A Horrific Jobs Report

Good day… And a Marvelous Monday to you! A wonderful weekend here in St. Louis, a taste of Spring was in the air. I got to spend some time with some of my closest friends on Friday night; a good time was had by all!

Well… Our Fantastico Friday was interrupted by that horrific Jobs Jamboree number that printed Friday morning… 651K jobs were lost in February, which let me remind you is a couple of days shorter than other months. So, it could have been even worse! Hard to believe that could be the case, but it’s true. The unemployment rate rose to 8.1%, from 7.6% in January. The jobless rate is the highest since 1983. The economy has now shed 4.4 million jobs since the recession began in December 2007, with almost half of those losses occurring in the last three months alone.

Remember a year ago, when I kept harping that we had entered a recession, but the NBER hadn’t announced one yet; nor were the un-dynamic duo of Paulson and Bernanke agreeing with me, as they kept denying what was right in front of them, for if little old me, could see that we had entered a recession, then why couldn’t these two? Oh well… We now know that the recession began in December 2007… And now we know that 4.4 million jobs have been lost since that time. Of course if the Bureau of Labor Statistics (BLS) didn’t add jobs throughout the year that didn’t exist, we would be even worse, so I don’t know whether to thank the BLS or curse them.

One thing to not let slip by you, is the fact that the previous months’ totals of -577K and -598K were revised upward by large amounts to -681K and -655K respectively… So, you’ve now got to ask yourself if the February figure will be revised to -700K… Of course, it’s my opinion that the BLS would never dare print that figure on a first run printing, but only as a revision, which can be swept under the rug.

So… The currencies reacted a bit differently on Friday than we had seen recently when bad news printed in the United States. Recall that the trading theme that rewarded the dollar, whenever bad economic data printed, had held a grip on the markets for some time… But Friday morning, I mentioned that the trading looked different, with no trading theme in place, and that carried on even after the Jobs data printed.

The euro (EUR) was stronger for most of the day on Friday, but as I left the office at the end of the day, it was beginning to look a little worn around the edges, and as I turn the currency screens on this morning, I see that the single unit has given back some ground.

I got a kick out of a story that a reader sent me over the weekend. It was a story that appeared on the Bloomie regarding rate cuts… I told him, “Yes, this is the stuff I keep harping on about how it’s not the cost of the credit that keeps banks from making loans, so why keep cutting interest rates?” So… Here’s a snippet of the report so you can see what it is that I’m talking about.

“European Central Bank Executive Board member Juergen Stark said cutting interest rates won’t remedy the financial crisis and pushing them too low may backfire. The financial crisis can’t be solved with rate cuts, Stark said in an interview to be published in Luxembourg’s Tageblatt newspaper on March 9. Too low a rate level can even be counter-productive.”

Hmmm… Finally a central banker with the intestinal fortitude to stand up and say the right thing! Of course, that didn’t stop the European Central Bank (ECB) from cutting 50 BPS last week! UGH!

Recall last week I was talking about how, fundamentally speaking, Australia was looking healthier than other countries, but then they posted a contraction in their GDP the next day… Some egg on my face with that one… But hey! I still think they are poised to pull out of this global financial meltdown on the fast track. Apparently, I’m not the only person that thinks that… Derivatives show that the worst is over for the Aussie dollar (AUD)… And the Royal Bank of Canada (RBC) is telling their customers to buy the Aussie dollar versus Canadian dollars/loonies (CAD)… I read that this morning; you don’t think I make this stuff up do you? It was there in on the screen…

I mentioned to Chris Gaffney last week, that I had been seeing more yen-selling coming across the trading desk than I had seen in a long time. I said that these people, if they had held it long enough, were probably taking profits. And why not? In this day and age, with deflationary pricing pushing most assets downward, when you see a profit, you take it!

The guy known as “Mr. Yen” Sakakibara, told the press last night that he believed yen (JPY) may rise to a record 70 versus the dollar… WOW! He also said that it would range trade between 100 and 70… He believes that the yen will be afforded the same kind of love the dollar has received since the financial crisis began in the United States. With Japan posting a large economic contraction last week, Mr. Yen, is of the opinion that it will help the currency gain to 70.

Hmmm… I just don’t know about all that… For one, I’m not convinced the flight to safety that has underpinned the dollar with buying of Treasuries will be duplicated in Japan… And two… The only thing I saw pushing the yen stronger in 2008 was the unwinding of the carry trade, which I said had come to end about a month ago. So… There you have it… I don’t like yen’s chances to go to 70, but do agree that it could hold 100… It’s darn close to 99 as I type.

Recall last week I told you about my neighbor that stopped me in the driveway and was all concerned about what he had heard on the radio that day, regarding the FDIC going broke… I said then, not to worry about it, as the Fed will print more money and keep the FDIC from failing. If they kept AIG from failing, they certainly would do the same with the FDIC… Well, on Friday I saw this… “The FDIC wants a permanent increase in its line of credit with the Treasury Department to $100 billion from the current $30 billion. FDIC Chairwoman, Sheila Bair told key lawmakers in letters Thursday that such an increase ‘would leave no doubt that the FDIC will have the resources necessary to address future contingencies and seamlessly fulfill the government’s commitment to protect insured depositors against loss.’”

OK… I told you on Friday morning about gold’s rebound to $940, but it failed to add to that figure even after the horrific jobs data. I guess you would have to say that gold traders had “priced in the jobs data already”, eh? Gold is off by about $4 this morning, as it gets pulled down by a report regarding global inflation… The Economic Cycle Research institute assesses that U.S. inflation pressures are at their lowest since 1958, and likely to decline further.

But for every report attempting to pull gold down, there’s one attempting to push it higher… What I’m talking about here is the report that our friends (NOT!) at OPEC are going to maintain their 13% cuts in production put in place since September 2008. They may consider more cuts. Oil is trading higher this morning at almost $47, and oil traders believe it will be back to $50 within two months.

Quietly making noise for the past 3 months has been the Brazilian real (BRL)… The real has gained 4% in the past three months, as investors around the world look for yield… And Brazil’s interest rates have had the allure of the Sea Hag’s song to Pop-Eye! But… There’s word out of Brazil that the central bank will look to cut rates by 100 BPS when they meet, later this week. That’s too bad, but Shoot Rudy, Brazil’s rates will still remain higher than you can get in most ports of call… And… Their GDP will be positive… And… If traders and investors reward the real for cutting rates aggressively like they did over currencies, then the real has nothing to worry about, eh?

OK… So, for the past month I’ve given you my ideas for the countries/currencies that could be on the fast track to recovery, given their ability to remain off the rosters of countries with failing banks. Norway leads the pack, with Canada and Australia close behind… I even told you about how Paul Volcker thought we should shift to the way Canadian banks operate. Well… It’s always nice to see someone else follow up on my ideas (not that they read the Pfennig), and said, “Hey! Let’s write about what Chuck wrote about”… Nah… That wouldn’t happen… HA! But, seriously, BNP Paribas’ research team has issued a report advising their clients to buy… You guessed it… Norway, Canada and Australia…

BNP said, “We remain friendly on commodity currencies like Norway, Canada, and Australia, and view today’s oil price rally as an indication for other commodities to follow. We are bullish on the Canadian dollar, Norwegian krone, and Australian dollar, but unlike last week we like trading these currencies long against the dollar.”

So… There you go! It’s not just me!

There is no scheduled data to print today, but the rest of the week is chock-full-o-data. On Wednesday, when I board a plane to Florida, we’ll see the Monthly Budget Deficit… That should be a doozy! On Thursday, we get the usual Weekly Initial Jobless Claims, and Retail Sales for February… I can tell you right now, that the BHI (Butler Household Index) tells me this report for retail sales is going to be very disappointing! Friday the 13th, we’ll see the Trade Deficit, Import Prices, and U. of Michigan Confidence. There are a few other second tier reports sprinkled in all week…

I really do think that the retail sales for February are going to be bad… And that may weigh on the dollar… That is, if the trading theme keeps to the back of the room!

OK, as I head to the Big Finish, I see the euro has lost more ground than when I first came in… It just can’t stand prosperity!

Currencies today 3/9/09: A$ .6360, kiwi .4980, C$ .7735, euro 1.2590, sterling 1.3890, Swiss .8595, rand 10.5930, krone 7.1125, SEK 9.2050, forint 247.90, zloty 3.77, koruna 22.02, yen 99.15, sing 1.5515, HKD 7.7550, INR 51.88, China 6.8410, pesos 15.28, BRL 2.3750, dollar index 89.20, Oil $46.74, Silver $13.22, and Gold… $937.90

That’s it for today… Well… The Butler boys made it through the five days on our own… No probs… My beautiful bride returned home last night, but too late for me to see her, as I was in ZZZZZZ-land when she got home. I believe a good time was had by all, though, given the messages/texts I received… I head to Jacksonville on Wednesday, for a corporate event, then drive down to Jupiter on Friday. My family joins me in Jupiter Friday night, and by Saturday, I’ll be in heaven… No, I mean, Roger Dean Stadium, watching my beloved Cardinals! Sure hope the weather is warm, to get the “frost” out of my system! I will celebrate my birthday in Jupiter, like I have for the past 7 years… After the events of almost two years ago, I do “celebrate” my birthday now more than ever. OK… I hope you remembered to set your clocks ahead this weekend. This is the second year of doing it this early, so eventually we’ll get used to it, of course by then they’ll change it again! UGH! Got to get this tied up and out of here, so I hope your Monday is Marvelous!