Jobs Jamboree Friday

Good day…and a Happy Friday to one and all! Today is also a Jobs Jamboree Friday, and there are Krispy Kremes on the desk, so we’ve got it all going on for us today! I’m typing away already today, and I hear the old Billy Joel song on the radio – “Keepin’ The Faith.” How apropos for currency investors. Yes, the dollar has lost ground this year, but not as much as it needs to, and sometimes it seems like it takes two steps forward and one step backward…but, we’re “Keepin’ The Faith.”

OK…there was no further depreciation in the dollar yesterday, but it didn’t gain anything either. So it was a real “nothing” movement-wise day for the currencies. Today should be different, with the Jobs Jamboree this morning right out of the starters blocks. The “experts” have forecast job creation in October to be 123K. Recall last month’s awful showing of just 51K? It will be interesting to see the revision to that awful number.

You may also recall that after that awful number was printed last month, the Bureau of Labor Statistics (BLS) came out with their announcement that they had “found” 810K jobs that would be posted next March. So, the dollar rallied and everyone forgot the fact that the Month of September had only created 51K jobs.

Recall, also that I was highly skeptical of these “found” jobs, and still believe that as we draw closer to the actual posting of the “found” jobs in March, that the 810K number will be greatly reduced.

Alright, on to other things. I really don’t want to get started on the BLS on a Friday morning…I’ll save them for a Monday! Besides, I really only concentrate on the average hourly earnings, and weekly hours in this Jobs Jamboree report. The markets are the ones that get all lathered up for a night on the town with the jobs created numbers.

Yesterday we had more illustrations of the “Tale of Two Cycles”, that I wrote about a couple of months ago in our private letter to clients of EverBank World Markets, The Review & Focus. Broad strokes here; the “two cycles” are the U.S. and Eurozone…and talks to the fact that interest rates are going in two different directions along with business growth, and GDP, among other things.

So here’s what I mean. First, European Central Bank (ECB) President, Claude Trichet, gave a statement following the ECB’s meeting yesterday, and in the statement, Trichet talked about how the economy should grow at a “solid pace”, how risks to price stability remained on the “upside”, and that annual inflation rates to stay “elevated.” And then the cherry on top…Trichet pledged “vigilance” toward inflation; which is Central Bank parlance for, “get ready, rates are going higher.”

Then yesterday afternoon we heard from two Fed Reserve members, Fischer and Bies. Both sang from the same song sheet, and talked about how inflation pressures were easing. In fact, Richard Fischer, the Dallas Fed President, said, “inflation may have peaked already and is now receding.”

There are your tales of two cycles, right there! And if it weren’t for the Jobs Jamboree hanging over the markets like the Sword of Damocles, we would have seen some additional dollar weakness on the words of these Fed Heads. As they say…timing is everything…and they certainly timed their words, didn’t they?

How about that rebound in gold and silver? Gold had been doing the rope-a-dope for much too long, and has finally bounced off the ropes, and is back jabbing away at the dollar. Dollar weakness has helped, along with the veritable Whitman’s sampler of weak economic data. I’ll tell you that I’ve had a reader that beats on me weekly, telling me how wrong I’ve been about tying gold and oil together. Well…he’ll be happy to hear that, after many months of trading in lockstep, I now believe that the relationship no longer appears to be holding up. At this point it would take a huge jump in oil prices to catch up.

Now I don’t know if gold is going to the moon from here, or if it will fall back below $600. All I know is that I believed that the less than $600 gold price was a buying opportunity. I do believe gold is going higher, along with other commodities…however, that doesn’t mean it will…it’s just my opinion.

The euro continues to trade in the 2 euro range that centers around 1.27 – with 1.29 on the high side and 1.25 on the low side. We’ve had a couple journeys to 1.30 this year, but none have had the follow through to move higher, and that’s because there is a ton of resistance at 1.30…tons of sells, to book profits at 1.30. Eventually, I believe, that resistance will be taken out, and then watch out!

Yen on the other hand doesn’t seem to have any resistance from its current level all the way down to 110. So, if yen can follow through on this recent strength, it could be down to 110 before you know it.

As you all know, I am a fundamentalist. To me, fundamentals are what create trends and end trends, and technicals are just the noise inside of the trend. I know that technicals/chartists have a different opinion…that’s OK! I still use the technicals to explain stuff inside the trend. So, to me they are quite useful!

Currencies today: A$ .7730, kiwi .6745, C$ .8855, euro 1.2775, sterling 1.91, Swiss .8025, ISK 67.85, rand 7.43, krone 6.4525, SEK 7.1830, forint 204, zloty 3.03, koruna 22, yen 117.10, baht 36.66, sing 1.56, HKD 7.7769, INR 44.82, China 7.8712, pesos 10.85, dollar index 85.35, Silver $12.57, and Gold… $624.90

That’s it for today…November 15th marks the start of the New Orleans Investment Conference. I’ll be there, along with the Big Boss, Frank Trotter. This is the granddaddy of Investment Conferences, and the only drawback is that it is a “paid” event. But well worth it, I might add! If you’re interested click this link:

I’m also hosting a lunch on Thursday November 16th. I’ll have more information on that on Monday. Frank will be hosting a dinner on Saturday night the 18th, and again more information will be available soon. No baseball… I’m going through withdrawal! Can’t wait for spring training to start! Have a great Friday and weekend!

Chuck Butler
November 3, 2006

The Daily Reckoning