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Wednesday, June 06, 2012 – Rally for Central Bank Juice – by Sinclair Noe

DOW + 286 = 12,414 SPX + 29 = 1315NAS + 66 = 284410 YR YLD +.10 = 1.65%OIL +.51 = 85.53GOLD + 2.80 = 1620.70SILV +.90 = 29.53PLAT + 26.00 = 1468.00 There have been several ideas floated to explain today’s rally on Wall Street: the markets were oversold, it was a technical bounce off the 200 day moving average, it was a dead cat bounce, traders who have shorted the market had to cover their positions, a response to Election Tuesday results, seller exhaustion, re-balancing, or my favorite – bargain hunting. How quick we forget. Goldman Sachs has already announced they expect the Federal Reserve to juice the economy and soon. So, apparently the work order has been submitted and now we just wait to see if Helicopter Ben can deliver the goods. Today, the general market feeling was that some central bank somewhere would start throwing money at the banksters. European Central Bank President Mario Draghi suggested that further stimulus to tackle the euro zone’s debt crisis would not necessarily be forthcoming, but speculation persisted that the ECB could act if financial market tensions intensify further. The ECB left interest rates unchanged following its policy meeting today. The Euro economy is standing at the edge; unemployment is soaring; the Spanish banking system is on the verge of collapse; Greece is already toast. And it looks like the ECB is trying to make sure the Euro-politicians know they won’t get any relief unless they enforce even more austerity …

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Tuesday, June 5, 2012 – Waiting for Euro-Failure – by Sinclair Noe

DOW + 26 = 12,127 SPX + 7 = 1285NAS + 18 = 277810 YR YLD +.03 = 1.56% OIL – .23 = 83.75GOLD – 1.40 = 1617.90SILV +.27 = 28.63PLAT + 10.00 = 1444.00 So, the G-7, the Group of 7 countries conferred on the Euro-zone’s debt crisis; Spain announced it was losing access to credit markets; the situation appears bad. So, the G-7 finance chiefs came riding to the rescue. And they achieved almost zero. Spain had a real estate bubble. Spanish banks are loaded down with bad debt. The premium investors demand to hold its 10-year Spanish debt over the German equivalent hit a euro era high last week on concerns it will eventually have to take a Greek-style bailout. Today, Spain’s treasury minister said Spanish banks should be recapitalized through European mechanisms, in other words the Spanish banks need a bailout and Spain can’t bail them out; this was a significant departure from the previous government line that Spain could raise the money on its own. And then Spanish government sources said ehhh, we’re not sure about a bailout. And the G-7 did almost zero. Observers of the G-7 conference say that there was talk about a bigger solution, a bigger response from the politicians in the form of a stronger economic union; and the talk was that it would probably take a few months to figure it out, maybe a few years; and it doesn’t look like there is a quick fix. The ECB holds …

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Monday, June 4, 2012 – Euro-crisis Moving Faster

DOW – 17 = 12,101SPX +0.14 = 1278NAS + 12 = 276010 YR YLD +.06 = 1.53%OIL +.15 = 84.13GOLD – 8.00 = 1619.30SILV – .42 = 28.36PLAT – 19.00 = 1434.00 Finance chiefs of the Group of Seven leading industrialized powers will hold emergency talks on the euro zone debt crisis tomorrow. The economic problems have spread and the G-7 teleconference is at least an admission that the euro is breaking down as a viable economic undertaking. We are finally moving past denial. There’s something rotten in Denmark; the Danish central bank cut interest rates twice last week; they say they’re battening down the hatches for a splintering of the European Monetary union. The European Commission said monetary union was in danger of “disintegration” and the European Central Bank said it was “unsustainable” as constructed. Felipe Gonzalez,the former Spanish prime minister says the Spanish economy is facing a “total emergency”, which is – just guessing here – a bit more problematic than a partial emergency. The Cypriot banking system is nine times the country’s GDP and they are now begging for a bailout. What a shocker. Cyprus is on the verge of becoming Iceland South. Switzerland is threatening capital controls to repel bank flight from Euroland. The Swiss two-year note has fallen to -0.32%; if you want to park money in the safe haven of Swiss bonds, you pay for the privilege. US 10-year note yield dropped down to 1.44%, lower than during the Great Depression. The United States …

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Friday, June 1, 2012 – Weak Jobs Report – What’s Next? – by Sinclair Noe

DOW – 274 = 12,118SPX – 32 = 1278NAS – 79 = 274710 YR YLD – .11 = 1.47%OIL – 3.27 = 83.26GOLD + 66.10 = 1627.30SILV + .97 = 28.78PLAT + 32.00 = 1451.00 Yesterday we set the stage for today’s jobs report; anything under 150,000 jobs gained would be considered bad. Mitt Romney called it devastating. In fact it was not quite as devastating as the 598,000 jobs lost in January 2009. The economy isn’t losing jobs, just not gaining enough. Nonfarm payroll employment in May increased by 69,000. The unemployment rate ticked up to 8.2%. This was a weak month, and the previous two months were revised down. The change in total nonfarm payroll employment for March was revised from +154,000 to +143,000, and the change for April was revised from +115,000 to +77,000; combined that works out to 47,000 fewer jobs than originally reported. The Labor Force Participation Rate increased to 63.8% in May. This is the percentage of the working age population in the labor force. This means more people felt good enough about economic conditions to jump back into the labor market and look for a job; the bad news is that they didn’t find many jobs. The U6 rate, which measures unemployed and underemployed was 14.6%. JPMorgan reported today: “Taking down the US growth projection has almost become a summertime ritual, and in keeping with tradition we are shaving our 2012 GDP outlook (Q4/Q4) from 2.3% to 2.1%. Over the first five months …

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Thursday, May 31, 2012 – Jobs and the Food Chain – by Sinclair Noe

DOW – 26 = 12393SPX – 2= 1310NAS – 10 = 282710 YR YLD -.04 = 1.58%OIL +.04 = 86.57GOLD – 2.30 = 1561.20SILV – .22 = 27.81PLAT +15.00 = 1421.00 The S&P 500 index fell 6.3 percent in May, its largest percentage drop since September. The Dow’s 6.2 percent drop and Nasdaq’s 7.2 percent loss are their largest monthly declines in two years. Crude oil futures prices finished May with losses of 17%, their worst drop (or best, depending on your position) since December 2008, near the height of the U.S. financial crisis. Gold ended May with its fourth straight monthly decline – about 6%, the most in 12 years, and only slighly better than the S&P500. The troubles in Europe sent investors looking for the safe haven of the dollar and the dollar index gained 5.4% in May. The Euro finished the month at $1.233, down 7%. The Spanish market index, the Ibex25 is down 13%, Japan’s Nikkei is off 10%, and the Russian RTS is down 22% in May. The 10-year US Treasury note returned 1.6% for the month as yields dropped to historic low. If you think the markets are starting to resemble Mr. Toad’s Wild Ride – you are correct. The VIX, the Volatility Index jumped 40%. We had a few economic reports, disappointing economic reports, however the big jobs report tomorrow will overshadow today’s news. The Commerce Department reports economy grew at an annual rate of 1.9 percent in the first three months of …

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Wednesday, May 30, 2012 – Spanish Winter, Mexican Spring – by Sinclair Noe

DOW – 160 = 12,419SPX – 19 = 1313NAS – 33 = 283710 YR YLD – 0.11 = 1.62%OIL – 3.38 = 87.38GOLD + 7.70 = 1563.50SILV +.05 = 28.03PLAT – 28.00 = 1406.00 Yesterday the Dow gained 125 and I said: “The reason du jour for today’s market gains: positive news regarding Greece. Really? I’m not buying it. Make up your own reason for today’s gains because we are just as likely to see declines tomorrow.” And sure enough. The problem du jour was Spain and the Dow dropped 160. This economic stuff is easy. Remember when I told you a couple of months ago to get out in May? The S&P 500 has fallen nearly 6 percent in May, heading for its worst monthly performance since September. You’re welcome. The Nasdaq is down 6.9% for the month. US Treasury benchmark yields fell to their lowest in at least 60 years. Oil dropped more than 3 percent to the lowest level in nearly six months; oil prices are down 16% in May. The dollar remains the cleanest shirt in the dirty laundry hamper, up 5.5% for the month. The euro dropped below $1.24 to a 23-month low. Spain’s stock market hit a 9 year low. Yields on 10-year Spanish bonds topped 6.6%, which is close to levels at which Ireland and Greece sought international bail-outs. The news from Europe was all Spanish overnight as the country struggles to find traction on any plan that will lead it away from the …

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Tuesday, May 29, 2012 – Dithering About Europe – by Sinclair Noe

DOW + 125 = 12,580SPX + 14 = 1332NAS + 33 = 287010 YR YLD -.01 = 1.73%OIL +.08 = 90.84GOLD – 18.90 = 1555.80SILV -.55 = 27.98PLAT – 9.00 = 1432.00 The reason du jour for today’s market gains: positive news regarding Greece. Really? I’m not buying it. Make up your own reason for today’s gains because we are just as likely to see declines tomorrow. Still, Europe is important. Philadelphia Federal Reserve Bank President Charles Plosser said Monday that people in the United States have no need “to get all in a dither” over Europe’s debt crisis. Plosser feels that Europe’s economic problems could even benefit the US in the short term. It is “not an unreasonable argument,” he said, that low US interest rates and gas prices in response to the uncertainty in Europe’s financial situation could offset any potential difficulties for the American economy. Plosser said Europe “is just throwing a lot of noise into the system right now. It makes reading the tea leaves particularly difficult right now.” He noted, however, that a “flood of liquidity” into the US seems much more likely than investors running from US financial institutions. But, he added, the Fed will be able to deal with any fallout from Europe’s economic troubles. He believes the Fed has the necessary tools to deal with the situation, no matter what the situation. So, how is the Euro situation likely to be resolved? Well, the Greek election is June 16, so the Euro …

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Friday, May 25, 2012 – It’s Better Than It Looks, Striving For Happiness Amidst the Cow Pies – by Sinclair Noe

DOW – 74 = 12,454SPX – 2= 1317NAS – 1 = 283710 YR YLD – .01 = 1.75%OIL -.06 = 90.60GOLD + 15.90 = 1574.70SILV +.21 = 28.63PLAT + 14.00 = 1436.00 For the week, the S&P 500 rose 1.7 percent.  I’m of the opinion that life is better than it appears. We look around sometimes and the world can seem scary. Sometimes we have to look a little deeper to find the good, the decent, the delightful and the potentially pluperfect. And that brings us to today’s topic on the possibility of the Federal Reserve pumping money into the banking system through asset purchases, in other words, Quantitative Easing Part 3. Inflation expectations are falling, if you consider Treasury bonds as a gauge of inflation. The lower outlook for inflation gives the Fed wiggle room to stimulate the economy. Although, right now the Dow looks like a better QE indicator, and it is not indicating QE. The banks can always make a case for QE, but what about the Fed officials who make the actual decisions? St. Louis Federal Reserve President James Bullard says he expects the U.S. economy to perform better than many forecasters anticipate and that the Fed will therefore need to raise interest rates in late 2013, not late 2014 as its policy committee is currently indicating. Minneapolis Federal Reserve President Narayana Kocherlakota thinks the current labor market performance is much closer to maximum employment than the data alone would suggest. A few weeks back, Kocherlakota …

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Thursday, May 24, 2012 – Banks Issue Instructions for the Euro-Crisis – by Sinclair Noe

DOW + 33 = 12,529SPX + 1 = 1320NAS – 10 = 283910 YR YLD +.04 = 1.76%OIL +.95 = 90.85GOLD – 4.50 = 1558.80SILV +.48 = 28.42PLAT – 7.00 = 1424.00 The Dow Industrials moved lower this morning, then recovered, then dropped, then rallied into the close. Stocks moved down, up, down, up. If you can figure out what it means, send me a note. I’m not sure it means much. Treasury prices declined a little and yields inched up. The Treasury Department sold 7-year notes at auction. One economic report today showed 370,000 people filed for first-time jobless claims last week. Another report showed durable good orders rose 0.2% in April. Nobody was surprised by the reports. The euro jumped up against the Swiss Franc on rumors the Swiss government might implement a tax on Swiss franc-denominated deposits. In the past the biggest argument against a tax was that it would drive Swiss banking activity off shore. So, how does a rumor like that get rolling? Well, there are wheelbarrows full of euros being deposited into Swiss banks right now. Meanwhile, JPMorgan issued a report on the European Central Bank, or maybe they issued instructions; I’m not sure which. The economic downturn will lead the ECB to ease monetary policy even further with a combination of interest rate cuts and another round of the LTRO, Long -Term Refinance Operation, also known as Free Money. Of course, if the ECB lowers rates and injects more liquidity into the banking …

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Wednesday, May 16, 2012 – Admit Nothing – by Sinclair Noe

DOW – 6.66 = 12,496 SPX + 2 = 1318NAS + 11 = 285010 YR YLD -.07 = 1.72OIL +.62 = 90.51GOLD – 6.00 = 1563.30SILV -.36 = 27.94PLAT – 20.00 = 1430.00 A listener writes: Maybe they should have renamed the company “Two Facedbook” at the IPO for all of the double dealing and back door insider information. One face for Joe public and the other face for Joe privileged… My .02 worth. We are learning details, and we will learn many more details as the Facebook Fiasco works its way through the courts. Zuckerberg made a boatload of money but he will spend a large part of his life dealing with lawyers and the legal system. At first blush it appears the bankers were behaving badly. Go figure. The latest revelation is that Facebook officials told the analysts for the banks that were underwriting the IPO to reduce revenue and earnings forecasts. Facebook backed off and said, “hey, get your models down.” Facebook’s advisory came around May 9, the day it published an amended prospectus that included a cautionary note about lower advertising revenue. It isn’t known which analysts from the 33 IPO underwriters were contacted by Facebook with the revised guidance. It also isn’t clear exactly who from Facebook gave the guidance. The analysts cut their estimates because a Facebook executive told them to. The information about the estimate cut was then verbally conveyed to sophisticated institutional investors who were considering buying Facebook stock, but not to smaller investors. The …

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