It’s A Jobs Jamboree Friday!

* It’s all about the dollar today!..
* Draghi throws the euro under the bus .
* A$ fall below 70-cents!.
* Simon Black shows us how overvalued the dollar is .

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

Good day. And a Happy Friday to one and all! Well, 2 am came, and I was awake. Oh no! Well, that’s all I’ll say about that, except to add that I do believe this will be shorter than usual this morning, as I think I had just about gone back to sleep and the alarm went off. But, you never know with me, I could catch a second wind and all would be normal. Well, as normal as things could be with me! The Great Late, Alvin Lee, just greeted me this morning with his classic song: Going Home.. This recording is not from Woodstock, but have you ever seen his performance at Woodstock? This song is not exactly a soft morning song to start the day, but it doesn’t matter to me what time of day it plays! And one final thought on this song. When I played in the band, it was the song that we played to end every show. brought down the house, had the people dancing in the isles, and so on.

Well, there’s no such thing as the usual mixed bag of currencies performance this morning. It’s all about the dollar today. China is on holiday, and Draghi threw the euro under the bus yesterday . Gold is down a few bucks, after an ugly day yesterday, and Oil is flat this morning, as the roller coaster eases into the starting house.

This morning will be a Jobs Jamboree Friday. Yes. Again this month, just like last month, the markets have put a lot of pressure on this month’s jobs report, saying that it will be the last determinant of whether the Fed is moved to hike rates in two weeks or not. Right now, that’s what all the dollar strength is about. the markets have decided that this Jobs report will be strong, and that will seal the deal for a rate hike. You know, I’ve always told you that I learned early in my trading career, that “the markets are never wrong”, which is a way of saying don’t go against the Tide of the markets, or you’ll be sorry. I’ve known guys through the years, that thought they were smarter than the average bear, and tried to prove that saying wrong. And I feel as though that’s what I’m doing now, as I say the Fed won’t hike rates in two weeks. the markets have just about made the decision for the Fed at this point, so what in the heck am I doing going against that, when I learned over 30 years ago, that you just don’t do that?

Well, all I can say for myself is I came up with that thought a year ago, that the Fed wouldn’t hike rates in 2015, and instead would begin to come back to the QE table, which was long before the markets started to drink the Kool-Aid that the Fed was serving, and bought into their rate hike scenario with cash and credit! So, that’s my story and I’m sticking to it! Conviction, man. You’ve got to believe in something. You might be proved wrong, but that doesn’t deter you from sticking with your conviction.

Yesterday, I told you that I thought that Mario Draghi, the President of the European Central Bank (ECB), was going to dig his heels in as he thinks inflation is rising too slow. And he pulled the old “let’s use verbal intervention first” rabbit out of his hat, and sent the euro to a two week low, dropping more than 1 full cent.. Draghi talked about how the ECB was “able” to increase monetary stimulus to counter downside risks to growth and inflation. And then proved that point by announcing that the ECB had raised the limit on its bond purchases under its Quantitative Easing program to 33% per issue from 25% previously.

So, dig his heels in he did. but added some spice to the soup I would say! Again, I would say that he is showing his impatience. The mortgage index (PMI) showed a considerable gain, and that the trend of recovery was solidly in place.. Unemployment has dropped. and inflation is inching higher. What else does he want? Patience man! But Noooooooo! Let’s throw the euro under the bus, for even more fuel. UGH!

The canary. You know the Aussie dollar (A$) has slipped below 70-cents this morning. And this time it wasn’t just a brief visit to the 69-cent handle, this time the A$ is firmly below 70-cents. UGH! I guess the canary is not doing too well, and that pretty much sums up the Global Growth and Emerging Markets. The Emerging Markets are what they are. Booms and Busts, and we are now firmly entrenched in a bust for the Emerging Markets. But what really concerns me is the lack of Global Growth, and even more, the forecast for even slower Global Growth..

I did read on the Bloomberg this morning, that MST Capital, a Sydney based Hedge Fund, which called for the rot on the vine in China to be exposed long before most observers and analysts did, says that the rout in A$’s is approaching an end. So, I would think that should make A$ holders breathe a little easier. But again, it’s just one firm’s opinion, and they could be wrong!

Hey! I guess, if I have to say that all the time, that it should apply to others that make calls like that!

Well, I said above that Gold was down a couple of bucks this morning. The shiny metal gains a tiny bit and then gives it back, as no terra firma can be found here. Especially with the Jobs Jamboree looming in a couple of hours. There’s been no new reports of China’s holdings, or Russia’s holdings or India’s for that matter.. So, things in Gold are pretty quiet this morning, but a strong Jobs report could turn up the volume and make things pretty loud! What’s that you say, I couldn’t hear you? HA!

The U.S. Data Cupboard had the usual Initial Jobless Claims yesterday, and they rose to 282,000 from 270,000 the previous week. It also had the July U.S. Trade Deficit, which came in lower than expected at $41.86 Billion. But let me tell you a story about this data. Back in June the deficit printed lower than expected, and everyone shouted for joy. but the $43.84 Billion print was revised higher to $45.21 Billion and ended up being greater than the expectations, but no one noticed, except me! So, what I’m saying here is while everyone might be rejoicing about the deficit being lower, I think all celebrations should be delayed until the revision prints next month.

The U.S. Data Cupboard for today is all about the Jobs Jamboree, and all the collateral reports that hang on the Job Jamboree, like Avg. Hourly Earnings, and Avg. Weekly Hours Worked, and the Labor Participation report, which are the three things I truly believe tells us more about the economy than the stupid BLS survey with hedonic adjustments!

I told you a few months ago that I had thrown in the towel on the BLS surveys. they didn’t make sense to me any longer, well, not that they ever did make sense to me, I guess I just “accepted them for what they were”. But no more! I refuse to go back either! The way the BLS counts jobs created, and is accepted by the markets just dumfounds me. So, like the CPI (consumer inflation) report, I no longer really care about this data. But prefer to concentrate on the three items I mentioned above.

To recap. It’s an all-out assault on the currencies and metals this morning by the dollar, as traders are already on the bandwagon that today’s Jobs report for August will be strong, and therefore the final determinant of a Fed rate hike in a couple of weeks. The Aussie dollar has fallen below 70-cents, and in its new role as the canary for Global Growth and China, things don’t look so good. ECB President, Mario Draghi, threw the euro under the bus yesterday, with talk of more QE, and some collateral changes. Whatever happened to Draghi’s “we’ll do anything to support the euro?” Oh well, we all change, right?

For What It’s Worth. Ok, I’ve got a special treat for you today. This is taken from a letter that Simon Black writes called the Sovereign Man. and can be found on his website But what he’s talking about is his alternative to the Economist’s Big Mac Index. You know where the compare the price of a Big Mac in the local currency converted to dollars of countries around the world to see who’s currency is overvalued or undervalued VS the dollar. Well, right now the dollar according to the Big Mac Index is way overvalued. Hmmm. But here’s Simon Black with his version using something other than two all-beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun!

OK, let me set this up first. Simon Black travels the world, and he buys a OneWorld RTW Ticket, and he’s found a way to not only do it cheaply, but to show how overvalued the dollar is. So take it away Simon!

“If you book the ticket in the city where you start, the ticket is based on that Cities’ local currency. So, if you book a trip starting in Los Angeles, your ticket is based in dollars.. And if you book your trip starting in Johannesburg, S.A. then your ticket is based in S. African rand.

So, let’s say he wants to book a trip between these cities. Johannesburg- London-Los Angeles-Sydney-Bangkok-Hong Kong- Johannesburg. The cities can be shifted to start in any city.

A ticket starting in Los Angeles costs $14,164.60. A ticket starting in Johannesburg costs 81,395 rand, but when converted to dollars it’s $6,000. A ticket starting in Sydney costs 15,272 Aussie dollars, but when converted to dollar is $10,900. and so on . So, it is way to save on airline costs, because you could just book a flight to the starting city and go from there. But the most important thing here is this shows overvalued the U.S. dollar is.

Chuck again. It sure does Simon! Thanks so much for illustrating that for us! And in my mind it is far better than the Big Mac Index, except it takes some work to find out the costs of the flights from each city. I hope you liked this FWIW today. I pondered long and longer regarding using it. and finally decided, oh shoot Chuck, go for it!

Currencies today 9/4/15. American Style: A$ .6985, kiwi .6365, C$ .7560, euro 1.1135, sterling 1.5230, Swiss $1.0270, . European Style: rand 13.6150, krone 8.2770, SEK 8.4575, forint 281.45, zloty 3.7967, koruna 24.2560, RUB 67.61, yen 119.20, sing 1.4185, HKD 7.7500, INR 66.46, China 6.3619, pesos 16.85, BRL 3.7405, Dollar Index 96.27, Oil $46.46, 10-year 2.12%, Silver $14.69, Platinum $1,000.23, Palladium $576.63, and Gold. $1,123.83

That’s it for today. Well, sort of normal.. Besides when it’s a Jobs Jamboree Friday, I like to get the letter out well before the party begins. I got to see the doctor that saved my life yesterday, he’s always talking to me about the currencies. He told me if the euro got to 1.10 to buy him some and he’ll give me a check, I told him that’s not it works, but he didn’t understand why it didn’t! It was a lively conversation to say the least! I have to wonder now if all the “stuff” he did got my stomach all riled up. or if it was just another Inlyta moment. Well, the Rams finished out their pre-season schedule last night, and will begin their last season in St. Louis (it appears) next Sunday. My beloved Missouri Tigers will begin their season tomorrow. I’m worried about the Tigers this year, as they had so many senior players last year. And my beloved Cardinals begin a 3-game series tonight with the 2nd Place Pirates. This is BIG, folks.. Go Cards! Go Tigers! Well, it’s time
to get off this bus today. I truly hope you have a Fantastico Friday, and a Wild and Crazy 3-day Holiday Weekend!

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