A Jobs Jamboree Friday!
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In This Issue.

* The markets like what Trichet had to say!

* Loonie nears parity again!

* Chinese forwards soar again!

* Brazilian economic data remains strong!

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

A Jobs Jamboree Friday!

Good day... And a Happy Friday to one and all! It's been a few weeks since I've written that to you, so the fact that I'm here today, on this Friday, makes it a Fantastico Friday! What will you do to make this a Fantastico Friday?

Well. the relief rally that has gone away and come back throughout each trading since it began on Wednesday, is still the underlying bias in the currencies this morning, with the euro trading to 1.3260, this morning. European Central Bank (ECB) President, Trichet, did his best to keep euro bulls upbeat in his press conference yesterday. (you may recall that I said that I thought he would!) Trichet told the audience of press and other interested listeners, that the ECB will deploy a two-pronged strategy to ease the tension in the Eurozone markets. The ECB wants all Governments (notice not sticking to just the Eurozone Governments) to take the lead in calming the markets. And Trichet then announced that the liquidity that the ECB has provided since the financial meltdown will remain in place. A month ago, the ECB was close to withdrawing this liquidity, but then the problems in Ireland came to light once again.

The ECB also kept their bond buying program in place, which helps in this time of periphery countries on the brink of disaster. I know. this is in the same family as Quantitative Easing, and I don't like it one iota. but. it is what it is. and . apparently, the markets are in the "Christmas spirit" already, because they liked these approaches by the ECB, and rewarded the euro!

When I wrote, above, the brink of disaster, the old song from the 60's by Barry McGuire, popped into my head. what a great song! For you youngsters. here is a sampling of the song, which could very well be sung today, and hold a ton of water, eh?

Well the Western World is in danger

We the People have become like strangers Taking polls and opinions while the fabric decays For the greed of the few how much the innocent pays And the children are watching, you can hear how the pray

And you tell me over and over and over again my friend How you don't believe we're still on the eve of destruction

OK. today is a Jobs Jamboree. and the forecasts call for a rise in employment (according to the BLS, who we've proven over the years, just can't keep their hands out of the cookie jar, with their "adjustment" to the figures). This would be a good thing for the U.S. economy. unfortunately, I don't think it means a hill of beans, as long as over 400,000 people each and every week file for unemployment benefits. The forecast for today's report on job creation during November, is calling for a rise of 150,000. Now that would be something to write home about, if it has an ounce of truth to it!

But 150,000 added jobs is better than a sharp stick in the eye, wait, I shouldn't say that, as someone might test it to see if I'm right! Nah. I don't think that will happen, it's just a saying! But, let's look at two figures that are more important. Avg Hourly Earnings, which remain flat at .2% increase this year, and Avg Weekly Hours, which has inched higher and higher as the year has gone on. Which means that those of us that have jobs, are working longer hours to make up for the loss of jobs.

Enough on the Jobs Jamboree. except to say that I personally believe that 150,000 created jobs in November is too high. my number on the back of cocktail napkin would 110,000.

And to try to figure which way currency traders are going to take the currencies after the Jobs figures are printed is like flipping a coin. In the past 6 months, we have months were the conventional reaction to an upside number to jobs, which would mean a stronger dollar. And then we've had non-conventional reaction to an upside number to jobs, which meant that risk was back on the table and dollars would get sold.

So. pick your choice here. Me? I think I'll stick with the underlying theme in the markets which is to reward the currencies and sell dollars when things look stronger, because the risk on mantra lives.

So. if that's the case, then the week will end up on a good note. jobs will have been created (supposedly), and the risk assets are rallying.

Earlier this week I told you about the recent rise in the Canadian dollar / loonie and how the data in Canada had been softer, but the rise in the price of Oil, was underpinning the currency. Well, have you been tracking the Oil price this week? WOW! The move in the past two days have been very strong in the Oil price, and coincidentally so has the move in the loonie the past two days! The loonie is spittin' distance from parity with the U.S. dollar again. We began the week with the loonie at $.9785, and now we're getting ready for a touchdown on parity again.

Just shows to go you how important the price of Oil is to the loonie.

Moving south from North America, we land in Brazil, where the currency, the real, is rallying VS the dollar once again. So, it's probably about time for the Central Bank in Brazil to come out with some new method to slow down the flow of investment funds coming into Brazil. But left to Brazil's own devices, the currency would be going great guns again this year, after posting a 34% gain VS the dollar in 2009.

Speaking of Brazil. Brazil's Industrial Production, rose .4% in October, which happens to be the fastest pace since June. The .4% rise in October was from the previous month, and the year-on-year rise was 2.1%! I would have to think that this number pushes the Brazilian Central Bank (BCB) to come back to the rate hike table. because believe when I say, that a strong rise like that in a country like Brazil isn't just restocking of supply. Domestic demand is driving this economy stronger and stronger, and it's time for the BCB to do something before inflation gets out of hand! Inflation is running at 5.47% in Brazil, Retail Sales expanded for the fifth straight month, and now this Industrial Production number tells me that interest rates should and will be going higher here.

Which means. and plays well with. the statement I made above about it being time for the BCB to announce another plan to stem investment flow into Brazil. because if the BCB has no other choice but to raise interest rates, the flow into Brazil will increase.

By any measure. Brazil continues to be a very interesting place to have money invested. But let me remind you that Brazil is an Emerging Nation, and when they have that title, they get thrown into the same barrel as the other Emerging Nations, like Turkey, S. Korea, etc. So, things can get a little hairy with the real from time to time, and you'll most likely see wild swings back and forth. So, therefore, only the money you set aside for risky investments should be used here. don't you think? I do.

And right on cue. the real is at a 3-week high this morning!

I saw a blurb on the Bloomie this morning that China forwards are soaring this morning. I've explained this before, but realizing that there are always new readers, or kids in class, I'll just say that in the forward market for currencies, there are points to receive or pay based on the interest rate differential of two countries that the currencies are being swapped. But in the case of Chinese renminbi, the currency's spot price is fixed by the government, so the markets play with the forward points. and whenever they speculate that the renminbi will be allowed to float, and therefore gain in value VS the dollar, the markets push the forward prices so strong that it makes it ridiculous to trade renminbi in the "forward market".

Well. the forwards are soaring this morning on the news that the Political Bureau of the Communist Party of China Central Committee said the country's monetary policy will go from being relatively loose to more prudent in 2011. Macro-regulation needs to be "more targeted, flexible and effective," the committee said in a statement. They went on to say that, "The conditions in China provide a sound base for stable and fast growth next year, but the country will face many difficulties and challenges."

The markets took this news to say that the renminbi is going to appreciate against the dollar at a faster pace than previously. and that. has made forward trading in renminbi ridiculous once again!

HEY! The 10-year Treasury is 3% this morning. That's quite a rise in yield in just the past 3 weeks the yield has gone from 2.63% to 3%... Once again, it looks like this could be the tipping point of the Treasury Bubble, but it could very well be just another head fake. I have gone on record in this letter and my paid for subscription newsletter that the Sovereign Society publishes, called the Currency Capitalist, that I believe the Treasury Bubble is the next bubble to pop, and when it does, things are going to get messy folks. So. when I see a move like this one in the 10-year yield, happens, I get all lathered up, thinking that this could be it. but I've been disappointed before on this, so much so, that I've lost that lovin' feeling for the Treasury Bubble popping.

Then there was this. I saw this story yesterday and wondered just how much it would take. OK, here's the skinny on what I'm talking about. Now, you may or may not believe that there are a couple of banks that hold mega-short positions in Silver. If you don't believe that, then go ahead and skip to the recap. Ok. for those of you about to Rock. The story is about how to make the banks that hold the mega-short positions in Silver hurt really bad (they even mentioned worse things that I would say to keep me out of trouble) , just buy as many Silver coins that you can get your hands on. the story said that if "5% of the world's population each bought a one-ounce coin of silver, XXX Mega Bank would be forced to cover their shorts - an estimated $1.5 Trillion liability" ( XXX out the name of the bank mentioned in the story) .

The thing I would say is that while I don't like the fact that the price of Silver is manipulated by these short positions. I also don't want to see any financial institution crash. We've all see this happen. recall Lehman Brothers? I would like for the CFTC to denounce these guys, fine them, and make them begin to unwind the positions. which would cause a gradual rise in Silver's price.

And. in then end. shouldn't everyone hold some Silver any way?

To recap. The relief rally remains as the underlying bias in the currencies, even with the volatility we've seen in the daily trading. It's a jobs Jamboree Friday, and the jury is out on which way the markets will take the currencies based on a positive number of jobs created in November. Brazil continues to book strong economic numbers, and the Brazilian Central Bank will have to react with a rate hike. China is looking to loosening the purse strings on the renminbi, and the forward markets are going crazy on that news.

Currencies today 12/3/10: American Style: A$ .9810, kiwi .7560, C$ .9990, euro 1.3260, sterling 1.5645, Swiss $1.0075, . European Style: rand 6.9135, krone 6.0340, SEK 6.8825, forint 209.75, zloty 3.0125, koruna 18.8550, RUB 31.30, yen 83.60, sing 1.3060, HKD 7.7650, INR 45.10, China 6.6622, pesos 12.31, BRL 1.6990, dollar index 79.99, Oil $88.16, 10-year 3%, Silver $28.75, and Gold. $1,391.30

That's it for today. one of baseball's great players, Ron Santo, died last night. Ron Santo played for the rival Cubs, but even as a young kid growing up, I could see that he was a heck-of-a-ball player. He fought diabetes for years, losing both legs. Ok. let's talk about something happy. Hmmm. well, Alex "won" his match last night. He actually didn't wrestle, because the other team didn't have a wrestler at his weight. So we drove way out west in rush hour traffic, to find out he wasn't wrestling! UGH! Oh well. We'll get the lights on the house all connected and lit this weekend. I said to my beautiful bride last night, "this is the latest that we've not had the lights on" She reminded me it was only December 2nd! OK. now I've said too much! HA. I'm sitting here, singing along with REM's Losing My Religion. great song! Now go out there and have a Fantastico Friday!

Chuck Butler


EverBank World Markets



Posted 12-03-2010 9:39 AM by Chuck Butler