A Jobs Jamboree Friday!
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In This Issue.

* Euro sells of nearly 2-cents!

* most over currencies range trade.

* China & Gold.

* EU Summit today.

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

A Jobs Jamboree Friday!

Good day... And a Happy Friday to one and all! I'm going to call it a Fantastico Friday right out of the starters blocks this morning, for it represents the end of a very long week. I'm over ending this week like a cheap suit! So. let's get moving on down the road.

On this fine Fantastico Friday, it is also a Jobs Jamboree Friday! So, we've got that going for us! Yes, jobs. jobs, jobs. That's the Big Kahuna to a lot of our problems regarding the meandering economy. Yes, there are signs that the economy is improving, and job creation is improving. But, we've got a long hard row to hoe here folks. And for a group of people that have been so used to having things handed to them, you've got to wonder if the "will" is there. I mean, the Gov't keeps sending them checks, right? I'm not trying to be mean, here. I'm simply stating that to get back to a thriving economy, we've got a lot of hard work to do.

So. the forecast for January jobs created was updated yesterday, and now shows that the experts believe that 145,000 jobs were created in January. Not exactly the stuff that strong economies are made of, but. it's a sign that it's improving. albeit at a snail's pace.

Today, the currencies will be driven by the markets' reaction to the Jobs Jamboree. Yesterday, the euro had the trap door sprung underneath it, while most of the other currencies traded in a tight range. Two days ago, we were looking at a euro with a 1.38 handle, and today, the handle is 1.36. But, that's the way of a currency that has so many pulls on it.. It has the pull of being the offset currency to the dollar. It has the pull of being a currency that is racked with a debt crisis. It has the pull of being the currency of Europe, for it is perceived that how the euro goes, Europe goes. and so on. So, one day, you can see a nearly 2-cent gain like we did on Tuesday, and the next day you can see a nearly 2-cent drop like we did yesterday.

I have a conspiracy theory on this. So if you don't want to hear it, simply skip to the next paragraph. OK. Those of you who stayed on to hear this get ready. set. go! You see, everyone and their brother knows about the Eurozone periphery countries' problems. It's not like these things crop up new. The so-called PIIGS were first brought to our attention 1.5 years ago! So, why, then when a country like Ireland, one of the PIIGS, get a credit rating downgrade, does it send the euro to the woodshed, when we've known for 1.5 years that stuff like this was going to happen? I personally believe that the U.S. Gov't directs the media to make a fuss over it, which then drives trader direction. Yes, I've told you that the U.S. Gov't wants and needs a much weaker dollar, but, they don't necessarily need it right here, right now. So, In my conspiracy theory mind, I believe that whenever it looks like the dollar is about to take a ride on the slippery slope again, the Gov't directs the media to "come up with something" which will change the direction of the dollar, for a short time.

OK. all of you who skipped that, you don't know what you missed! HA! OK. as I said above, the euro dropped yesterday, but most of the other currencies range traded, which means they did not sell off like the euro. At one point in the day, I looked up, and noticed that Gold had turned around. I yelled out to the boys and girls on the trading desk, that Gold had just moved $20 in 10-minutes! WOW! I joked, semi-seriously, that Gold must have reached a low enough price to entice the Chinese to buy! I mean who else could buy enough Gold to move the price that quickly and by that much?

In 2009, China took delivery of 209 Tons of Gold. They are quickly becoming the largest holder of Gold, passing India. Why are they amassing so much Gold? Ahhh grasshopper, here's another thought that's way out on the limb but not as conspiracy driven. I mean, we do have the proof that China is hording Gold these days. Well. this is what I told the interviewer from the Street.com (Alix Steele) I truly believed that this Gold buying (and Silver!) was just another step in China's plans to have their currency front and center in the world in a few years. Their goal, when they signed the currency swap agreements with other countries, was to 1. Remove dollars from the transaction, and 2. Gain a wider distribution for their currency. Now. the baby steps that China is taking to get their currency used by more people, will get a HUGE boost, should they decide that when they get around to floating the renminbi, that they back it with Gold & Silver! Talk about making your currency ATTRACTIVE! The hard money investors of the world would flock to renminbi.

Now Alix Steele asked me a good thoughtful question when I told her that. She asked me if there was enough Gold in the world to sufficiently back the renminbi? Ahhh. I said, this is why I believe China will also use Silver, making their currency backed by a combination of Gold & Silver. I could be so far off base here, but I don't think so. To me, this means that Gold & Silver will be underpinned going forward. Sure they could slip further, but in my heart of hearts, I believe that China will be there to support the price of Gold & Silver by buying at the cheaper levels. And if this looks as though it's about to come to fruition, then the price of Gold & Silver will skyrocket, for everyone will want to get in on the action!

OK. that's Chuck's views for Gold, Silver, the renminbi, and China's plans. Shoot holes in it, but do it nicely.

Earlier in the week, I talked about a renewed enthusiasm for risk. I do believe that's being played out right before our eyes (for you, eye for me) with the so-called safe haven Swiss franc, seeing weakness for the first time in weeks, and currencies like Aussie dollars (A$), and even as far flung as the Mexican peso, getting a ton of air play time. I mean, I've said this before, but Australia, has been rocked this summer by floods, and then a cyclone that was nearly the size of the U.S. 48 states! But. the A$ continues to gain VS the dollar.

And what about that Mexican peso? Ahhh grasshopper, this is where the "silly money" goes. Like you've heard of the youngsters, "drunk dialing". Well, investors in Mexico are drunk dialing, for there is no risk premium to protect people from the things that can happen to investments in Mexico. In 1994, for instance, Mexico had a fixed exchange rate system that accepted pesos during the reaction of investors to a higher perceived country risk premium and paid out dollars. However, Mexico lacked sufficient foreign reserves to maintain the fixed exchange rate and was running out of dollars at the end of 1994. The peso then had to be allowed to devalue despite the government's previous assurances to the contrary, thereby scaring investors away and further raising its risk profile.

I was the currency and foreign bond trader at Mark Twain Bank in 1994, and had traded a ton of the Tesobonos, which were Mexican bonds denominated in pesos, but indexed in dollars. I remember investors screaming bloody mercy when Mexico devalued the peso. And this wasn't the first time Mexico had left investors holding the bag, and I don't know what would stop them from doing it again! So. be careful here. Don't get caught drunk dialing.

On the northern end of the NAFTA countries. Canada will also print jobs data today. You might recall that last month Canada's job creation was surprisingly strong. Well. I'm going to say that I believe that this month Canada will again print an upside surprise in job creation. I was asked by someone the other day, just how strong I thought the Canadian dollar / loonie could get. I turned it around, and asked how high they thought the price of Oil would get? For, it is my opinion that the loonie has really turned into a petrol-currency. Now, it's true that the Canadian Gov't usually goes into convulsions when the loonie trades past parity. But, with soaring Oil prices kicking the inflation meter up a couple of notches, the Canadian Gov't will allow the loonie to get stronger to offset the inflation pressures. But how strong? Well, in Nov. of 2007, the loonie traded to $1.1040. So. I would use that as a guide. but then, if the price of Oil drops, the loonie won't even get to smell what Nov 2007 was like!

Ok. yesterday, I rambled on and on about rising inflation pressures. and rightly so. but, a good friend, and old colleague, Ed, sent me a note, and reminded me that inflation isn't the cause of all price increases. And of course he is correct, for I tell you all the time about the saying that my dad would tell me, that "there's no such thing as a shortage, it's something that's merely in need of a price adjustment". So, as food shortages continue to show up the prices are adjusted upward, which is causing a lot of pain in parts of the world.

The "other Big Meeting" today, other than the Jobs Jamboree, will be the European Union (EU) Summit. The heads of states will meet and discuss important matters. or so they say. EU President van Rompuy indicated earlier this week that today's summit would set a "clear path" for resolving the sovereign debt crisis... Yeah, and cows jump over the moon! I guess we'll hear what van Rompuy has up his sleeve around noon time today... I doubt it's anything and will be akin to Bullwinkle saying, "hey do you wanna watch me pull a rabbit out of my hat? Nothing up my sleeve... "

Then there was this... found this in the FT... Based on unemployment forecasts by the Congressional Budget Office and the Federal Reserve, it is becoming clear that this round of quantitative easing in the U.S. is doing its job, according to The Economist. "With QE2 in place, American unemployment is likely to be between 6% and 7% in 2012, the magazine notes. "That's not full employment, but it's pretty close. ... A big risk is that the Fed will back away from its policy too quickly, thinking all is going well and worrying preemptively about inflation."

Chuck again. WOW! Are these guys living on Fantasy Island or what? First, I would dispute that QE 2 had done anything except to prop up the stock market, and second, do they truly believe that the Fed will back away too quickly? I don't. no in any sense of my imagination!

To recap. The euro is dragging the line today, after selling of nearly 2-cents yesterday, in a harsh reaction to Ireland's credit rating downgrade. Most of the other currencies range traded on the day, and are not selling off like the euro. It's a Jobs Jamboree Friday, both in the U.S. and Canada. And the renewed enthusiasm for risk is really getting far flung, as the Mexican peso rallies, alongside the A$!

Currencies today 2/4/11. American Style: A$ $1.0170, kiwi .7730, C$ $1.0115, euro 1.3630, sterling 1.6125, Swiss $1.0550, . European Style: rand 7.3025, krone 5.7430, SEK 6.4620, forint 108.35, zloty 2.8640, koruna 17.6050, RUB 29.44, yen 81.65, sing 1.2740, HKD 7.7855, INR 45.59, China 6.5850 (China is on holiday, so no change in the renminbi), pesos 12, BRL 1.6660, dollar index 77.77, Oil $90.88, 10-year 3.54% (time for the CABA to buy again, as the yield is creeping higher again!) Silver $28.88, and Gold. $1,349.90

That's it for today. Sorry about leaving out the currency roundup yesterday, I must have really been zoning out to the Rain Song, eh? It's Super Bowl Sunday this weekend, and the parties will be getting started. I don't have an axe to grind on either team winning, as I like both of them. Traditional football powers, Packers and Steelers. Congrats to my buddy Alex, who challenged the Jr. Varsity wrestler at his weight, and won, thus now he will wrestle in the season ending Jr. Varsity tournament tomorrow, which means I get to go sit on bleachers for 9 hours. But good for Alex! I'm sitting here singing along with the Beach Boys, and their song: Wouldn't It Be Nice. OK. you have 10 days to secure a nice Valentine's Day gift for your loved one. I'm giving you plenty of warning guys. Don't blow it! This marks 5 weeks in my attempt to lose weight. I've stayed under 2,400 calories per day for 5 weeks now. I'm not seeing much in results, but. I know it can't hurt me and I haven't gained any weight, and that's a good thing for me! I have a feeling that Sunday will be the end of my consecutive days under 2,400 calories, but as long as I keep it at one day. right? OK. I hope everyone is staying warm. Jimmy Kimmel had a great line last night about the cold weather, he said, "for once that extra layer of fat is coming in handy for Americans". HA! Ok. I hope you have a Fantastico Friday, and a Wonderful Super Bowl Weekend!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837





Posted 02-04-2011 1:36 PM by Chuck Butler
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