A BLS Report Not Witnessed in 25 Years

Well… Today is another Jobs Jamboree Friday, and we’re about to witness something that hasn’t been seen in 25 years… A “published by the BLS” unemployment rate of 9%!

OK… You know me… I think the (Bureau of Labor Statistics) BLS should just drop the “L” as they have gone whacko with the adjustments and deletions to the statistics! So… For those of you keeping score at home, we will have a Jobs Jamboree this morning, and the “experts” believe the total jobs lost in May will be -520,000 – with the unemployment rate rising from 8.9% to 9.2%.

Me? I have to think that that -520,000 is too optimistic… But, with the BLS making adjustments, it’s just too difficult to make a call based on the data you’ve seen… Data like the ADP report that was worse than expected… Recall that last month the BLS added over 220,000 jobs to the report out of thin air, including construction jobs! Really? I shake my head in disgust! So, we’ll just have to wait-n-see, eh?

The currencies threw out their own roadblock on the dollar bulls yesterday, and wrapped a tourniquet around the wound suffered from the dollar’s rise from the canvas that I talked about yesterday.

The European Central Bank (ECB) and Bank of England (BOE) both kept their interest rates unchanged… The thing we were looking for from ECB President Trichet, (any words suggesting the euro has risen too fast) didn’t materialize, and like I said yesterday… If Trichet doesn’t mention the euro, the single unit will get to pass Go and collect $200!

The BOE announced that they would keep their Quantitative Easing (bond buying) right where it’s at, with no rise, which surprised a few analysts that follow the BOE. This non-move allowed the pound sterling to stop the bleeding, but only momentarily… The political picture in the U.K. is dragging pound sterling through the mud. A 5th minister resigned yesterday, and on his way out he urged Prime Minister Gordon Brown to do the same! There is political uncertainty underway in the U.K., and political uncertainty is a recipe for disaster regarding a currency, which in this case is the pound sterling! A huge drop form the lofty figure of 1.65 earlier this week in pound sterling, has occurred… Recall, I told you I just couldn’t get my arms around why the pound sterling was so strong…

I did an interview with the Pittsburgh Gazette the other day, (someone that wanted to talk about the dollar!) and excepts of the interview printed in yesterday’s edition of the Gazette… I tried and tried to get across the deficit thang, I even repeated the phrase… “recall the people that kept saying that deficits don’t matter? Well, obviously the do!”

Speaking of deficits… I believe that while there may be short periods of time when the dollar rebounds, especially when U.S. Treasury Sec. Geithner goes on his Magical Currency Tours, but overall, the deficits will hang over the dollar like the Sword of Damocles… And I also believe that we will return to the underlying Weak Dollar Trend for good in the 2nd half of this year… Because… By then… the U.S. Budget Deficit, which has already breached 5% of GDP (late last year), will be heading beyond 10% of GDP this year. So… Do you want to own a truck load of dollars when the markets are staring at a Budget Deficit of greater than 10% of GDP? I don’t think so!

Recall yesterday’s Pfennig, when I made a BIG deal out of what Angela Merkel, Germany’s chancellor, said? Well… Big Ben Bernanke didn’t like being taken to the woodshed like that, and said that he respectively disagreed with the chancellor… He went on to defend his actions… “The US and the global economies, including Germany, have faced an extraordinary combination of a financial crisis not seen since the Great Depression, plus a very serious downturn. In that context, I think that strong action on both the fiscal and monetary sides is justified.”

“I am comfortable with the policy action the Federal Reserve has taken,” Mr. Bernanke said Wednesday. “We are comfortable we can exit from those policies at the appropriate time without inflationary consequences.”

Really? You think so? I don’t think so! And remember I was the first to say that the Fed would begin to cut rate aggressively in August of 2007! I remember it because I was at home recuperating from my cancer surgeries, and watched the liquidity get drained out of the markets in the first round of the housing meltdown… I wrote about how they would cut rates immediately and a couple of more times before year-end… The Big Boss, Frank Trotter, called me at home and said, “are you sure?” I was!

You might also recall that Big Ben Bernanke was quick to say that the sub-prime meltdown would not filter out through the rest of the mortgage sector, or economy… It was an isolated thing… Remember? Then… The U.S. Treasury Sec. Paulson, said a month later that the housing meltdown had “bottomed”… So… You want to go to the bank on the fat chance that the Fed WILL know when to exit these policies? Not me! Their track record is awful!

OK… Enough on that! So… How about that Aussie dollar? Yesterday, I told you how the Australian economy avoided a technical recession by posting a positive growth figure in the last quarter, after posting a negative figure the previous quarter. Well… Barclays Capital issued a report this morning calling for a rise to 90-cents in the Aussie dollar in the next year. Barclays believes that within the year, the Reserve Bank of Australia will be back to raising interest rates, and this will be enough to push the A$ higher and higher… (think of Sly Stone with his arms in the air… I wanna take you high-er!)

However, before you rush out and buy on what Barclays Capital has to say… You might want to read the fine print from their report that says… “We continue to expect some pullback in these currencies (Aussie and kiwi) in the near term to provide opportunities to establish medium-term positions.”

So… In other words… They’re saying to buy on the dips! Shoot Rudy, wouldn’t it have been easier for them to just say that than all those words?

Canada also prints a jobs report today… But that will take a third row seat to the U.S. Jobs Jamboree… Nevertheless, Canadian dollar investors will want to watch for any signs of the job losses to bottom out.

Speaking of Canada… I see where the folks at Morgan Stanley like the Canadian dollar / loonie, and Norwegian krone because of each respective country’s strong balance sheet… Hmmm… Sounds like the researchers there have been reading the Pfennig again! HA! But seriously… It’s nice to see other companies that spend large sums of money for research, come up with the same stuff that little ole’ me comes up with! OH! And a looooonnnnngggg time before they do!

The FDIC is calling for a shake-up at Citigroup… What? Since when does the Gov’t or its Agencies make decisions like that? Isn’t it up to the shareholders and board of directors? OH! That’s right! The government has made a LARGE investment into Citigroup… And having done so, they believe they can call the shots! What did I tell you was going to happen with all those bailouts and TARP money? It’s happening… (Strike up the eerie music)…

Speaking of the government of this country… I’ve been writing and writing about the things I see going on that makes my skin crawl… Yesterday I really went out on a limb, but that’s OK, it is MY letter, and it is FREE, so, if I want to talk about how we’re taking our republic to the brink of bad stuff… It’s OK!

Today, instead of a “feel good” Corporate story, I have something that I want to share with you… Yesterday, the Big Boss, Frank Trotter, sent me a note. He had gone to a Crosby, Stills and Nash concert the night before, and had a V-8 moment… So… As I finish out this week’s Pfennigs and head to the Big Finish, I want to give you Frank’s notes to me… There’s a loud message here, folks…

You got to speak out against the madness…

I went to a CSN concert last night. The crowd was a little thin but not as thin as the hair in the auditorium. I’ll have to admit it transported me straight back into the spirit of the early 70’s. No matter what your side of an issue it was a time to speak your mind. One of the most disappointing things, and something that is indicative of the country’s reliance on “I’m from the government, and I’m here to help” is the total lack of belligerence with any side of issues today. At that time there was another war under way and after Nixon conceded that the combination of the Great Society and a foreign war was a little too much even for the greatest economic powerhouse on earth to support he took the US off the gold standard and let the dollar float. Well it’s 38 years later and a long, strange float downward it has been. Just hearing the words made me resolve to speak out against the current madness. Madness in congress for the past 10 years and at least two administrations. Madness at the Fed as Helicopter Ben spreads the good word of monetary easing. Madness of Nationalization and a trend toward Collectivism. Madness in the markets. Maybe it’s time to stop the motors of the world and head for your own personal gulch – but make it one where you can still make a difference and “Speak out, you got to speak out against the madness, you got to speak your mind, if you dare.” (David Crosby)

I’ve always told Frank that he had a gift to write… He’s got bigger fish to fry though! And… Can you see why Frank and Chuck have been good friends since 1981? I tell people when we speak that we’ve worked together so long… That when we began working together, the Dead Sea wasn’t even sick! HA!

The Daily Reckoning