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

Source:  A Jobs Disaster!

Today is the day the Gov’t prints the December Jobs Jamboree, and if Wednesday’s ADP report did what they said it was going to, and that is change their methodology to mirror the BLS (Bureau of Labor Statistics) then this morning’s Jobs Jamboree will be a nightmare. Of course not the kind of nightmare that the over 2.5 million people that lost jobs in 2008 had! I was once in those numbers, as our old Bank, Mark Twain Bank, was bought by a bigger bank, Mercantile Bank, and Mercantile decided after a few months to perform ethnic cleansing of Mark Twain employees… I called it “my retirement” but with a 3 year old at home and on my lap most of the day, “retirement” couldn’t last too long! My point is that you don’t know the emptiness and failure you feel when they show you the door… So my thoughts are always with those that lose their jobs…

OK, back to the Jobs Jamboree… Earlier in the week the “experts” were forecasting a -500K in job losses… But as the week has gone on, that forecast has inched up to -515K and then -523K… It’s like the BLS is setting us up for a BIG number, but wants the media to carry on their charade of reporting the jobs numbers by saying they came in “just above the forecast” (as if the forecast wasn’t bad!)

The other thing to think about prior to the print is the shenanigans the BLS plays with the jobs numbers… I’ll tell you this… Given what we know about the state of the economy, should the Jobs Jamboree print lower than the -525K that’s now forecast, then you will know in your heart of hearts that the BLS “cooked the books”… That’s all I’ll say about that…

The Weekly Initial Jobless Claims came in under 500K for the second week in a row… I would put this down to the Holidays… I fully expect this to catch up next week! UGH!

So… The currencies yesterday rallied hard, sold off, rallied hard again, sold off, and this went on for the bulk of the day. As I signed off yesterday, the Bank of England (BOE) cut rates 50 BPS, and sent the pound sterling higher… I know, I know, that shouldn’t be, but it is, and the mental giants that are running these trading desks, reward countries that debase their currencies!

But in the end… The euro was higher on the day, along with yen, and Swiss francs… The high yielders took one to the chin, as risk takers have gone back under the covers to get warm, as the chill in the air got to them!

I had more than a few people send me a story that appeared in the NYT that played well with my screaming from the rooftops about the Budget Deficit announcement from the day before… Here is a snippet, of the story that can be read in its entirety here.

“In the last five years, China has spent as much as one-seventh of its entire economic output buying foreign debt, mostly American. In September, it surpassed Japan as the largest overseas holder of Treasuries.

But now Beijing is seeking to pay for its own $600 billion stimulus — just as tax revenue is falling sharply as the Chinese economy slows. Regulators have ordered banks to lend more money to small and medium-size enterprises, many of which are struggling with lower exports, and to local governments to build new roads and other projects.

All the key drivers of China’s Treasury purchases are disappearing — there’s a waning appetite for dollars and a waning appetite for Treasuries, and that complicates the outlook for interest rates, said Ben Simpfendorfer, an economist in the Hong Kong office of the Royal Bank of Scotland.”

OK… Back to me… So… If, what President-Elect Obama said regarding “expecting Trillion dollar Budget Deficits for several years” is to come to fruition, then what pray-tell will we do with all the Treasuries we issue to pay for the debt?

Uh-oh! Spaghetti-o’s! The Gov’t will have to ratchet the yield on these bonds up so high to attract investors… OR… Allow a general debasing of the dollar to allow those purchases of Treasuries to be made at a discounted clearing price. I’ve said this all along folks… Over and over again and over again until I’m blue in the face… Or was I holding my breath again? Both! I hold my breath in hopes that it is all a nightmare!

I have to tell you all, especially new readers that haven’t heard me screaming from the rooftops about the direction of this country, to socialism, that this is all getting completely out of hand! The Fed is well down the path to controlling the markets, taking the term “free markets” away for good… And do we expect anyone to stop them? Not unless it’s us… We The People…

Ty Keough sent me a note yesterday from James Quinn on investmentrarities.com… “As the politicians scurry to “save” capitalism through the use of communist measures, more Americans are becoming disheartened. The definition of communism according to Webster’s is:

A system in which goods are owned in common and are available to all as needed.

George Bush, Henry Paulson and Ben Bernanke have decided to seize money from the vast majority of Americans who lived within their means, utilized debt sparingly, and worked hard to get ahead, and give it to the most appalling failures in our society. They have shoveled billions to banks that operated their businesses like gambling parlors. They have shoveled hundreds of millions to people who bought houses with no money down, interest only mortgages and fraudulent loan applications. They are now rewarding automakers who made the wrong vehicles, pay 30,000 workers per year to not work, and have only been able to “sell” cars by giving them away with 0% financing to any schmuck who could sign on the dotted line. These acts fit the definition of communism. We are now more communist than China.”

I spent a long time with a Wall Street Journal reported yesterday… The reporter, who has interviewed me before, going back to 2002, was interested in my take on Gold as an inflation hedge… I know there are people out there that will dispute this, but if you go back to where Gold was issued when Nixon closed the Gold window in 1971 ($34), and not from it’s previous high in 1981, you can see it not only is an inflation hedge but a store of wealth, and as people that own dollars look at the loss in purchasing power of their dollars, and look at the store of wealth Gold has held… It makes abundant sense to have Gold… I wonder if this will get printed in the WSJ….

And Savers… I’m a saver, are you a saver? Yes, I spend money, just like a lot of people, but I also save… And that’s what ticks me off these days! The Fed has lowered rates to 0%, so there’s no incentive to save if you only look at yield… But, if you look at the fact that saving has to start somewhere, then maybe the Gov’t will get the hint / clue, and stop overspending! But doesn’t it tick you off that the Fed has lowered rates to 0% and have basically told you, the saver, to go out and seek risk to offset that loss of yield? They don’t want us to save, people… So… You know me! SAVE, SAVE, SAVE! And then SAVE some more!

And that… Leads me to a book, that a reader sent me, that he wrote! The title of the book is: Debt is Slavery… And 9 Other Things I Wish My Dad Had Taught Me About Money… The author is Michael Mihalik… I think most people don’t believe they have a debt problem… But… If this financial meltdown continues at its current pace, I think they’ve got a rude awakening coming. Just like the U.S. and their debt problem… It’s relatively the same ordeal…

So… The Bank of England (BOE) did cut rates 50 BPS yesterday, which puts their total of the last three rate cuts at 300 BPS… And what did the pound sterling do? It rallied! These are strange times, my dear reader friends… But in my humble opinion, I would view this rally as an opportunity to look to sell at these higher levels, because my view on the pound is not good… The U.K. has the same problems as here in the U.S. (not the deficit problems, but they could get there in heartbeat should they continue to bail out institutions) just on a smaller scale… And in the end, that will be enough to push pound sterling down… My long time friend, Joe Losos, asked me if he could write a piece for the next monthly newsletter to clients of EverBank World Markets. Of course I said yes… And he came back with a piece on the prospects for the pound… So look for that in the monthly Review & Focus at a newsstand near you, sometime in the future!

The Japanese yen is back on the rally tracks, as the risk takers have gone AWOL… Yen is back to below 91, trading with a 90 handle, and looking perky… Should the Jobs report in the U.S. today be rotten, yen should have a field day VS the dollar. Now there’s something to look for!

The Brokerage House that owns a Bull, issued a report that said, “Dollar would slide if U.S. loses more than 700,000 jobs”… They really went far out on the limb with that one, eh? HAHAHAHAHAHAHA! No, I’m not taking a shot at our friends there, just pointing out that even the Big Boys right now, don’t have a strong conviction on the direction of the markets right now… So, they tip-toe through the tulips…

Canada will also print their employment data this morning… About 1/2 hour before the Jobs Jamboree. I also didn’t like hearing what the Canadian Finance Minister had to say yesterday about Canada seeing a “substantial deficit later this year”… The Finance Minister, Flaherty will present his budget on April 1… Let’s hope he’s setting us up for an April Fool’s Day joke! Unfortunately, I don’t think these Gov’t people have a sense of humor, so I think it’s safe to rule that thought out right here, right now!

I’ll finish this up with a brief snippet from a report by one of my fave writers, William Pesek of Bloomberg… Mr. Pesek’s complete piece can be found here: http://www.bloomberg.com/apps/news?pid 601039&refer columnist_pesek&sid aHOuXTmCv61Y

Here’s William Pesek… “Beijing bookstores would be wise to stock up on Johann Wolfgang von Goethe. His work will help Chinese officials understand the “Faustian bargain” in which they are engaged with the U.S.

The reference here is to a compromise of principles for fleeting gains. In literature, Goethe’s Faust is a mythic German alchemist who made a deal with the devil. And that, in a nutshell, is where China, the biggest foreign holder of U.S. debt, finds itself as America re-inflates its economy.

Treasury Secretary Henry Paulson isn’t the devil, yet on his watch the U.S. has morphed into a huge debt-issuing machine. The Congressional Budget Office says the U.S. deficit will more than double this year to at least $1.18 trillion, the biggest since World War II.

Barack Obama has even bigger plans. The CBO’s estimates don’t include the cost of the president-elect’s stimulus package, which will probably add at least $750 billion to the total over the next two years. Last year’s shortfall totaled $455 billion. The U.S. needs China’s money more than ever.

“I spent most of the first two quarters of 2008 marveling at the pace of Chinese reserve accumulation,” Council on Foreign Relations economist Brad Setser in New York wrote on his Web log this week. “I expect to spend the first few quarters of 2009 marveling at the size of the U.S. fiscal deficit.”

Currencies today 1/9/09: A$ .7065, kiwi .5920, C$ .8435, euro 1.3710, sterling 1.5260, Swiss .9150, rand 9.69, krone 6.9350, SEK 7.8350, forint 201.70, zloty 2.9575, koruna 19.3150, yen 90.75, Sing 1.4790, HKD 7.7570, INR 48.25, China 6.8355, pesos 13.76, BRL 2.2980, dollar index 81.65, Oil $41, Silver $11.18, and Gold… $853.50

So… Hold on today… The Jobs Jamboree could be earth shattering as far as the markets are concerned.

Source: A Jobs Jamboree Friday

Junior Mogambo Ranger (JMR) Phil S. sent me an article titled “Numbers Racket”, with the subtitle “Why the economy is worse than we know”, by Kevin Phillips, which first appeared in (I assume) Harper’s Magazine, and which I had talked about in a previous MoGu newsletter – although I forget which one, and I am not going to go find out because I can hardly stand to read that Stupid Mogambo Crap (SMC), as it is embarrassing enough to write it. I can only imagine your embarrassment in being caught reading it! Hahaha!

But this article is not about solving that old riddle, “Who is the most stupid: The Mogambo for writing his stupid crap, or the people who voluntarily read it?”, but about how I am glad JMR Phil sent it to me, because there was something in it that I had missed before, where the discussion turned to unemployment.

Mr. Phillips writes, “The series nearest to real-world conditions is, not surprisingly, the highest: U-6, which includes part-timers looking for full-time employment as well as other members of the ‘marginally attached,’ a new catchall meaning those not looking for a job but who say they want one”, and which is running at a frightening 9% unemployment.

Well, admittedly, this is not new, but the interesting part that IS new is when he writes, “Yet this does not even include the Americans who (as Austan Goolsbee puts it) have been ‘bought off the unemployment rolls’ by government programs such as Social Security disability, whose recipients are classified as outside the labor force.”

That’s right! There are lots and lots of people who no longer have to work because the government supports them! Too bad he doesn’t give an estimate of how many these are!

But the new unemployment numbers came out, and right off the bat I see that the Civil Labor Force went up by 173,000 and the number of Employed went up by 360,000, but Non-Farm Payrolls went down by 20,000 and Goods Producing Payrolls went down by 110,000! Huh?

Of course, nobody is surprised that government employment went up by 9,000 employees to 22,385,000, which is up 224,000 over the last year.

In fact, there are now more people on Government Payrolls (22,385,000) than Goods Producing payrolls (21,618,000)! Hahaha! We are so freaking doomed! What makes it So Damned Funny (SDF) is that a conceited, self-absorbed nation like America, that boasts how smart we are, cannot possibly realize the utter, utter stupidity of this! Hahaha! And yet, here it is! Dare I repeat myself that we are freaking doomed? Sure! We’re freaking doomed! Hahaha!

Agora Financial’s 5- Minute Forecast ignores my jocular outbreak and somberly reports that “The U.S. economy shed jobs for the fourth-straight month in April” which they say is important because “in post-Great Depression history, a four-month losing streak has always preceded a recession.” Yikes!

I am always interested in things that use “always” to describe them, which I have learned the hard way, such as “People always get upset when I tell them that they are stupid because they are not buying gold, even in response to Alan Greenspan of the Federal Reserve destroying the dollar by creating so much of them, so that the damned government can spend us into bankruptcy, and then they REALLY always get upset when I say that their stupidity has doubtlessly been passed along to their ugly, mutant children, who are, on average, the most ignorant, most stupid, most self-absorbed, most violent, most criminal bunch of worthless trash ever created in America, as indicated by standardized testing and personal experience, mostly from having a few of the rug-rats myself.”

And the fact that I “always” have to defend myself against these stupid people, including my own wife and kids to show you the kind of treachery I have to put up with around here every freaking day of my life, makes me perhaps a little more sensitive to the word “always” being featured so prominently in the snippet “a four-month losing streak has always preceded a recession.”

Maybe this “recession” thing is why the Labor Department reported that the U.S. lost another 20,000 jobs in April. In fact, the economy has shed 260,000 jobs since New Year’s Day!

I admire the way that John Williams restrains himself from busting out laughing as he says in his review of the government’s Payroll Survey that the “Bureau of Labor Statistics (BLS) reported a seasonally-adjusted jobs loss of 20,000 (loss of 28,000 net of revisions) +/- 129,000 for April 2008.” Hahahaha! Plus or minus more than 600% of the estimate? Hahahaha!

I instantly see how I can use this to my advantage the next time my stupid boss calls me into her stupid little office to get “on my case” about something. Like yesterday, for example, I could have used this fascinating and powerful technique when she called me in to ask me about losing the stupid Lindsey contract, which was because old man Lindsey had a “Hillary Clinton for President” campaign bumper sticker on his car, and so I politely told him that he was “stupid, commie-rat Marxist pinko collectivist low-IQ trash”, which he apparently took some exception to, and now it’s suddenly important to know how many OTHER contracts we lost because of me merely giving people what they deserve.

My first thought, of course, was to politely say, “None of your business, you stupid old cow, so shut up!”, but I realized it WAS her business, and, even worse, six other instances of this same thing instantly ran through my mind.

Today, now that it is too late to do me any good, I realize that I could have said, “How many others? None! Give or take six, which should be good enough for you because your own Leftist trash government says it is good enough when calculating employment!”

Saving this for another day, I now turn to the Birth/Death Model, which plays such a prominent role in the government’s calculation of employment, and which showed a surprising gain of 267,000 jobs, which is the biggest increase in the last 12 months! Wow!

Before you go off shouting “The recession is over! They’re hiring again!”, the Model showed that 45,000 jobs were added in Construction, which makes me laugh my Big Fat Mogambo Butt (BFMB) off, but not laughing in merriment and joy, but a dark and scornful laugh of contempt, because this would be the most jobs created in the Construction category in the entire last freaking year, which makes me laugh even harder and with more scorn! And LOTS more contempt!

Oddly enough, 83,000 jobs were created in the April’s Birth/Death Model in the category of “Leisure and Hospitality”, which I figure is a pretty good estimate of the number of women who have recently become prostitutes because they are so desperate for money! Welcome to the hell of inflation!

Until next time,

The Mogambo Guru
for The Daily Reckoning

The Mogambo Sez: I feel sorry for those who have not converted their wealth into gold, silver and oil. Not sorry enough to give them some of mine, however. Just sorry.

And I will feel sorry for them when gold, silver and oil make me rich and them poor. Not sorry enough to give them some of mine, however. Just sorry.