The Bermuda Triangle (of weak data)...

Good day… I made it back all in one piece, although my hip has gone into regression… The pain and weakness is back, well it never really went away, but at least it felt like it was getting better… UGH!

OK… The currencies are rallying this morning with the euro leading the way, ratcheting up 1/4-cent so far… German Manufacturing Orders rose 2.4% in March, rising for a second consecutive month…

The reality of Friday’s Jobs Jamboree must be finally entering into their trading equations! Did you see that awful showing of jobs created in April? Only 88K… With the unemployment rate inching up to 4.5%… That’s not a good sign for the economy at all, but did you see the TV media report it? Instead of showing the unemployment rate moving higher, they showed that 95.5% of the people in the U.S. have a job! Balderdash! What a crock! How can they get away with lies like that? When the Bureau of Labor Statistics (BLS) doesn’t count people who have had their unemployment benefits expire… When the BLS doesn’t count people in jail as unemployed, as if they even have a chance to get a job! Oh, and the list goes on, and on…

But don’t let the facts get in the way of a media driven “feel good story”… Unemployment in my opinion is probably more in the neighborhood of 12%…

So… In the past week we had GDP fall to 1.8%, Personal Consumption (inflation) weaken, and this awful showing of job creation… Oh, there was some smoke and mirror manufacturing numbers in between, but I’m sure future revisions will see to making those reports fall in line with the overall trend, which is a weaker economy… Maybe even one heading toward a recession… But that’s not a clear picture just yet.

I told my audience in Panama last week that I believe the economy is heading to the dumpster, and that the Fed would most likely go for a rate cut in August… The Fed Funds Futures are pricing in a rate cut in October… I think if Big Ben Bernanke and the Fed Heads wait until October, it could be curtains Batman!

I also told my audience last week that I believe the European Central Bank (ECB) will not raise rates this week, but prepare the markets for a June hike, while the Bank of England (BOE) will opt for a rate hike… And here’s where I really went out on a limb… I said the BOE would make a statement and hike 50 BPS this week! That’s right! I said 50 BPS! Let’s just hope the Monetary Policy Committee at the BOE sees it the same way I do, eh?

The Fed also will meet this week on Wednesday… And with the Bermuda Triangle of Weak GDP, Weak Personal Consumption, and weak jobs, I just can see them doing anything besides remaining on the sidelines with rates remaining unchanged… But, the key to the meeting is the Fed statement… And here’s where Big Ben could leave the dollar out on a line… But we have to wait for Wednesday, so let’s just leave that one right there for now.

I’ll be at the ballpark for a businessmen’s special (or that’s what they used to call them) when the announcement will be made, but since it will be so late in the day, I’ll give the skinny on Thursday morning.

May 9th, is that day I talked about on Friday in my note to Chris, that the subcommittees meet to discuss the Japanese yen, and Chinese renminbi… Recall, I told you that they are going to come to the opinion that these are manipulated currencies, and 1. should more tariffs be employed, and 2. Why hasn’t the Treasury Dept done more about this!

Should make for a very interesting day for the dollar, given the Fed meeting, and this… Then on Thursday, the ECB will most likely talk about vigilance toward inflation, which is Central Bank parlance for interest rates are going higher… And the BOE hiking rates… Which is going to put the dollar even deeper in the dumpster… Watch out here folks, these two days have the potential of really spinning the dollar much lower…

Have I flashed the Blue Light Special on currencies enough for you this morning? I would much rather be prepared for a two day event like this, than have the dollar lose a chunk of ground and be like… “Hey, I wish Chuck would have told us this could happen”

You’ve been told!

Risk Aversion is nowhere to be found these days… I mean, we have all this stuff that looks bad for the U.S. economy, but stocks find a new record level every day… Look at the performances of the Emerging Markets like South Africa, and Iceland, and India… All kicking some tail and taking names later these days.

G-10 is meeting today in Switzerland… I’ll bet a dollar to a Krispy Kreme that the ministers bring this lack of taking full account of potential risks by investors world wide to the forefront of their meeting. I doubt G-10 will do anything to stop this as long as the money supply worldwide is strong…

Hey! Did you see our own Chris Gaffney quoted in a MarketWatch story on Friday regarding Silver, and Copper?

Currencies today: A$ .8250, kiwi .7380, C$ .9045, euro 1.3614, sterling 1.9975, Swiss .8260, ISK 63.46, rand 6.9150, krone 5.9675, SEK 6.7370, forint 181.10, zloty 2.75, koruna 20.70, yen 119.90, baht 32.55, sing 1.5140, HKD 7.8175, INR 40.65, China 7.7050, pesos 10.8820, dollar index 81.62, Silver $13.50, and Gold… $690.30

That’s it for today… At home for a week before I head back out on the road next week to the Las Vegas Money Show… Since Chris and I go there together, I “get” to write the Pfennig each morning on the road… You KNOW how I just love doing that! NOT! Oh well, no biggie… Should be a very interesting week for the currencies, stay tuned… Same bat time, same bat channel! Hope all’s well with everyone, have a great Monday and week!

Chuck Butler — May  07, 2008

The Daily Reckoning