Friday, November 09, 2007

The Proof is in the Pudding

The phrase ‘The proof is in the pudding” is a shortened version of “the proof of the pudding is in the eating”. This phrase comes from an old parable where we are taught that the real proof is in the test. Last week I stepped out on a limb and stated that there was no real job growth that the non-farm payroll numbers were reflecting second jobs more than new jobs and more employment. I had a number of comments on this matter, many complimentary but there were some that weren’t confident in my analysis. To those who were not confident and to those who want a second serving, open up here comes the pudding.

First of all price, how can you argue with that. The dollar hit record or multiple year lows against the euro, the pound, the aussie, and the loonie (by lows I mean as compared to these currencies no forum posts pointing out the obvious record highs on some of these pairs, it was the dollar weakness or lows that caused it). If the economy were strengthening, GDP were truly rising, and new jobs were everywhere, would the dollar continue its collapse?

Second, Ben Bernanke backed me up yesterday, giving clear indications of economic slowing and probability of further more “severe” problems in the housing and credit markets’ already poor situation.

Not enough?

Third, and the one none can argue with, the actual data. Last week the non-farm payrolls report surprised everyone. Septembers new jobs were 110k new jobs, October was expected to be 82k but the report came in at 166k, 84k more jobs than was expected. The Burea of Labor and Statistics October report for multiple job holders over the age of 16 came in at 7852k (that is right a ‘k’ meaning thousands) which is up 231k from September (0.2% higher).

Now for some simple subtraction 166k new jobs minus 231k more people with multiple jobs equals -65k jobs or in other words, less total people are employed and more people are picking up second jobs. You may be thinking ah-ha I caught you Blake, they said that unemployment didn’t go up, true the percentage didn’t but the number of employed individuals went down 250K people in October. This is off 11k, but notice I said there were 250k less employed not 250 more filing for unemployment, that is a different number. Unemployment filings went up in October by 38k, not enough to change the 4.7 rate to 4.8.

Mmmm, tastes like pudding.

Suspended Account - I think not

If you have tried to stop here this week you may have been redirected saying the blog was suspended. Well, "they" can NEVER SILENCE THE TRUTH!!!

Oh wait, it was just a java script in the pivot point that was crashing. So no more pivot point calculator here and things should be fine again. I am writing a post similar to last week today so if you can suffer through a long post then come back later on.

Oh wait, before I stop for the moment, let me point something out to the nay say-ers. Remember the Gbp/Chf trade??? You may have forgot, it has been a month now. On October 4th I said that no comment was not a good thing out of England and it would hurt the pound and I liked the Swiss Franc as a counter part. A number of people questioned my logic and sanity in chats, emails, and phone calls. Well, this is just another one of those I was right situations isn't it? He He and Ha Ha, laugh my way to the bank.

Now were are we? At a support level. If we see consolidation or a bounce, get out. If we see a break of the 2.35 level hang on for a couple of more days to see where it goes. It took a month but for 500 pips, that is alright.