A Jobs Jamboree Friday!

Good Day. And a Happy Friday to one and all! The rain let up, the sun came up, and we were getting dry. That was our day yesterday, that ended up being a nice summer day, but the morning was filled with dark skies, thunder boomers, and buckets of rain. I was questioning my decision to go to the baseball game, when the rain let up, the sun came up and we were getting dry. Can you guess what song greets me this morning from what I’ve just said? If you guessed Van Morrison singing: And It Stoned Me, you win the Kewpie doll! Made your day, eh? HA!

Well, there’s no getting around it, today is a Jobs Jamboree Friday, and the markets are all slobbering over themselves to see what the June Jobs looked like. I told you yesterday that there will be a 40,000 addition to the numbers this month due to the settlement of the Verizon workers’ strike. But given the previous 4 month trend that saw the number of jobs created each month decline I would think that June’s report would get back in line, as May’s 38,000 number was pushed lower by the Verizon strike. So, to remind everyone the trend looks like this: Feb job growth was 233,000, March was 186,000, April was 123,000 (see the monthly decline?) and then if we add in the 40,000 Verizon striking workers, May was 78,000.

I still say that there are more important things to look at each month than how many low paying jobs are created, or made up by the BLS! I’ve become jaded toward this data, and really don’t know why the markets and media are so enamored with it? The Average Hourly Earnings and the Weekly Hours Worked are two items that need to be looked at more closely than the BLS hocus pocus they produce each month!

Alrighty then. I got that all out of the way, so now we can go on to other things! The currencies which fought back yesterday but gave up some of the gained ground in the late afternoon trading, are for the most part gaining VS the dollar again this morning, which is strange, since we’re only a couple of hours away from the Jobs Jamboree. I just did a quick review of everything that I follow and I was taken back by the BIG drop in the price of Oil in the past 24 hours. West Texas Intermediate (WTI) crude is trading with a $45 handle this morning, so as you well know the procedure here, the Petrol Currencies are not faring so well this morning.. Rubles, real, krone, loonies, they are all underwater this morning.

Before the BREXIT bomb that was set off on the markets a couple of weeks ago, I told you that should the “leave vote” win that sterling and euros would get hammered. And they have. Speaking of the U.K. did you see where the country will have their second female Prime Minister when current PM Cameron steps down in September? I wouldn’t want that job, and whoever it is that wins, will have to be able to perform magic on the U.K. economy, but before she does that, it would behoove her to deal with reducing the debt, for that’s the main thing holding back the U.K. economy.

And speaking of loonies. It looked like the loonie was finally going to remain above 78-cents yesterday, but then the price of Oil began to drop, and soon after that, the loonie joined Oil and they both saw previous figures drop like a bad habit. The loonie could get a lift today though, as Canada, as usual, will also print their monthly Jobs Report today, and it is expected to show that 5,000 new jobs were created, but I’m thinking that the number will be closer to the May’s 13,800 number, which would be a pleasant surprise, and give the loonie a lift.

That sultry voice of Dusty Springfield is singing to me right now, and saying that Wishin’ and hopin’ and thinkin’ and prayin’, which is one of my fave sayings when writing something. And I could use it here, when talking about the euro. The euro has really taken on a lot of water since the BREXIT results, and I don’t think it’s over yet either. The Big Dog on the porch (the euro) has had its leash drawn in and it’s not been allowed to get off the porch, as no one knows what’s going to become of the European Union / EU. In fact, I could be wishin’, and hopin’ and thinkin’ and prayin’ that something good comes from BREXIT for the Eurozone, but I would be wasting my time, and like I pointed out the other day, these things take time to work their way throughout the markets. So stay tuned, same Bat Time, same Bat Channel..

I forgot to mention yesterday that the thing that was holding the euro back from reaching 1.11 was a report out of Germany that showed German Industrial Production dropping the most in two years. Just when you think that the Eurozone is ready to come out of the recession woods, they find their way back into them.

Well, sooner or later today, you knew I was going to go to the well once again and talk about negative yields in Gov’t Bonds issued around the world. But mostly with what’s going on here in the U.S. with Treasury yields. So, here I go again. I’ve been shouting from the rooftops recently about negative yields in Gov’t Bonds around the world, and while the ones we issue, U.S. Treasuries, aren’t negative on the outside, they are on the inside. (yield minus inflation)= real yield) The Daily Reckoning (www.dailyreckoning.com ) had a bit on negative yields and low U.S yields on Wednesday, that I wanted to add to my daily tirades about negative and low yields. “According to Bloomberg, the 12-month dividend yield of the S&P 500 is now greater than that of the 30-year Treasury. That hasn’t happened since the depths of the financial crisis of 2008-09. We’re witnessing something happening with U.S. Treasury yields that has never been outside of one of the greatest financial crises of all time.” The Daily Reckoning then asks, “So. is the bond market one big bubble waiting to burst? The case is before the jury.”

Uh-Oh, here we go again. I first mentioned the phrase that the bond market bubble was going to burst back in 2008! Little did I know then that the Fed was about to undertake a bond buying program that would rival foreign entities’ appetites for Treasuries. Trillions of dollars printed to buy the Treasuries later, we had very low yields across the Treasury yield curve, and Chuck had to go to the back of the room with his tail between his legs, and head hung way down low. How could the Fed do that to me? I would ask. But they didn’t just do it to me. They did it to every “saver” and “retired person”. And yesterday, I pointed out that Marc Faber had joined me in saying that the Fed would implement another round of QE / bond buying, before they hiked rates again. So, if that’s going to happen, where will yields be after the dust settles on the bond buying program? You and I both know, they will be south of 1%… or so it seems. but one never really knows until it happens!

Bond guys aren’t not mentally challenged, nor or they whimsical in their approach to how they direct bond yields. These guys are steely-eyed, gun slingers, that don’t care who they hurt, as long as they aren’t on that list. They see things in economies and move yields accordingly. And apparently they are telling us that the “mother of all financial crisis could be coming down upon us”. Otherwise, bond yields wouldn’t be so low, or even negative.

My good friend, and the retirementor, Dennis Miller from www.milleronthemoney.com told me he had read an article about former Fed Chairman, Big Ben Bernanke where Big Ben was touting his book and had a problem with a lot of what Big Ben had to say, but particularly with this quote from Big Ben, “That improvement (as measured by the Unemployment Rate) has been quicker than expected by most economists, both inside and outside the Fed.”

I said to myself, well I see your Bernanke quote and I raise you one. How about this one from July 2005.. “We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”

That’s a fun game to play on the Butler Patio. And don’t for a minute think that it would be short game, for there are more Bernanke quotes that are so absurd you wouldn’t know whether to laugh or cry!

In Japan this weekend, there will be elections, but PM Abe is in no danger of being pushed out. In fact that seems to be a major problem in Japan, there’s no competition or opposition in Japan. The Japanese yen is back below 101 this morning which is pretty darn amazing to me folks. I can’t believe the Japanese leaders haven’t added to stimulus in an effort to take some of the froth off of yen, but that they haven’t, and yen just continues to take liberties with the dollar.

On the opposite side of the ledger from Japanese yen is Chinese renminbi. Another night, and another depreciation in the renminbi. the renminbi is now trading at levels last seen 5 years ago. UGH! I recently wrote about how the Chinese recession is lasting longer than I would have ever thought it would last, and it doesn’t look like it can shake itself out of these recession shackles. I wouldn’t be surprised to see China take another chunk of renminbi in an overnight devaluation in an attempt to stir the economy. The problem with that is that it scares the bejeebers out of foreign investment in the country, and soon they see mass exoduses of funds from China, and that won’t help things any, so for now, it’s a case of night depreciations instead of a one-time devaluation. But like I said I wouldn’t be surprised if the Chinese got tired of this slow drip and opted to go with a one-time cut / devaluation.

Well, the price of Gold lost $3 at the end of the day yesterday, and is down another $3 in early morning trading today. I have to admit that I’m amazed at the number of contracts that being traded each day in Gold. Ed Steer documents this number of contracts each day, which is why I see the number! Yesterday it was 184,000 contracts, which was down a bit, as days of plus 200,000 contracts has been the norm recently. Global Gold holdings are growing faster than a weed in the summer sun. Holding topped 2,000 metric tonnes for the first time in 3 years, as BREXIT has fueled another run up in Gold. And according to a report on Bloomberg this morning, China is back to buying large sums of Gold after taking a breather in May. I found this news to be interesting in that it showed that the price of Gold was not a deterrent for China to keep buying. And it’s also a good reminder that China is attempting to diversify their reserves using Gold & Silver, but mostly Gold.

The U.S. Data Cupboard is dominated today by the Jobs Jamboree, and in the back room the Consumer Credit data will print. This data is for May, which seems like a long time ago to me, and should show that U.S. Consumers increased their debt by $16 Billion in May. We’ve had two spikes up to near $25 Billion in a month this year, but I don’t think we’ll see another spike in May.

To recap. It’s a Jobs Jamboree Day. The currencies for the most part are a little better today VS the dollar, as the dollar has gone soft ahead of the Jobs Jamboree. The price of Oil dropped to a $45 handle in the past 24 hours and that has set the Petrol Currencies on their collective ears. Chuck has more on negative yields, and feels sorry for the euro. Gold was down $3 yesterday, and down $3 this morning so far, and Silver lost the $20 handle it so proudly held for a couple of days.

For What It’s Worth. This is a piece from Ambrose Evans-Pritchard of the U.K. Telegraph, and I think it’s pretty good. You can read the whole article here: http://www.telegraph.co.uk/business/2016/07/06/sterling-slide-is-painful-but-what-we-need-is-a-global-deflation/

Or, here’s your Snippet: “Britain faces a frightening array of economic risks if Parliament makes a mess of Brexit, but a sterling crisis is not one of them.

A weaker exchange rate acts as a shock absorber. It cushions the downturn to some degree and strengthens our buffers against deflation. Those fretting about the inflationary risk of a lower pound are stuck in a time warp, or living on the wrong planet.

Global bond yields are touching historic lows every day and signaling a deflationary depression into the next decade. This is not like the 1930s. It is worse. Investors are so frightened – or so short of safe debt to buy – that Switzerland can borrow for 50 years at rates below zero, Germany and Japan for 15 years, and France and Holland for nine years. Roughly $10.7 trillion of sovereign debt and $1 trillion of corporate debt is now trading at negative rates worldwide.

British 10-year yields have collapsed to an all-time low of 0.73pc since the Brexit vote, and 30-year yields are down to 1.58pc. This would not be happening if the bond vigilantes had the slightest concern that Britain was heading into a stagflation trap.

After all, the essence of ZIRP and NIRP is to drive interest rates below their natural market clearing levels so as to induce more borrowing and spending by business and consumers. It’s also the inherent result of massive QE bond-buying where central banks finance their purchases with credits conjured from thin air. The central banks’ big fat thumb on the bond market’s supply/demand scale results in far lower yields than real savers would accept in an honest free market.”

Chuck again. This guy is usually spot-on with his analysis of things in the markets, and I try to keep up with his articles, but I have so much reading to do that I lose track of him from time to time.. UGH!

Currencies today 7/8/16: American Style: A$ .7510, kiwi .7270, C$ .7695, euro 1.1065, sterling 1.2977, Swiss $1.0202, . European Style: rand 14.7148, krone 8.4955, SEK 8.5590, forint 284.39, zloty 4.00, koruna 24.4260, RUB 64.20, yen 100.50, sing 1.3472, HKD 7.7578, INR 67.37, China 6.6862, peso 18.81, BRL 3.3675, Dollar Index 96.13, Oil $45.52, 10-year 1.38%, Silver $19.81, Platinum $1,079.88, Palladium $606.22, and Gold. $1,358.40

That’s it for today. I’m so late today, that the Jobs number just printed while I’m still writing! UGH! For those of you who still care, the BLS created, I mean the economy created 287,000 jobs in June. Now there are some numbers you can really be sure they are correct! HA! How sad was that news from Dallas last night, where 5 policemen were shot dead, and 7 others were wounded? The fabric of our country is being torn to shreds, we need a healer, more than anything right now. I have to move on here, I just get sick thinking about this stuff. Malinda just brought me two chocolate chip cookies that she made last night, WOW! They are hitting the spot for sure! Again, sorry for the late letter. Like I said the other day, my hands are tied and I doubt it will ever be as early as it used to be again. So, let’s all make plans to have a Fantastico Friday, wonderful weekend! And Be Good To Yourself!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts