Jobs Jamboree Friday

Good day… And a Happy Friday to one and all! I hope it turns into a Fantastico Friday, because it’s not starting out that way. Technical difficulties would be the term used to describe my morning so far. I don’t know if the Pfennig will go out on time this morning, as those “technical difficulties” have me working offline right now. But we’ll see, eh?

Well, it’s a Jobs Jamboree Friday! This should be quite the Jobs Jamboree too, as the ADP Employment report suggested the other day that this data could be even worse than the forecast -200K job losses for October. There have been more job losses in 2008, than you can shake a stick at, but yet the beat goes on for the dollar. Coming to America is the theme playing out in the currencies… Which I’ve explained over and over again, until I sound like a broken record.

The Weekly Initial Jobless claims data that printed yesterday was the culprit for reminding the markets that the deep, dark, dangerous clouds still hover over the U.S. economy. The Weekly Initial Claims edged up (again!) to 481K. This data has printed over +475K since the first week in August, and now is very close to the Weekly total that was booked during the 2001 recession of 500K per week… And… The Continuing Claims hit a 25-year high this week!

I’ve gone on record as saying that I believe the Jobless rate will move to greater than 7% in the next year, and could very well, be lapping at the shoreline of 8% when all is said and done on this recession – which I am also on record as warning about since February of this year, and telling anyone that would listen to me, that it would be a long protracted recession… Not the 2001 kind…

But, just like in 2001, the Fed and Treasury are doing their best to cut it shorter than the markets/nature would have it go. I was exchanging emails with one of my fave economists yesterday, and I said, “I believe we’ll see the Fed cut rates to near zero; we’ll see another stimulus package, adding to the budget deficit; and the beat goes on toward our Turning Japanese, yes I’m turning Japanese, I really think so!”

OK… The Big News yesterday was the size of the rate cut from the Bank of England (BOE). As I was signing off yesterday I told you that the BOE had cut rates 150 BPS (or 1.5%)… This was HUGE folks… You just don’t see major central banks like the BOE slash rates by 150 BPS every day… In fact (and I can’t be sure on this), but I don’t believe I have ever seen this before from the BOE! So… The BOE must really think things are either 1. Going to get real bad, or 2. Are already really bad, and they felt this was needed to play “catch-up”… Either way, it’s not good, folks… Sterling rallied when the news was first announced, but eventually, sold off.

The European Central Bank (ECB) cut rates 50 BPS (or 0.5%), like I thought they would, and the currency got whacked as it should have been. In fact, I think the sterling (GBP) sell off was triggered by the fact that the ECB did not slash rates more to stay in line with the BOE’s cut. It was like, “WOW, things must really be bad in the U.K. if the BOE cuts 150 BPS and the ECB held the line at 50 BPS”.

The Swiss National Bank (SNB) surprised the markets with an unscheduled meeting rate cut of 50 BPS… Does anyone else get the feeling that we’re all going to zero? It’s like central banks around the world are in a race to zero! And you know what? There’s nothing in their way to stop them from doing so! Except maybe their consciences!

I’m really distraught with these latest central bank moves… And my conspiracy blood is boiling this morning. Let’s just say… The Fed knows it has to move rates to zero, but realizes the damage it could do to the dollar, and sends a text to their VBCBF (Very Best Central Bank Friends) and asks them for help. “If you cut rates too, then the dollar won’t look so bad”… OMG! IMOH! (I’m Outta Here!)

OK enough of that silliness!

The Big Boss, Frank Trotter, is in Cancun talking to the good folks at the Sovereign Society Conference. He sent me his presentation, so I could see what he was talking about. Frank’s PowerPoint presentations are always chock-full-o-slides, where mine are always “lacking”… But, I stick to my guns and keep it simple… Anyway, one of his slides is a quote from former Fed Chairman, Big Al Greenspan… This is really interesting folks, and a real insight into the most powerful man in the world’s inability to see the trees in the forest! This was a Greenspan quote from the 2002 FNMA annual report.

“The current data, he said, ‘suggest that we don’t have a demand for housing which could all of a sudden slip.’ He went on to say, ‘We are effectively not building up a glut of excess housing. Under those conditions, one would presume that even though we have been having some fairly strong gains in home prices, it is our conclusion…that it is unlikely that we are confronting a housing bubble.”

I shake my head in disgust that this man was allowed to run our central bank for 18 years! “Bubbles Greenspan” Again… If you really want further insight into this stumbling, bumbling, fumbling Fed Chairman, you should pick up the book by William Fleckenstein… The Age of Ignorance at the Federal Reserve: Greenspan’s Bubbles…

OK… Let’s get back to the task at hand… The Jobs Jamboree this morning… So, it looks like more rot on the vine will be exposed today. But, as I’ve explained many times – in fact, so many times before, long time readers should know where I’m going with this already… I’m talking about what I feel to be the “real meat” of the Jobs Jamboree report… Sure the job creation (or lack of it, which should be the case) is important… And, with jobs it’s even more important to me to look at the data from the Manufacturing sector…. But to me, we can get a better picture of the economy by looking at the Average Hourly Earnings, and Average Weekly Hours.

Average Hourly Earnings is running about 3.5% YOY… That’s not too inflationary. And the Weekly Hours have remained steady Eddie all year… So again, not too inflationary, which gives the Fed another rate cut arrow for their quiver.

A reader sent me a note last night regarding Japanese yen (JPY)… Let’s go to the story… First of all, let’s set the stage… Japan’s former top currency official, Sakakibara – who was known as “Mr. Yen” – was talking on Bloomberg TV last night, and had this to say… “I still believe a strong yen is in the national interest of Japan, particularly in this situation when raw material prices will increase, the yen may rise to 80 per dollar as so-called carry trades unwind.”

“WOW! 80 yen?” I said as I read the story. “That’s got to be a type-o”… But there it is, in black and white, the text of this interview, and he said 80 yen. Of course, you must remember that this guy was named “Mr. Yen” because he was always cheerleading the yen higher versus the dollar (and the fact that he was perceived to have influence over the currency markets). I just don’t see the Bank of Japan (BOJ) sitting idly while their currency gets out of whack with other Asian currencies… And remember, in the end, that’s what it’s all about in Asia… Keeping one’s currency in line with the others to remain competitive with their exports.

I read a story this morning while waiting to see if the “technical difficulties” would go away. It’s about Russia’s ruble, which may have to be devalued by 30%, because of the drop in oil prices. For the past 3-5 years all I ever heard about was the BRIC currencies, and how we should offer Russian rubles. B- Brazil, R- Russia, I- India, C- China… I’m sure glad we steered clear of that one!

So, here’s what’s on tap for today… (In order of what time they take place, not their importance!)

1. Jobs Jamboree
2. Pending Home Sales
3. Former Fed Chairman Greenspan speaks on Economy in Toronto
4. Obama has first press conference after meeting with Economic Advisers

U.S. stocks lost another 445 points yesterday… That’s over 800 points the last two days! UGH! This time it was due to retailers reporting dismal October Sales, and a weaker-than-previously expected outlook… Yes, folks it looks like the U.S. Consumer is spent (in more ways than one!) And the Christmas shopping season is looking bad for retailers. And that will cause the recession to be even more protracted… Deep, dark, and dangerous!

I can’t go the Big Finish on such a doom and gloom note… OK! I’ve got it! Gold is up $6.75 this morning! And the price of oil continues to correct! Alrighty then! We’ve got that going for us!

Currencies today 11/6/08: A$ .6710, kiwi .5890, C$ .8360, euro 1.2780, sterling 1.5750, Swiss .8525, ISK (no quote), rand 10.11, krone 6.84, SEK 7.8550, forint 208, zloty 2.8550, koruna 19.62, yen 97.20, baht 35, sing 1.4950, HKD 7.75, INR 47.66, China 6.8255, pesos 13.05, BRL 2.20, dollar index 85.80, Oil $61.90, Silver $10.13, and Gold… $740.50

That’s it for today… Glad it’s Friday! I have been getting off the desk and home on time this week, which has done wonders for the swelling I get in my leg, ankle and foot, when I don’t get off it. Our little Christine reminds me each day, to go home! OK… The cold front came through last night, ending our Indian Summer weather, just in time for me to go to Columbia, MO tomorrow to watch my beloved Missouri Tigers play Kansas St. Oh boy! Cold weather to sit around in! Oh well, what did I expect for November? Global warming? OK… I had better go on… I actually have my presentation completed for my New Orleans Conference spot on the main stage! That’s a record for me! My little buddy, Alex, made a basketball team, and now he’s going to wrestle two nights a week! Keep ’em busy, right? You betcha! I wrestled my senior year in High School, don’t know that I was ever in any better shape than during that wrestling season… OK… Time to go, Mary Owens just got here! Still no email ability, so I don’t know when you’ll get this… But try to have a Fantastico Friday, OK?

Chuck Butler
November 7, 2008