In This Issue.

*Last jobs report before the election.
*Euro gets slammed.
*Aussie PPI rises.
*China slows down pace of appreciation.

And, Now, Today’s Pfennig For Your Thoughts!

A Jobs Jamboree Friday!

Good day.  And a Happy Friday to one and all! I was caught up in telling you about my grandkids’ costumes yesterday that I forgot to welcome you to November. So.. . welcome to November! Long time readers. I think you know by now that November is my most disliked month for a number of reasons. Some very bad things have happened in November (to me), the trees all look dead, the skies are steel gray, and the days are raw temperature wise. I could go on, but you get the drift.

People up east, have been sending me notes, pictures, and thoughts on their blackout and devastation from the superstorm Sandy. You know, other parts of the country experience these things from time to time, but they never encompass so many people at once. Makes you think these people might want to think about moving to Idaho, eh? However, I truly understand being near work, and family. Here in the Midwest, families don’t see their kids (for the most part) take off to the hinterlands.  So. be careful up East. Hopefully the power will be back on this weekend.

Ok. the dollar bias rally that began with the return of the NY traders, continued throughout yesterday, last night and this morning. The euro has lost another 1/2-cent, and Gold has lost $5 at this point of the morning. I find these downward moves overnight to be somewhat strange. You see, today is the BLS Jobs Jamboree here in the U.S.  And what these downward moves in the currencies and metals are telling me, is that traders are of the belief that the Jobs Jamboree will be disappointing.  The reason I find that strange is that it is the last jobs report before the election, how could it be disappointing?

So. since we’re on the Jobs Jamboree train this morning, let’s go over the particulars. The so-called experts have forecast a gain of 125,000 jobs in October, but an increase in the unemployment rate to 7.9%…  (OK, math wizards, riddle me this Batman. last month we saw a gain of 114,000 jobs and the unemployment rate dropped .3%, and this month we are expecting 125,000, (which is more than 114,000, even using new math), and an increase in the Unemployment rate. how does that work?)  I’m beginning to get a rash, from all these gyrations in the unemployment rate.  Yesterday, Ty Keough, and me were talking about this same thing, and we decided that the BLS just throw a dart at the listing of unemployment rates that are listed on the wall. HA!

The thing that gets my spider sense tingling is the fact that the regional manufacturing reports have shown some real rot on the employment vines. So will that carry over to the BLS report?  Probably not, just like the rot on the regional manufacturing indexes don’t carry over to the national ISM manufacturing report.  For instance, the large regionals showed a lot of weakness, but that was not seen in the ISM, which gained in October (from 51.5 to 51.7)  So, my spider sense may be tingling and telling me the Jobs Jamboree will be disappointing, I’ll have to stick to my thought of this being the last report before the election, how could it be disappointing?

I know you’re waiting to see my number for jobs for October.  Can’t do it. wouldn’t be prudent.  I’ll just say that deep down, I think it will be disappointing, considering the forecast for 125,000.

Global growth is the main entre’ on the menu for traders these days. and if the U.S. jobs report is disappointing, the chances for global growth get sent to the woodshed. And since we’re still not to properly valuing currencies on fundamentals, these mental giants (traders) will flock to the dollar on a disappointing jobs number. strange, eh?  Of course it is. but, it is what it is, and as long as we know where the goal posts are we can trade accordingly. The problem is we can’t be 100% sure that the goal posts don’t get moved on us!

One more thing on jobs today. A couple of years ago, the ADP employment report, which prints the day before the BLS report, said that they were changing the way they were reporting the jobs in attempt to be closer to how the BLS does it, so it could be more useful in indicating the next days’ report. But that never materialized. And now ADP has announced that they are changing again, and that they would be even closer to the BLS report. I have great doubts that this will happen, unless that is they drafted the BLS to help them. And that didn’t happen.

The good folks over at RBC (Royal Bank of Canada) believe that the ADP report has an average absolute miss of 47,000. So. the ADP report yesterday showed 158,000 jobs created in October.  take 47,000 away, and you get 111,000 for the BLS report.

Adding to the euro’s weakness this morning, is the realization that next week brings the Greek Parliament vote on their budget proposal. And last night, an ECB member said that Greece was “way behind in its reform tasks”. German PMI’s (manufacturing reports) were good in Germany and France, and lagged in the other countries. So, that’s not good medicine for an ailing euro this morning.

The Aussie dollar (A$) has held its ground pretty well, in the face of the euro weakness this morning.  So, A$ traders are thinking differently than the euro traders. they are of the belief that the U.S. is improving, and the prospects of global growth are good, which is a good thing for the A$…  I know, I know, you would think these guys would sing from the same song sheet.   one bit of data from Australia may be the reason for the different thinking. Aussie PPI (wholesale inflation) ticked upward to .6% in the 3rd QTR VS the previous QTR at .5%…  This data will be added to previous data that makes it difficult for the Reserve Bank of Australia (RBA) to pull the trigger on aggressive rate cuts, which the markets were pricing in 30 days ago..

The other day, I told you how the Chinese renminbi had gained 2% between August and end of October, but that we could see the appreciation slow down. The reason I said that, was the pressure on the Chinese to allow the renminbi / yuan to appreciate ahead of the U.S. election would dissipate once the election was over. And we’re beginning to see that, as renminbi/ yuan hasn’t appreciated in the past three trading sessions. And, not to get to technical, the renminbi/ yuan forward points are also reflecting a slowdown in the currency’s appreciation.

Our friends to the North, Canada, will also report their October jobs this morning.  You may recall that last month Canada reported a strong job increase in September. But, that may be the best the jobs data can get in Canada, for now. I expect the report to show job gains, but at a slower pace. The Canadian dollar / loonie, which previously this week had fallen below parity, only to see the currency regain parity, could very well fall below parity again, if the jobs report is very disappointing.

Well. with the bias to buy dollars going on the past 3 days, Gold has had a difficult time finding some terra firma. The shiny metal is down $6 this morning. But remains above $1,700, which seems to be the line in the sand for the metal. Not that there’s really any resistance that could hold off another takedown by the price manipulators PM;s). But for now, the PM’s  are happy to let the dollar strength do their dirty work. I don’t want to do your dirty work no more..  -Steely Dan.

On a side bar. I heard a great Steely Dan song on my way to work this morning. Deacon Blues. Don’t know what it is about that song, but it always gets me singing along, and will remain in my head the rest of the day!

Did you see where coalitions in the U.S. business community are fighting over whether tax increases should be a part of debt reduction. Recall that I told you previously that Business leaders / CEO’s had brought to Congress their plan for debt reduction. Well, now a group dubbed the Tax Relief Coalition, had brought their plan for debt reduction, that excludes tax increases.  You see, everyone is getting a little uptight about the upcoming Fiscal Cliff. And they probably read my Sunday Pfennig, and thought, if little old Chuck in St. Louis, Mo. Can come up with a plan to cut debt, so can we! (HAHAHAHA!)  Either way, I don’t see real debt reduction without increased revenue.  So, you can grow the economy so that the tax revenue increases without tax increases. That’s what they did in the 1950’s when the debt to GDP got out of hand. They didn’t cut debt, they simply increased economic growth.  Well, the Fed and the Gov’t has done everything but thrown the kitchen sink at trying to increase economic growth. and it hasn’t happened.  I would bet that in the 50’s they simply allowed businesses to grow without red tape, and questions of health care taxation hanging over their heads.

Then There Was This. from the U.K Telegraph, and one of the best writers in the world. Ambrose Evans-Pritchard. regarding what I’ve been telling you for some time now about Asia. “Green shoots are sprouting across much of the Far East as stimulus begins to feed through, greatly reducing the risk of a deep global slump next year.

A slew of economic data from China and the Pacific Rim show that orders are picking up and trade is rebounding after the industrial recession of the past few months.

The Baltic Dry Index, measuring shipping rates for commodities – watched as a proxy for Chinese demand – has come back from the dead, rising 50pc since July…and container freight rates on Asian routes have started to recover. The Danish group Maersk raised its shipping rates two weeks ago, and the Chinese operator COSCO followed suit on Thursday.

The HSBC/Markit index for Chinese manufacturing jumped to 49.5 in October. It is still below the expansion line of 50 – for the 12th month in a row – but domestic orders have risen sharply, suggesting that the world’s second-biggest economy is at last generating its own momentum.”

Chuck again. It’s always nice to see someone else notice what I had been talking about for some time.

To recap. The bias to buy dollars remains in place this morning ahead of the Big Jobs Jamboree report.  Chuck believes the Jobs Jamboree report will disappoint this morning, as the BLS throws its dart at the unemployment rate. The A$ remains steady Eddie, as another report (this time PPI) causes more paring back of rate cut bets, and China begins to take its foot off the gas pedal on renminbi/ yuan appreciation, given that the U.S. election is almost here.

Currencies today 11/2/12. American Style: A$ $1.0375, kiwi .8270, C$ $1.0020, euro 1.2885, sterling 1.6095, Swiss $1.0675, . European Style: rand 8.6705, krone 5.7045, SEK 6.6875, forint 218.40, zloty 3.1970, koruna 19.6125, RUB 31.32, yen 80.25, sing 1.2225, HKD 7.75, INR 53.80, China 6.2410, pesos 13.02, BRL 2.0305, Dollar Index 80.32, Oil $86.29, 10-year 1.73%, Silver $31.98, and Gold. $1,706.85. and our usual Friday tradition of taking a peek at the U.S. debt clock can be done by clicking here:

That’s it for today. Man this no NHL thing is really getting to me. I miss the Blues!  Even when they were the hapless Blues, they were our Blues. Well, Alex swam well last night, to end his swim season, as his times weren’t state qualifying times, but I’m sure that’s OK with him, as now he gets to begin his wrestling season, his favorite sport. Tomorrow night we will celebrate son Andrew’s wife’s birthday (which is actually Monday). But we will celebrate the lovely Rachel’s birthday tomorrow night.  And my beloved Missouri Tigers travel to Gainesville Florida to play the top ten Florida Gators tomorrow. I’m really surprised that the folks in our Jacksonville office, who happen to be mostly Gator fans (not my mortgage guru friend Stacy!) , haven’t been giving me the business about the Gators beating my Tigers this week. And with that, I thank you for reading the Pfennig, and hope you have a Fantastico Friday!

Chuck Butler
EverBank World Markets