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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Financial Review

Financial Review for Thursday, January 25, 2012

DOW +81 = 12,756SPX + 11 =1326NAS + 31 = 281810 YR YLD -.06 = 2.01OIL +.79 = 99.74GOLD  + 44.40 = 1711.80SILV + 1.22 = 33.37PLAT + 35.00 = 1585.00 The Federal Reserve will leave interest rates unchanged. That is the biggest non-news event of the day, but wait, there’s more! The Fed wrapped up their FOMC meeting with a new twist, they issued an official inflation target of 2 percent and they published individual policymakers’ forecasts for the Fed funds rate. A 2 percent target for inflation isn’t really new, and it wasn’t really on target because the rate for 2011 was 3 percent. The individual policymakers offered a wide range of views; three policymakers expect rates will need to rise this year and two others don’t think rates will need to rise until about 2016. The consensus seemed to be that rates should stay unchanged until the end of 2014. The Fed says the economy faces “significant downside risks” but it offered little to suggest it was close to launching another round of bond-buying to prop up growth. It did say, however, that it would maintain a “highly accommodative” monetary policy stance. The statement also dropped a reference saying the Fed was monitoring inflation and inflation expectations. Let’s break this down a bit further; the biggest change was that the Zero Interest Rate Policy has been unofficially extended from 2013 to 2014; this could be considered dollar negative; meanwhile, there was no announcement on QE3 – no …

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Financial Review

Financial Review for Tuesday, January 07, 2012

DOW + 33 = 12, 878SPX + 2 = 1347NAS + 2 = 290410 YR YLD +.06 = 1.96%OIL + 1.74 = 98.65GOLD + 25.00 = 1744.90SILV +.47 = 34.15 PLAT + 36.00 = 1647.00 I talked with a friend this weekend about the unbelievably better than expected jobs report on Friday. My friend was a bit surprised that I viewed the report favorably. I tried to explain that the report was deeply flawed, seriously imperfect, and likely not accurate, however it is probably still the best report to track the jobs picture, even with strange seasonal adjustments. The debate continued that the jobs report was certainly nothing more than a big BLS snow job, and if I bothered to look at the tax rolls, I would see that tax revenue declined while jobs were supposedly increasing. Of course, that’s what happens when you cut the payroll tax rates. Then I heard the argument that if we really counted the way we used to count in 1994 the unemployment rate would be 22.5%, and I was politely told about shadowstats. Well, I’ve met John Williams and I’ve cited John Williams, and if we compare today’s  unemployment rate to 1993, then he has a good point, but if we compare the unemployment rate from a year ago or 3 years ago then the jobs picture is improving; apples to apples and oranges to oranges. Then my friend asked if the economy was recovering. I think we’re still in a small “d” …

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Financial Review

Tuesday, January 03, 2012

DOW + 201 = 12418SPX + 21 = 1278NAS +44 = 264910 YR YLD +.09 = 1.96%OIL +4.22 = 103.05GOLD +37.20 = 1604.60SILV +1.85 = 29.81 (biggest % gain in 3 years)PLAT + 32.00 = 1435.00 Here is the basic question for investing in 2012: will we see a turnaround? Will we see economic growth or is the economy so inherently damaged that you should fear it and possibly short it? The Federal Reserve has been driving the bus, so let’s start there. The Fed has been active in Quantitative Easing. This means the Fed has been adding tremendous amounts of money into the financial system by selling treasuries directly from the government to the big banks at auction.  The Fed then purchases the treasuries from the big banks, also known as primary institutions, and pays the banks by crediting their accounts. The big banks get paid for holding the treasuries in reserve. And the big banks now have new “cash” for their banking activities. You have to think the Fed intervention had something to do with treasury bonds posting one of their biggest annual gains last year. Further, the Fed has a ZIRP Policy, or Zero Interest Rate Policy. The Fed has held interest rates to the big banks at near zero for the past 3 years, and they announced today they will communicate any intention to change the ZIRP – there will be no surprise interest rate hikes, but eventually there must surely be an interest rate hike. …

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