Financial Review

Getting Better

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Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB) Financial Review DOW + 221 = 17,195 SPX + 12 = 1994 NAS + 16 = 4566 10 YR YLD – .02 = 2.30% OIL + .53 = 81.95 GOLD – 12.80 = 1199.80 SILV – .63 = 16.56 We start with the government’s report on third quarter gross domestic product showing the economy grew at a 3.5% annualized rate between July and September. The Commerce Department reported the increase was primarily due to consumer spending, exports, and higher government spending on the federal, state and local levels. In four of the past five quarters, the economy has expanded at a rate of 3.5 percent or greater; the exception was in the first quarter, when the economy contracted by 1%. Year to date GDP is running at a 2.4% pace. Consumption and fixed investment, taken together, is up 2.8 percent over the last year. This is a pretty good growth rate, and it was better than estimates of 3% growth. The economy has performed well of late, consistently adding jobs for 4-1/2 year and reporting sturdy sales of both homes and new automobiles. Meanwhile, many are optimistic that lower gas prices at the pump can lead to higher spending from consumers. Consumer confidence readings are at their highest level in seven years; but consumer spending has been tepid; keep in mind that lower gas prices are considered part of the consumer spending numbers, and if gas prices stay low, …

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Financial Review

The Grand Experiment

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Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB) Financial Review DOW – 31 = 16,974 SPX – 2 = 1982 NAS – 15 = 4549 10 YR YLD + .04 = 2.32% OIL + .53 = 81.95 GOLD – 16.20 = 1212.60 SILV – .11 = 17.19 The Federal Reserve wrapped up their 2 day FOMC meeting. There were no surprises. The Fed is ending Quantitative Easing, just as they promised they would. There was a very slight change in their description of the labor market and inflation; saying underutilization in the labor market is gradually diminishing; and regarding inflation, the rate of price changes has slackened recently because of lower energy prices. The Fed kept their phrase “considerable time” to describe how long they will hold off raising interest rates. Quantitative Easing is Fed-speak for large scale asset purchases, or another way of saying the Fed had been buying US Treasuries and mortgages. At one point they were buying $85 billion a month. Over the past year they’ve scaled back purchases, cutting back about $10 billion after each FOMC meeting. Earlier this month they had scaled back purchases to $15 billion, and now the buying spree is over. Except it isn’t really over. The Fed has spent about $4.5 trillion and removed a tremendous amount of bonds and mortgages from the market, greatly reducing supply. The basic supply demand equation says that when you reduce supply, prices go up. Sure enough, prices for bonds have gone …

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Financial Review

The Ghosts of October

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Podcast: Play in new window | Download (Duration: 13:15 — 6.1MB) Financial Review DOW+ 187 = 17,005 SPX + 23 = 1985 NAS + 78 = 4564 10 YR YLD + .03 = 2.29% OIL + .38 = 81.38 GOLD + 2.90 = 1229.00 SILV + .09 = 17.31 Today, we’ll start with a few earnings reports then move to economic news. After the close Facebook reported a profit of $806 million, or 30 cents a share, up from $425 million, or 17 cents a share, a year earlier. Excluding share-based compensation and other items, earnings rose to 43 cents a share from 27 cents. Revenue increased 59% to $3.2 billion. Earnings were up about 90%; revenue up about 60%. Shares were just a little lower in after-hours trade. Dupont reported operating earnings per share of $0.54 were up 20 percent from $0.45 per share last year, in-line with estimates. Pfizer reports a third-quarter profit of $2.67 billion, or 42 cents a share, up from $2.59 billion, or 39 cents a share. Revenue slipped 2% to $12.36 billion. Freeport-McMoRan reported earnings of 53 cents per share for third-quarter 2014, reflecting a decline of 32.9% from the year-ago earnings of 79 cents. Profit declined 32.8% year over year to $552 million, hurt by lower pricing of copper and gold. The S&P/Case-Shiller index of property values increased 5.6 percent from August 2013. Prices are still going up, but at a slower pace. Home prices in the 20-city index adjusted for seasonal variations …

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Financial Review

Monday.

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Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB) Financial Review DOW + 12 = 16,817 SPX – 2 = 1961 NAS + 2 = 4485 10 YR YLD – .02 = 2.26% OIL – .52 = 79.92 GOLD – 5.90 = 1226.10 SILV – .10 = 17.21 In economic news: the National Association of Realtors reports pending home sales rose 0.3% in September, hitting the second highest level for this year. The index of pending home sales reached a seasonally adjusted 105 in September, compared with 104.7 in August. Slower price growth and more homes for sale are likely supporting pending home sales. Pending sales typically close within 2 months, and so this gauge augurs well for actual sales. Financial data firm Markit said its preliminary or ‘flash’ services sector purchasing managers index slipped to 57.3 last month, the lowest reading since April, from 58.9 in September. A reading above 50 signals expansion in the services sector. The index has been gradually declining for 4 months. The October readings would indicate fourth quarter GDP slowing to about 2.5%. Goldman Sachs analysts revised their price outlook for oil; they are decidedly more bearish, predicting $75 a barrel for the first quarter and second half of next year. The thinking is that US shale oil will be enough to keep prices down, and non-OPEC countries will continue to provide plenty of supply, so even if OPEC wants higher prices, they will find it difficult. Oil prices hit a 28 …

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Author Interviews

Michael Malone

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Podcast: Play in new window | Download (Duration: 19:50 — 9.1MB) Listen to Sinclair Noe interview author Michael Malone. for more information, or to buy the book, click the banner. The Intel Trinity: How Robert Noyce, Gordon Moore, and Andy Grove Built the World’s Most Important Company by Michael Malone Based on unprecedented access to the corporation’s archives, The Intel Trinity is the first full history of Intel Corporation—the essential company of the digital age— told through the lives of the three most important figures in the company’s history: Robert Noyce, Gordon Moore, and Andy Grove.

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Author Interviews

Philip K. Howard

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Podcast: Play in new window | Download (Duration: 19:50 — 9.1MB) Listen to the author interviewed by Sinclair Noe. Click the banner to buy the book or for more information. The Rule of Nobody: Saving America from Dead Laws and Broken Government by Philip K. Howard The secret to good government is a question no one in Washington is asking: “What’s the right thing to do?” What’s wrong in Washington is deeper than you think. Yes, there’s gridlock, polarization, and self-dealing. But hidden underneath is something bigger and more destructive. It’s a broken governing system. From that comes wasteful government, rising debt, failing schools, expensive health care, and economic hardship. Rules have replaced leadership in America.

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Financial Review

A Solid Week in a Rocky Month

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Podcast: Play in new window | Download (Duration: 13:15 — 6.1MB) Financial Review DOW + 127 = 16,805 SPX + 13 = 1964 NAS + 30 = 4483 10 YR YLD – .01 = 2.27% OIL – .80 = 81.29 GOLD – .90 = 1232.00 SILV + .01 = 17.31 Last Friday we covered some technical analysis of the equity markets, looking at support and resistance, as well as a short-term bullish pattern, a morning star that had formed. Sure enough, this week provided the follow through on that bullish pattern. Major indices snapped a 4-week string of losses. For the week, the Dow gained 425 points, or 2.5%. The S&P gained 78 points, or 4.1%. And the weekly gain for the Nasdaq was 225 points or 5.2%. So, where do the markets go from here? The pullback that started September 19th never really materialized into a full blown correction, and there is a feeling that there should be more to the downside, but as of today the markets seem to be firmly in retracement mode. Better to let the market tell you when that retracement ends than to try to impose your opinions on the market. And then remember that we are almost through the treacherous month of October. The Stock Traders’ Almanac reminds us that “in 64 years before 2014, DJIA and S&P 500 have both declined 26 times in October. However, these October declines were followed by 23 DJIA November-December gains averaging 4.0%. S&P 500 November-December gains …

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Financial Review

A Boatload of Economic News and Earnings Reports

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Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB) Financial Review DOW + 216 = 16,677 SPX + 23 = 1950 NAS + 69 = 4452 10 YR YLD + .05 = 2.28% OIL + 1.33 = 81.85 GOLD – 9.10 = 1232.90 SILV + .02 = 17.30 The S&P 500 has risen five times in the past six days, pushing the gauge up 4.9 percent since Oct. 15 and recouping about half the losses from a selloff that began in mid-September; the S&P is still down about 3 percent from a record. The Federal Housing Finance Agency, which tracks deals involving mortgages backed by Fannie Mae and Freddie Mac, said home prices in August were up 4.8% from the year-earlier period; and up a seasonally adjusted 0.5% in August from July. The average rate for a 30-year fixed mortgage was 3.92 percent, down from 3.97 percent last week. The average 15-year rate dropped to 3.08 percent from 3.18 percent. Mortgage rates are now at the lowest levels since the summer of 2013. Refinancing applications jumped 23 percent in the week ended Oct. 17 to an 11-month high. The number of people who applied for US unemployment benefits rose by 17,000 last week to 283,000, but initial claims remained below the key 300,000 level for the sixth straight week. The Conference Board’s leading economic index rose 0.8% in September, after no change in August. The index points toward improving employment and income growth which are expected to support …

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Financial Review

Inflation or the Lack Thereof

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Podcast: Play in new window | Download (Duration: 13:21 — 6.1MB) Financial Review DOW – 153 = 16,461 SPX – 14 = 1927 NAS – 36 = 4382 10 YR YLD + .02 = 2.23% OIL – 2.06 = 80.43 GOLD – 8.40 = 1242.00 SILV – .34 = 17.27 The major stock indices were higher this morning, then they dropped about the time were heard reports of a shooting in Ottawa Canada, near the parliament building. The shooting in the Canadian capital left a soldier dead and the city on lockdown. The Labor Department said the Consumer Price Index edged up 0.1% last month. In the 12 months through September, the CPI rose 1.7%. The core CPI, which strips out food and energy prices, ticked up 0.1% last month, while the year-on-year change held steady at 1.7%. Energy prices fell for a third straight month in September, with gasoline costs slipping 1.0% after dropping 4.1% in August. Food prices gained 0.3% in September and were up 3.0% from a year ago, the largest gain in nearly 2-1/2 years. Shelter costs increased 0.3% in September after rising 0.2% in August. The medical care index increased 0.2%, with prices for nonprescription drugs posting a record increase. Airline fares declined for a third straight month, while prices for new motor vehicles and apparel were unchanged. Prices for used cars and trucks fell for the fifth straight month. Wages remain stagnant. Average hourly earnings adjusted for inflation fell 0.2% in September and were …

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Financial Review

Financial Engineers at the Gate

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Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB) Financial Review DOW + 215 = 16,614 SPX + 37 = 1941 NAS + 103 = 4419 10 YR YLD + .03 = 2.21% OIL + .64 = 82.55 GOLD + 2.50 = 1250.40 SILV + .09 = 17.62 In economic news, the National Association of Realtors reports sales of existing homes rose 2.4% in September to a seasonally adjusted annual rate of 5.17 million, hitting the fastest pace in one year and rebounding from an unexpected drop in August. However, September’s pace of sales was down 1.7% from a year earlier. So, the housing market isn’t roaring, but lower interest rates managed to pull some buyers off the sidelines last month. Low interest rates are just part of the equation in the housing market; buyers also need to be employed. The Labor Department today released state unemployment numbers, and in 15 states, the unemployment rate is now under 5%; that list includes: North Dakota at 2.8%, South Dakota at 3.4%, Utah 3.5%, and Nebraska, Minnesota, Hawaii, New Hampshire, Vermont, Idaho, Iowa, Montana, Dolorado, Oklahoma, Wyoming, and Kansas. Georgia has the highest unemployment rate at 7.9%. Arizona made the bottom 10 with a 6.9% unemployment rate, a full percentage point higher than the national average. Reuters reported the European Central Bank was looking at buying corporate bonds as soon as December in its efforts to revive the Eurozone economy. The move to buy corporate debt reinforced the idea that …

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