A Jobs Jamboree Friday!

Good day… And a Happy Friday to one and all! This will be a day dominated by the U.S. Jobs Jamboree, which prints later this morning. The forecast is for a negative -80K jobs to have been created… In other words… We will have lost jobs again for the fourth straight month. Expect the unemployment rate to step up to 5.2%, which is really a crock, given the Bureau of Labor Statistics (BLS) doesn’t really count the “unemployed”.

The Jobs Jamboree… Can you believe that so much attention and drive to the markets is tied to this?

The dollar is a bit softer this morning going into the Jobs Jamboree, and rightly so, given the forecast. However, the dollar is still swinging a mighty hammer and I’m a bit perplexed by this. Last night I was up late (for me) and decided to put down some thoughts that were bouncing around in my head.

Well… How about that U.S. dollar? That’s some currency, Rudy! Why, look at it rallying against the euro (EUR) and other currencies as if it’s on a mission from God! It looks as if the United States has turned things around. The deficit no longer needs to be financed with over $2 billion a day in foreign investment… Interest rates are where they need to be to fight this soaring inflation… The government has stopped spending wildly, and the budget is balanced… The mortgage lenders have recovered all of their losses… There is no longer a credit crunch… And finally, the war in the Middle East is over.

But Wait! Unless I pulled a Rip Van Winkle and slept through all of that… These things haven’t happened, nor do they look as though they might begin to happen any time soon! So, what the heck has the dollar bulls dancing in the streets swinging a mighty hammer?

You’ve got me on this one. Folks, for once, I’ll admit that I have no idea what the heck is going on here… Serenity Now! Is this the pullback in the euro that I said we should look for in January, but never saw? If so… When will the tourniquet be applied to this gushing wound? Hmmmm… Good question! And I don’t have an answer to that either! I thought back in January when the euro was around 1.45, that we could see it fall back to 1.40, before moving ahead again… But that never happened. Instead we saw the euro climb to 1.50, then 1.55, then 1.60 in a little over three months time. Was it too quick? Is that what we’re seeing, merely a technical correction? Or is there something else in the works here?

Again… I don’t know the answer… But I’m hoping that in the days to come, it becomes apparent, and when it does, I’ll be Johnny on the Spot in reporting it to you! (Notice I said, “I’ll be Johnny on the Spot”, and not I’ll be “A” Johnny on the Spot! HAAHAHAHAHA)

This dollar rally has got the “naysayers” coming out of the woodwork too. Oh, the whole lot of them are pointing fingers and claiming they knew the dollar was undervalued, and blah, blah, blah… Where were these guys when the euro hit 1.60 about 10 days ago? They were hiding under the sheets!

Forgive me for this but this reminds me of when I coached my darling daughter Dawn’s girls softball team. The girls would do these chants on the bench that drove me nuts! But there was one that would just make me want to scream! We would be getting beat unmercifully, and the girls would be chanting something that ended with, “We can beat your team any old time.” UGH! But that’s what the naysayers are reminding me of right now. They are chanting about the dollar, when it has gotten beaten unmercifully for six years.

OK… Onto other things… The U.S. ISM Manufacturing Index remained well below the 50 level for the third consecutive month. I saw a news story yesterday where the writer was seriously talking about how Manufacturing will pick up due to the stimulus checks, as the receivers of those checks go out and spend them. Folks… The writer was serious…

I’ve told you over and over again that these stimulus checks might get spent by some… But I don’t see the checks getting spent by most. Instead, I see them using the money to pay down a credit card, or some form of debt, as the past couple of months has been quite sobering to the U.S. consumer.

Hey! You’ve got to feel good this Fantastico Friday, as U.S. Treasury Secretary Paulson is telling anyone that will listen, that we are “closer to the end” of the credit crisis. Oh, now that gives me a warm and fuzzy, given his track record of spouting off stuff like that in the last year!

I’ll bet him a shiny quarter that we’re only halfway through the credit crisis! The Bank of England (BOE) said yesterday that they feel as though the “worst is over” . Hmmm… Maybe these guys know something I don’t!

Down Under in Australia, retail sales surprised on the upside, printing at +0.5% versus the +0.3% that was forecast. Retail sales account for 40% of private consumption, which in turn accounts for around 60% of GDP… So this is important data for the Reserve Bank of Australia (RBA). The RBA will not need any excuses to keep rates at current levels given the strength of this data… And that thought should be a good underpinning for the Aussie dollar (AUD).

The U.S. stock market has been on a feeding frenzy since the rate cut on Wednesday. All this euphoria in stocks has the carry trade going great guns once again… This is being reflected in the price of yen (JPY) and Swiss francs (CHF)… I just don’t see how this can continue to go on and on and on. The carry trade has longer lasting power than the Energizer Bunny! But one day, it will all come crashing down like a house of cards… At least that’s my opinion.

There was another story yesterday about the Gulf States ending their dollar peg. This is getting out of control! About every three months these guys get together and make big plans to drop their dollar peg, and the media goes hog wild over the story. Shoot Rudy, I used to get all caught up in it too until I realized they were just being the boy who cried wolf.

It makes for good story, though, eh? Iran DID announce the other day that they would no longer accept dollars for their oil… That news didn’t budge the dollar, when it should have… The reason why? Because the markets have been there, done that and bought the T-Shirt! We’ll have to wait-n-see if Iran really carries through with this announcement.

There are signs, don’t you think, that the dollar has lost some of its shiny reputation as the world’s reserve currency? I think so… When these Gulf States feel as though they can take pot shots at the dollar any old time they feel like it… And countries stop using the dollar to transact their oil trade… And the euro goes from 82-cents all the way to 1.60, it sure has that feel about it.

So… To end this today, here’s something to think about… If the Jobs Jamboree comes in as bad as forecast and the dollar doesn’t sell off, like it has failed to do this week with all the rotten data, I would have to think that we’ve gone into a longer-term dollar rally – one that might last longer than previous dollar mini-rallies.

Currencies today 5/2/08: A$ .9390, kiwi .7810, C$ .9840, euro 1.5470, sterling 1.9880, Swiss .9540, ISK 75, rand 7.5820, krone 5.1275, SEK 6.0450, forint 162.90, zloty 2.2320, koruna 16.35, yen 104.60, baht 31.70, sing 1.3630, HKD 7.7950, INR 40.70, China 6.9885, pesos 10.48, BRL 1.6660, dollar index 73.20, Oil $115.20, Silver $16.24, and Gold… $853.90

That’s it for today… OK… Here’s the BIG news on my latest scan… It’s celebration time come on! Yes… Thanks to all the thoughts and prayers… The lesion they thought they saw on my rib was NOT a lesion at all! Somehow, I fractured my 12th rib! (The doctor believes that my beautiful bride must have been punching me in the middle of the night! HAHAHAHA!) But who cares how it got fractured? It wasn’t what has been weighing on my mind for a month or so now! YAHOO! OK… That doesn’t mean I’m out of the woods yet, and I have to finish this four-week phase of my cancer drug… But… It just might mean, come June (which will be one year from the original diagnosis) that I get to stop taking drugs! So… Thanks again for all the good thoughts and prayers, as I said the other day, I’m truly blessed to have such caring people as readers.

Chuck Butler
May 2, 2008

The Daily Reckoning