U.S. Payrolls Plunge

Good day… And a Marvelous Monday to you! The weekend was great, as I got to spend it with my kids at the Missouri Tigers football game on Saturday. It was a cold one, but a great game, and fun time all day and night.

Well… We might as well get right into this… I’m sure you heard that the Jobs Jamboree was awful on Friday. UGH! Jobs are dropping like the temperatures outside, and there doesn’t seem to be anything to stop them from dropping either! For the record… October’s jobs losses were worse than expected (-200K), coming in at -240K… OUCH! But the real kicker, something the mass media might not have covered, was found in the September revision. Recall that September’s Jobs data showed a negative -159K… Well, that number was revised to -284K! Double OUCH!

I would have to think, given the size of the September revision, that October’s -240K will be revised to near 300K. The job losses are beginning to accelerate folks, and that’s a spiral that’s difficult to come out of. And as far as these revisions are concerned… That’s a fact of life in a slowing economy. You see, it’s all based on past performance, and there’s no way the models they use can adjust to this, and therefore they have to wait for the “hard evidence” to show up… Maybe they could use different models? Yeah, right… They might do that right after they get rid of their “inflation expectations”.

So… With the Jobs Jamboree circling the bowl on Friday, the deep, dark, dangerous clouds hovered over the U.S. economy once again, and at first, the recent trading theme began to trade the dollar higher… But apparently, someone with an ounce of brains on the trading floor, said, “Wait! This is crazy”! And the dollar began to sell off, which went into the afternoon market; and on a Friday – after London heads to the pubs, and it’s already Saturday in Japan – there’s not much volume or liquidity, and that can lead to boredom or wild crazy moves. This was more of the boredom, Friday afternoon.

In the overnight markets last night, the euro (EUR) has tacked on some minor gains versus the dollar, but once again the trading theme hangs over the currencies like the Sword of Damocles.

We used to have a local newspaper that would carry a weekly article called, “news of the weird”, and as you can imagine the articles would be quite entertaining. Well… The reason I bring this up, is, I was reading an article on Friday, and it reminded me of “news of the weird”.

Here goes… Michael Alix, chief risk officer at Bear Stearns from 2006 until its demise in March, was named senior vice president in the Bank Supervision Group of the New York Fed on Oct. 31.

OK… I could just leave that one alone… Or… I could rip the Fed for hiring the guy who was the watchdog over risk at Bear Stearns… To do just that for the Fed! I mean come on! Shouldn’t this guy have just slipped off quietly? But, to his credit, the Fed thought enough of his abilities to hire him… I just have one question, “What the heck is going on at the Fed?!” We all know that the Fed’s balance sheet is growing bigger all the time with “risky assets”, and they need someone to manage that risk… But they picked the guy from Bear Stearns… The now defunct Bear Stearns!

Now, was that “news of the weird” or what?

OK, back to currencies, economies and anything else I can think of to write about! OH! AIG’s bailout is swelling to $150 billion, and the insurer posts another huge loss! I know the market participants have become “comfortably numb” with the “numbers” being thrown at these losses and bailouts these days… But come on! This is real money! President Reagan used to say, that’s billion with a capital B!

On Friday, I mentioned the possibility of a Russian ruble devaluation of 30% and how I was glad we didn’t offer that currency… A few readers took exception with that and pointed out the losses in Aussie dollars (AUD)… Well… The point I was simply trying to make is that with a devaluation it happens overnight… So, you wake up and your investment is 30% underwater, without you having a chance to “get out”… That’s all…

Did you hear about China’s big deal this weekend? Here’s how the Wall Street Journal reported it… “China’s government set plans for 4 trillion yuan, or $586 billion, in spending and stimulus measures through the end of 2010 aimed specifically to target people’s livelihood in an effort to offset the impact of slowing global growth and unlock the spending power of its vast population.”

Now, I can hear you saying, “Hey Chuck, how come you’re not ripping China for their stimulus announcement?” Ahhh grasshopper, spending money you have in your war chest is one thing, while spending money you don’t have, and putting it on the taxpayers bill is another.

The currencies are all liking the Chinese announcement, as it gives hope that the U.S. recession doesn’t cut too deep for the rest of the world. I think the currencies also like the fact that there appears to be a new “sheriff” in town… A new “white knight” if you will… China… And why not, they’ve been packing away billions each month in trade surpluses!

The Chinese announcement came at the G20 meeting of finance ministers that was held in Brazil over the weekend. The finance ministers agreed to take “all necessary measures” to get financial markets back to normal and counter the backlash of the credit crisis. OK… You know me… And I think these things are nothing but boondoggles. For instance… The Finance Ministers make that big announcement, but give us nothing, not even a bone, about how or what they will do to make that announcement come to fruition!

Today… The Treasury Dept. will discuss TARP… This is the “Troubled Assets Relief Program” that’s part of the bailout. This should be interesting…

The data cupboard is bare today, and tomorrow is a holiday – Veteran’s Day. Wednesday, when we come back, will be pretty bare too! So, we don’t get any real data until Thursday, when the Trade Deficit for September is printed, along with the Monthly Budget Statement. Then on Friday, we get Retail Sales for October. The Butler Household Index (BHI) indicates that the Retail Sales figure for October will be very disappointing.

It’s been a while since I talked about the BHI. This is a simple observation by yours truly as to how many shopping bags I see come into the house during a month. I call it the BHI… And it has been quite indicative of what we will see in the national Retail Sales data. I made it up, folks… It’s not real, except in my mind and in the Pfennig! (I once had someone send me an email and tell me they tried to Goggle BHI, and didn’t get anything! HA!)

In New Zealand, a new government took over this past weekend, and I’m sure they are real happy about that, given the problems going on globally, and in New Zealand. The change went off without a lot of fanfare, and was hardly noticed by the markets.

So… As I get ready to go to the Big Finish, the euro has pushed past the 1.29 handle, and the currencies as a whole look better overall. But remember, this move higher for the currencies can be erased in a NY Minute, if the trading theme is put back into place. The good news for currencies is that there isn’t any real economic data for a few days this week, which means the deep, dark, dangerous clouds will lift temporarily.

Currencies today 11/10/08: A$ .6950, kiwi .6030, C$ .8540, euro 1.2920, sterling 1.58, Swiss .8525, ISK (no quote) rand 9.8850, krone 6.7350, SEK 7.7270, forint 205.20, zloty 2.8050, koruna 19.5350, yen 99.10, baht 34.90, sing 1.4875, HKD 7.75, INR 47.37, China 6.8260, pesos 12.66, BRL 2.1205, dollar index 85.13, Oil $64.40, Silver $10.34, and Gold… $752.90

That’s it for today… Don’t forget, tomorrow is Veteran’s Day! Banks will be closed, and no mail will be delivered. Our trading desk will not be live. So, if you forget and call, we won’t be here… There will be some in to get caught up, etc. but phones will not be answered. It’s a holiday! And what a holiday it is! I tell this story every year, but my darling daughter, Dawn, submits a picture of a dad (her grandfather) in his army uniform for their Veteran’s Day celebration at her school (she’s a kindergarten teacher) each year, and that make’s me feel good. She said a couple of years ago, that she never realized how much the two of us look alike… I think of my dad a lot, but especially on Veteran’s Day, Christmas, his birthday, and school picnic day… OK… Enough of that! Tigers move up to #12 in the country, inching their way back to the Top Ten… Welcome back from Washington D.C. to Chris Gaffney, I heard he was great! Let’s get going on this Marvelous Monday, eh?

Chuck Butler
November 10, 2008