US Trade Deficit Widens

The price of oil has dropped from $83.18 a week ago, to $79.80 this morning… Why did this spoil my day? Well, like Lloyd Bridges in Airplane, I must have picked a bad day to fill my gas tank – the other day, when oil was so high!

Well… Even with oil backing off, the Canadian dollar/loonie (CAD), remains well bid this morning… That’s strange… But, in the whole scheme of things, not too strange… I mean, not Tiny Tim strange… Just strange enough to make someone think for a moment about what else could be underpinning the loonie? It sure wasn’t their return to a deficit, which, by the way, was only $0.3 billion in November, which reversed October’s $0.5 billion surplus… I’m talking about trade balances here.

I think that when all the dust settles on the loonie, investors, traders and anyone else who finds the loonie attractive, still have their eyes on the price of oil, and are thinking that it will continue to rise from last July’s low of $59.

Well! Yesterday was certainly interesting with the currencies and precious metals… We began the day with these asset classes seeing profit taking… Then the US trade deficit printed worse than expected, and we saw these asset classes rise versus the dollar, only then to see them give back those gains in the early afternoon, but then rise again by the end of the day. The good news was that these moves back and forth were confined to a tight range… The euro (EUR), for instance, range traded from 1.4475 to 1.4550.

This morning, the euro is pushing higher than yesterday’s top mark of 1.4550. This single unit has pushed to 1.4570 as I write.

Speaking of the trade deficit… UGH! The US November trade deficit was worse than forecast, printing at $36.4 billion (forecast was for $34.6 billion), and October’s deficit of $32.9 billion was revised upward to $33.2 billion… Again, as I said yesterday, this trade deficit hangover is a doozy, and one that is flying right smack dab in the face of rising exports. US exports for November rose 0.9%… Unfortunately though, imports rose 2.6%!

Oil prices have a lot to do with that import number… And here we are circling back to talk about oil again… You know… Black gold, Texas tea…

At one point last year, the old “petrol currency”, pound sterling (GBP), appeared to be teetering on the edge of a cliff – ready to be pushed to the depths of currency values… But, it held on… First it was the notion that Special Drawing Rights (SDRs) could be used as a reserve currency. SDRs contain sterling as one of its components, and sterling was pulled from the edge of the cliff…

Then the dollar began to trade with fundamentals again, and it was merely a case of one car looking worse than the other when it came to the pound sterling and the dollar… And now… There’s a story hitting the news wires this morning regarding English policymaker Andrew Sentence’s comments last night about how the Bank of England “may have to increase interest rates this year”…

Hmmm… I’m still not a fan of what’s going on in the UK to believe that sniffing around an interest rate hike would make all those things go away… But, there’s the pound sterling trading at 1.6280, up 1% this year… I don’t care! It still doesn’t erase the fundamentals in the UK!

This afternoon, we’ll see the US Fed’s Beige Book, which is always interesting, getting the different Fed regions’ thoughts, before Big Ben Bernanke can squash them like a bug.

But more important this afternoon will be the latest Australian Jobs Data… The “experts” are forecasting that 10,000 jobs were added in December, which is the height of the Summer for Australia…
The Aussie dollar (AUD) suffered a set-back yesterday, when China announced that it had raised bank reserve requirements by 50 Basis Points (BPS). This announcement has worried traders that China will slow their economy, which would hurt the Aussie dollar… Personally, I think that this is quite insignificant, and soon the markets will forget about this, and get back to marking up the Aussie dollar versus the green/peachback.

The New Zealand Commodity Export Prices report printed last night, and showed a 10th consecutive month of rises… November’s rise was 2.6%, following October’s 10.6% jump! This report tracks the commodities that New Zealand exports only… You know, like dairy, wool, and lumber…

That Brazilian Sovereign Wealth Fund (SWF) has really been making it difficult for the real (BRL) to gain versus the dollar since being announced last week… I told you that at first this might be the case, but then doubted that this will work in the long run… Sooner or later, the SWF will run out of funds… And the markets, with deeper pockets, will still be there with their appetite for reals.

So… What does one do during this conflict? Ahhh grasshopper, I would think it to be quite prudent to buy on the dips… But then, that’s just my opinion, which could be wrong!

Under the heading of “Where’s the Beef?” Did you see the claim from the White House that last year’s $787 billion stimulus package, has added 2 million jobs? Where? Can anyone – even the crooked BLS – tell me where those jobs are? This is preposterous! How can you go about claiming this when so many people are jobless?

Remember last week, when the BLS claimed that 85,000 jobs were lost in December? Well… To be honest about the whole thing, the BLS could have also told us that about 600,000 unemployed people were dropped from the BLS’s records… Remember, I’ve explained this to you many times in the past, that once an unemployed person’s unemployment benefits run out, they are considered to be “no longer looking for a job” and therefore not counted any longer as unemployed.

I just find this statement by the White House to be typical of the government… They just say stuff… And there will be millions of people who don’t have a clue, and will say… “WOW, the government created 2 million jobs last year, they sure know what they’re doing!”

I’m stepping away from the desk now to go yell at the wall… I’ll be back in a minute!

Then there was this… I was looking for lawmakers all day to go outside the Federal Reserve building and protest the Fed’s billions in earnings last year, the way they stood in front of gas stations and protested the billions in earnings from oil companies a couple of years ago. I waited and waited… But nothing… Why is that? I wonder if these dolts even know that the Fed is not a government agency, but a private corporation? Why, then, is no one up in arms about the record earnings by the Fed?

The Daily Reckoning