Norges Bank Keeps Rates Unchanged.

* Dollar rebounds against most currencies.
* Krone, renminbi, rubles rally VS dollar.
* Lockhart and Yellen speak.
* ADP report misses expectations..

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

Good day.. And a Tub Thumpin’ Thursday! An easier/ navigable morning for me, so I’ve got that going for me, eh? Not so much for all the participants of the U.K. election, which is going on today. As I’ve been saying, it appears it’s a toss-up right now, but the exit-polls later today should give us some indication of the outcome. more on that in a bit. My beloved Cardinals saw their 8-game winning streak come to an end last night. And Fed member, Lockhart, tells an audience that tomorrow’s Jobs Jamboree (my words of course) comes as a key point for policy makers and will say a lot about the expected 2nd QTR growth bounce back. I was greeted this morning with a Steely Dan song: Black Friday. Could that be tomorrow if the BLS jobs report mirrors the ADP report?

WOW! Now that’s putting “it” out there for everyone to see, feel, touch, and write it down so they can shove it in the person’s face should it all come crashing down around them going forward! Lockhart said that with such confidence that you would almost think that he already knows what the BLS will tell the rest of us tomorrow, as to the job creation in April. Now, I’m not saying that he does have the numbers ahead of the rest of us, all I’m saying is that he acted and talked like someone that knew the numbers already. But that wouldn’t be possible. the BLS wouldn’t allow that to happen, right?

So. I turned on the currency screens this morning, and the currencies, for the most part, were all up VS the dollar. And then ½ hour later, when I begin to write, those same currencies have turned around and are losing ground. Hmmm. Just about the time the U.S. Traders begin to show up at their desks. I have to wonder just what the heck just went on to turn that around that quickly. Because I had read all the articles and notes from traders around the world and had formed an idea as to how the letter was going to go this morning, and now I have to trash that idea, and go back to the drawing board! UGH!

One thing that I was going to highlight, I’ll still highlight. The Norwegian krone is the best performing currency overnight, with the Chinese renminbi a close second, and the krone is getting its oats this morning from the Norges Bank, who left rates unchanged last night. See! I told you that was going to be the outcome, and it was! In fact, let’s review exactly what I said in the Pfennig on May 5th. “Norway’s Norges Bank will meet this week (May 7), and most observers, economists, and traders believe the Norges Bank will opt to cut rates at this meeting. But I’m on the other side of the fence on that one. Here’s my reasoning. The Norges Bank, seeing the stabilization and mini-rally of the Brent Oil price at the last meeting, opted to keep rates unchanged. Well, since that last meeting, Brent Oil price has rallied nearly 22%. So, I see the Norges Bank keeping rates unchanged, and IF they do, a heavy weight will be removed from the krone, for at least a few days.”

But. and you knew there would be a “but” here. the Norges Bank did indicate that they will keep looking at economic data, but the trend indicates to them that they will probably cut in June. YIKES! I remain steadfast in my thought that the Norges Bank does not need to cut rates given their housing boom, so maybe the Norges Bank was just attempting to keep a lid on the krone, as they saw traders pushing it higher after the Norges Bank left rates unchanged.

And so the krone did have a heavy weight removed from it from all the traders that thought the Norges Bank was going to cut rates at this meeting. In other news. The euro was stronger earlier, as Greece did make their payment this morning, to the IMF for: euro200 Million, but that’s small potatoes to the payment that’s due next Tuesday of euro770 Million. There have been positive tones coming from the talks with Greece, so that’s encouraging, and like I said the other day, rising Bund yields are certainly helping underpin the euro.

Did anyone besides me see that Germany posted a record Trade Surplus? And that has the German Current Account Surplus reaching 7.9% of GDP. You know, everyone in the Eurozone is having a conniption fit over this, because it violates the Eurozone stability rules, and get this. it would force a sanction if the European Union law was enforced. For what, being very good at manufacturing and exporting? That just rubs me the wrong way that they would be sanctioned. Is it Germany’s fault that the euro dropped from 1.30 last year to near parity this year before its recent rally? The answer is no. So.. the European Union needs to focus on increasing the growth of the Club Med countries so the euro can rebound further and slow the exports. But that would be everything, the other Eurozone countries need to get better at manufacturing and exporting.

So, I mentioned it at the top this morning, I might as well get to it so you all know what I was talking about. The April ADP Employment report didn’t even come close to meeting the expectations of 200,000, printing instead at 169,000, with last month’s 189,000 revised downward to 175,000. I try to mention the revisions because the markets and media seem to ignore them, but to me they are important. So, just as a reminder for you, the ADP report is supposed to be a good indicator for what the BLS will print tomorrow. It rarely works out that way, but you can’t ignore the ADP print. And according to Fed Member Lockhart, the April BLS report is going to carry a lot of weight toward monetary policy.

On a sidebar, I’ve pretty much always said that the U.S. should scrap the BLS report, which to remind you, is nothing but surveys, that then the BLS adds or subtracts (rarely do the subtract) jobs out of thin air, which leaves the BLS subject to be shot full of holes, by people like me each month. And instead use the ADP report. ADP basically does the payroll systems for most companies, so they are the people (ADP) that would know the employment in the country! But no one listens to me. Just like at home.

The Aussie dollar (A$), which yesterday rose to above 80-cents, has since seen selling. It began with profit taking, and then turned ugly with the Aussie April Employment report, which fell 2,900. which to me is no Big Deal. Especially, and here I go with the revisions again, that the markets and media ignored, when you look at the revision to last month’s number, which originally was reported as 37,700, but revised upward to 48,100. So, to me. the 10,400 gain in the revision was greater than the 2,900 loss this month, so why the negative Nellies with the A$?

Well, it’s because as I keep telling you, markets and media don’t recognize revisions. And that’s all I’ll say about that, because I have a ton of things to say that would get me into big trouble here. So, move along, Chuck.

The Russian ruble traded below 50 yesterday, it last traded below 50 on April 16th, So just a few weeks ago, and then as it was yesterday, the drop below 50 didn’t last long. But at least the last time the ruble visited the 49 handle (11/2014) it was going in the opposite direction! As I said the other day, the bad stuff for the economy has been priced in, and without an unseen chaotic happening to Russia, the ruble should be able to trade sideways with the dollar and gain a little here and there, going forward. I will remind you that while the ruble has rebounded from the devastating drop to 79, a year ago, the ruble traded at 35.

And the Chinese renminbi followed up the big appreciation on Tuesday night, with an even bigger appreciation on Wednesday night! Good for them! I think the Chinese will use this upcoming meeting with the IMF to decide if the renminbi can be part of the SDR, as an opportunity to increase the value of the renminbi. In other news from China, I read yesterday, where there are confirmed reports that China has been running tests on a floating renminbi. Hmmm, I know it’s only smoke, but remember what I’ve always told you, where there’s smoke, there’s fire.

In a follow-up of my report yesterday on the HUGE widening of the U.S. Trade Deficit for March, I came across some data that might just put the kyboshes on any thoughts that the initial 1st QTR GDP print of 1% will be added to in the revisions. In fact, from what I can figure, the March Trade Deficit which was $51.4 Billion, will put the revisions of 1st QTR GDP in negative territory. So, once again, we’ll be starting the year in the hole.

Speaking of being in a hole. Oh, that’s right! I already talked about the ADP Employment report, so move along here Chuck, what have you run out of things to talk about that you’re going to resort to repeating yourself in the same letter? Shame, shame..

OK. I won’t go there, it really was just a stream of consciousness. not any attempt to repeat myself! I guess it’s OK to talk about the Jobs Jamboree tomorrow?

This Jobs Jamboree has become quite the circus event. The circus is coming to town, the circus is coming to town. Ladies and Gentlemen, welcome to the Big Event! The flying acrobats will be performing while the fire eating giant thrills the crowd, and the dog riding ponies parade around the ring! But seriously, the Jobs Jamboree somehow has been granted the authority to decide whether or not the Fed will hike rates in June! Crazy, I know, simply crazy, but that’s the game that’s being played by the markets right now, so get your seat under the Big Tent before it’s sold out!

Well, Fed member Lockhart wasn’t the only Fed member talking yesterday. The Fed Chair, Janet Yellen got her own gig at the Institute for New Economic Thinking. In fact, on MarketWatch they have a picture of both Yellen and IMF Managing Director, Christine Lagarde, sitting next to each other in big comfy chairs, and Yellen seems to be attempting to explain something to Lagarde. Well, in Yellen’s speech, she mentioned that, “I would highlight that equity market valuations at this point generally are quite high. They are not so high when you compare the returns on equities to the returns on safe assets like bonds, which are also very low, but there are potential dangers there.”

Pretty interesting wasn’t that? HA! Just like an economist. on one hand we have dangerous levels of equity values, and on the other hand they aren’t so dangerous. You see, economists do this so they can point to either side of the fence they were on with their “two-handed” comment, and say, “see I told you”. of course they don’t mention then that they had hedged their statement! HA!

The thing I would have liked to hear her say is, “And this is what we at the Fed are going to do about these dangerous levels.” Instead she said, “we need to be attentive and are to the possibility that when the Fed decides it is time to begin raising rates, these term premiums could move up and we could see a sharp jump in long-term rates.” The key there being, “when the Fed decides it is time to begin raising rates”. Wouldn’t it just be better if she said, “get ready for we are going to raise rates at the next meeting, or next year or whenever?”

And Warren Buffett and Bill Gross both think that bonds are overvalued. Hmmm. So, if stocks and bonds correct, as these people seem to think is coming, where would you go with your cash? May I suggest Gold? Gold has different pricing mechanisms than Stocks or Bonds, and have the potential for numismatic values, that Stocks or Bonds don’t have, therefore is a very good asset class to include in your investment portfolio. Especially while the price is being held down so arbitrarily by manipulators that eventually will be driven from the markets.

Well, so, right after writing all that about Gold. Gold is getting whacked again this morning. The shiny metal is down $9 as I write. Another Blue Light Special? That’s for you to decide. I’m just here to point stuff out to you and make you think. I used to say things like “it’s time to look to go long kiwi” and so on, but. Those days are gone. Old days.. Good times, I remember, Fun Days, Filled with ship of pleasure. Drive in Movies, Comic Books, and blue jeans. Howdy Doody, Baseball Cards, and birthdays. Please take me back to the world gone away. -Chicago

The U.S. Data Cupboard is basically empty today, with only the usual Tub Thumpin’ Thursday fare of Weekly Initial Jobless Claims, which have seen some good movement lately in the Continuing Claims, which could be good, or it could be that the people are just dropping off the list, and giving up.

To recap. The U.K. election is taking place right now, and we should begin to see the exit polls as the day goes along, in an election that appears to be very tight. Norges Bank left rates unchanged and the krone is the best performing currency overnight. Greece made their payment on time to the IMF, but it was the smallest payment they have coming due, so this one was made without problems. But the euro has given back its gains overnight in the early morning trading. Aussie employment fell 2,900, no biggie, but traders are ripping the A$ this morning. And Gold is down $9 in early morning trading.

For What It’s Worth. I had a dear reader send me a thesis titled: “Has The Invisible Hand Disappeared?” I’m only going to give a small snippet of it.
But the basic idea here is that In the last 25 years there has been a loss or decline in intrinsic demand, most people don’t really need anything today. So, that’s where the demand has gone. here’s your small snippet, but it will make you think..

Unfortunately today there is nothing important enough to rally around. Nothing new. Everything important has already been invented – ha! (Of course not, but important inventions are genuinely few and far between.) Control over the world populace is unprecedented. If there are important things to rally around, such change is quickly suppressed before it can take hold.

But to the point. People have their basic necessities – what they need. As innovation and change is stifled, big business fights over a smaller pie. The government responds by forcing people to buy more things, which is an unending and unnatural cycle. A vicious circle. You can stimulate, drive and force a great deal of new demand – squeezing blood from a turnip – but eventually it dries up. Without that, the infighting begins. Eventually there are only a few survivors and they own or control everything. We’re already there. Without meaningful change in demand – something new or different – there can be no real growth, and business and the market shall remain stagnant as today. This is likely to persist for a very long time, especially when markets are artificially controlled (manipulated) and true innovation is suppressed, if only by overwhelming barriers to entry, in favor or old ways of doing things. This is why prices no longer move according to natural market forces we learned in school, and why the invisible hand has, in fact, disappeared. []

Chuck again. Makes sense. I had a dear reader send me something that’s truthful and funny in his follow up of my attempt to be funny yesterday, asking why they call it a boxing ring. The reader said, “The same faceless people that come up the economic numbers decide that you will park your car in a driveway, and drive on a parkway.. HAHAHAHA!

Currencies today 5/7/15. American Style: A$ .7955, kiwi .7470, C$ .8275, euro 1.1305, sterling 1.5210, Swiss 1.0945, . European Style: rand 12.0285, krone 7.3695, SEK 8.2130, forint 269.60, zloty 3.5830, koruna 24.2320, RUB 50.37, yen 119.25, sing 1.3310, HKD 7.7525, INR 64.23, China 6.1113, pesos 15.35, BRL 3.5835, Dollar Index 94.28, Oil $61.19, 10-year 2.27% (big move upward the past couple of days), Silver $16.33, Platinum $1,1137.26, Palladium $793.07 and Gold. $1,186.20

That’s it for today. Well, as I told you at the top this morning, my beloved Cardinals winning streak of 8 games came to a halt last night. A dear reader sent me a note the other day and said, “Chuck are you superstitious you haven’t mentioned that the Cardinals have the best record in baseball”? And I replied, yes I am! And that’s why I haven’t mentioned it until they lose one. Well, how about what that investigation had to say about Deflategate? They concluded that Patriots’ Quarterback Tom Brady probably knew about the deflated balls he was using in the Super Bowl, and all year according to the investigation. WOW! Of course I’ll have all the Patriots fans ripping me today, but Cheaters are cheaters, I still feel the sting of losing to them in the Super Bowl 12 years ago! Our neighboring state, and one that I used to live in for a short time, Oklahoma is experiencing some dangerous weather, tornados, etc. My friend, Donnie Phillips who played lead guitar in our traveling band, still lives there. I hope all everyone is safe. The Moody Blues from their Seventh Sojourn album are playing their song: Isn’t Life Strange on the iPod right now. I love that album, and Life is strange isn’t it? Well, I actually took way too much time writing today, and now I’m late! So, let’s go out there and make this a Tub Thumpin’ Thursday!

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