It’s A Jobs Jamboree Friday!

* Draghi doesn’t deliver the goods!.
* The euro soars 3.1%!!!!!.
* What happened Lola?
* Fed members to move the goal posts?

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

Good day.And a Happy Friday to one and all! Two days of “event risk” and now we’ll deal with another one today, as it is a Job Jamboree Friday. I made the decision months ago, to stop getting all worked up over these surveys, and to keep my head down and just look at the Avg. Hourly Earnings, the Avg. Weekly Hours Worked, and the Labor Participation rate. These have always been the things I prefer to garner my attention, and not how many min. wage jobs were created. So, that’s how I’ll play today’s events. The great band, Chicago, greets me this morning with their song: Stay the Night. This song came from a later album from Chicago, after they had lost Terry Kath, the driving force for the band in the early days when they made their mark.

Well. Yesterday I talked about how great the “event risk” was given all the people that were on the side of the ship calling for a rate hike from the Fed. What I completely missed was the “event risk” of everyone being on the same side of the ship for European Central Bank (ECB) additional stimulus. And brother that’s exactly what we saw! Can you say “short squeeze”? I thought you could. So, while I was finishing up the Pfennig yesterday morning, I broke in with the news that the euro was rallying instead of getting “slobber knocked” like Lola said it was going to get. You don’t know how happy that made me feel! To know that Lola had gone out and said that the euro would lose 3% today, and knowing that they had to have tons of short trades that had to get knocked out with huge losses, just made me feel all good inside, good inside. I’ve always rooted for the underdog. Except when my team is playing the underdog. And the underdog won yesterday, folks. Brilliant, simply Brilliant!

So what did ECB president, Mario Draghi, say that turned the tables on the short euro trades? Well get this. And I have to thank my longtime friend, and colleague, Chris Gaffney, for sending this info along to me. It seems that, The FT initially reported the ECB left rates unchanged which set the euro on its upward trajectory.   Massive shorts on the euro going into the ECB meeting were covered after the FT report and continued to be covered even after the FT retracted the story.

The cut in interest rates wasn’t as large as expected – so the shorts continued to be covered.

Ahhh, yes. Draghi did cut rates further but not as wide as the markets were expecting. And then he left the size of the bond buying program steady, when it was thought that he would increase that too! So. cancel the helicopter ride for Mario! So. at one point of the day, the euro was up 3% on the day. You don’t think, do you, that Lola got it backwards and she meant to say the euro would gain 3% today instead of losing 3%? Can you tell that I’m having loads of fun with this? And given where the euro was in the early morning trading (recall I said it was down 2 thirds of a cent) the reversal was over 3%!

So. one event risk down, and the short trades got the snot knocked out of them! Serves them right! Oh can you see, by the dawn’s early light, what would happen if the event risk of the Fed meeting on December 16, went this way too? Oh my goodness, OMG! I don’t know that I can recall a day when the Dollar Index moved downward by almost 2 full points! And that would be just the tip of the iceberg, if the Fed left rates unchanged. Unfortunately, this little mishap with event risk yesterday, probably opened the Fed members collective eyes, and they too now realize just what’s at stake when they meet on 12/16.

Unfortunately for the rate hike naysayers like me. This move in the euro is probably the last nail in the no rate hike coffin. You see, with the euro flying high on the day, and the Dollar Index losing major ground, the Fed’s fears of a strong dollar getting even stronger if they hike rates, has dissipated. And you didn’t have to look anywhere else than the U.S. Treasury bonds reaction to the event risk of the day. The 10-year Treasury yield rose very quickly from the 2.19% in early morning trading to 2.35% later in the day. I don’t know about you, but I was a bond trader once upon a time, and bonds don’t make one-day moves like this every day. So, the bond boys and girls (got to be fair and balanced, can’t just say the “bond boys” any longer!) saw the euro rally, thus taking out the strong dollar fear, and began to unassemble the low yield structure of Treasuries. Remember that movie from the 80’s, my kids loved it, called: Short Circuit? Do not disassemble number 5! I just had to throw some humor in there, as this piece was beginning to get too darn serious!

To follow up that mention of the movie Short Circuit. The movie had two endearing features in it. 1. One of my heartbeats at the time: Ally Sheedy. and 2. One of the funniest lines ever. When Number 5 (a robot that had life) says to another robot. “Hey laser lips, your mother was a snow blower!” Now tell me that’s not funny!

Well, that was all yesterday. Worn out? I sure was! No wait, that worn out feeling was from the walk I went on yesterday afternoon. the sun was out, the sky was blue, it was chilly, but not bad, and I dragged my painful, stiff back outside for a short walk. I had to get moving, I had become too sedentary. Sort of like the currencies were earlier this year, before all this event risk stuff came along!

So, this morning, the euro has consolidated its gains and is giving back some of them, ahead of the Jobs Jamboree in the U.S. which is thought to be the last tell-tale sign that the Fed has the ammunition to hike rates in two weeks. So, traders are backing off their buying of the euro, after the single unit gained 3.1% VS the dollar yesterday. The Aussie dollar (A$) is also giving some of its gains back this morning, wait a minute Chuck. It certainly appears that most of the currencies are in the “giving back some gains” boat this morning! Yes, the Chinese renminbi, Russian ruble and Canadian dollar / loonie seem to be the only currencies with gains this morning VS the dollar.

Gold pushed higher in price yesterday, just when it appeared that all was lost for the shiny metal’s rebounding effort. Gold isn’t giving back any of those gains this morning, but it’s also not adding to those gains either. there was some news about Gold Imports in India yesterday on the Bloomberg, so let’s go to the tape and see what’s going on here.

Gold imports by India, the world’s second-biggest consumer, more than doubled in November as a slump in global prices to a five-year low stoked demand amid the peak festival and wedding seasons.

Overseas purchases last month climbed to 101 tonnes from 45 tonnes in October, two finance ministry officials said, asking not to be identified citing government rules. Imports dropped 22 percent to 655 tonnes in the eight months through November from 841 tonnes a year earlier.

So, I tell you these things so you can see that physical demand for Gold (& Silver) continues to be quite strong in Asia, and Russia. Can you imagine what the paper trades would be doing to the price of Gold if there wasn’t all this physical demand? YIKES!

I wanted to talk to you about this yesterday, but with all the crazy stuff going on, I just didn’t have the time or space. But the plan to monetize Gold by the Indian Gov’t. has been a bust. Indian citizens just aren’t willing to put their Gold on deposit and earn interest on the holding. I really don’t blame them, given the caveats of this program, but to fall on its face was something I just didn’t think would happen. Well, the Indian Gov’t. isn’t going to take this laying down! Now the Indian Gov’t is attempting to get the rich temples to see the value of the program. Unfortunately, for the Indian Gov’t, I don’t think they’ll have much luck here either. You see, the fine print of the program says that the depositor might not get back the same Gold they deposited. I wouldn’t go there either! I still think the “idea” of receiving interest on a Gold deposit is a novel idea.. But the devil in the details need to ironed out. for sure!

Alrighty then, let’s step back in time, to yesterday, and talk about what Mario Draghi actually did. And what he did was take the negative rates in the Eurozone which were -.20 and widened them to negative -.30. Yes, that wasn’t a good thing, but. the markets were expected a larger move, and so Draghi avoided the executioner.. Oh many, I just had a flashback to a very old song, by Mason Proffit, titled: Two Hangmen. Two hangmen hanging from a tree, that don’t bother me, at all.. WOW! I think when I die have designated that I’ll donate my brain to science, given the right examiner, they might find just what it was that made me think like this! HA! I can’t tell you the last time I even heard that song, but it just popped into my head right there! I know, I know, get back to what you opened up this email for! Sorry..

But since we’re talking about negative rates, I thought some real thought about what this involves would be good here, and that’s when I ran across a quote from Bill Bonner. let’s listen in. A quote from my friend and publishing guru, Bill Bonner on negative rates.

“Already, the European Central Bank’s key lending rate is MINUS 0.2%. We have been amazed and befuddled by these negative rates for a long time. They suggest an impossibility: That the value of money is less than nothing. And if that is so, the value of everything money buys – including labor – must also be less than zero..which is such a strange and preposterous thought that it can’t be correct.”

Ahhh, I can always rely on Bill to explain things so that the idiocy of the person, place or thing, is as obvious as a man with a hatchet in his forehead. (no one was hurt here!)

So. It’s all about the Jobs Jamboree this morning folks. If I were in the office I would be texting our little Christine, to see if she would be so kind and stop for donuts this morning. The folks on the desk, and me here in my war bunker are going to need the “sugar to help us through the day” I told you a couple of weeks ago, that the end of this week had all this event risk, and so far it sure hasn’t disappointed us has it? I guess it disappointed Lola yesterday, and nothing could make me happier, other than learning that a cure for my cancer was available! Or maybe a new DNA. Yeah, that’s the ticket! A new DNA. I’ll check with our insurance and see if that’s covered. HAHAHAHAHAHA! As If!

My neighborhood pals found out that it was Gumbo Thursday at our watering hole, the Fenton Bar & Grill (FBG) and sent out a group text to meet. So, I dragged my sore back out of the house and went down the street. FBG is 1/8 mile from my house! And soon I was holding court, as one of the guys asked me about December 16. It was the Butler Patio , in FBG! And people all around us were stopping to listen to what I was saying. it was so much fun!

To recap. Well, having everyone on the same side of the ship of more stimulus from the ECB didn’t work out so well, as ECB president Mario Draghi, didn’t deliver the goods, yes, he put more stimulus in to the economy, but it was muted compared with what the markets had thought would be the size of stimulus implemented. Goldman (Lola) even said the euro would lose 3% on the day. Well, the euro gained 3.1% on the day instead, as short positions in euros were squeezed out, and HUGE losses were taken for those short position holders! Chuck figures that this move in the euro has given the Fed the green light to hike rates, as the “strong dollar” problem has dissipated.. At least that’s what the bond traders think as the yields on Treasury bonds gapped higher on the day. Oh, and it’s a Jobs Jamboree today!

Before we head to the Big Finish today, I wanted to bring your attention to something I’ve harped about for years on years. And that’s the continual moving of the goal posts by the U.S. Gov’t and Fed and Treasury on how data is looked at. In just the last year, we had the GDP calculation “adjusted” that would add 3% to GDP on an annual basis, for “research and development”. Just think where actual GDP would have been this year without the 3%!!!! In the past we had changes to the basket of goods used to track inflation. Remember when the price of a T-Bone steak got too expensive, so the “mental giants” decided that consumers would stop buying steak and buy hamburger instead. And so the switch was made, and voila! Inflation shows a drop! Imagine that! Well, now we have something else going on that just might make its way to prime time. I read yesterday that some Fed members are looking to change their view on PCE (personal consumption expenditures, which is the Fed’
s preferred inflation calculator) Yes, imagine this, the Fed members are taking comfort with a “trimmed mean measure of PCE” You know what that means don’t you? That come hell or high water, the Fed will get their 2% inflation! A trimmed mean measure would mean that they would take out core goods prices, which have been declining due to the strong dollar. Somebody wake me up from this nightmare, please! Shake me! Throw cold water on my face! I need to wake up now! Uh, Chuck. You’re not having a nightmare. This is reality, bud. Oh. Sanity Now! Please give me Sanity Now! Before I go crazy and run out into the street in my pajamas screaming that the sky is falling!

Currencies today 12/4/15.American Style: A$ .7325, kiwi .6685, C$ .7500, euro 1.0890, sterling 1.5130, Swiss $ 1.0010, .European Style: rand 14.4305, krone 8.5015, SEK 8.5075, forint 287.70, zloty 3.9580, koruna 24.8240, RUB 67.47, yen 122.85, sing 1.3960, HKD 7.7500, INR 66.68, China 6.3851, pesos 16.74, BRL 3.9590, Dollar Index 98.16, Oil $41.74, 10-year 2.31%, Silver $14.17, Platinum $854.23, Palladium $541.98, and Gold. $1,062.05

That’s it for today. Stevie Wonder is playing Superstition on the iPod right now. Stevie Ray Vaughn does a nice version of that song too, but normally I prefer the original version of songs. I remember when I thought I was going to be a song writer. There was this folk music song writer contest every year, and every year I would submit a song that I wrote, thinking I was going to be the winner, only to receive the “thank you for playing there’s a nice parting gift for you at the door” letter. I have all those songs I wrote on the original paper, stashed away. Sort of like the hand written Pfennigs I used to write and then put on the salesmen’s desk each morning. What I’m going to do with all that I have no idea, but maybe when I’m gone, and my kids or grandkids want to know more about me. That’s the way it’s done, right? Never sit down with your parent or grandparent and ask them questions when they are alive, and when they’re gone, you wonder, why you didn’t do that. Whoa, Chuck. That’s too serious, too depressing, and too not like you, especially on a Friday! You’re Right! Sorry. How did talking about writing songs end up there? Again, more for the examiner to figure out with my brain! HA! Well, I want to send out a big Good Luck to the Clemson Tigers who play in the ACC Championship Game tomorrow night! And tomorrow night is our neighborhood’s Annual Progressive Dinner, always a good time with neighbors that you don’t get to see much once the warm weather goes away. So. that’s it for today, it’s time to get off this bus today, and head out to a Fantastico Friday, I sure hope you can get there too!

OH! And don’t forget that Sunday is St. Nick’s Day! So leave your shoes outside your door on Saturday night! Man! I can’t believe I almost forgot about St. Nick’s Day!

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