Did The BLS Really Adjust Jobs That Much?.

* MarketWatch says rate hike is on the docket!.
* PBOC cuts rates 25 Basis Points.
* BCB hikes rates 25 Basis Points.
* ANZ deep sixes kiwi….

And Now. Today’s A Pfennig For Your Thoughts.

Good day.. And a Marvelous Monday to you! For those of you who are lucky and still have their mom around, I sure hope that you all got a chance to hug your mom and tell her you love her yesterday. And for those of us that have lost our mom, well, we stopped and closed our eyes, and said “bless you mom”. The day here turned out just swell, that is until early evening when the rain returned, but for the most part of the day, it was beautiful, as it should be on Mother’s Day! The late, great Dan Fogelberg greets me this morning with his song: Aspen/ These Days. A very symphonic beginning to the song, that’s the perfect music to start one’s morning!

Well, the BLS had their say on Friday at the Jobs Jamboree, telling the world that the U.S. Job Creation for April was 223,000. Ahem. What they failed to tell the world, is that after their surveys were finished, they took it upon themselves to add 213,000 jobs so they could reach 223,000! Yes, in a time when small business deaths are greater than births, the BLS saw to it that they ignored that, and added 213,000 jobs out of thin air! Now. riddle me this Batman. How does a jobs report that was basically “made up” give an indication that the Fed was correct that the bad data for the last 6 months was only “transitory”? What’s that you say? It doesn’t? That’s it Batman! You found the answer to the riddle! Now, if only the markets would see it that way.

I have a feeling that the markets did kind of see it that way on Friday, for the dollar which was already up against most currencies going into the Jobs Jamboree, remained in a tight range the rest of the trading day. Gold couldn’t find a bid that would take it higher, and the euro actually recovered a couple of shekels on the day. In the overnight markets and into this morning, Traders are seeing things differently, as the dollar is up against most currencies and metals, with only the Brazilian real and Chinese renminbi / yuan carving out gains VS the dollar.

So, I guess in the end, according to publications like MarketWatch, and other dealer research papers, this jobs report gives the Fed the green light to hike rates next month. And therefore we have dollar strength to deal with today. Memo to the dollar bugs. They had better be careful running so far and fast with the dollar ahead of the June Fed Meeting, as there is still a truckload of data that will print between now and the meeting, and you wouldn’t want to be long to the hilt dollars, and have the Fed disappoint you, now would you?

Getting back to reality, which is not anywhere close to what the BLS told us on Friday, let’s talk briefly about the two currencies rallying VS the dollar this morning. First, the Brazilian real. Remember a month or two ago, I told you that the real was rallying in stealth-mode? Well, Mom? He’s doing it again! You may also recall me telling you after the rate hike in April that the Brazilian Central Bank (BCB) had mentioned in their statement that the rate hike cycle was probably nearing an end, and traders took that to mean it had ended, and the real got whacked? Well, guess what? The BCB proved those traders wrong, like Central Banks are known to do (wink, wink, Fed.) and hike rates last week. Their Selic Rate, (internal rate) is now 13.25%, and the BCB talked with panic in their voices. It appears that the Brazilian Inflation is due to print this week on Friday, and is expected to show consumer inflation rising to 8.23%!!! If that’s what we see, you can be pretty sure that the BCB will follow last week’s rate hike with another one in June. The real has rallied to below the 3 handle again, back to stealth-like rallies for the real..

The Chinese renminbi / yuan. The Peoples Bank of China (PBOC) announced this weekend that they had cut 25 Basis Points (1/4%) from both their benchmark lending and deposit rates. I think the PBOC and the Chinese Gov’t has seen enough of this slowdown in the economy and wanted to provide more help. You may recall that the PBOC had previously cut the reserve requirement ratio in an effort to help the economy. And then the PBOC decided to allow the renminbi to appreciate overnight. This is in line with what I told you last week, that we could very well see the PBOC move to more frequent appreciation of the renminbi, ahead of the BIG KAHUNA Meeting between China and the IMF. Just to show the IMF that the renminbi is a stable currency.

The New Zealand dollar / kiwi is the worst performer overnight, see its value cut by 1 full cent. Over the weekend there has been a call from ANZ (Australia New Zealand Bank) that the Reserve Bank of New Zealand (RBNZ) will cut rates at both the June and July meetings. and just like the rats that are the first to jump ship when it’s going down, kiwi Traders took the ANZ call as the gospel and began selling kiwi like funnel cakes at a State Fair. This looks to be way overdone to me folks, and could be an opportunity to pick up some kiwi, that is, if you should feel the need to, at a much cheaper level today. Of course that’s just my opinion and I could be wrong!

The euro has fallen back below 1.12, and doesn’t look as perky as it did in April. Hopefully April’s currency rallies don’t turn out to be like star that shines the brightest before burning out. I actually was thinking all the while the April rally was going on, and even mentioned it a couple of times in this letter, that the rally was coming too soon as far as I was concerned. But that’s in the past, so let’s look forward. And the Eurogroup and EcoFin will meet the next couple of days, but I don’t expect anything concrete from this meeting, just more rhetoric about how Greece needs to comply to get loans.

There will be an important economic data print from the Eurozone this week, as the Flash GDP for the 1st QTR will print. Here’s where I think the euro might get a boost, because I’m probably one of the few around that believe Eurozone GDP is going to be a good uptick for the 1st QTR. Well, let me restate that, good uptick given where Eurozone GDP was last year!

On Friday, we also saw, actually heard, some intervention by the Swiss National Bank (SNB) Gov. Jordan, who told the markets that “if necessary the SNB will intervene in the FX markets”. What brought him out from under the cover he took a couple of months ago when he told everyone one week that the SNB would defend the cross peg with the euro, only to drop the peg a week later, to attempt to talk down the franc? Well, in case you missed it in the currency round-up on Friday, the Swiss franc had reached, in dollar terms, a price of $1.0820. that’s getting pretty price again for the franc, which I’ll remind you has negative rates, and a Central Bank that can’t be trusted. So, not wanting to see the franc get too out of whack with the euro, Jordan decided to try to verbally intervene, and it worked, as the franc fell immediately following his comments, to $1.0750. No great shakes, but remember the SNB can’t be trusted folks. You don’t know what they might do here.

BTW. Remember when the cross with the euro had a floor of 1.20? Well, these days, the cross with the euro stands at 1.0390. That’s quite a bit of strength VS the euro that the franc has built up. And I think that’s what has Jordon coming out from under cover, and unafraid of investor backlash!

The Bank of England (BOE) held a meeting already this morning, which I had to check twice to make sure I was reading that correctly, as most BOE meetings are held on Thursdays. But the BOE left rates unchanged this morning at near zero. Remember a year ago, when new BOE Gov Mark Carney, was getting the markets and pound sterling traders all lathered up talking about how he was going to remove the accommodation and hike rates soon? Well, I pointed out then that he was just blowing smoke then, and here we are a year later, and guess who’s still not removed one ounce of accommodation or hiked a rate? But now pound sterling traders are proving once again that they forget the pain, and are pushing the currency appreciation envelope with pound sterling. When will they ever learn? When will, they, ever. learn?

So, there’s a ton of economic data due to print all over the world this week, so if that’s your “thing” you are in for a real treat! I’ve already talked about some economic data that will print this week, and to that we could add, CPI in Sweden tomorrow, Manufacturing Sales from Canada, The Federal Budget in Australia, the semi-annual RBNZ Financial Stability Report in New Zealand, and inflation prints in so many countries it would be painful to list them all.. Painful for me to type them and painful for you to have to read them!

Here in the U.S. The Data Cupboard will bring out the Big Guns this week with April Retail Sales on Wednesday. I have to say that the BHI (Butler Household Index) tells me that this report will be disappointing yet again, even with the Easter Sales in this month. But today, the Data Cupboard is basically empty except for some third Tier data on Labor Market Conditions.

This is where I would normally circle back to the top and talk some more on the Jobs Jamboree last Friday. But I just don’t have the energy to get all lathered up about surveys and hedonic adjustments. But, I’ll point out one thing before I head to Gold. If you look at the jobs numbers like I do. there were only 10,000 net jobs actually reported through the surveys, because 213,000 jobs were added by the BLS to the surveys, to make 223,000. Sure maybe some of those 213,000 were actually added by small businesses that aren’t a part of the surveys yet. But 213,000? Really? Of course that’s just me looking at things. logically!

Gold is still trying to find a bid, as it waffles back and forth each day. Gold is down a buck or two this morning, but let’s just call that basically flat, and the other metals are in the same boat as Gold, still trying to find a bid of their own. Well, I was reading some stories on Google+ this past weekend, and on Drudge (didn’t know I liked Drudge? Love it! Have the APP on my phone!), and came across an interesting story regarding Captain Kidd’s Treasure trove being recovered after all these years. I always find these stories pretty entertaining to me. There’s also a story that Ed Steer ran over the weekend about a sunken ship named Hanneke Wrome that sank in a storm in the 15th Century off the Finnish coast. 10,000 Gold coins and jewelry were recovered, along with the documents that showed the ship also had 200 parcels of fabric and 1,200 barrels of honey. Pretty interesting, eh?

Hey! It’s not all about the price of Gold going up and down or moving sideways. It’s the “stories” that to me makes it so interesting to read about and to tell. Just imagine, if you will, that you are standing around the barbeque pit at a summer cookout, and the boys are talking about sports, and someone mentions money, and you pull out a Gold coin from your pocket, and begin to tell the story behind that Gold coin? Now that would be fun, interesting, and better than standing there like bump on a log!

To recap. The BLS added 213,000 jobs to its surveys on Friday and told the world that the U.S. created 223,000 jobs in April. MarketWatch and other publications said that this 223,000 addition of jobs was all the Fed needed to hike rates in June. And that got the dollar buying started. BCB hike rates late last week, and with inflation soaring, it appears that the thought that rate hikes in Brazil were a thing of the past, have been greatly exaggerated. The BCB is now expected to hike rates again in June! The real is back to its steal-like rally. China’s PBOC cut both benchmark lending and deposit rates 25 Basis Points this past weekend, but the renminbi was allowed to appreciate overnight, as they prepare the renminbi for a visit to the IMF. A ton of data this week around the world, with the Big print here in the U.S.. April Retail Sales.

For What It’s Worth. OK.. had a dear reader send me a link to this story, and he must know me well, and knew the title would catch my eye. Check it out. “House Flippers Are Back With Wall St. What Could Possibly Go Wrong?” it’s found on Bloomberg’s website, and can be found here should you want to read the whole article: http://www.bloomberg.com/news/articles/2015-05-08/hard-money-comes-easy-as-wall-street-funds-home-flippers

“Real estate buyers seeking money to renovate and flip U.S. houses are getting help from some of the world’s biggest investment firms.

Colony Capital Inc., Blackstone Group LP and Cerberus Capital Management are among the companies that have started making bridge loans to investors who buy homes to sell them quickly for a profit. Borrowing costs — traditionally the highest in residential lending — are tumbling as the firms compete for customers.

The foray represents a deepening bet on the housing market by Wall Street-backed companies, many of which have built rental-home empires during the past three years and started specialty-lending businesses to finance smaller investors. Big firms with deep pockets and access to cheap capital may have an edge over local private lenders that have dominated flipper financing.

The average gross profit for completed flips in the first quarter was $72,450, up from $61,684 a year earlier and the highest in records dating to 2011, according to a report Thursday from RealtyTrac, a real estate data firm. Markets with the highest average gross return on investment included Baltimore, central Florida and Detroit.

Fix-and-flip investors have generally gotten funding from local private lenders as banks have shown reluctance to extend credit for speculative real estate deals. Borrowers are forced to pay high costs in exchange for the quick cash.”

Chuck again. this will just end up the same as past forays into this arrangement. And then people will point at the banks and say why did you allow this to happen? Ahem. better go ask the regulators.

Currencies today 5/11/15. American Style: A$ .7905, kiwi .7385, C$ .8255, euro 1.1150, sterling 1.5480, Swiss $1.0725, . European Style: rand 11.9905, krone 7.5665, SEK 8.3035, forint 272.70, zloty 3.6460, koruna 24.5580, RUB 51.39, yen 119.90, sing 1.3340, HKD 7.7525, INR 63.85, China 6.1132, pesos 15.15, BRL 2.9735, Dollar Index 95.07, Oil $58.94, 10-year 2.17%, Silver $16.47, Platinum $1,139.49, Palladium $794.63, and Gold. $1,188.66

That’s it for today. Rain, rain go away, come again some other day! Well, that’s what we’re saying here in the Midwest. I know that California would love to have some of this rain we’ve had the past 4 days. And it’s rained cats and dogs as the saying goes! My beloved Cardinals finally lost a series, allowing the Pirates to take 2 of 3 from them this past weekend. Yesterday was the 20th consecutive game for the Cardinals, and they kind of looked like they were a team that were playing the 20th game in row. It’s early in the season, there’s a ton of time and games left to play. But games you win in April & May are games you don’t have to win in September! It was good to see the Moms yesterday. Alex surprised his mom, sister and sister in-law with bouquets of flowers. This past weekend, I was flipping through the channels and came across a Fleetwood Mac concert from the last year. Now, back in the 70’s and early 80’s, Stevie Nicks was every guy’s dreamboat girl. My wife you to make fun of me, the way I would carry on about Stevie Nicks. Well, fast forward to now, and I’m watching this concert, and my wife walks through and says, “is that your girlfriend, Stevie Nicks?, She sure has gotten big over the years.” And I reply. “Yes, we would have grown old and big together nicely”.. HAHAHAHAHA! And with that. Let’s go have a Marvelous Monday!

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