More Stimulus For Japan!

* Jobs Jamboree blows the doors off!
* But do we really believe the BLS?
* BOE and BOC meet this week.
* Silver soars, then gets brought back to earth!.
And now. Today’s A Pfennig For Your Thoughts.

Good Day. And a Marvelous Monday to you! It’s July 11th. or 7/11. Which when I heard that date on the radio this morning, all I could think of was whether I wanted a Big Gulp or a Little Gulp. HA! After the previous weekend being a complete rain washout, this past weekend was a complete sun washout! YAHOO! And now we’re just 10 days away from my summer vacation! A double YAHOO! Nazareth greets me this morning with their song: Hair of the Dog. 70’s rock personified! An infusion shortened week for me, so I’ve got that going for me this week!

As I was signing off on Friday, I gave you the headline number for jobs created by the BLS, I mean the U.S. economy In June of 287,000. Now that number sure blows the doors off doesn’t it? So, that’s on the outside, let’s look under the hood. 92,000 jobs were added by the BLS to the surveys with their Birth/ Death model. They just keep shoving it in our faces don’t they? A couple of weeks ago, I gave you some data from a research firm that showed that business failures have outnumbered business startups by 70,000 per year since 2008. (courtesy of the non-partisan group EIG) So, how is it that the BLS adds jobs each month as if there are more startups than failures? Because they can. Sort of like why does a. Oh, never mind, that would be distasteful to some, but funny to most, and I guess you can figure out what I was going to say there! But the BLS can, and do! And no one stops them from doing what they do so brazenly. I just shake my head in disgust that the markets are so moved by this data that’s so obviously flawed.

And there’s more! You just have to pay for separate shipping and handling. Wage growth is tepid at best as it gained just 0.1%, and stands at 2.6% annualized. The Average Weekly Hours Worked remained at 34.4 hours per week. Oh, and remember that 38,000 print in May for jobs added? (The BLS added 244,000 jobs that month!) it was revised downward to 11,000. (and the BLS 244,000 jobs remain in the number, otherwise that would certainly be a very bad number!) I told you a week or so ago, that this jobs report would be better, especially if they still allow the president to keep sending the reports back until the accounting people get it right, like they did in the time of LBJ. But June is historically a good month for job growth, as you have all the graduates hitting the jobs market, and the summer jobs that open up in June. But never in my wildest dreams thought I would see the BLS trying to force this down our throats. 287,000 jobs created in June.

And furthermore on the Birth / Death Model, here are some numbers to take in, digest, and think about for a while. In the 2nd QTR (April, May, June) The total BLS jobs reported as created was 421,000 And the number of jobs that the BLS has added in the 2nd QTR is a total of 549,000. That’s 128,000 more than what they reported as a total. I know that sounds weird, but in May when only 11,000 jobs total were reported, the BLS added 244,000 keeping May from being negative. So again, let me be perfectly clear on this, the EIG group says that business failures have outpaced startups by 70,000 per year since 2008. That’s a total of 7 full years, with is a total of failures over startups of 490,000, which to me seems to be too HUGE of a number for the BLS to ignore. But yet, the BLS just keeps adding jobs each month, because, well because they can.

So, with the “strong” number from the Jobs Jamboree last Friday, we can expect the rate hike rhetoric to return. The rhetoric by the Fed members has gone silent since last month’s awful jobs print. And we know that when the Fed members start talking they can sound pretty convincing, but don’t let their words or their persuasive manners fool you. The Fed isn’t going to raise rates this year, If I’ve said it once, I’ve said it a couple of dozen times!

But with the rate hike rhetoric back on the table, so is the drive to push the dollar higher. When will these traders and investors ever learn? When will they, ever, learn? But that’s what we have this morning, the dollar with the conn. Whenever I see the dollar as the king of the hill, I think of the story about the Emperor that had no clothes. But that’s just me, and I tend to see things for what they are, not what people think they are. Yes, I know, perception is everything, you are what you are perceived to be, but I just don’t buy it on the dollar, the U.S. Debt picture is awful, and getting worse all the time, the U.S. economy is teetering on recession, bond yields are so low you wouldn’t trip on them should they be laying on the floor when you walk, and the stock market bull market is so long in the tooth, it scares the bejeebers out of me. I could go on, but we have other things to talk about this morning.

Most of what we have to talk about today though is all about what the events/ prints that are going to take place as the week moves along. I told you on Friday about the Japanese elections that would take place over the weekend, and in those elections, Japanese PM Abe gained even more of a majority, and it now appears that there will be no opposition to his plans to implement more stimulus. And that thought pierced right through the yen’s bubble, as the currency lost 1 full figure.

The currencies are looking for direction this week, and the U.S. Data Cupboard does have a couple of things worthy of providing direction. Things like the Labor Market Conditions Index (LMCI), which is the preferred labor market information of the Fed, and not that trumped up BLS hedonically adjusted Jobs Jamboree. We’ll see the color of the June Retail Sales on Friday. And even with all the Graduation parties, and gifts in June, I don’t expect a good strong report here, as the BHI indicates to me that it will be disappointing. But the Fed members will be out in force this week with Loretta Mester kicking things off today, and James Bullard, who’s always good for a sound bite or two, follows up tomorrow. Kaplan, Kashkari, Harker, Lockhart, and George are all scheduled to speak this week. Remember when you never heard from the Fed members? And would have a difficult time naming them? They were silent, and kept to the task at hand, but not these days, these guy and gals want to be rock stars.

The Bank of Canada (BOC) meets this week and I expect them to leave rates unchanged, as there has been no dip in the economy’s performance of late, although I will admit that the economic reports have been softer than expected, but not overly weak, which is why I think the BOC will leave rates unchanged, but could come out with a dovish statement following the rate announcement, and that fear of that dovish statement has the Canadian dollar/ loonie seeking shelter as we start the week. The loonie has been one of the better performing currencies in 2016, as we started the year around 70-cents, and today the loonie trades with a 76-cent handle and as traded recently with a 78-cent handle!

The euro is flat today, but was down about ¼-cent when I came in this morning. The global uncertainty of the BREXIT result is still filtering through the markets, and weighing heavily on the euro. For no one knows what’s going to happen going forward, and they have to take it one day at a time. The Eurozone leaders have been quite quiet since the BREXIT vote, which is probably good thing, but I would have thought that they would be out talking about how the Eurozone will weather this storm, etc. Have they learned nothing from how the Fed members and U.S. Gov’t leaders tell us everything is fine, when they know in their heart of hearts it isn’t!

The Bank of England (BOE) will meet on Thursday, and this would be the time, in my humble opinion, to make a rate cut, BOE Gov. Mark Carney. Look, you could blame the unknown that was created by BREXIT, as the reason to cut rates, and then you wouldn’t look so silly, given that you told everyone two years ago that the next move in rates would be a hike. But he won’t use this time after the BREXIT vote as an opportunity to cut rates. He’s too hard headed. That’s what my mom used to call me. A hard headed kid. I still have some of that in me, as when I believe in something, I won’t back down from defending the idea. But getting back to the BOE and Carney. I read this last weekend that U.K. Consumer Sentiment plunged the most in 21 years after BREXIT. Carney could also point to this data when he cut rates, should he go down that path.

I had to laugh when I read a piece this weekend that talked about how CPI (consumer inflation ) was going to finally get to the 2% level that the Fed members are seeking, because of the price increases in gas. Ahem. Have they seen that the price of Oil has fallen to a $44 handle? And if that happens what happens to the price of gas? Well, as long as the refineries are keeping up with the demand, the price of gas should at least remain steady Eddie, and I filled up my gas tank yesterday, and thought it was a reasonable total when finished.

I also had a big belly laugh when I read that “Worries about the health of the U.S. economy lessened after the nonfarm payrolls report”. Again, that’s just me being me, for I get it, the flag wavers for the U.S. dollar and rate hikes, will be out in force again, and could support the dollar in early week trading, but we have to come back to the fact that one single data point doesn’t make a trend, and shouldn’t go very far in adding confidence to the U.S. dollar. I would think that by Wednesday, we could be seeing the dollar’s confidence fading quickly.

I’ve really triggered some great thoughts from readers in the last couple of weeks with my going on and on like the Ever ready Bunny, about negative yields, and NIRP. Keep ’em coming! I love them! All of them with well thought out discussions of their views on negative yields and NIRP. The most important thing about all of this is that once they go negative, there’s no stopping them from going all-in negative. And it’s not just Gov’t bonds that are seeing their yields drop to such low figures. Last week Walt Disney sold a 30-year bond with a 3% interest rate and a 10-year bond with a 1.85% interest rate. These bonds represent the lowest long-term borrowing costs in U.S. Corporate bond history!

The dollars from Australia (A$) and New Zealand / kiwi, have backed off some lofty levels seen on Friday, this morning. The A$ was up to 76-cents and kiwi was trading with a 73-cent handle, before seeing profit taking and other manipulations. These two have been very stealth-like in their rise to higher ground, as if they didn’t want anyone to notice, but when they reached those lofty figures, someone was bound to notice. unfortunately.

Gold found its way to add $5 to its price on Friday, and is up another $2 in the early morning trading. Nothing really to get excited about, but a positive is better than a negative in the Gold price any old day! There was an article on the Bloomberg this weekend about how Japanese investors are flocking to Gold. I’ll have that for you in the FWIS section today, so you’ll not want to miss that!

Silver had a good day going, at one point in the day, it was up $1.11!!!! But had to settle for an increase on the day of 60-cents. UGH! I guess $1.11 was just too much to deal with for the price manipulators. They couldn’t bear to see that figure staring them in the face, so they took care of that! But Silver still maintained a 60-cent move, which on most days would be just peachy. But not on a day when it was up $1.11 and had to settle for 60-cents.

I don’t know if you’ve noticed or not, but Platinum has really taken off in recent weeks.. First was a return to $1,000 and now Platinum is within spittin’ distance of $1,100 as it trades this morning at $1,097.

To recap. the dollar has the conn again this morning, after the Jobs Jamboree on Friday, showed 287,000 jobs created by the BLS, I mean the economy in June. Believe what you want, but I’m taking the high road on this and calling this report out. If we just use BLS numbers in the 2nd QTR, the BLS added more jobs in the 2nd QTR with their Birth/Death model than they actually reported jobs created! Now how does that happen? Just shows to go you just how screwed up the BLS report is. Japan’s elections went well for PM Abe, and now he should be ready to implement more stimulus in Japan, and that has taken a bit of the shine from the Japanese yen. The BOC, and BOE meet this week, and neither one should have any surprised for us, although Chuck thinks that BOE Gov. Carney should use this market turmoil as his excuse for cutting rates.

For What It’s Worth. Well, I pre-billed this FWIW this morning, by telling you above that I had something about Japanese investors flocking to Gold. It was a Bloomberg report, so you can find it here:

Or Here is the Snippet. “Japanese investors are buying gold to store in Switzerland because of negative interest rates and fears the yen will depreciate as the government grapples with the heaviest public debt burden in the developed world, according to BullionVault Ltd., an online trading and storage company.

The number of buyers jumped 62 percent in the first six months from the second half of 2015, Atsuko Sato Whitehouse, head of Japanese markets at the London-based investment service, said this week. She didn’t provide details. The Bank of Japan has embarked on unprecedented bond buying to bolster the economy, prompting speculation the yen could plunge if stimulus efforts fail.

“Many of our Japanese customers think it’s too risky to hold gold bars at home and they want to keep them in Switzerland because they are anxious about the future of Japan,” Whitehouse said in an interview. The country’s growth has stagnated for a decade, defying fiscal and monetary stimulus which has driven up public debt to more than double the value of annual economic output.

Chuck again. You know, one thing the article didn’t mention was that with the surge higher in yen, it has kept pace with the surge in Gold. So Gold’s price in yen is still within reason for Japanese investors. When I read this I couldn’t help but think about the old stories about the Japanese housewives moving the “Carry Trade” with their selling of yen and buying of Aussie and New Zealand dollars. Remember those? Boy, I do. and all can think about when reading this article was that if the Japanese investors get behind Gold like they did the “Carry Trade” this could be the kick that Gold has been waiting for..

Currencies today 7/11/16. American Style: A$ .7555, kiwi .7245, C$ 7645, euro 1.1045, sterling 1.2930, Swiss $1.0170, . European Style rand 14.52, krone 8.5255, SEK 8.5835, forint 283.69, zloty 4.00, koruna 24.4783, RUB 63.20, yen 102.30, sing 1.3490, HKD 7.7582, INR 67.18, China 6.6902, peso 18.54, BRL 3.30, Dollar Index 96.62, Oil $44.77, 10-year 1.38%, Silver $20.47, Platinum $1,097.18, Palladium $621.74, and Gold. $1,361.10

That’s it for today. Well, it’s that time of year again when baseball pauses for its All-Star festivities, which began yesterday with the futures game, then really gets going tonight with the Home Run Derby, and then tomorrow with the All-Star Game. The Great Leon Russell takes us to the finish line today with his song: Delta Lady. Did I ever tell you that I met Leon Russell once? I was playing with the band at a venue in Tulsa, Oklahoma, and he was there to perform. What nice guy, and I have always loved his music, including the stuff he did with Joe Cocker, Mad Dogs and Englishmen. Well, both grandsons are now swimming all around the pool. They are so darn cute when they realize that they can swim! OK, people are arriving in the office now, I need to turn down the volume on my iPod speakers, and then tell you that I hope you have a Marvelous Monday! Be Good To Yourself!

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