Jobs Jamboree Horror Show

Good day… And a Marvelous Monday to you! Well, Chris and I returned Saturday night and it was warmer in St. Louis than it was in Orlando Florida! Un-Be-Live-able! I know that it stayed warm there however, as opposed to here! The Money Show was good, not the best one or even close to the best one I’ve attended, but as I told Chris, I believe it was simply “a sign of the times”… Bad economic times that is!

OK… Let’s get this ball rolling, eh? The currencies had a nice rally on Friday, as the Jobs Jamboree turned out to be a horror show… But I don’t think it was the Jobs Jamboree horror show that pushed the euro (EUR) and other currencies higher. I think it was the stock market rally. Recall, last week I told you that the stocks and currencies had been trading side by side, which wasn’t something we normally see, as they have different pricing mechanisms, and a low correlation to each other. But they were trading in tandem, and that carried through on Friday.

So… The currencies, other than yen (JPY), rallied on Friday… Euro, Swiss (CHF), Norway (NOK), Aussie (AUD), kiwi (NZD), Brazil (BRL)… They all had it going for them… And of course when stocks do well, the risk takers are back on the board, and that spells yen selling… It’s one big circle, folks.

Then someone has to ask why stocks would rally when 598K jobs were lost in January? Ahhh, grasshopper, you’ll want to sit down for this one… You see, the stock jockeys were all about the 598K jobs lost in January, because they were “sure” the lawmakers would get off their duffs and get to pushing the “new and improved” stimulus package through… And… The lawmakers rewarded them, announcing later Friday that they had reached an agreement on the package.

So… Let’s skip back to Friday morning, and revisit the Jobs Jamboree Horror Show… Brought to you by the Bureau of Labor Statistics (BLS). The BLS printed one horrible Jobs number on Friday, thus showing that the United States continues to shed jobs in January, posting jobs losses of 598K, and revising the previous month’s number from -524K to -577K… And the unemployment rate jumped from 7.2% to 7.6%. Recall on Friday, I said that the report would be more disappointing than forecast and that the unemployment rate would jump to 7.5%… So, I was “dialed in” on that one, eh? That’s too bad, though, because no one, and I mean no one, wants to see this kind of blood in the streets. Of all the sectors that lost jobs (service, construction, etc.) one sector eeked out a gain of +6,000 for the month… Yes, you got it! I’m talking about Government jobs!

This was the worst month of job losses since 1974! I was telling Chris at breakfast the other day, that I was working at Stifel Nicolaus in 1974 in the margin department, and I just don’t remember it being that bad… But, as a qualifier, I was still living at home with my mom and dad, and I wasn’t married yet! Wait, that didn’t sound right! Oh well, I think you know what I mean…

So… This has really gotten out of hand folks. I’m going to have to go back to the drawing board, and revise my timetable for when the United States begins to dig itself out of this mess. Previously, I thought it would be this year, by the end of summer… But, as I said, this monthly bloodletting in jobs is making me re-think this… More later.

When the Jobs losses were announced, the lawmakers got “busy” on their “new and improved” stimulus package. I see where they announced that they had cut some of the fat (my words not theirs) out of the package, and it would be around $780 billion. Well… In my opinion, they need to go back to the cutting room and cut some more! That is… Unless this is all targeted for job creation… And then, I want to see a plan for how it will be paid back!

I checked the stock futures this morning to see if there would be follow through today, and it doesn’t look like that will happen, as stock futures are pointing toward a soft open. The fact that the lawmakers didn’t send the “new and improved” stimulus package to the President to sign yet has probably caused some consternation in the stock jockeys. Don’t worry boys and girls in the stock jockey pits, the President can’t wait to get his signature on this spending bill, no matter how much pork and craziness besides job creation is in it!

Well… The G-7 ministers will meet this coming weekend. I guess they told their sweethearts that they’d make it up having missed Valentine’s Day! I was reading a story at home yesterday, that discussed what the G-7 ministers might be talking about this weekend. The writer believed that foreign exchange would be high on the G-7 agenda. The dollar’s rise in the past six months, the U.S.’s position on China’s renminbi (CNY), the pound sterling’s (GBP) fall from grace, and Japanese yen strength… Everyone will have their own agenda on these items, so it ought to make for a lively meeting, instead of the boring boondoggles G-7 normally holds.

But then, I wouldn’t put too much stock into anything you think might come out of G-7, for they have been known to disappoint!

My friend, and wonderful writer, David Galland, wrote a great letter, The Room, this past week… And since I was getting all riled up about the “buy American” and protectionist stuff in the “new and improved” stimulus package, I thought his letter hit a home run! Here are a few snippets…

“If you have read this weekly missive for any length of time, it might surprise you to learn that even my skepticism about the intelligence of the political class has limits.

“That’s because even I can get to the point where, wondering at how the politicians will react to this or that challenge, say to myself, ‘Nah, they can’t be that stupid! They wouldn’t dream of doing something so obviously misguided and potentially disastrous!’

“But invariably, as they have done again this week, they prove me wrong.

“I am referring, of course, to the pending passage of Smoot-Hawley II… Otherwise known as the ‘buy American’ provision interjected by members of the Senate into the new stimulus bill.

“Back in 1930, when Smoot-Hawley was passed, it wasn’t as if the potential blow-back effect of the bill weren’t understood: over 1,000 economists signed a petition begging Congress not to pass the bill that layered tariffs on over 20,000 foreign-produced goods.

“But, following tradition, they passed it anyway.

“The record on the consequences of that action is unequivocal: between 1929 and 1934 – when trade was again liberalized – world trade declined by 66%.

“I’ve got a better idea, though you might disagree. Just call the whole stimulus plan off; regardless of what it allocates spending to is made in America or by a foreign trading partner, we can’t afford it.”

David is a great writer, and you should subscribe to his letter, as he talks about all things related to the economy, and resources.

OK… This is getting a bit long today, but I still have some thoughts on gold to share with you this morning. As I explained about a month ago, gold continues to probe higher, and then sell off, but each time it sells off, the low is higher than the previous sell off low. This trading pattern has long been know as an indication that an asset was forming a strong base and preparing to move higher… Recall, when I told you about this a month ago, gold was about $860 or so, and I said then that I thought it looked as though gold would move back to $900, based on this trading pattern.

Well, the pattern still exists, as gold sold off of last week’s high of $927, and is just above $900 this morning. The sell off low is higher than the previous sell off low… I think you have to credit this strong performance in gold to a change in investors’ feelings about hard assets versus fiat currencies, and a hedge versus the eventual deep slide in the dollar…

Currencies today 2/9/09: A$ .6745, kiwi .5340, C$ .8150, euro 1.2960, sterling 1.49, Swiss .8610, rand 9.6275, krone 6.6930, SEK 8.0650, forint 223.40, zloty 3.4970, koruna 21.4610, yen 91.60, sing 1.4950, HKD 7.7535, INR 48.57, China 6.8335, pesos 14.08, BRL 2.2450, dollar index 85.15, Oil $40.37, Silver $13.03, and Gold… $902.14

That’s it for today… This coming Saturday is Valentine’s Day… You have been alerted! My granddaughter, Delaney Grace, (and her parents of course), stopped by to see me yesterday, after their trip to the zoo. She is beginning to really say words, and react to things you say to her, it is amazing to watch, and she’s so darn cute! Well, the cards were flowing to Chris on the return flight home, and he beat me worse than I beat him on the way down! (He bet me that I wouldn’t put that in the Pfennig! He lost the bet!) After 4 hours of playing gin, the score difference was 100 points. My vision in my left eye still hasn’t improved… Patience, they tell me… Patience… OK, Mike’s here, I’m running late! Time to go, hit send, and all those other sayings… I hope your Monday is Marvelous!