A Pfennig For Your Thoughts

In This Issue…

  • Jobs disappoint…
  • But not the BLS!
  • N. Korea detonates a nuclear bomb?
  • OPEC to cut oil production…

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And Now… Today’s Pfennig!

A Big Surprise From The BLS!

Good day… Whew! What a day on Friday! After signing off on the Pfennig from home and heading to the dentist, all heck broke loose in the currencies as the Jobs Jamboree had a BIG surprise for us all… Here’s the skinny…

The Jobs Jamboree revealed that only 53K jobs had been created in September (recall, I said it would be disappointing), with the previous month’s total being revised up 60K to 188K… But that’s not what caused the euro to lose over 1 cent to the dollar… Oh no… What caused the euro to lose over 1 cent to the dollar was a report by the Bureau of Labor Statistics (BLS), you know, those guys that created the infamous “birth/death model”… Yes, the same guys, known for making “feel good stories”… Here’s the info:

The Bureau of Labor Statistics announced a preliminary estimate for the annual benchmark revision for the level of employment as of March 2006. The official report will come out in February 2007 with the publication of the January 2007 payrolls. The preliminary estimate shows that payrolls for March 2006 were 810,000 higher than the reported number. This equates to about 0.6%, well above the 0.2% average change.

That’s right… The BLS has “uncovered” 810K jobs that have been created since March! But they aren’t going to make the adjustment now, they are going to wait until February of 2007… Why? Well… With this little thing we call an election coming up… Isn’t it better to announce this now and then somewhere down the line make an adjustment to the number after the elections? I know, I’m just going through one of my conspiracy theories here… But come on!

And we received this bit of news that should make us all feel warm and fuzzy… The BLS currently is researching possible sources for this larger-than-normal expected revision and will include its findings in the February report. Yes… My thinking is that the BLS will “discover” a glitch in their math, and that 810K jobs created will be much reduced…

But… For now, the markets have taken the bait… Hook, line and sinker! So… They aren’t “wrong,” I learned that lesson years ago! They may not be “wrong,” but they sure are taking the bait into deep water… So… The dollar romped and roped on Friday… I was in so much pain when I arrived from the dentist that I took one look at the trading screens, packed up and went home! I was in enough pain, I didn’t need to be looking at the dollar rallying on the BLS news.

Friday morning, the title of the Pfennig was “OPEC To Cut Production?” At that point it was simply a rumor… Here’s what I wrote about on Friday just to review: 10-6 Pfennig…

“There were two rumors going around yesterday that really got the price of oil back over $60… The first one I heard through traders was that oil tankers were reporting a cut in Saudi oil production… Then the news wires had a story that OPEC might meet to discuss cutting oil production. Now… That’s one way to get the price back up, eh?

I’ve not seen anything since that report… So it could all be hogwash by now… But the one thing it does indicate to me is that should the price of oil turn around, it would certainly light a fire under gold! I just read a report that said an analyst didn’t expect any production cuts at this moment… That’s smart of him… If OPEC decides to cut production this weekend, the analyst can say… ‘I said, at this moment.'”

So… I wonder what that analyst has to say now that 6 members of OPEC have agreed to cut oil production? That’s the latest news… A 3.4% cut to stem the slide of oil prices… And guess who led the rally for production cuts… Saudi Arabia…

OK… Enough of that oil talk, I don’t want my blood pressure going through the roof! There are reports overnight that N. Korea is claiming they detonated their first nuclear bomb… That has Japanese yen on the slippery slope down once again… This nuclear bomb detonation is scary stuff… And especially if your country is close to N. Korea… Japan needs for the rest of the world to step up to N. Korea… But they won’t… OK, I’m going to stop there because this would get my blood pressure high, too!

So, the yen is taking on water, along with the rest of the Asian currencies, due to N. Korea… The euro has already taken on water but seems to have stemmed the tidal wave caused by the BLS… Even the Swiss franc hasn’t seen any love thrown its way, which is unusual given the geo-political crisis going on… But at this point, do we really, surely know that N. Korea detonated a nuclear bomb? They said they did it “underground”… Hmmmm…

Well… Today is a holiday… It’s Columbus Day! Which means banks are closed, there’s no mail, and all the things that go along with a holiday… But not at an Internet bank! So… We’ll struggle along today with most of our trading partners on holiday today, so liquidity after London signs off will be absent.

There isn’t any U.S. data to look at today, either… We start the week slow… And build to a crescendo! By Thursday, we’ll be talking about the latest Trade Deficit number, followed by Friday’s printing of Retail Sales… The Butler Household Index (BHI) tells me that Retail Sales will be slow for September… For new readers…. The BHI is what I call my own little way of measuring Retail Sales, by counting the number of shopping bags that enter the Butler house during a month… Amazingly, it is usually a very good indicator of the actual Retail Sales number for the country!

Currencies today: A$ .7450, kiwi .6575, C$ .8910, euro 1.2610, sterling 1.8675, Swiss .7935, ISK 68.55, rand 7.8180, krone 6.6725, SEK 7.36, forint 215.64, zloty 3.11, koruna 22.3675, yen 119, baht 37.55, sing 1.59, HKD 7.7894, INR 45.7150, China 7.90, pesos 11, dollar index 86.46, silver $11.32, and gold… $578.10

That’s it for today… How about that weekend for a sports fan like me? My beloved Missouri Tigers went to 6-0 for the first time since 1973! The Rams won… And those unpredictable Cardinals closed out their series with the Padres and moved on to the National League Championship Series for the 5th time in the last 7 years… And I can’t forget to mention my little buddy’s interception in his flag football game on Friday night! So… It was all going on this weekend! Now… It’s time to hit the “send” button and see what needs to get done on this “holiday”!

Chuck Butler
EverBank World Markets