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Tuesday, September 4, 2012 – Review of the Economic News

Review of the Economic News DOW – 54 = 13,035SPX – 1 = 1404NAS + 8 = 307510 YR YLD +.02 = 1.58%OIL +.26 = 95.56GOLD + 3.60 = 1697.20SILV + .26 = 32.46PLAT  + 21.00 = 1576.00 The Institute for Supply Management manufacturing index fell to 49.6% in August, lower than the 49.8% in July and the worst reading since July 2009. Readings below 50% indicate contraction in manufacturing companies surveyed. It appears to be part of a global trend; there has been a slowdown in manufacturing activity in Asia and Europe. Only eight of 18 industries as tracked by ISM were growing in August, led by printing, primary metals and food. August’s new-orders index fell to 47.1% from 48.0% in July; this points to manufacturers ratcheting down production activity, and that might also lead to a slowdown in hiring. The employment index fell to 51.6% from 52%; still positive but heading in the wrong direction. Another ISM survey of the services sector — things like banking, health care and entertainment — is also expected to show an economy plodding ahead. The services index is forecast to edge down to 52.5 from 52.6. The monthly jobs report is always an important chunk of economic data, and this Friday’s report takes on a little added significance because the Federal Reserve FOMC will be meeting next week to determine policy, and most likely announce something like QE3. It’s expected the economy added about 120,000 new jobs in August. While that’s enough …

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Friday, August 31, 2012 – Trout Fishing in America Benny

Trout Fishing in America Benny – by Sinclair Noe DOW + 90 = 13090SPX + 7 = 1406NAS + 18 = 306610 YR YLD -.06 = 1.56OIL + 1.75 = 97.51GOLD + 36.30 = 1692.60SILV + 1.30 = 31.84PLAT + 33.00 = 1545.00 First, let’s wrap up the month of August compared to July 31: DOW = 13,008 (up 82 for month)SPX = 1379 (up 27 mo)NAS = 2939 ( up 127 mo)10 YR YLD = 1.49 ( up .07 mo)OIL = 89.89 (up 7.62)GOLD = 1615.90 (up 76.70)SILV = 28.10 (up 3.74PLAT = 1421.00 (up124.00) Every August, the world’s financial markets shift their attention from the centers of global commerce — New York, London, Tokyo — to a mountain valley in northwest Wyoming. And for a day at least, Jackson Hole becomes the financial center of the globe. Why? The answer is trout. And it goes back to former Fed chairman Paul Volker, who enjoyed fly fishing. And yesterday, Bloomberg News marveled at the sight of Ben Bernanke at the airport, wearing blue jeans. Even central bankers wear jeans. It’s good to have these guys going fishing. It would be even better if they stayed in Jackson Hole and kept fishing and never went back. Chairman Ben Bernanke sent a clear message that the Federal Reserve will do something. We still don’t know exactly what or when. Bernanke described the U.S. economy’s health as “far from satisfactory” and noted that the unemployment rate, now 8.3 percent, hasn’t declined since January. …

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Thursday, August 30, 2012 – While We Wait for Fed, Banks Behave Badly

While We Wait for Fed, Banks Behave Badly -by Sinclair Noe DOW – 106 = 13,000SPX – 11 = 1399NAS – 32 = 304810 YR YLD -.03 = 1.62%OIL – .67= 95.88GOLD – .80 = 1656.30SILV -.29 = 30.54PLAT – 11.00 = 1512.00 Federal Reserve Chairman Ben Bernanke has returned to Jackson Hole Wyoming for the annual economic symposium.  Following the minutes of the most recent FOMC meeting, in which we learned the Fed felt compelled to take action unless the economy shows dramatic improvement, there has been general acknowledgment the Fed must certainly act sooner rather than later. Sooner being tomorrow or later being at the next FOMC meeting September 13th.  And although it is unlikely Bernanke will announce a major new program tomorrow, he must at least telegraph. Any new Fed actions are likely to have only a small effect on job creation. Among possible options, Bernanke might announce he’ll extend the Zero Interest Rate Policy to late 2014 or into 2015. He could move toward QE3, another round of bond purchases, most likely involving Treasury bonds and mortgage bonds. This would flood money into the economy and housing market, pushing record-low interest rates even lower. Both republicans and democrats have weighed in. Democrats say he should not be deterred from doing what’s needed to reduce unemployment; Republicans say new action should be avoided because of the risk of inflation. So we have a question of whether inflation or no job is the main culprit to eroding incomes.  …

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Wednesday, August 29, 2012 – Today’s Debt and GDP

Today’s Debt and GDP  By Sinclair Noe DOW + 4 = 13, 107SPX + 1 = 1410NAS + 4 = 308110 Yr Yld +.02 = 1.65% OIL – 1.02 = 96.80GOLD – 10.50 = 1657.10SILV – .17 = 30.83PLAT – 3.00 = 1521.00 The month of August has been basically flat, looking at the major market indices, just a couple of points movement. You may recall that last March I was warning you about the worst six months in the market, the old idea of “sell in May and stay away”. On May 1st, the S&P 500 closed at 1405. So, if you did get out in May, you’re doing O.K. Of course, the theory looks at the worst and best six months of the market, and based upon that you would avoid the market volatility in September and October. September is historically the worst month for stocks. The Dow Industrial Average has declined 1.4 percent on average in September since 1929. Taking a broader look at the market, September is by far the worst month for the S&P 500. It has posted an average decline of 1.3 percent since 1929. Over that period, it’s the only month to drop more than 50 percent of the time. Of course, there are no guarantees in the stock market; might go up, might go down; but I think it’s a safe bet that the lazy, hazy days of summer will give way to more volume and more volatility and it could start …

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Tuesday, August 28, 2012 – I Won’t Be Going to Jackson Hole

I Won’t Be Going to Jackson HoleSinclair Noe DOW – 21 = 13,102SPX – 1 = 1409NAS + 3 = 307710 YR YLD -.02 = 1.63%OIL + .57 = 97.48GOLD + 3.00 = 1667.60SILV +.18 = 31.00PLAT – 23.00 = 1524.00 The ECB announced that Mario Draghi had canceled plans to attend the Kansas City Federal Reserve’s annual economic symposium in Jackson Hole, Wyoming citing “a heavy workload”. So, I would just like to announce that I’m not going to be able to attend either. Further, I can tell you that none of that makes much difference; the markets are waiting on a Federal Reserve announcement and an ECB announcement. Relax, it’ll happen. Draghi faces a tougher row to hoe. ECB staff are still weighing a variety of approaches. Draghi, meanwhile, remains in conflict with Germany’s Bundesbank, which has reiterated its opposition to bond purchases of any kind. Meanwhile Fitch has downgraded ratings on 7 mid-sized Italian banks, based on the “current challenges in the operating enviroment” and the difficult of accessing wholesale funding. At the same time, the ECB is in a standoff with Spain, which remains reluctant to seek help from the euro-zone’s rescue fund, an action that Draghi and other ECB officials have made clear is an absolute prerequisite for any new bond-buying efforts. Apparently the Spanish have figured out that the medicine is worse than the ailment and they don’t want to be economically indentured for the foreseeable future. I can understand that Draghi is busy these …

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Monday, August 27, 2012 – Still Waiting on the Fed

Still Waiting on the FedSinclair Noe DOW – 33 = 13,124SPX – 0.69 = 1410NAS + 3 = 307310 YR YLD -.03 = 1.65%OIL +.25 = 95.72GOLD – 7.10 = 1664.60SILV – .10 = 30.82PLAT – 6.00 = 1549.00 The Greek economy shrank 6.2% in the last quarter. The European Monetary Union is insisting on even more austerity in return for emergency funding. They’re trying to see if they can contract the economy right into oblivion. And that’s the good news; the bad news is that 20% of Greek bank loans are now non-performing.  The non-performing loans in Greece are bound to get worse, as the government does not have enough cash to return VAT tax refunds to small businesses which depend on such rebates for survival.  So, it is highly likely that the non-performing assets in Greek banks will rise as small businesses fail. And in Spain, 9.5% of bank loans are non-performing, a record high and cause for a little concern. Italy’s fiscal deficit is swelling. Germany is still the strongest Euro-country and they will probably see economic contraction in the next quarter. The UK might be as bad as any of them, with the exception of Greece.  In China, the housing bubble is deflating.  Prices are falling rapidly.  Lack of new construction has had a worldwide impact on the prices of raw materials.  The slowdown in demand and the decline in raw material prices has significant negative implications for the commodity producing countries like Australia and Canada. …

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Friday, August 24, 2012 – Say It Ain’t So

Say It Ain’t So-by Sinclair Noe DOW + 100 = 13,157SPX + 9 = 1411NAS + 16 = 306910 YR YLD +.01 = 1.68%OIL – .44 = 97.47GOLD – .40 = 1671.70SILV +.24 = 30.92PLAT + 7.00 = 1554.00 Say it ain’t so Lance. The unbeatable Lance Armstrong; the guy who did so much with the yellow bracelets; he finally admitted he is a cheat. He used performance enhancing drugs. He doped. “Enough is enough,” that was Armstrong’s statement. I couldn’t agree more. And yet, even with this I have to take exception. You see, Armstrong didn’t admit guilt. He didn’t come clean. Armstrong will not contest the charges of doping against him. Weary from years of denial, legal battles, skirmishes with former-team mates and anti-doping chiefs, it is a fight Armstrong says he no longer has the stomach for: “Today I will turn the page,” Armstrong said. “I will no longer address this issue regardless of the circumstances.” He didn’t go through a discovery process that would have brought out all the sordid details and entered them into evidence. No, that might have allowed his corporate sponsors to claw back all those endorsement fees. So, Armstrong and his attorneys just say that’s it, enough is enough. This is what corporations do when they want to limit liability; make no mistake, Armstrong is a corporation.  Pay the fine, but do not admit guilt, give up the Tour de France championship but keep the money. The workers were already taking down …

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Thursday, August 23, 2012 – No QE? Step Away From the Crack Pipe

No QE? Step Away From the Crack Pipe-by Sinclair Noe DOW – 115 = 13,057SPX – 11 = 1402NAS – 20 = 3053 10 YR YLD -.05 = 1.67%OIL – 1.05 = 97.69GOLD + 17.00 = 1672.10SILV + .75 = 30.68PLAT + 6.00 = 1548.00 The Federal Reserve FOMC minutes were released yesterday and the interpretation called for monetary accommodation sooner rather than later; so we’ll see QE3 August 31 at Jackson Hole on September 13 at the next FOMC meeting. They might not call it QE3, they might do some variation on the theme but the promise was that there will be big time accommodation unless the economy shows a strong and sustainable improvement. And if the Fed fails to deliver on QE3, you can expect a severely negative response from Wall Street; expect a move that would make today’s 115 point drop look small; the economy would tank and the Fed would be forced to step in with QE3, only in crisis mode.  So, this morning on CNBC, James Bullard, president of the Fed’s St. Louis bank, said the minutes from the July 31-Aug. 1 meeting were “stale” because the economy had picked up since then. If it becomes “a bit stronger,” he said, the Fed will hold off. And then he went back to smoking  his crack pipe.  What do the economic reports suggest? The HSBC Flash China manufacturing purchasing managers index, a preliminary reading that provides an early peek at data for August,  fell this month to …

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Wednesday, August 22, 2012 – QE Soon, Inequality Grows

QE Soon, Inequality Grows– by Sinclair Noe DOW – 30 = 13,172SPX + 0.32 = 1413NAS + 6 = 307310 YR YLD -.09 = 1.72%OIL – .28 = 96.40GOLD + 15.50 = 1655.10SILV + .50 = 29.93PLAT + 26.00 = 1541.00 The Federal Reserve released minutes of their most recent Federal Open Market Committee meeting. Here’s the money quote from the FOMC minutes: “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.” In other words, a majority of the FOMC members think it is time for QE3, unless we see an economic miracle, say hallelujah! So, when will they make an announcement? Well, there is a symposium in Jackson Hole, Wyoming on August 31. There is another FOMC meeting September 12 and 13. The language in today’s minutes is not a guarantee of QE3, but if they do not make an announcement of QE3, then the lack of action will be interpreted as highly political and obstructionist. They have now obligated themselves to some sort of accommodation; it might not be called QE3, but a rose by any other name… The economy is ready for help; GDP is growing at less than 2%; inflation is running less than 2%; unemployment is lingering at 8.3%; Europe could implode and hurt the US economy. So, what will happen when the Fed provides additional monetary accommodation? Kansas City Federal Reserve President Esther …

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Tuesday, August 21, 2012 – A Crash? Your Guess is as Good as the Economists, Maybe Better

A Crash? Your Guess is as Good as the Economists, Maybe Better -by Sinclair Noe DOW – 68 = 13,203SPX – 4 = 1413NAS – 8 = 306710 YR YLD -.01 = 1.80%OIL -.30 = 98.16GOLD + 17.40 = 1639.60SILV + .52 = 29.43PLAT + 25.00 = 1516.00 Normally, these are the slow,  sultry, dog days of summer; that’s what we’ve seen lately. Volume has been so light that you wondered if everyone had gone to sleep. And then this morning, people started trading, or maybe the computers started trading. Who can say which? Volume jumped to the highest in 3 weeks and prices flopped.  David Kostin, Goldman Sachs chief US equity strategist, has sent a note to clients advising them to get out of stocks; Kostin is forecasting a 12 percent drop ahead, down to about 1250, believing that Congress will fail to address the fiscal cliff before the election, and maybe even before the end of the year. Kostin says: “Political realities and last year’s precedent suggest the potential that Congress fails to reach agreement in addressing the fiscal cliff is greater than what most investors seem to believe based on our client conversations.” According to Goldman Sachs economists, the worst case scenario this year is that a lame duck Congress does absolutely nothing after the election – not even kick the can down the road by voting in a short extension of the tax breaks and spending plans. Under that scenario, 2013 GDP would actually contract. Now normally …

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