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Wednesday, July 18, 2012 – A Primer on Money

A Primer on Money– by Sinclair NoeDOW + 103 = 12,908SPX + 9 = 1372NAS + 32 = 294210 YR YLD -.02 = 1.48%OIL +.72 = 90.26GOLD – 8.90- = 1574.50SILV -.13 = 27.28PLAT – 12.00 = 1412.00It’s earnings reporting season: Ebay profit more than doubles. IBM profit was up and they raised their outlook. American Express profit came in flat. I don’t think earnings have as much impact as they once did. Treasury Secretary Tim Geithner was speaking at a conference in New York. Geithner says the economy is definitely slower than we’d all like it to be. He cited 3 reasons: “It’s slower mostly because of the trauma from Europe, the after effects of the rise in oil prices earlier this year, and because government spending is actually falling now quite significantly. Those three things are a pretty significant drag on a recovery.”Geithner also defended his response, or lack thereof, to the Libor rate rigging scandal: “We acted very early in response to the concerns that the processes to set this rate were impaired and flawed, and vulnerable to misrepresentation,” he said. “The U.S., to its credit, set in motion at that stage a very, very powerful enforcement response, the first results of which we have now seen,” and “There is more to come,” he added, but provided no details. Four years after the fact, Barclays is fined; finally an investigation starts; maybe something will happen, wow, that was soooo powerful. Apparently Geithner never heard the phrase, justice delayed is …

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Thursday, July 17, 2012 – Accepting Unacceptable Manipulation or Dude, What Happened To My Pension

Accepting Unacceptable Manipulation or Dude, What Happened To My Pension?-by Sinclair NoeDOW + 78 = 12,805SPX +10 = 1363NAS + 13 = 291010 YR YLD +.04 = 1.50%OIL – .21 = 89.01GOLD – 6.20 = 1583.40SILV unchanged = 27.41PLAT + 1.00 = 1424.00Federal Reserve Chairman Ben Bernanke went to Capitol Hill today. He made some remarks; he took some questions; he did not surprise.  Bernanke said in his testimony:”Reflecting its concerns about the slow pace of progress in reducing unemployment and the downside risks to economic growth, the committee made clear at its June meeting that it is prepared to take further action.” Prepared to act but not acting right this moment. Nothing new. If you were looking for a signal, you didn’t really get it.Bernanke said the risks of a surge in inflation were low and that there was a modest risk of a broad-based decline in prices.Bernanke said  the Fed could also use communications tools, such as extending its pledge to hold rates exceptionally low. He cited the possibility of additional bond buying — whether Treasury debt or mortgage-backed securities — lending through the Fed’s emergency loan window, and lowering the rate the Fed pays banks on reserves held at the central bank. Which is almost a new idea. Holdings of cash and other liquid assets at US industrial corporations rose to $1.7 trillion in March 2012; that’s cash held in short-term and low-risk instruments, which is what the Fed has been selling to buy longer-term as part of …

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Monday, July 16, 2012 – Strong Demand for Negative Interest

Strong Demand for Negative Interest-by Sinclair NoeDOW – 49 = 12,727SPX – 3 = 1353NAS – 11 = 289610 YR YLD -.03 = 1.46%OIL -.32 = 88.11GOLD – .80 = 1589.60SILV – .03 = 27.41PLAT – 15.00 = 1423.00The International Monetary Fund cut its forecast for global economic growth and warned that the outlook could get worse if policymakers in Europe do not act with enough force and speed to control the financial crisis. The IMF said emerging market nations, long a global bright spot, were now being dragged down by Europe. It said a drop in exports in these countries would combine with earlier policies meant to prevent overheating and slow growth more sharply than hoped. The IMF cut its 2013 forecast for global growth to 3.9 percent from the 4.1 percent it projected in April, trimming projections for most advanced and emerging economies. It left its 2012 forecast unchanged at 3.5 percent. The IMF said advanced economies would only grow 1.4 percent this year and 1.9 percent in 2013.It also trimmed its forecast for emerging economies, projecting they will expand 5.9 percent in 2013 and 5.6 percent in 2012. Both figures are 0.1 of a percentage point lower than in April. The IMF cut its 2013 growth forecast for the crisis-hit euro zone to 0.7 percent, while maintaining its projection of a 0.3 percent contraction this year.The IMF cut its US forecasts slightly, largely based on concerns over a political battle brewing in Washington over how to avoid painful …

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Friday, July 13, 2012 – Jamie Dimon is to Jerry Sandusky as Tim Geithner is to Joe Paterno

Jamie Dimon is to Jerry Sandusky as Tim Geithner is to Joe Paterno-by Sinclair NoeDOW + 203 = 12,777SPX + 22 = 1356NAS + 42 = 290810 YR YLD +.02 = 1.50%OIL +.99 = 87.07GOLD + 17.20 = 1590.40SILV + .13 = 27.44PLAT + 15.00 = 1438.00JPMorgan Chase reported second quarter earnings of $5 billion; part of that is from accounting gimmickery – turning loss reserves into profits and such; and that’s after losses from the trading unit in London. The Chief Investment Office, or CIO, also know as the London proprietary trading unit, aka., the London Whale, sometimes known as Voldermort, occasionally referenced as he whose name can not be spoken – they lost $5.8 billion. Jamie Dimon, the CEO said back in May that the losses were $2 billion; now Dimon says that in a worst case scenario the London Whale losses will grow to $7.5 billion; the slow motion train wreck is still happening and Dimon can’t stop it. Dimon claimed traders may have deliberately hidden losses and the bank will restate first quarter earnings within the next week or so. So, there was this small trading unit in London and they accounted for about one-quarter of the bank’s net income, several billions of dollars in profits, and wants you to believe that he didn’t know what they were doing. His best story is that he is remarkably incompetent yet pleasantly surprised when billions of dollars of profits just magically materialized out of thin air. All right, MF …

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Thursday, July 12, 2012 – Banks Taking Risks, Evading Taxes, Discriminating, Foreclosing, And Yes It Is A depression

Banks Taking Risks, Evading Taxes, Discriminating, Foreclosing, And Yes It Is A depression-by Sinclair NoeDOW – 31 = 12,573SPX – 6 = 1334NAS – 21 = 286610 YR YLD -.02 = 1.48%OIL – .23 = 85.85GOLD – 4.40 = 1573.20SILV +.07 = 27.31PLAT – 12.00 = 1423.00After the financial meltdown of 2008, regulators vowed to overhaul supervision of the nation’s largest banks. Last year, the Federal Reserve Bank of New York replaced almost all of its roughly 40 examiners at JPMorgan Chase. The thinking was that the regulators shouldn’t get too cozy with the regulated. They brought in some new regulators. By the time they got up to speed, it was too late.The New York Fed’s shake-up only aggravated a continuing struggle between JPMorgan executives and regulators from the Office of the Comptroller of the Currency, which supervises banks. For years, the agency, with dozens of its own examiners at JPMorgan, worried that the bank had been miscalculating how much money it could lose in extreme situations.Examiners challenged the executives; the executives stonewalled. At one point in early 2012, JPMorgan briefly stopped providing examiners with an important risk estimate for the chief investment office, the group at the center of the recent trading losses. Executives told examiners not to worry. For their part, regulators say it is not their job to micromanage or remove risk altogether. Their goal is to protect the financial system broadly.Around that time, the bank changed the value-at-risk measure for the chief investment office, which they …

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Wednesday, July 11, 2012 – Toodaloo San Berdoo

Toodaloo San Berdoo-by Sinclair NoeDOW – 48 = 12,604SPX – .02 = 1341NAS – 14 = 288710YR YLD un = 1.50%OIL + .18 = 85.99GOLD + 10.10 = 1577.60SILV +.33 = 27.24PLAT + 6.00 = 1435.00The city council of San Bernardino, California, voted last night to file for bankruptcy, marking the third time in recent weeks a California city is seeking bankruptcy protection. The decision followed a report by city staff that said the city faced an imminent financial crisis. The report said the city had exhausted its reserves and projected that spending would exceed revenue by $45 million in the current fiscal year which started on July 1.The city attorney general James Penman said San Bernardino’s city officials had been submitting false accounting documents for 13 of the last 16 years in an effort to hide the real financial situation of the city. That period covers the tenure of multiple city managers and sets of elected officials, but it predates the  Acting City Manager.San Bernardino will join the California communities of Stockton and Mammoth Lakes in bankruptcy court. Stockton failed on June 28th, after three months of talks with its creditors to obtain concessions to close its $26 million budget gap. Mammoth Lakes, a ski resort town of about 8,000 residents, last week filed for bankruptcy due to a nearly $43 million legal judgment against it.San Bernardino has suffered from the housing crash and high unemployment. According to the report to its city council, the city “has reached a …

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Tuesday, July 10, 2012 – Starting to Detect a Pattern

Starting to Detect a Pattern– by Sinclair NoeDOW – 83 = 12,653SPX – 10 = 1341NAS – 29 = 290210 YR YLD -.02 = 1.50%OIL +.23 = 84.14GOLD – 20.80 = 1567.50SILV – .53 = 26.91PLAT – 20.00 = 1429.00Did you ever write a note to yourself, maybe you even wrote it down on your calendar, something that required your attention, and even with the reminder, you never got around to it. Treasury Secretary Turbo Tim Geithner pulls out one of the old calendars, and there it is, plain as day, a little memo to himself from back in 2008, when he was heading up the Federal Reserve Bank of New York. The memo says: Fixing Libor. That’s what it says right there after lunch on a Thursday,  just before an appointment with his accountant. Fixing Libor. And then there were all those emails, and phone calls, and Bear Stearns collapse, and there was the money market thing, and well, you know how it is. Meanwhile, legislators on Capitol Hill have signaled they are interested in learning more about what Fed officials knew with regards to allegations of Libor manipulation.Rep. Randy Neugebauer, chairman of a subcommittee of the House Financial Services Committee, sent a letter to the New York Fed asking for transcripts of any “communications with Barclays regarding the setting of interbank offered rates from August 2007 to November 2008.”Tim Johnson, who chairs the Senate Banking Committee, said today he was concerned by the allegations of the potential “widespread manipulation” …

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Monday, July 09, 2012 – Barclays Did Not Act Alone – Reaching Into the Upper Echelon

Barclays Did Not Act Alone – Reaching Into the Upper Echelon-by Sinclair NoeDOW – 36 = 12,736SPX – 2 = 1352NAS – 5 = 293110 YR YLD -.03 = 1.51OIL -.34 = 85.65GOLD + 4.90 = 1588.30SILV  + .24 = 27.44PLAT – 2.00 = 1449.00Alcoa kicked off the second quarter earnings reporting season. Alcoa has the ticker symbol AA and they are one of the 30 stocks in the Dow Industrials, so they start the earnings season based on alphabetical order and size and a little bit of tradition. Alcoa lost $2 million for the quarter. With an overhang of high inventories and a 20 percent drop in prices since March, many aluminum producers are losing money. Excluding items, also known as the cost of doing business, Alcoa earned $61 million from continuing operations, or 6 cents per share, which topped estimates of 5 cents per share. Later this week we’ll have earnings reports from some of the big banks, so it seems appropriate that Alcoa start earnings reporting season with some flashy accounting. Based upon this loss, they will probably get a tax refund. President Obama called on Congress to extend tax cuts for families earning less than $250,000 a year while allowing taxes to rise for households making more.Obama said: “Let’s not hold the vast majority of Americans and our economy hostage while we debate the merits of another tax cut for the wealthy.”Obama wants Congress to pass a one-year extension of the Bush-era tax cuts for households making …

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Friday, July 6, 2012 – That’s Just the Way It Is

That’s Just The Way It Isby Sinclair NoeDOW – 124 = 12,772SPX – 12 = 1354NAS – 38 = 293710 YR YLD -.05 = 1.54%OIL – 3.10 = 84.12GOLD – 21.50 = 1583.40SILV -.60 = 27.20PLAT – 28.00 = 1451.00We make a big deal out of the monthly employment outlook report.  It is a natural mistake. We think the report can tell us whether the economy is improving and, if so, by how much. Employment is fundamental for consumption, corporate profits, tax revenues, deficit reduction, and financial markets. People place too much emphasis on the official report, which is really only an estimate; there will be revision.  In about eight months, we’ll have an accurate count from state employment offices, but by then no one will care. There are several approaches to analyzing employment. And then there are seasonal factors. And you will be told there are different numbers that require your attention. And when you cut through all the noise and confusion, the monthly jobs report for June was a gain of 80,000 – and it just plain and simple sucked. The Labor Department said non-farm payrolls expanded by just 80,000 jobs in June, marking the third straight month employment has grown by fewer than 100,000 positions. Job creation was too weak to bring down the 8.2 percent unemployment rate. Job creation averaged 75,000 per month during the second quarter, compared with an average increase of 226,000 in the first quarter. Economists estimate that roughly 125,000 jobs are needed each …

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Thursday, July 5, 2012 – The Incredibly Massive Libor Scandal, Snakes, Plus the Halftime Report

The Incredibly Massive Libor Scandal, Snakes, Plus the Halftime Reportby Sinclair NoeDOW – 47 = 12,896SPX – 6 = 1367NAS +.03 = 297610 YR YLD -.03 = 1.60OIL +4.46 = 92.12GOLD – 12.80 = 1604.90SILV – .59 = 27.80PLAT – 16.00 = 1479.00It was a busy day for the central bankers. It started with the Bank of England. A couple of months ago, the BoE stopped bond purchases; today they resumed the practice. The Bank of England Governor, Mervyn King announced they will increase bond purchase to 375-billion-pounds, or about $585-billion-dollars. They think this will help pull the UK from recession but they admit output will likely remain sluggish after contracting for the past two months. A few minutes later, the People’s Bank of China cut its key interest rate for the second time in a month  and allowed banks to offer bigger discounts on their own lending costs. The one-year lending rate will fall by 31 basis points to 6 percent and the one-year deposit rate will drop by 25 basis points to 3 percent effective tomorrow. Banks can offer loans of as much as 30 percent less than benchmark rates.A few minutes later, the European Central Bank cut its key interest rate by 25 basis points to a record low of 0.75 percent. ECB President Mario Draghi questioned the economic impact of cutting rates but did it anyway. He said the ECB is not “running low on policy options” but he didn’t say what the other options are. Draghi claimed …

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