MORE DISCOMFORT

Jean Claude started it today. He was fairly clear that one could not expect to see a rate rise in the Euro zone until July at least and when asked about the relationship of the Euro to the dollar he referenced Ben's and The Suit's comments about a strong dollar and said, essentially, put up or shut up. Nobody likes cat fights between central bankers and the unease began to grow. The economic numbers over here came out a few hours later and they were less than good. Unease grew. Somebody remembered that the numbers from China earlier in the week were less than stunning and the unease grew greater. Somewhere along the line the idea began to service that Jean Claude was going to shame us Yanks into recognizing that there is some importance to things non-American and adopt more rational fiscal and monetary positions and the rout was on. Commodities were crushed, oil tanked (ok,ok my bad) gold slumped badly and you couldn't give silver away. Stocks, surprisingly, dove as well the Dow being down 140 points at the close. The dollar, however, rose probably on the basis that the home commodity currencies (oz dollar, loon) got wrecked and that the Euro represented a bad spot in the world. Treasuries rose. Tomorrow we get new jobs and the unemployment number. If they are not at least ok, best keep the children off the streets because it's going to be ugly out there. All the leverage trades are off which is another reason the dollar is rising: I wish I could say that is a good thing and it is but for all the wrong reasons.

We are not watching it closely enough but the situation in China is, I think, key to the near term. I don't envy those guys. Inflation is more than they are willing to admit but stomping it down must slow growth and jobs at a time when 700 million people ain't working and beginning to ask "why," and those that are continue to be a real pain by asking for a larger share of the pie in things like wages, standards of living and creature comforts. My Really Smart Friend, Larry, spends a lot of time with them and I'm going to get his opinion but lately he and I have been disagreeing on stuff like currency plays and plans. On the straight economics, however, I will always defer to him. Oh, he was in one of the "Stans" recently. You know, Kazek, Turk...some Stan. Seems I'm blocked there too. Nobody likes Charlie, he reports. I was shattered.

Oh, yesterday I neglected to mention that despite relief from the EU, Portugal's bond auction was a real woofer--a bow wow of major proportions and implications. Buyers were very official in nature with no real demand in retail. As we used to say in the old days, "Allotments were generous."

So I remain very ill at ease. Up until today, nothing was happening...it was too quiet. Today, too much happened and going into the week-end I anticipate a knock-on to what happened today unless we get some blow-out employment numbers tomorrow which I doubt. Everybody is going to be square going in which means the deleveraging continues. For those with a short term view, adios. For those along for the ride, hold on. It's going to get more than bumpy