a "survey". You know, real science!

But the markets are glued to the BLS survey with Gorilla Glue, so the ADP report gets pushed around like the 100 lb weakling on muscle beach. And tomorrow is this month's Job Jamboree Friday! It will be interesting to see what the BLS cooks up this month. I'm thinking that someone really messed up last month, and was suppose to type 174,000 jobs added, but dropped the 1, and therefore only 74,000 jobs added printed. I'm sure that "someone" is looking for a new job now, or, no, wait, he's probably been promoted, it is the Gov't. All silliness aside, I expect tomorrow we'll see a HUGE number to make up for last month's "error".

That's the beauty of making things up as you go along, folks. If the BLS wants to "adjust" the number, they just do it, and no one, except me, questions it.

OK. I have to move along, because I was beginning to get a rash from all this talk of the BLS, and their jobs survey.

China will return to work tonight after celebrating their lunar holiday. What's the use of that? Coming back to work on a Friday? Spend the day attempting to catch up, and then off again. Sounds like good work if you can get it! HA! So welcome back! And when they return they'll be greeted with the news that I told you about earlier, regarding the 2-way trade with Australia. Good stuff for China too, folks!

Speaking of China, and the story I told you yesterday about the well known writer in Orlando who was telling his audiences that China will never have the reserve currency because the reserve currency has always gone to the country that has the biggest Navy. Well, my friend, and trader/ writer extraordinaire, Sean Hyman, sent me a link to a story on how China's military spending is surging. Yes, China announced that their military spending for 2014 will increase to $148 Billion from $139.2 Billion in 2013. Just for reference, the U.S. will spend $575 Billion this year on the military, but the U.S. spending is falling, while Chinese spending is rising. Uh-oh.

Thanks to Sean, who is one of the best technical traders you'll ever come across, and even better than that, he's one of the nicest people on the face of the earth. Sean and I used to work together at the Sovereign Society, writing publications for the publishing firm.

Yesterday, I gave you a snippet of what I'm writing about for the World Money Analyst letter, regarding the Emerging Markets. I saw yesterday on the Bloomberg, that Money Managers and strategists from Goldman Sachs Group, to Fidelity Investment Management are advising clients not to panic after equities from developing countries suffered their worst start to the year since 1988 and emerging markets currencies were also sold off. Bill Gross, you know the "bond king" was sounding a lot like Chuck yesterday, talking about how China is the "wild card" for global growth and the Emerging Markets.

And speaking of the Emerging Markets, the Indian rupee is back on the rally tracks after getting caught up in the selling to start the year. There are still plenty of roadblocks for the Indian economy, but right now, the reforms that have been implanted have had a positive effect on the economy, and traders see that, and thus the stronger rupee.

The U.S. Data Cupboard has a few more things for us to look at today including: The December Trade Deficit, the stupid productivity for the 4th QTR, and the Usual Thursday fare of the Weekly Initial Jobless Claims. The markets haven't paid attention to the Trade Deficit for years now, and as I said the productivity stuff is stupid. So, that leaves us with the weekly job claims, which should remain well above 300,000, with the continuing claims remaining close to 3 million.

Before I head to the Big Finish today. I came across something from the CBO yesterday that caught my eye. OK, flash back to when the Affordable Health Act (AHA) was being introduced, and the Congressional Budget Office (CBO), said, that implementation of the AHA would only cause 800,000 job losses. Ahhh grasshopper, but now that we have the AHA, the CBO comes out and does a mea culpa and tells us that the AHA will reduce employment by 2.3 million jobs over the next 10 years. That's nearly triple what they told us in the beginning! I don't think we can put that down as a "rounding error", now can we? I shake my head in disgust over this stuff folks. and wonder why the U.S. media isn't all over this story like a cheap suit!

For What It's Worth. There's something happening here, what it is, ain't exactly clear. I found this on Bloomberg this morning, and really raises the question to me that is, and should to everyone for that matter, that. If the economy is so darn strong to taper bond purchases, why then are interest being kept at zero? Well, here's Fed Head Dennis Lockhart talking about interest rates. Keep in mind that he's a non-voting member this year.

"Federal Reserve Bank of Atlanta President Dennis Lockhart said policy makers may revise their forward guidance to signal they don't intend to raise interest rates any time soon.

Fed officials have said since December that an increase in the main interest rate wouldn't be on the table until "well past" the time unemployment falls below 6.5 percent. The jobless rate stood at 6.7 percent in December.

Lockhart, a consistent supporter of record stimulus who doesn't vote on policy this year, said "the unemployment rate is not a perfect indicator of the broad health of the labor markets." Given a decline in labor-market participation, he said, he prefers to look at a broader range of indicators, "more of a dashboard approach."

"When we get close to or even beyond the 6.5 percent, I think it is reasonable to expect the Federal Open Market Committee will revise forward guidance, maybe even well before that, to help the markets and the public have an ability to gauge how the economy is performing relative to some sense of goal. I do think forward guidance is going to require revision before long."

Chuck again. So once again I point out that the Fed has been overly optimistic about the economy, and has error' ed in their judgment. But then that's just little old me saying that, I could end up being wrong. We'll have to wait-n-see, eh?

To recap. The tight ranges for the currencies remain in place with one breakout currency overnight, the A$, which saw some good data prints including some strong numbers in the two-way trade with China, which is good for both countries. The BOE, ECB and BOC all meet today, with only the ECB on the board with a chance to announce something, which the markets are clamoring for. The Indian rupee is back on the rally tracks after the relative calm came over the beaten down Emerging Markets this year.

Currencies today 2/6/14. American Style: A$ .8955, kiwi .8235, C$ .9035, euro 1.3510, sterling 1.6305, Swiss $1.1060, . European Style: rand 11.1150, krone 6.2285, SEK 6.5090, forint 227.30, zloty 3.0950, koruna 20.3595, RUB 34.74, yen 101.45, sing 1.2685, HKD 7.7590, INR 62.38, China 6.1050, pesos 13.26, BRL 2.4015, Dollar Index 81.11, Oil $97.80, 10-year 2.67%, Silver $20.11, Platinum $1,384.75, Palladium $716.25, and Gold. $1,261.57

That's it for today. Well, our St Louis U. Billikens won their 15th straight basketball game last night. They are on a roll, eh? I hear that my beloved Missouri Tigers had a good National Signing Day for football recruits, of course we'll find out on the field in the next couple years how "good" it really was. The group, Live is on the IPod this morning with their song, Selling The Drama, which is what the lawmakers will be doing the next couple days. See, how I am? Attaching song lyrics to just about everything! It's a curse! HA! The walk across the "wind tunnel bridge" this morning was brutal. And spring gets here when? And then are people that love cold and snow, take the big boss Frank Trotter, he loves it! I say to all of those people, you live up North, and I'll live South! And with that. Let's go out and make this a Tub Thumpin' Thursday!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837





Posted 02-06-2014 12:31 PM by Chuck Butler
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