09/04/09 St. Louis, Missouri
The currencies remain in a range, this morning, with the euro between 1.41 and 1.43… One day up a bit, the next day down… No direction. I think the culprit behind this is that there are so many people on each side of the fence right now, claiming that they know what is going to happen to the economy… I, for one, still believe that we’re going to experience a “W” affect.
Joseph Stiglitz, the Nobel Prize-winning economist (and don’t get me started on the questionable people that have won Nobel Prizes), believes there is a “significant” chance of a “W”… “It’s not inevitable, but there’s a ‘significant chance of a W’…” he went on to say… “It’s not clear that the US is recovering in a sustainable way.”
So… There you go… In the past two days, you’ve heard me, Bill Gross, and now Joseph Stiglitz, all talk about a “W”, which in it’s simplistic form is double dipping for the economy…
As I said yesterday morning… The real winners of the day were the precious metals. It could be repeated this morning too! And most likely Monday morning too! Gold is taking off in flight right now, and if you blinked the last two days, you’ve missed it! It’s off about $3 bucks this morning, but give it a chance to have investors see it heading to $1,000 again!
The thing I think you need to think about here is the fact that there is tons of money sitting in bank accounts right now, and I wouldn’t be surprised to see that money begin to make its way toward gold purchases! This is normal, isn’t it? I mean, an asset class, like precious metals/gold, begins to move higher, and then the money begins chasing the price higher and higher… There’s an old saying about how you can lead a horse to water, but you can’t make it drink… That’s how I feel about gold. I’ve given the wink and nod for so many years about gold… But I can’t make you buy it!
OK… Enough… Let’s go to the Eurozone and see what’s up there! The European Central Bank (ECB) met yesterday, and you may recall that I said that the markets were looking for ECB President, Trichet to get them “pumped up” on economic growth expectations… I said the risk for the euro (EUR) yesterday was that Trichet disappoints the market’s expectations… Well, I believe that’s one of the reasons for the move down from 1.4330 yesterday to the low 1.42 handle.
Trichet basically told the markets that it’s premature to call the financial crisis “over”… And that was enough for the markets. But in reality, Trichet did the right thing… The ECB does not bow to the markets! If it’s not the right time to talk about growth expectations, then don’t do it! I raise a glass to Jean Claude Trichet this morning…
I mentioned that the Trichet statement was one of the reasons the euro had a tough row to hoe yesterday, the other reason was the Weekly Initial Jobless Claims, which printed at 570,000 (last month was revised up to 574,000)… And the continuing claims continue to be quite the heavy load for this economy. Continuing claims hit 623K! People who know that these things don’t stack up when talking about a strong economy, took money off the risk assets table.
Yesterday, I talked about how the Fed officials had begun to talk about exiting the stimulus measures, or monetary candy, as I prefer to call it, but Treasury Secretary Geithner, spoke out against that. Well, we have a G-20 meeting that begins today in London… I suspect that G-20 will issue a communiqué that basically said that the members do not believe that now is the time to exit the monetary candy.
The price of oil rebounded yesterday for the first time in a week… I would have to think that with the price of gold heading toward $1,000 again, it’s taking oil along for the ride! The weak dollar, feeds higher oil prices… I would think that we all would recall that to be the case, from the spring and early summer of 2008! The euro was 1.60, gold was near $1,000, and oil was $140+!
With both gold and oil prices percolating… The Canadian dollar/loonie (CAD) gets to get in the game! The loonie is so dependent on commodity prices, but especially those of oil and gold. So… If this rise of oil and gold becomes a trend, I think you could look for loonies to make a run at parity again… But, only if, the rise in prices of oil and gold become a trend.
Well… All eyes are focused on the Jobs Jamboree this morning. Hmmm… The ridiculous Bureau of Labor Statistics (BLS) will print their adjusted nonfarm payrolls this morning. It is forecast to show job losses of 230,000… I know, you’re saying but Chuck, just earlier you told us the Job Claims filed just last week was 570,000, how do we only show 230,000 for the month? Ahhh grasshopper… There are two different methods of reporting. The Jobless Claims is a “real” number… They have the claims and all they have to do is add them up! So… In my mind, wouldn’t it make sense to just add up four of these for the monthly total? Unfortunately, that’s not what the BLS does… Instead they do a “survey”… And then make adjustments where they believe they need to be made, because they’re so smart and know all these things… NOT! Geez Louise, even though I was being facetious I still can’t believe my fingers would allow me to write that the BLS was smart!
So… We get stuck with a massaged survey… But, it is what it is, and nothing more… So… I guess we carry on despite the dolts we have to deal with and their cooked books! But, be that as it may, 230,000 job losses is still bad… Let’s go back a year ago, before we had the eye-opening 600,000 job loss months… If the BLS had printed a 230,000 job loss month, the Chicken Littles of the world would have been screaming that the sky was falling, for crying out loud! But now? The dolts will be spouting off about how that’s a “good number”!
I’m working on a report about what the IMF did last weekend that most people don’t even know about… But, I’ve got more research to do, so hopefully I can have that ready for the Review & Focus monthly letter that goes to customers of EverBank World Markets.
I just did a video the other day on a brief but chock-full-0-information history of the dollar. You all know that I write another monthly letter for my friends over at the Sovereign Society, called The Currency Capitalist. You actually have to pay to receive that letter, but as a subscriber you not only get the letter, but weekly videos of me, answering questions that readers send in… Pretty cool, eh?
OK… That was a shameless plug… But I couldn’t pass it up! Besides this is my letter; I can talk about anything I want!
The Chinese renminbi (CNY) finally moved below 6.83, which it held for months! It will be interesting to see if this move higher versus the dollar continues, or if the renminbi pops back over 6.83 next week… I’ll keep an eye out for that!
Well… We went through yesterday, and touched on what’s going on today… (Jobs Jamboree and G-20), and spent a lot of time talking about gold… It’s a Beautiful Morning isn’t it?
Chuck Butler
Chuck Butler is President of EverBank® World Markets and the author of the popular Daily Pfennig newsletter, which is reposted here at The Daily Reckoning. With a career in investment services and currencies extending over 35 years, Mr. Butler oversees all aspects of customer service and the trading desk for EverBank World Markets. A respected analyst of the currency market, Mr. Butler has frequently made appearances or been quoted by the national media. These include the Wall Street Journal, US News and World Report, MarketWatch, USAToday, CNNfn, Bloomberg TV, CNBC, and the Chicago Tribune. Mr. Butler was previously the Chief International Bond Trader and Director of Risk Management for Mark Twain Bank, and has held significant positions in the investment industry since 1973.
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Chuck, I agree. FYI — It’s W effect, not affect.