Tomorrow Is Being Called: “Judgement Day”

* Lockdown begins ahead of jobs jamboree tomorrow.
* Chuck gets on his soap box!
* It’s Cinco de Mayo!
* Kentucky Derby & Mother’s Day Weekend!
And now. Today’s A Pfennig For Your Thoughts.

Good Day. And a Tub Thumpin’ Thursday to you! And it’s Cinco de Mayo! So, I’m sure there will be some Tub Thumpin’ going on around town today. Unfortunately for me, there will be no Tub Thumpin’ for me today, for it’s an infusion day, and I’m still dealing with the gout! UGH! Loggins and Messina greet me this morning with their song: Your Momma Don’t Dance. When darling daughter, Dawn, was a little girl, she used to sing: My Momma Does Dance, and My Daddy does Rock-n-Roll! I have my traditional story to tell on Cinco de Mayo at the end today, and I have some interesting stuff today beyond the usual this currency and that currency talk. So, are you ready? Yes, I’m ready..

A quick look at the currencies and metals this morning tells me that the markets are already in a defensive shell awaiting Friday’s Jobs Jamboree. I’ve read quite a bit about this Friday’s Jobs Jamboree, and while I’m still committed to “not giving two hoots about what the BLS’s surveys and hedonic adjustments tell us” I still have to deal with the fact that the markets do give two hoots about it, and what I’m reading tells me that there are a lot of eggs being placed in this month’s Jobs report basket. I’ve even read where the markets are calling tomorrow’s Jobs Jamboree the “Judgement Day”. Well, the only “Judgement Day” I know of is in the Book of Acts 17:31.

A lot of eggs have been placed in the Jobs report’s basket, as we’re back to the same stuff the markets were all lathered up about a few months ago, saying that this week’s jobs report will determine if the Fed feels that the economy is strong enough to hike rates in June. I can’t believe this is happening again! Didn’t the markets get the stuffing knocked out of them with this thought process being so wrong a few months ago? Then why get right back on that horse? Fool me once, it’s your doing, Fool me twice it’s my doing. But, it is what it is, right? And if the markets want to get all lathered up over surveys that get run through the massaging table before going public, then we just have to sit and watch it all happen. But that doesn’t stop me from telling you that I think that they are all dolts!

Judgement, Schudgement Day, is what I say! But, as I said above, the markets are already backing off on volume traded and positioning and the dollar is looking like it still has the conn, but not as strongly as the previous two days. Japanese yen is trading back over 107, the euro has lost another 1/2-cent but the Aussie dollar, which has spent the previous two days in the woodshed, as wrapped a tourniquet around the bleeding for now.. Gold is down again this morning after losing $6.70 yesterday.

I got a kick out of quote by Mark Mobius, of the Templeton Emerging Markets Fund.. He said, that, “a rebound in commodities is only getting started after prices sank too far and that gains may be extreme”. And this is where I’ll remind everyone about the Pfennig ad at the top of the letter today, that highlights our MarketSafe Commodity Solutions CD, that’s a 5-year, 100% principal protected CD. And also let me remind you that the great investor/ analyst/ author, Jimmy Rogers taught us in his book Hot Commodities, that Commodity Bull Markets are long running trends that may last many years.

So, if Mark Mobius is correct, and believe me he’s not the only one out there calling for a rebound in Commodities, then we may have something here. I love it when a plan comes together though. Because it was at my urging that the boys and girls on the trading desk, decided to look at Commodities for a MarketSafe, since they had been beaten up so badly, and what did I tell you last week that I learned early in my career about investing? Buy into weakness.

Getting back to the Jobs Jamboree tomorrow, or “Judgement Day” according to the markets, I was exchanging emails with my friend, the retirementor, Dennis Miller, yesterday, and I got on my soapbox and started preaching to the choir. And then afterwards, I thought, this discussion would be better served, sharing it with you, dear Pfennig Reader! So.. here goes.. .

Dennis: In my article tomorrow, I am not joking when I say Janet Yellen is the most powerful woman in the world. (chuck here: you should check his letter out!

Chuck: something I used to say when Bernanke was there, and that is that we, as a country would have been better off if they never were created. let the markets set the interest rates, they know what they should be! And we would have never had this mess to begin with!

And then I was reading an article on LinkedIn by Danielle DiMartino Booth, which I would like each and every one of you to take the time to read you can find it here:

And she wrote something that plays well with my let the markets set the interest rates: “A new generation of revolutionary central bankers must be called to arms for all of our sake. Their battle cry: We commit to never returning rates to zero or below again, to never let be money be free and forever ensure there is a true cost associated with borrowing. Release the markets to set interest rates now and forever!”

Talk about perfect timing!

So, I’ve done all this talking this morning about “Judgement Day” tomorrow, and haven’t talked about what the forecasts are calling for. I think that’s because I really don’t care about the “numbers” any longer. The one that I do care about is the Labor Participation Report, which shows that we’re at 1977 levels of labor participation. But for those of you keeping score of the BLS surveys and hedonic adjustments, well, the so-called experts believe that in April, the total jobs created will be 200,000. The ADP Employment Report printed 193,000 jobs created in April. I would say that number is pretty close to where we’ll see tomorrow’s print. But who knows what wild hair the BLS will have for adjustments?

Does 200,000 meet the “Judgement Day” level that the markets are thinking will be enough to get the Fed to hike rates in June? I shake my head in disgust that we even have to deal with this stuff. My answer is no. and yes, that’s my final answer!

And why is it that I say that? Well, let’s see. Yesterday, I told you about Fed Atlanta President, Dennis Lockhart, who said that the rate hike in June was a “live option”. Then San Francisco Fed President, John Williams, said that he would support such a move (rate hike) at the next meeting provided the economy stayed on track. Hmmm, funny thing, again not funny ha-ha, about these guys talking rate hikes at the June meeting. They are NOT voting members this year. But the markets don’t seem to care one iota, and it’s all been about the dollar rebound since Lockhart first talked. I do believe that a voting member and hawk, Fed St. Louis President, James Bullard is to speak this week still, should be interesting to hear what he has to say.

Oh, and that comment by Williams about: providing the economy stayed on track. Now that’s interesting, was he talking about staying on the track that has Durable Goods Orders negative each month, along with Capital Goods Orders? Or maybe he was talking about staying on track with Manufacturing that has only seen one positive month since August 2014? Or the economy that has produced so many Corporate closings and bankruptcies in the past year? I think you get my drift here. I’m sure he’ pinning his colors to the labor mast, for that seems to be the only thing we’ve got going here in the U.S. right now. And I don’t think that’s enough to move the Fed to the rate hike table in June. But I’ve been wrong about the Fed’s moves before (December), and I might be wrong about this meeting in June, but does it make their moves right? Oh, for heaven’s sake, I really don’t care anymore what they do, or don’t do, I’m tired of talking about them!

The price of Oil rebounded in the past 24 hours from $43.67 yesterday morning to $45.12 this morning. But the hold that the dollar has on the currencies right now, hasn’t allowed the Oil price rebound to benefit the Petrol Currencies. And the Russian ruble continues to get whacked again. The ruble has to feel like the guy in the great Allman Brothers song, sometimes I feel, sometimes I feel, like I’ve been tied to the whipping post. (it’s just a song, no one was hurt)

Since it’s Cinco de Mayo today, we might as well spend some time talking about Mexico and the peso. I don’t know if you follow the peso or not, but as recent as Monday of this week, the peso was in rally mode, that began last week when all the currencies were taking liberties with the dollar. But since Monday the trap door has sprung on the peso again, now what could that be in reference to? There’s been no real data prints. Yes, the dollar has rebounded, but that doesn’t usually work against the peso that much. Ahhh, grasshopper here’s my take on the peso drop. It coincided with the result of the Tuesday Indiana primary results here in the U.S. And who was the Big Winner on the Republican side? Trump, and what has Trump had to say about Mexico? A lot, and I’m not going to get into the politics of this, only to say that the Trump victory, I believe has investors, and traders in pesos running scared.

The U.S. Data Cupboard yesterday, had the ADP report like we talked about above, and Factory Orders, which I told you we would see an improvement in since March manufacturing was better, and that’s exactly what we saw in Factory Orders for March, which grew at 1.1% after a downward revised February negative result of -1.9%… Since April manufacturing backed off the surprise in March, I expect this data to back off when it prints again next month.

We also saw the Trade Deficit here in the U.S. for March, and it dropped by quite a bit, from $47 Billion in February to $40.4 Billion in March. Unfortunately, that’s not all good news, because imports dropped 3.6%, and this is used as an indication of domestic demand.

Let me straighten this stuff all out for you. We had Manufacturing, and Factory Orders rebound in March, and the Trade Deficit drop also in March, and what else dropped in March? That’s right the value of the dollar! The dollar dropped in value during March, and amazingly enough these data prints that depend on a weaker dollar to rise, did so!

It’s not so much that we need a weaker dollar, but we need a dollar that’s fair priced, based on its fundamentals, and we haven’t had that in a few years now. So, when I say, “weaker dollar” I mean from its lofty status that had no fundamental backing on why it would be so “lofty”.

Of course, looking long term, we need a much weaker dollar so that we can inflate away our debts, but we can’t have the dollar fall off a cliff to achieve that goal, just years of weakness and begins to boil. You know, like the frog in the pot of water on the stove. If you turn the heat on high immediately the frog jumps out, but if you gradually turn the heat up, well you know the rest.

To recap. The dollar still holds the conn on the currencies that came about after the Dennis Lockhart speech this week talking about how the rate hike talk is a “live option” at the June meeting. However, the moves this morning are more muted as traders begin to batten down the hatches ahead of tomorrow’s Jobs Jamboree, which is being called “Judgement Day”. Chuck thinks it’s all malarkey, but the markets have pinned their colors to the mast of the “Judgement Day”. Today is Cinco de Mayo.. And Jim Sinclair is looking for people to join him in his new kind of litigation against the price manipulators of metals.

For What It’s Worth. So, I’m sure you’ve heard of Stanley Druckenmiller, right? I believe I’ve used some of his quotes before.. Well, I found this on Bloomberg, and it talks about how Druckenmiller is increasing his allocation of Gold. I thought you would be interested in this, and you can read it all here:

Or you can be satisfied with the Snippet: “Stan Druckenmiller, the billionaire investor with one of the best long-term track records in money management, said the bull market in stocks has “exhausted itself” and that gold is his largest currency allocation.

Druckenmiller, speaking at the Sohn Investment Conference in New York on Wednesday, said while he’s been critical of Federal Reserve policy for the last three years he expected at that time it would lead to higher asset prices.

“I now feel the weight of the evidence has shifted the other way; higher valuations, three more years of unproductive corporate behavior, limits to further easing and excessive borrowing from the future suggest that the bull market is exhausting itself,” said Druckenmiller, who averaged annual returns of 30 percent from 1986 through 2010 at his Duquesne Capital Management.

As bankers experiment with “the absurd notion of negative interest rates,” Druckenmiller said, he’s wagering on gold. “Some regard it as a metal, we regard it as a currency and it remains our largest currency allocation,” he said, without naming the metal.”

Chuck again. Thanks to Ed Steer who pointed this article out to me this morning.

Currencies today 5/5/16. American Style: A$ .7485, kiwi .6885, C$ .7795, euro 1.1435, sterling 1.4510, Swiss $1.0398, . European Style: rand 14.9680, krone 8.1490, SEK 8.1010, forint 273.50, zloty 3.8495, koruna 23.6220, RUB 66.73, yen 107.35, sing 1.3585, HKD 7.7606, INR 66.50, China 6.5039, Peso 17.70, BRL 3.5490, Dollar Index 93.51, Oil $45.12, 10-year 1.81%, Silver $17.44, Platinum $1,055.50, Palladium $601.46, and Gold.. $1,278.90

That’s it for today. So. Happy Cinco de Mayo to everyone that celebrates this day! Every year on Cinco de Mayo, I tell the story of when I was in Cancun years ago with Kathy and friends Toni and Duane, and we walked past a street performer that was playing his guitar beautifully I might add, and he began to play a song I recognized, I saw a microphone on his amplifier and I picked it up and started singing Dust in the Wind to the crowd. Kathy was embarrassed, but the crowd loved it, and the guitar player thanked me and gave me his CD he was selling. Quite a few years ago now, I told this story, and a very angry reader sent me a note and told me I was a MAK. So that’s the joke on the desk every Cinco de Mayo, that I was a MAK. (I can’t tell you what it means, but I’m sure you can figure it out) Cardinals pull out a victory in the bottom of the ninth, last night, whew! Oldest son Andrew was at the game, I’m sure he’s moving slow this morning, for that was a late night! S
peaking of Andrew, his Lindbergh High School Water Polo team will be playing in the State Tournament again this year, and they are the #3 seed going into the tournament. He would sure love to get into the Final Four again for the second consecutive year. What a good job he’s done with that Water Polo program. I don’t think the school recognizes that.. But then that could just be a proud papa talking. So, I won’t be writing tomorrow, as it’s Whacked out Friday for me. and because of that I’ll miss the talk about the Kentucky Derby that’s this Saturday, and Mother’s Day which is Sunday! I have my usual salute to mothers with a poem below, so hang on there’s more.

With little Braden Charles Butler staying with us these last two weeks (they move to their new house tomorrow) he brought home some Mother’s Day craft gifts he made in preschool yesterday, and I thought this little note would great today and Sunday for Mother’s day. Which by the way if your mom is still alive, make sure you give her a big hug, tell her you love her, for when she’s gone, it’s a cold world.

Here is my handprint
Five fingers in all,
Outside they are short,
But the middle is tall.

You will find them on windows,
You can find them on the wall,
They will make a big mess,
For something so small.

One day I will grow,
And leave them no more,
My hand prints will be missed.
Of that I’m sure.

So here is one now,
That you can’t wipe away
My present to you,
This Mother’s Day.

Todd Rundgren takes us to the finish line today with his song: I Saw The Light. and with that I’ve got to get this out the door, and get ready to go, it’s infusion Day! Happy Cinco de Mayo, Kentucky Derby Day, and Mother’s Day to everyone out there. bye~

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