A Doozy Jobs Jamboree!

Good day… Yes, January 8th… We finally crown a new college football Champion tonight. Remember when this was all done by New Year’s Day? January 8th was also Elvis Presley’s birthday… If still living, he would have been 72 today. On top of all that, everyone on our trading desk will be in their places with bright smiling faces today, as all vacations have ended!

Well… The Jobs Jamboree on Friday was – as I thought it would be – a doozy! Remember on Thursday when I told you the ADP jobs report was negative and said… “OK… Let me say that this report is very volatile, and doesn’t exactly feed right into the report the Bureau of Lies and Massaged Numbers, Ooops, did I say that out loud? I mean, the Bureau of Labor Statistics will print tomorrow.” If that didn’t play out right in tune!

The ADP report show negative, but the Bureau of Lies and Massaged Numbers, tells us that jobs creation in December was 167K! Alrighty then! That sure was nice to see… Not for the currencies… But for our economy. I just wonder what part of that number was “ghost jobs” from the birth/death model the BLS uses. I wanted to look further into it on Friday, but never had the time. Friday was a crazy day! I’ll do the research today, and let you know.

For what it’s worth… There’s something happening here… And what it is isn’t exactly clear! The economic reports this week have all been dollar friendly. The headlines in the Business Section of my worthless local paper in St. Louis, said something about how the U.S. consumer continues to spend. And we all know that this consumer spending props up the economy… Gives businesses a false sense of needing additional employees, etc. Yes, we just keep spending don’t we!

Let me tell those that believe this spending somehow makes them rich…. Consumption DOES NOT CREATE WEALTH! Oh yes, we feel wealthy because we just bought the latest gizmo, and proudly display it for our friends and family… But what happens when the credit card bill arrives? Would it not be better to not spend so much, and save? Oh well… This is not my economics 101 class I’m repeating here… So I’ll just get on with my Pfennig!

A hefty Jobs Jamboree lifted the dollar further on Friday, and at one point it looked as though the euro would fall below the 1.30 handle, but the level held and the overnight markets haven’t moved the currencies at all. So, we begin this week with the euro at 1.3015, much weaker than when we began the year last week. Is this the same pattern we’ve seen the last couple of years, when the euro rallies at year-end, only to begin the new year losing ground?… Only to recover later? Hmmm… Maybe so.

If so… Maybe we can use this trend to our benefit, knowing the weakness in January will be short-lived, should recent history play out.

On Friday, I told you about a one whole yen rally based on a newspaper story that talked about how the Bank of Japan (BOJ) would hike rates soon. Well, once the Jobs Jamboree printed in the United States, that one whole yen disappeared in a New York minute! But yen is trying to mount another rally as I write this morning. You see… The thought in the markets this morning is that the G-10, which is meeting in Switzerland today, will say that Asia and Europe are able to withstand a slowdown in the United States.

I’ve talked about this for some time now… 80% of trade in the Eurozone is among the Eurozone countries… And… If Asian countries could work out something similar, they could indeed withstand a slowdown in the United States.

This week, we’ll see the November trade deficit, the monthly budget statement, and December retail sales, but nothing today. So, we’ll have to wait on all that, along with Central Bank meetings in the United Kingdom and the Eurozone on Thursday. I don’t expect either bank to raise rates this month, although I think the Bank of England should strongly discuss raising rates.

Commodities sure took it on the chin last week… As you would expect them to do, given the dollar strength last week. Chris Gaffney sent me a story from MarketWatch on Friday that discussed the commodity sell off. I found a statement in the story that I liked, and here you go… “But the true center of the universe is the U.S. dollar, and it’s dead – only no one has officially told it yet.” That was said by Peter Grandich who is the editor of the Grandich Letter.

Economists are still looking for a slowdown in the United States this year. Some have gone as far as forecasting a recession. So, if that all plays out… These current levels of commodities will be looked at like “going out of business” sale prices!

Canada finally received some good news for its economy as the number of jobs created in December exceeded the forecasts by a wide margin, coming in at +61.6K. The Canadian dollar/loonie has been sent to the woodshed on a number of occasions since the taxation of the Royal Income Trusts was announced. But this was good news for the loonie, and has given it a very welcomed reprieve from the daily trips to the woodshed.

However, it doesn’t really change the recent selling trend in the loonie as a negative shadow has been cast upon the loonie by the taxation “thang”.

Not really much else to talk about today, so I’ll just head to the Big Finish, and begin my set up of trading for the day.

Currencies today: A$ .7805, kiwi .6855, C$ .8520, euro 1.3015, sterling 1.9340, Swiss .8085, ISK 70.75, rand 7.24, krone 6.3525, SEK 6.97, forint 194.35, zloty 2.97, koruna 21.25, yen 118.50, baht 35.62, sing 1.5380, HKD 7.7933, INR 44.46, China 7.8127, pesos 10.94, dollar index 84.61, Silver $12.19, and Gold… $608.80

That’s it for today… When I first heard on Friday that today was Elvis’ birthday, my thoughts immediately went back to my late friend Frank Weiler, who was a huge Elvis fan, and had every album Elvis recorded (back in the 60’s). We would sit and try to sing like Elvis… Great stuff! The Big Boss is off to a month-long sabbatical at the home office in Jacksonville… I’ll try not to mess things up here too much! HAHAHAHA! Have a great Monday and week!

Chuck Butler, January 08, 2007

The Daily Reckoning