Good day… And a Marvelous Monday to you! You know, I liked last week, when I was still sleeping at this time on Monday morning, due to the holiday! What an awful display of baseball by my beloved Cardinals in the worst possible place, Chicago, this past weekend… UGH! I guess I’ll just have to admit it, this is a bad baseball team, and it’s going to be a long season… UGH! I went to the office yesterday, and cleaned out my office… I’m going to work from home from here on out, so there was no reason to take up space! Now the back of my car is filled with “stuff” that I have to get out of there! Steely Dan greets me this morning with their great song from the Album of the same name: Aja… (my fave Steely Dan album too!)
Well, Friday’s price action in the currencies and metals were something to see.. The Jobs report in the U.S. was disappointing, and the long dollar trades were getting unwound faster than a speeding bullet, no wait, that’s Superman’s speed… Hmmm, faster than you can say Englebert Humperdink! (remember him?) So, the currencies and metals were off to higher ground and remained there through the overnight sessions of Asia and Europe last night. The Petrol Currencies got an extra boost when the price of Oil jumped on news that some of the Arabic countries were shutting off relations with Qatar, saying that Qatar had harbored terrorists…
So, if all this movement in the currencies and metals came about from the Jobs Jamboree on Friday, I guess this is where I have to deal with the BLS’s report… You know I don’t like having to do this, because I’m going to point out the hedonic adjustments, and the off-base assumptions they make… So, here goes…
So, get a #2 pencil and a blank piece of paper and write this down… The May Jobs Jamboree only netted 138,000 jobs, and that puts the year-to-date average at 162,000 per month, and when you just count the last three months, where the drops have really occurred, the average month is only 121,000… So, knowing this, now try to figure out how the Unemployment Rate dropped to 4.3% and is down ½% in these last three months, when the drops in jobs created have occurred… I for the life of me can’t, and yes, I know all about the people dropping off the jobs radar…
Even with this 3-month drop (proving that it wasn’t just “transitory”) I don’t think it’s enough to stop the Fed from hiking rates this month… I said it before and I’ll say it again, they are hell bent and whiskey bound to hike rates this month, so like I said Friday, let ‘em hike rates… I don’t think that in 3 months or so, they’ll be happy about that decision, but for now, it’s all sunshine, rainbows and lollipops, Everything that’s wonderful when the Fed hikes rates in a weakening economy…
Of the 138,000 jobs created by the U.S. in May… The BLS added 230,000 to the survey totals… 230,000 jobs added to the numbers out of thin air! And this brings me to the main reason I just don’t care what the BLS prints any longer, it can’t be trusted as true data! Why can’t 230,000 jobs be added using the Birth/ Death Model? Well, a few months ago, you may recall me talking about how an independent research firm had issued a report saying that there had been far more business deaths in the past 10 years than “births”… But all this time the BLS was adding jobs using this model every month…
Last week, Dave Gonigam, over at the 5 Minute Forecast (www.agorafinancial.com ) talked about this subject regarding business deaths… The Census Bureau calls it” Exits and Entries”… and had a graph that showed how the “exits” were greater than the “entries” but the data stopped in 2013… So, choose your report, the independent research team, or the Census Bureau, they both come to the same conclusion, and that is that the BLS has no basis whatsoever to add jobs each month, especially to the tune of 230,000!
Oh, and one more thing before I go on… the U.S. National Economic Council Director, Gary Cohn, said Friday that we should not obsess over any one number in the jobs report… Hmmm, I wonder if after he said that, one of his “assistants” whispered to him and said, “ahem, the previous 2 months were bad too”… memo to Mr. Cohn… remember to wear flavored socks… wink, wink..
Gold was able to gain $ 13.10 on Friday… As Ed Steer says, “it was able to gain its usual 1% that it’s normally allowed to have on any given day” wink, wink.. Gold closed on Friday at $ 1,278.50, and is up $ 5 in the early morning trading today. We draw closer to the level I said I thought Gold could reach by the end of summer, which is $ 1,300… That’s a good thing, folks, because the shiny metal is ahead of schedule!
Have you heard the news on Gold? Bloomberg, GATA, you name it has been all over this story like a cheap suit, and I’m going to pile on… Basically, David Liew a trader that used to work at Deutsche Bank pleaded guilty in federal court in Chicago of spoofing of futures contracts for Gold, Silver, Platinum and Palladium, according to court papers… Spoofing is an illegal trading scenario, where the trader places orders without the intent of executing them in an attempt to manipulate the price. This trader also acknowledged front-running customer’s orders.. If you would like to read more about this click here: https://www.bloomberg.com/news/articles/2017-06-02/trader-pleading-guilty-in-metals-probe-tied-to-deutsche-bank
I have to wonder what this leads to… More traders being brought to court? I f I were the CFTC (the commodities regulator) I would have a parade to traders at every bullion dealer, lined up to testify in court of whether they participated in the manipulation of the prices for the precious metals… Yes, or No… Under oath mind you, and then when they said “No” they were allowed to return to work… If they said “yes”, then they were taken to a different courtroom.. Or, was this just a warning to the Big firms that hold most of the short positions?
So, two BIG stories on this Marvelous Monday Morning… Look at Chuck Rocking the Alliteration! HA! The Big Story of the Jobs disappointment and the Gold trader story… Now that’s enough for one day, but hold on, there’s more! And if you’re one of the first 100 callers, you will also get detailed information on the Data Cupboard! HA!
Friday’s Data Cupboard was dominated by the Jobs Jamboree, but there was more behind the curtain… We also saw the Trade Deficit number, that was the net of the actual trade number and investments… The Trade Deficit was larger than expected at $ 47.6 Billion..
Today’s Data Cupboard is chock-full-o-data, that isn’t all Tier 1 data, but it’s printing anyway… First we get the 1st QTR Productivity revision and 1st QTR labor Costs. (that 1st QTR data is really getting stale isn’t it?) Then we’ll see the color of the ISM Services Index, and finally, Factory Orders for April… (really the only data today I care about!) I really don’t care about Services, because as I’ve said for years, “we’ve become a servicing country/ economy and our service lacks BIG TIME!
The U.K. will finally go to the election booths this week on Thursday I do believe. Which also happens to be an ECB (European Central Bank) meeting day. But before we get to Thursday, the Reserve Bank of Australia (RBA) meets tonight (for us, tomorrow for them)… I don’t expect anything but the same-o, same-o, from the RBA… They won’t sound too upbeat in the statement, after leaving rates unchanged, and they have just enough optimism to keep everyone interested…
I think the A$ is going to go through a rough patch here with the RBA dragging their feet with regards to hiking rates. Traders, as I’ve explained many time before, will grow bored with the no movement from the RBA or the currency, and then look for greener pastures…
Getting back to the U.K. elections… The latest poll this weekend has the Conservatives maintaining their lead, but remember the previous polls in the U.K. and U.S.? I won’t believe anything here until the outcome is posted! And currency traders have that same belief, for they’re not giving the pound any chance to rebound ahead of the vote outcome.
And I’m told that the 10-year Treasury yield fell to 2.11% on Friday.. But has fallen back to 2.17% this morning… That’s pretty unbelievable to me, that the 10-year still sports an ultra-low yield like this, with all the talk by the Fed about growth, inflation and rate hikes… Are the bond boys telling us something?
To recap… The Jobs Jamboree on Friday was disappointing and left the dollar out to hang. Traders began unwinding long dollar positions, but it wasn’t just one month of disappointing numbers, May marked 3 consecutive months of disappointing numbers in jobs… Chuck has all the details and a look under the BLS’s hood today… A Gold trader has pleaded guilty to spoofing and front running, but most importantly spoofing because that can be used to manipulate a price. Chuck asks, what will happen next here? The RBA meets tonight, and there shouldn’t be any fireworks here, and the U.K. finally goes to the election booths this week…
For What It’s Worth… Well, this is a subject that I’ve been talking about for over a decade now… It’s the underfunded pensions… Well, this article talks about underfunded pensions around the world, but focuses on the U.S. which happens to have the largest amount of underfunded pensions… The article can be found here: http://www.cnbc.com/2017/05/26/pensions-time-bomb-for-worlds-biggest-economies-could-explode-to-400-trillion-says-wef.html
Or, here’s your snippet: “Future generations are on course to become enveloped in the biggest pension crisis in history, according to the World Economic Forum (WEF), unless policymakers from the world’s leading economies take urgent action.
The Geneva-based organization predicted the challenges of an ageing population could result in the world’s largest economies being forced to tackle a pension time-bomb.
Analysis from WEF showed six countries with the biggest pensions, including the U.S., Canada, U.K., Netherlands, Japan and Australia, as well as the two most densely populated countries in the world – China and India – would face a retirement savings gap in excess of $ 400 trillion in 2050, up from around $ 70 trillion in 2015.
According to the WEF’s forward looking estimates, the retirement savings gap from all eight countries is set to inflate by 5 percent every year over the next four decades. This translates to an extra $ 28 billion of deficit every 24 hours.
“We must address it now or accept that its adverse consequences will haunt future generations, putting an impossible strain on our children and grandchildren,” Drexler added.
Chuck again… yes, we must address this now, but we won’t… Because talking about that kind of stuff won’t get anyone reelected ! It’s that simple folks… So, like I say about debt that the U.S. keeps accumulating at an alarming rate, it might not be something that keeps people like you and me indoors, but our kids and grandkids are a different story… I thought about this briefly last night, when little Delaney Grace was sitting on my lap talking to me.. But I quickly got that out of my mind so I could concentrate on what she was telling me! She’s so darn cute!
Currencies today 6/5/17… American Style: A$ .7480, kiwi .7137, C$ .7426, euro 1.1265, sterling 1.29, Swiss $ .9641, … European Style: rand 12.7163, krone 8.4232, SEK 8.6574, forint 272.82, zloty 3.7098, koruna 23.3622, RUB 56.60, yen 110.50, sing 1.3563, HKD 7.7912, INR 64.27, China 8.1150, peso 18.37, BRL 3.2403, Dollar Index 96.77, Oil $ 47.84, 10yr 2.17%, Silver $ 17.55, Platinum $ 964.75, Palladium $ 844.61, Gold $ 1,283.70, and SGE Gold $ 1,267.78 (the SGE Gold price hasn’t been updated since last Friday, Chinese time)
That’s it for today… Frank sure did a great job on the Sunday Pfennig yesterday, as he talked about Diversification. (www.dailypfennig.com) And then last night I listened to an interview with the father of diversification, Harry Markowitz, that Grant Williams had imbedded in his letter: Things That Make You Go Hmmm… You should check out Frank’s piece, it’s really good! The older kids were here yesterday with the grandkids, and I smoked some pork steaks for them… They meat was falling off the bone when I took them off the Big Green Egg! Darling daughter Dawn will be back this morning to teach swim lessons (I’m thinking that I should get a cut of her earnings, right?) It was downright “summerish” yesterday, and I love it! The Amazing Rhythm Aces take us to the finish line today with their song: Third Rate Romance… And with that I hope you have a Marvelous Monday… Be Good To Yourself!
Chuck Butler
Managing Director
EverBank Global Markets
Creator / Editor of: A Pfennig For Your Thoughts
1-800-926-4922
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