A Jobs Disaster!
Daily Pfennig

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In This Issue..

* Retail Jobs are cut in December!                     
* Dollar rallies on renewed Trading Theme...                   
* Looking for the Obama bounce...                        
* High yielders get sold...                                  

And Now... Today's Pfennig!

A Jobs Disaster!                       

Good day... And a Marvelous Monday to you! A grand weekend for yours truly with time spent resting, watching football, Alex play basketball, dinner with friends, and finally a wonderful dinner with my kids as we celebrated my oldest son, Andrew's, birthday. Whew! I'm at work about an hour earlier than usual this morning, as I couldn't sleep, and just decided to get up and come in... UGH!

OK... Well, the big news this morning, is that the Jobs Jamboree was just awful, but "not as bad as some forecast" and therefore the dollar rallied. OK, I'm shaking my head in disgust too, but that's what the headlines reported later in the day on Friday, as the reason for the dollar rally. But let's get to the meat of the Jobs report... First of all, jobs lost in December were -525K, which was bang on the forecasts. But here's the two things I found to be very scary in the report... First of all, November's awful print of -533K was revised downward to -584K (recall, I questioned a month ago if it would reach -600K on the revision)... And here's the really scary number... -67K Retail jobs were cut in December... That's right, December! The month when retailers are supposed to be on fire!

I was very impressed with the network news on NBC with Brian Williams, Friday night, as they did report the numbers as awful, and highlighted the Retail jobs losses as I did above... But then I got to thinking... Who the heck watches network news any more? Oh well, they tried!

Oh... And for those of you keeping score at home... The Bureau of Labor Statistics (BLS) decided that they would ADD 72K jobs in their Birth / Death Model... Makes sense, eh? NOT! So, if they hadn't put their hands in the cookie jar, the total job losses in December would have been within spittin' distance of -600K! Any way... The Unemployment rate rose to 7.2% from 6.7%, that's quite a hefty rise in one month, and is very reminiscent of moves made in previous recessions...

But the dollar rallied, so I'll leave all that Jobs Jamboree stuff, and move on! 

The euro is much weaker as we begin this week than it was last week, and besides the mental giants that marked up dollars after the jobs report, the euro was feeling the pressure from some statements from European Central Bank (ECB) President, Trichet... Yes, it sounded as though Trichet had turned dovish... But then there were denials that he said anything, but it was too late, the cow out of the barn!

The ECB DOES meet this week, on Thursday, and while I once thought that the ECB would skip cutting rates at this meeting, I now, with the Trichet comments even if he didn't say them (you know me, where's the smoke, there's fire!), believe the ECB will cut rates this Thursday, and that is also weighing on the euro.

As we, (me, and you dear, long time reader) know all too well, the euro is the Big Dog on the currency porch... It's the offset currency to the dollar, which is quite impressive given the fact that it has only been around for 10 years! Anyway... Back at the ranch, dollar strength shows up here with the euro first and foremost... But guess what happens when everyone finally begins to focus on fundamentals again? Well, Oooh! Oooh! Call on me, teacher! Call on me! Yes, you, in the back, what's your answer? Well, teacher, My answer is that the dollar will come under pressure again, and with the euro being the offset currency to the dollar, this current weakness will be a thing of the past. Very Good, young man, please move to the front of the class!

So... After the dollar performance on the bad news of the Jobs Jamboree, I got to thinking that the Trading Theme that was all so evident... I know, I thought we had put the Trading Theme of second half of 2008, in the closet... But here it is again, all dusted off, and looking as though it might be here to stay... For those of you new to class or in need of a refresher course... The Trading Theme I'm talking about, is the one where the deeper, the darker, the more dangerous things get for the U.S. and the economy, the dollar is rewarded, as dollars are repatriated, and Carry Trades that used the dollar as the funding currency get unwound, thus propping up the dollar...

I've seen this before, as I've explained before... It was Japan in the late 90's... Their economy was circling the bowl, and yen was being repatriated, pushing the yen to 88!

These Carry Trades also use Japanese yen as the funding currency... And that goes to explain why Japanese yen is trading so strong again... Last week, with the risk takers dipping their toes in the risk waters again, Japanese yen was weakening... But not now!

This is all bad news for the high yielders, which had really stretched their legs last week! The usual suspects of Aussie, kiwi, Brazil, South Africa, have all been sold again on this return to the Trading Theme which has risk takers pushed to the back corner of the room...

This is as good of a time as any to repeat my thoughts for 2009... ( I did this the last week of 2008) First of all, I believe, we'll get an Obama bounce, thus pushing stocks back up, and giving everyone a false sense of euphoria... By late spring, this euphoria should all be fading, as people begin to realize that we're just mortgaging the future with stimulus package after stimulus package... And all that "horded up cash" that investors have been holding on to, will begin to get spent... Then we'll have a problem Houston, as the Corporations that have slowed production down during the recession, can't produce enough to meet demand, and inflation begins to soar!

The dollar basks in the sun during the first part of the Obama bounce... But, when the bloom is off the rose, we should see a return to the fundamentals...

OK... This week, we've got some hefty data in the U.S. and of course the ECB rate meeting on Thursday. Here in the U.S. we'll see this week... The Trade Deficit for November, Retail Sales for December, The TIC Flows, the stupid CPI and PPI reports will also print. Sprinkle in the Philly Fed (manufacturing), Business Inventories, and the Initial Jobless Claims, and we've got a data cupboard that chock-full-o-numbers!

None of these should be good for the economy, save for the stupid CPI report, which they will try to push off on us a report that inflation fell -.2% in December, and now stands year-on-year at 1.8%... HOGWASH! The boys and girls that print this report think that just because the price of Oil has collapsed, they can mark inflation down to the bone... That's right, there's no other inflation going on, not medical, not tuitions, not insurance, not food, not ball game tickets! HOGWASH!

After all that, there is no data scheduled for printing today! I hear that Big Ben Bernanke is going to speak on "The Crisis and the Policy Response"  at the London School of Economics tomorrow. Oh boy! NOT!

OK, before I head to the Big Finish... I wanted to give you a piece of my friend, Bill Bonner's, Daily Reckoning (www.dailyreckoning.com) from Friday, as he discussed the massive amounts of stimulus that have been put in place and the massive amounts yet to be put in place... Here's Bill...

"When America's economy was young and competitive it survived slumps and crashes without medical intervention. Now, every passing cold requires feeding tubes. And this latest bout of influenza has the doctors in a panic. They are casting aside warnings and giving the patient masses doses of the old quack treatments. They'll increase the dosage - until they run out of supplies - and then switch to those new, experimental medicines that have recently been used in field trials by Dr. Gono in Zimbabwe.

Since they cannot leave well enough alone - the public won't stand for it - they will keep giving bigger and bigger doses, of more and more dangerous medicines, until the patient dies."

Currencies today 1/12/09: A$ .6845, kiwi .5790, C$ .8340, euro 1.34, sterling 1.4955, Swiss .8940, rand 10.02, krone 7.0550, SEK 8.0450, forint 208.20, zloty 3.02, koruna 19.83, yen 89.80, sing 1.49, HKD 7.7540, INR 48.84, China 6.8370, pesos 13.69, BRL 2.2940, dollar index 82.93, Oil $38.70 (Oil is collapsing once again!), Silver $11.11, and Gold... $844.50

That's it for today... A great big Happy Birthday, to my son, Andrew, who turns 27 today. Andrew teaches high school social studies, history and law. He teaches at his Alma Mater, and coaches the swimming and water polo teams. I always told him to "give back" to the sport he loved, and that's what he's doing, as he ended his swimming and water polo careers highly decorated. OK... Did you all see I.O.U.S.A. on CNN yesterday? Sorry, I didn't tell you Friday, I didn't know about it until later in the day! Every time I watch I.O.U.S.A. I get chills down my spine, and want to get my pitchfork and march to Washington D.C.! And then to top off the day yesterday, my fave TV show is back after a 1 year hiatus... 24... It was great to see Jack back! And we get another 2 hours of 24 tonight! YAHOO! And how about those Arizona Cardinals (once our football team here in St. Louis), and the ex-Rams quarterback, Kurt Warner? The Cardinals lost me as a fan when they moved to Arizona, but I just can't help but root for Kurt Warner! OK... I know it's early, but I'm going to hit the send button, and get working on today's trades... I hope your Monday is Marvelous!

Chuck Butler
EverBank World Markets

Posted 01-12-2009 10:35 AM by Chuck Butler