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Friday, September 28, 2012 – Eat Cake

Eat Cake by Sinclair Noe DOW – 48 = 13,437SPX – 6 = 1440NAS – 20 = 311610 YR YLD un = 1.64%OIL + .25 = 92.10GOLD – 6.50 = 1772.10SILV – .17 = 34.59PLAT + 13.00 = 1669.00 There are bad things and they are bad. There are good things and they are good, even though the bad things are bad. Let me give you an example; You probably know I’m not a fan of the Federal Reserve. I believe there are better ways to conduct monetary policy. This does not mean the Fed’s monetary policy doesn’t work. You’ve heard the old adage, “don’t fight the Fed”. In case you haven’t noticed, the stock market has doubled in the past 3 1/2 years. That’s good, even though the bad things about the Fed remain bad. And the stock market has been performing much better than seems possible. As the third quarter comes to an end you might think about the problems in Europe and the slowdown in China; you might think about the slowdown in the US with the economy growing at an anemic 1.3% pace, the seemingly never ending housing recovery, the interminably high unemployment; and you might think of the looming fiscal cliff and the dysfunctional political bickering as corrosive elements sucking the life blood out of the economy; and you might think the best investment opportunities are in freeze dried foods and concrete bunkers – but no. The stock market has been sweet. The S&P 500 …

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Thursday, September 27, 2012 – GDP Dries Up

GDP Dries Up by Sinclair Noe DOW + 72 = 13,485SPX + 13 = 1447NAS + 42 = 313610 YR YLD +.02 = 1.64%OIL + 2.25 = 92.23GOLD + 24.30 = 1778.60SILV + .67 = 34.76PLAT + 13.00 = 1654.00 This economics stuff is an imprecise, semi-dismal, pseudo-science. This morning the Bureau of Labor Stats released the preliminary annual benchmark revision to the jobs report. Seems there were an additional 386,000 jobs as of March 2012. They’ll revise the numbers again in February. The Commerce Department reports the US economy grew at an annualized rate of 1.3% in the second quarter; that’s down from 2% in the first quarter; and that’s down from 4.1% in the fourth quarter of last year. The results were worse than anticipated. The Bureau of Economic Analysis made an initial guess that GDP grew at a 1.7% pace, then they revise the guess down to 1.5%, then they make a third and final guess which was today’s 1.3% number. We can talk about politicians, corporations, workers, the Fed, and lots of other factors but one of the most important factors in the lower GDP number was the weather. The Midwest drought wasn’t the only thing that caused the government to change its GDP estimates. Figures for consumer spending and business investment also were revised down, along with the contribution to GDP of net exports.A drop in farm inventories knocked about 0.2 percentage points from the GDP. And we’re just feeling the initial impact of the …

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Wednesday, September 26, 2012 – A Funny Thing Happened on the Way to the Forum – Not Funny HaHa

A Funny Thing Happened on the Way to the Forum – Not Funny HaHa by Sinclair Noe DOW – 44= 13,413SPX – 8 = 1433NAS – 24 = 309310 YR YLD – .06 = 1.62%OIL +.23 = 90.21GOLD – 7.30 = 1754.30SILV +.25 = 34.09 PLAT+9.00 = 1641.00 Did you hear the one about the bank’s prop trading desk. This will have you laughing out loud, it is a real side-splitter.Well, not so much a slap your knee kind of joke, not a real hearty guffaw, but more like a giggle, more like a hahahaha kind of joke. So this trader for Morgan Stanley, just a tyro, he walks onto the trading floor and he’s talking to his more experienced colleagues. They told him the banks misreported the Libor rates in away that would generally bring them profits. The kid said he was unaware of that, as he was relatively new to financial trading. The old, battle scarred traders laughed the kid off the trading floor. Libor fraud: More fun than a barrel of monkeys. And then Bloomberg reports on new emails from RBS traders reading: “Our six-month fixing moved the entire fixing, hahahah.” Haha, haha indeed. Libor fraud: Grins and giggles since the turn of the millennium. We keep getting all this information that Libor fraud was an ongoing and well-known, in your face fraud. And yet, nobody goes to jail. It is funny. Not in a laughing funny kind of way, but in a strange, nauseating, disgusting funny …

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Tuesday, September 25, 2012 – Fed Good at Growing Inequality

Fed Good at Growing Inequality by Sinclair Noe DOW – 101 = 13,457SPX – 15 = 1441NAS – 43 = 311710 YR YLD -.04 = 1.68%OIL – .51 = 90.86GOLD – 3.90 = 1761.60SILV – .23 = 33.84PLAT + 8.00 = 1634.00 Let’s start with a few economic reports. Case Shiller’s Index of existing home sales posted a 1.6% increase in July; all 20 cities in the index saw housing prices rise; it’s the fourth month of price increases, and the past 12 months are now showing increases. This is very positive news for housing. Pricesin Phoenix gained 2.2% to take the year-on-year increase to 16.6%, by far the strongest advance of any major metropolitan area. Los Angeles saw a 1.3% gain, and the year-over-year comparison has now turned positive by 0.4%. The consumer-confidence index increased to 70.3 in September, the highest level since February. Generally when the economy is growing at a good clip, confidence readings reach at least 90. September expectations increased for employment and business conditions, while consumers’ views on the present situation also rose. One of the big factors affecting the optimistic outlook is the turn in the housing market.  In August, the dividend-reinvested S&P 500 was up some 18% year-on-year. The combination of positive returns on stocks and real estate hasn’t been this good since 2006. Any economic gains are still fragile but you take whatever positives you can find. Both consumer-confidence measures, the one conducted by the University of Michigan and the one done …

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Tuesday, September 25, 2012 – Fed Good at Growing Inequality

Fed Good at Growing Inequality by Sinclair Noe DOW – 101 = 13,457SPX – 15 = 1441NAS – 43 = 311710 YR YLD -.04 = 1.68%OIL – .51 = 90.86GOLD – 3.90 = 1761.60SILV – .23 = 33.84PLAT + 8.00 = 1634.00 Let’s start with a few economic reports. Case Shiller’s Index of existing home sales posted a 1.6% increase in July; all 20 cities in the index saw housing prices rise; it’s the fourth month of price increases, and the past 12 months are now showing increases. This is very positive news for housing. Pricesin Phoenix gained 2.2% to take the year-on-year increase to 16.6%, by far the strongest advance of any major metropolitan area. Los Angeles saw a 1.3% gain, and the year-over-year comparison has now turned positive by 0.4%. The consumer-confidence index increased to 70.3 in September, the highest level since February. Generally when the economy is growing at a good clip, confidence readings reach at least 90. September expectations increased for employment and business conditions, while consumers’ views on the present situation also rose. One of the big factors affecting the optimistic outlook is the turn in the housing market.  In August, the dividend-reinvested S&P 500 was up some 18% year-on-year. The combination of positive returns on stocks and real estate hasn’t been this good since 2006. Any economic gains are still fragile but you take whatever positives you can find. Both consumer-confidence measures, the one conducted by the University of Michigan and the one done …

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Monday, September 24, 2012 – Counting Fingers

Counting Fingers by Sinclair Noe DOW – 20 = 13,558SPX – 3 = 1456NAS – 19 = 316010 YR YLD -.04 = 1.72%OIL +.14 = 92.07GOLD – 8.50 = 1765.50SILV – .55 = 34.07PLAT – 16.00 = 1626.00 Goldman Sachs is out with some research. I always feel more than a little skepticism when reading Goldman research. It’s tough to believe a research report from a company you know would bet against you. You want to count your fingers after shaking hands. Goldman Sachs strategists expect the “fiscal cliff” to push the market lower in the fourth quarter, and they recommend investors sell the stocks that have lagged so far this year. Goldman chief U.S. equity strategist David Kostin writes that the S&P 500 should fall sharply after the election when investors finally realize that there is a possibility that the fiscal cliff will not be resolved smoothly. He says the majority of investors expect to see the fiscal cliff avoided in the lame duck session of Congress, but Goldman sees a one-in-three chance that Congress will fail to address the issue. Goldman says a catch-up strategy could be to sell stocks that have had the worst performance year-to-date. In the 23 years that the S&P was positive in the first nine months, a sector-neutral basket of underperforming stocks continued underperforming by an average 291 basis points during the fourth quarter, giving the strategy a 65 percent outperformance rate. In a separate report, Goldman forecasts an 18.2 percent return on …

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Friday, September 21, 2012 – It’s Not Whether You’re Right or Wrong

It’s Not Whether You’re Right or Wrong by Sinclair Noe DOW – 17 = 13,579 SPX – 0.11 = 1460NAS + 4 = 317910 YR YLD – .02 = 1.76%OIL + .47 = 92.89GOLD + 4.50 = 1774.00SILV – .12 = 34.62PLAT + 11.00 = 1641.00 Let’s be very clear on what has happened over the past week or so. You already know the Fed announced QE3 to infinity or 5.5% unemployment plan (whichever comes first). What does that really mean? It is probably a very, very bullish event for stocks and commodities. We talked about commodities and equities moving higher in anticipation, and we saw silver move up about 33% over the past month; gold up 14%; the Dow Industrials picked up almost 600 points; the S&P 500 up about 60. Since March 2009, Gold is up 97%, silver is up 162%, oil is up 122%, and the Continuous Commodity Index (CCI) is up 55%. And then we’ve seen some consolidation over the past week, exactly as we anticipated, because this was the pattern that we saw after previous QE announcements, but you’ve got to suspect QE3 means the Fed has flipped the switch to risk-on. Maybe you also remember that back in the Spring I brought up the old adage about the best and worst 6 months in the market; you remember, “Sell in May and stay sway.” Well, the S&P 500 is up about 50 points from May 1st. If you missed that, don’t feel bad because …

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Thursday, September 20, 2012 – QE3 to 5.5, Bad Banks, Bad Politicians

QE3 to 5.5, Bad Banks, Bad Politicians by Sinclair Noe DOW + 18 = 13,596SPX – 0.79 = 1460NAS -6.66 = 317510 YR YLD unch = 1.78%OIL + .51 = 92.93GOLD – 1.20 – 1769.50SILV – +.07 = 34.74PLAT – 16.00 = 1633.00 So, we know the Federal Reserve has committed to buy mortgage-backed securities at the rate of $40 billion a month until the employment picture gets better; that’s the plan behind QE3 to infinite and beyond. So, when will they stop? Narayana Kocherlakota, president of the Federal Reserve Bank of Minnesota, gave the answer in a speech today. Kocherlakota says that as long as inflation isn’t a problem the Fed should keep its foot all the way on the gas pedal until unemployment drops from its current 8.1 percent down to 5.5 percent. Koacherlakota is not the ultimate decision maker for the Fed, but now we have a target. Why did it take so long? An interesting graph today from the Department of Labor showed the fastest growing industries for new jobs over the next 10 year; the top 4 are Services for elderly, Home health care services, offices of mental health, and masonry contractors. Bank of America has a plan to cut back on expenses by $ 8 billion dollars in annual savings by 2015. How can they possibly find that much in savings? By firing 16,000 by the end of the year, and more than 30,000 total. See how that works? Bank of America keeps the …

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Wednesday, September 19, 2012 – Distortions and Unintended Consequences

Distortions and Unintended Consequences by Sinclair Noe DOW + 13 = 13, 577SPX + 1 = 1461NAS + 4 = 318210 YR YLD – .03 = 1.78%OIL – 3.31 = 91.98GOLD – 1.40 = 1770.70SILV – .21 = 34.67PLAT + 12.00 = 1647.00 It was no surprise last week when the Fed announced a new quantitative easing (QE) program. They had telegraphed the new QE. The Fed will purchase $40 billion of agency and mortgage-backed securities (MBS) per month until the labor market improves. This amounts to about half a trillion dollars per year, give or take a few billion, and there is no specific limit on how long the program will last. Toss in $85 billion a month in the still-in-effect Operation Twist and by 2015, the Fed balance sheet would grow to $4 trillion, from under $3 trillion today. And the European Central Bank is on the path of its own quantitative easing via open-end bond buying like our own Federal Reserve. Some Euro countries are in a flat out depression and even the healthy ones are looking at economic contraction at least through the end of the year, with GDP forecast in the range of negative -0.6% to -0.2%. Now, the Bank of Japan has joined the party, announcing their own bond buying program, hoping to avoid the appearance of a strong currency, or maybe to stimulate economic growth. I don’t know anymore. Pick a reason that suits you. I suspect, the central bankers are doing a …

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Tuesday, September 18, 2012 – Maybe We’ll Just Keep Plugging Along

Maybe We’ll Just Keep Plugging Along -by Sinclair Noe DOW + 11 = 13,564SPX – 1 = 1459NAS -0.87 = 317710 YR YLD -.03 = 1.81%OIL +.24 = 95.53GOLD + 8.60 = 1772.10SILV + .53 = 34.88PLAT – 38.00 = 1635.00 FedEx lowered its outlook for global growth and industrial production when it reported fiscal first-quarter earnings. That has negative implications for energy demand. The world’s No. 2 package delivery company forecast a continued slowdown in global trade. Yesterday, we told you about the little flash crash in oil. The price of a barrel of oil dropped $3 in about one minute for no apparent reason. There were rumors of an announced or leaked SPR release decision, then there were rumors of an algorithmic trade gone bad. The timing was suspect; the equity and other markets have rallied due to all of the announced and expected easing measures from the Fed and the ECB; the belief is that consumption and economic growth will necessarily follow due to extremely low interest rates and the positive effect of inflation on asset values. And commodity prices, including oil, moved higher after QE 1&2. So, it was strange to see prices just drop for no apparent reason; they seemed to collapse of their own weight. Maybe the outlook for the economy is more dire than we think. Maybe demand for oil is far less than projected. Maybe the Fed has done all they can and they’ve run out of firepower. Maybe the odd price …

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