The Markets Say Rate Hike Is A Done Deal!

* Jobs Jamboree. Blows doors off jobs report
* But is the number real?
* Currencies and metals get hammered!
* China posts record Trade Surplus!

And now, today’s A Pfennig For Your Thoughts

Good day… And a Marvelous Monday to you. It turned quite chilly this past weekend here, but the sun was out, so that’s not so bad. The Beatles greet me this morning with their song from the Sgt. Pepper’s Lonely Heart Club Band album : A Day. In The Life… This album was critically acclaimed but I have to admit that Rubber Soul was my fave album by the Beatles…

Well we were all stunned on Friday morning weren’t we? Even those that were calling for 200,000+, never in their wildest imaginations thought the “+” laws going to be as high as 271,000 jobs created. The report was very robust, and most of the components of the report showed improvement, including the additional 165,000 jobs that the BLS added to the survey… Hmmm, let’s see now 271,000 – 165,000 leaves just 106,000 jobs that came fro the always questionable sure eyes… But hey! The markets bought it, the rat hike campers were dancing in the streets, and the currencies got the you know what kicked out of them…. Aye,yay,yay… Well one piece of the pie on Friday, isn’t subjected to “additions”, fasted that is the Avg. Hourly. Earnings, and the Avg. Weekly Hours.

The Avg. Hourly earnings did show an unexpected bump higher which is go for those of us earning wages, and could very well be an indicator of rising wage inflation,which. Is exactly what the Fed wants to see… Butler just like everything else, and this month’s. Jobs report. Is no exception, one swallow doesn’t make a summer, and one strong jobs report doesn’t represent a trend.. Did everyone forget that The previous two month’s Jobs reports weren’t so strong? And before that May, June, and July’s reports this year were all in the 200,000’s in BLS jobs reports… One would have thought after July’s report, that 200,000+ was going to be the new run rate each month! But then we had back-to-back months of sub 155,000… What happened? Well, the May,June,July, and Rocktober prints had something in common that the August & September reports didn’t have… They had large BLS additions after the surveys… May’s total jobs reported was 260,000,with 213,000 added, June was 245,000 reported with 109,000 added, July was 223,000 reported with 83,000 added, and now Rocktober’ reported total was 271,000 with 165,000 added. Let’s just for fun add all that up… Total reported by the BLD for those 4 months = 999,999 with 570,00 added by the BLS after the survey… So, more than one-half of the total jobs reported by the BLS were simply a hedonic adjustment.

But I can rant and stomp and get my blood pressure on the rise over this stuff, but It doesn’t make any difference in the markets… Now,if I were king of the forest, not queen, not prince, not duke… There would be no hedonic adjustments, and… The markets would pay attention to what I say!!!! HAHAHAHAHAHA!

So, like I said above, the currencies and metals just got their legs chopped off at the knees… The jobs report got everyone thinking now (everyone but me) that a rate hike in December is a done deal…. I have a question for these soothsayers… If it’s such a done deal, why wait until he he December meeting, pulls Volcker and hike rates on a Saturday night!!!!! Oh, and there’s also this to think about… The dollar is now higher than it has been at any point win the past 13 years, do you remember in September that the Fed pointed out the problems with the strong dollar? Well, it’s stronger that it was then, now! Could this strong dollar hurt the chances for a rate hike? Well, only if the Fed remains consistent… Of course if they stayed with their Statements, then we wouldn’t be carrying on like this with the dollar, because not all of their stated things they were following that would tell them when to hike rates have hit their stated bogeys… Just as a reminder.. PCE inflation is only 1.3%, not 2%… And GDP is 1.5%….

Shoot Rudy, even our local Business section writer in the Post Dispatch thinks the jobs report means it’s time for liftoff…. So here I am, yes, I know there are still a few brave analysts out there still saying the Fed won’t hike rates in December… But here in my seat at my writing desk, I get the feeling that I’m all by myself on this one…

I was so concerned about the health of the currencies and metals that last night I had to pull up a screen so I could see what was going on in Asia. I was pleasantly surprised to see what the screens showed me that the currencies & metals were fighting back against the Death Star (dollar)… Strange that the Asian markets didn’t see the jobs report like their NY Trading brothers… Don’t you agree?

I’ve also read a lot of analysts reports with their reasons why they believe the Fed will hike rates, and almost all of them talk about how the last time the Fed passed up a rate hike in September the Fed was concerned about China, and these analysts now believe that China has shown that they aren’t in that bad of shape… So… I wonder how they are feeling this morning when they wake up and see that China reported their latest trade numbers… The good news? China posted a record $61.6 Billion Trade Surplus. The bad news. Well there are two fronts on this bad news stuff… 1. Chinese imports dropped 18.8%… No domestic demand, or at least very little of it… L

And 1. Exports dropped 6.9%!!!! That means there is much less demand for Chinese goods around the world, which means global growth is circling the bowl, and we all know who China’s biggest partner in trade is right?

The Chinese renminbi took on some major water overnight after the trade data printed… Sure the imports # is worrisome,but let’s not lose track of the fact that their Trade Surplus was an all-time record! But that fact didn’t help the renminbi last night.

So… This morning, the European session has carried on with rally that was started in Asia last night. The moves. Aren’t in any way shape or form the size of the losses that the currencies and metals took on Friday, but at least the selling didn’t carry over to the overseas markets…

And don’t look now but the 10-year Treasury yield has fallen out of bed! The losses here are huge folks but holders don’t have to book them they can I just hold to maturity, but if yields are rising, wouldn’t. holders want to hold the higher yielding bond? Of course they would, which means they’ll have to sell their current low yielding bond at a huge loss first… But no worries, they’re safe right?

The U.S. Data Cupboard needs a day to recover, in fact, there won’t be a tier 1 data print this week until Friday, when Rocktober Retail Sales print… I’ll tell you right now,and then of course, remind you later this week, that the BHI indicates to me that this data will be better than the disappointment in September, but still not the stuff that so-called strong enough economies to take on rate hikes should be printing at this point, 6-years after we supposedly ended the Great Recession, and began Quantitative Easing, and ZIRP…

Well Gold fell below $1,100 on Friday and hasn’t made its way back above that level… Last week I told you about the Gold coverage ratio, and some of you found this data to be impossible… Well, I don’t make this stuff up folks… Personally I was blown away at the size of the numbers, and began to wonder if the “house” is going to win at all costs! I began to rant and yell out loud (good thing I was here by myself!) and then found myself questioning all sorts of things… I even had thoughts of walking away from all of this, because the stress is becoming to much, and stress isn’t good for anyone, especially people that already have cancer!

But don’t worry about me, like I said they were just thoughts… I can deal with it, it’s just that some days I just can’t deal with the dolts any longer!

To recap… The Jobs Jamboree caused shock & awe on Friday with a print of 271,000 jobs, of course Chuck breaks down the BLS numbers, but that didn’t stop the markets from going all-in on dollar buying, and buy dollars they did! It got really ugly for the currencies and metals on Friday folks. Last night in Asia the currencies and metals started to fight back, and it carried through in Europe this morning… Chuck talks and talks and talks about the now called for, December rate hike… He really does overdue it, but he was on a roll, and we didn’t to stop him… Ha!

Currencies today 11/9/15…American Style: A$ .7065, kiwi .6560, C$ .7540, euro 1.0780, sterling 1.5105, Swiss $ .9970, … European Style: rand $14.2429, krone 8.6226, SEK 8.6585, forint 291.67, zloty 3.9565, koruna 25.0625, RUB 64.44, yen 123.40, sing 1.4245, HKD 7.7520, INR 66.44, China 6.3578, pesos 16.80, BRL 3.7912, Dollar Index 98.88, Oil $44.46, 10-year 2.34%, Silver $14.76, Platinum $932.15, Palladium $597.53, and Gold… $1,093.42

That’s it for today… I’m writing the Pfennig on my iPad this morning… So that’s taken me twice as long … UGH! Yes technical problems arose yesterday And with it being a Sunday, well hopefully it can all be fixed today.. Thanks to Mike Meyer back on the trade desk for making sure this gets out… We had a very nice birthday celebration dinner last night to celebrate Rachel’s birthday… The grandkids were bouncing off the walls, and even Alex made it home for the dinner, that Kathy spent the whole day in the kitchen working on…. The Rams lost a tough game in OT yesterday, but our Blues won in Nashville on Saturday night… I actually got out of the house and drove my car to someplace other than the doctor’s office on Saturday. Remember I told you wi was going to become a recluse because of my problem right now… But good friend Rick B asked me to come over and watch his Clemson Tigers play, so I did! The sun hurt my eyes! Ha! Dion is playing his great old song, The
Wanderer on the iPod right now.. Jerry always says that song is about him, and we all laugh… Alrighty then, I’ve had enough of this typing on the iPad… I hope you can get out there and make this a Marvelous Monday!

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