FEBRUARY, TUESDAY 28, 2012

DOW + 23 = 13,005SPX + 4 = 1372NAS + 20 = 298610 YR YLD +.01 = 1.93%OIL – 1.96 = 106.60GOLD + 15.80 = 1784.90SILV +1.47 = 37.03PLAT + 11.00 = 1723.00 Dow at 13,000 for the first time since May of 2008. I never really liked the Conference Board’s Consumer Confidence Index. First, it reduces people to the role of consumers. I consume, but I do much more. I don’t consider myself a consumer, at least not first  and foremost. Second, it isn’t really trying to measure our confidence, it is trying to determine if we will loosen our steadfast grip on the purse-strings, and if we will buy something. Apparently we will. The Consumer Confidence Index jumped to 70.8 from 61.5 in January. A nationwide average of $3.78 a gallon was trumped by a stronger jobs market and a mild winter that left many people with more work and lower heating bills. Consumer confidence resulted in a 3% increase in chain store sales for the week. Meanwhile, the durable goods orders dropped 4.5% in January. Part of the drop may be the expiration of a tax break which pushed demand forward into December. The Case-Shiller report on sales of homes in 20 major metropolitan areas across the country shows that house prices continued to drop in December, down 1.1%, for the 4th quarter, prices dropped 3.8%, and for the year, prices dropped 4%. For the Phoenix market, prices have been going up the past couple of months. …

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February, Monday 27, 2012

DOW – 1 = 12,981SPX + 1 = 1367NAS + 2 = 296610 YR YLD -.06 = 1.92%OIL – 1.07 = 108.70GOLD – 5.50 = 1769.10SILV +.05 = 35.56PLAT – 3.00 = 1711.00 Let’s look at the price of a gallon of gas and the factors that have been pushing prices higher. You may recall that last May, oil prices moved up to $114 per barrel. So one of the first considerations is that this is a seasonal move. You will also recall that last spring, the oil production in Libya was disrupted. After a while, Khadafi was deposed and by last October, prices had dropped to $75 a barrel. Now the concern is Iran, and any disruption in Iranian oil supply would be considerably larger than Libya, and might lead to even more widespread disruption of oil transportation through the Strait of Hormuz. Iran produces about 4.3 million barrels per day. So, now we are looking at the imposition of sanctions on Iran. What are the implications? The most likely result of sanctions is that the countries participating in the sanctions would have to cut back demand and find new sources, and the countries not participating could buy the oil from Iran. China and India would buy more oil from Iran, while Europe would buy more oil from Saudi Arabia. There would still be the same amount of oil in the global market, just have to buy it from different sources. Maybe sanctions could alter global production, or maybe …

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February, Friday 24, 2012

DOW  – 1 = 12,982SPX + 2 = 1365 NAS + 6 = 296310 YR YLD – .01 = 1.98% OIL +1.86 = 109.69 GOLD – 6.50 = 1774.60 SILV +.04 = 35.51PLAT – 13.00 = 1717.00 We’ve almost made it through the first two months of the year and if you haven’t noticed, things are getting better. This is not to say that everything is good or even great, just that things are getting better. And of course, there is the caveat that things might get worse and that could happen fast and it could be severe, but for this specific moment in time, things are getting better. Some people would like to deny this; they claim this getting better notion is a false meme; we’re being manipulated into believing that things are getting better when they are not. Despite the presence of bright sunlight, we know that the darkness of night is right around the corner; and even cold, hard numbers are unconvincing. Let’s look at the numbers: the S&P 500 has doubled in less than 3 years, and it’s up more than 8% year to date; just this week home sales showed strength and inventories dropped, the unemployment rate has been steadily dropping and the initial claims for jobless benefits fell to the lowest level since March, 2008; and consumer confidence in January moved to its best level in a year. Maybe these numbers don’t apply to you personally; fair enough. And it’s easy to claim the …

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Financial Review

Financial Review for Friday February 24, 2012

DOW  – 1 = 12,982SPX + 2 = 1365 NAS + 6 = 296310 YR YLD – .01 = 1.98% OIL +1.86 = 109.69 GOLD – 6.50 = 1774.60 SILV +.04 = 35.51PLAT – 13.00 = 1717.00 We’ve almost made it through the first two months of the year and if you haven’t noticed, things are getting better. This is not to say that everything is good or even great, just that things are getting better. And of course, there is the caveat that things might get worse and that could happen fast and it could be severe, but for this specific moment in time, things are getting better. Some people would like to deny this; they claim this getting better notion is a false meme; we’re being manipulated into believing that things are getting better when they are not. Despite the presence of bright sunlight, we know that the darkness of night is right around the corner; and even cold, hard numbers are unconvincing. Let’s look at the numbers: the S&P 500 has doubled in less than 3 years, and it’s up more than 8% year to date; just this week home sales showed strength and inventories dropped, the unemployment rate has been steadily dropping and the initial claims for jobless benefits fell to the lowest level since March, 2008; and consumer confidence in January moved to its best level in a year. Maybe these numbers don’t apply to you personally; fair enough. And it’s easy to claim the …

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February, Thursday 23, 2012

DOW + 46 = 12,984SPX + 5 = 1363NAS +23 = 295610 YR YLD -.02 = 1.98%OIL +2.41 = 108.69GOLD +4.30 = 1781.10SILV + 1.11 = 35.47PLAT – 2.00 – 1728.00 How much does it cost you to get to work each week? How much do you spend on gasoline? Is it $10 a day? $50 a week? Maybe a couple of hundred a month? Maybe more? For a whole lot of people, when the price of gas starts to go up, it has a definite impact on their budgets and on their lifestyles. Last year, the average American family spent 8.4% of their incomes on gasoline; that percentage has doubled over the last ten years. And the price of gas doesn’t just affect people who drive long miles; the price of energy gets factored into almost everything because almost everything we buy has to be transported. When the price of gas goes up, it tends to push prices up on everything. The strength of the economy is largely predicated on cheap oil. When the price of oil goes higher, we tend to cut back to compensate. Americans are using less gasoline; as the price has increased, demand has dropped; we drive less, and still the price at the pump moves higher. The average price across the country is now up to $3.53 a gallon. In California, the average price is 3.96. The price is up 25 cents a gallon since the start of the year. The Oil Price Information …

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February, Wednesday 22, 2012

DOW  – 27 = 12,938SPX – 4 = 1357NAS – 15 = 293310 YR YLD -.04 = 2.00%OIL -.30 = 105.95GOLD + 15.50 = 1776.80SILV – .09 = 34.36PLAT + 12.00 = 1727.00 So, the Euro-Union bailed out Greece and the thinking is that the lazy, shiftless, socialists in Greece can roll around in the cash. The reality is that Greece won’t be getting any cash. The bailout money will go into an escrow account and most of the money will ultimately go to the European banks; the creditors have senior claims over any bailout cash. The Greek citizens will never see a penny of the bailout cash. All the money will be used to fund debt interest and maturity payments. Now anybody who has ever had a mortgage will probably remember that there are fees associated with establishing an escrow account. So, not only do the Greek citizens not get a single penny, they have to pay for the bailout. It’s a negative bailout. Remember a couple of months ago, I told you the Europeans were going to follow the Federal Reserve Playbook for dealing with debt crises. The playbook called for privatized profits and socialized losses. So, where is the bailout money going? The banks. The socialists are the banks. And then let’s put some salt on the wound. Fitch downgraded its credit rating on Greece to Triple-C. Which is just one step above default, and is basically very dangerous, very speculative junk status. The Greek parliament still …

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February, Tuesday 21, 2012

DOW +15 = 12965 SPX +0.98 = 1362NAS – 3 = 294810 YR YLD +.04 = 2.05% OIL +2.64 = 105.88GOLD + 26.20 = 1761.30SILV + .74 = 34.45PLAT + 44.00 = 1694.00 The European Union has approved a $170 billion-dollar bailout package for Greece. No surprise; they had to come up with a deal, they were running out of time. The Euro-crisis is now officially under control; at least for a couple of days. There is still the little problem of making sure the ring-fences hold. The Euro-Union has set up massive pools of money to make emergency loans. The ECB has loaned more than $600 billion to Euro-banks. It still remains to be seen if the loans do anything more than allow the Euro-banks to kick the can down the road. Meanwhile, the Euro-zone is in a recession and the prescribed medicine is austerity. The cure may be worse than the affliction. And when all is said and done, the cure may not actually cure anything. Part of the plan is to bring down Greek debt to 120% of GDP within the next 8 years, but if Greece misses a few economic assumptions, they might end up with debt to GDP at 160%. And the truth is that whether it is 120% or 160%, the debt is going to bury Greece, and the bailout won’t stop it. Countries like Germany might demand even tougher conditions on loans. Politics and democracy might destabilize the markets. Part of the deal …

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February, Monday 20, 2012

What would happen if the Federal Reserve was shut down? Most Americans don’t really think about the Fed much. Most Americans think the Federal Reserve is just another government agency that sets our interest rates. But that is not the case at all. Most Americans don’t realize the Fed isn’t really a government agency, and that we haven’t always had a central bank. The Federal Reserve’s stated mission is to conduct the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates; to supervise and regulate banking and financial systems to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers; and to maintain the stability of the financial system and contain systemic risk that may arise in financial markets. The truth is that the Federal Reserve is a private banking cartel that has  systematically destroyed the value of our currency, diminished the wealth of the American public and subjects the federal government to perpetually expanding debt. The Constitution states that Congress has the responsibility to conduct the nation’s monetary policy, but the Federal Reserve has usurped that authority. Any honest review of the past 30 years would conclude that the Fed has failed in its mission. The Fed’s monetary manipulations led to the worst unemployment since the Great Depression, price volatility, excessive swings in interest rates, extremely low rates for member banks, and usurious …

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February, Friday 17, 2012

DOW +46 = 12950SPX + 3 = 1361NAS – 8 = 295110 YR YLD +.02 = 2.01%OIL +1.75 = 104.06GOLD – 5.00 = 1724.80SILV -.24 = 33.38PLAT + 11.00 = 1638.00 The stock market is looking great. The S&P 500 hit a nine-month high. The Dow is back at levels from the beginning of 2008, (record high was 1517 for SPX) (14,198 for Dow). At least it’s looking decent. The market was cruising along with triple digit gains, but couldn’t hold into the close. Confidence is one thing, but going long heading into a holiday weekend.., well, let’s not get carried away. Optimism was high that there would be some sort of  deal worked out to rescue Greece by burying the country under unsustainable debt.  Euro-zone finance ministers will be meeting over the weekend to hammer out details. The big challenge is to cut Greece’s debt down to 120% over the next 8 years; to do this, the Greeks will have an orderly default of debt, paying off bonds at about 30 cents on the dollar for private sector investors and about a 50% haircut for the central bankers that hold Greek bonds. And nobody is quite sure if the private sector investors are going to accept the haircut. In return for the discounts, the Greeks would accept, maybe, harsh austerity measures that will contract the economy. And they keep saying they will have a deal, probably by Monday. And all I can think of is that Homer is now …

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February, Thursday 16, 2012

DOW + 123 = 12,904SPX + 14 = 1358NAS + 44 = 295910 YR YLD +.06 = 1.99%OIL +.55 = 102.35GOLD +.70 = 1729.80SILV +.02 = 33.62PLAT – 10.00 = 1629.00 The number of people seeking unemployment benefits fell to the lowest point in almost four years last week, the latest signal that the job market is steadily improving. Weekly applications for unemployment benefits dropped 13,000 to a seasonally adjusted 348,000. It was the fourth drop in five weeks and the fewest number of claims since March 2008. The US economy is showing signs of strength. New construction of houses rose 1.5% in January. Part of the increase can be attributed to unseasonably warm weather, however part of it is that the economy is showing signs of strength. The Philly Fed Index of manufacturing hit a  four month high in February. US manufacturers just had their best month of growth in five years. As manufacturing has increased it has rippled through the economy, increasing demand in other industries, such as shipping and transportation. Part of the increase may be attributed to pent-up demand; individuals and businesses postponed purchases over the past three years. Now companies are investing in machinery and computers. Individuals are once again starting to make purchases of certain discretionary items, and even cars. Two years after emerging from bankruptcy GM unveiled record profits of $7.6 billion for 2011. It’s been a great year for GM. Although its European business is still in reverse and it is unlikely …

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