Financial Review

Thursday, June 26, 2014 – Buffers and Filibusters

Buffers and Filibusters by Sinclair Noe   DOW – 21 = 16,846 SPX – 2 = 1957 NAS – 0.71 = 4379 10 YR YLD – .03 = 2.52% OIL – .80 = 105.70 GOLD  – .70 = 1317.90 SILV + .10 = 21.22   Yesterday, the Commerce Department downgraded the first quarter gross domestic product to a negative 2.9%, meaning the economy shrank by 2.9%. Today, St. Louis Federal Reserve president James Bullard says it’s likely an aberration; the weak report for the first quarter was likely distorted by inventories, weather, and by the challenges of accounting for health-care spending under the new law. Bullard says he isn’t worried, “the market’s right to shake this off. Looking forward over the next four quarter, most forecasters have 3% growth.”   Well, that’s good. No worries. Nothing to see hear, move along, move along.   It’s just that the fall was so nasty, it’s hard not to look and linger over the carnage. It really was ugly. And while we can blame it on the weather, that doesn’t seem right. We always have weather. Minneapolis is underwater today. Bad weather is a fairly constant aberration. We should be past the point of excuses; we are 5 years into a recovery; granted it has been a stealth recovery.   I wonder if Mr. Bullard is confusing the stock market with the economy. A down day in the bull market would just be a blip on the tape, but the stock market is …

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Financial Review

Wednesday, June 25, 2014 – Use Your Library Card at a Copy Shop for a Horseback Ride to the Moon

Use Your Library Card at a Copy Shop for a Horseback Ride to the Moon by Sinclair Noe   DOW + 49 = 16,867 SPX + 9 = 1959 NAS + 29 = 4379 10 YR YLD – .02 = 2.56% OIL + .74 = 106.77 GOLD – .60 = 1319.40 SILV + .09 = 21.12 One of the jobs of the Commerce Department is to calculate the gross domestic product of the country; clearly it is a difficult task to figure out the value of all the goods and services produced, and so they tend to revise the numbers as they gather information. In April the Commerce Department figured the economy grew, just barely, 0.1% in the first quarter; last month they revised their GDP numbers to negative1.0%; today they revised GDP even lower. The economy shrank by 2.9%.   To understand the big move, you first have to realize that the GDP number is supposed to measure everything; construction and demolition, marriages and divorces, broccoli sales and cigarette sales, yoga classes and cancer treatments. One of the big reasons for the negative number is that the cost of healthcare dropped significantly.   The US spent $6.4 billion less on health care in the first quarter than in the last quarter of 2013. Government statisticians initially forecast a 9.9% increase in health-care spending, and what we got was a 1.4% decline. Considering all the millions of previously uninsured people who are gaining access to health insurance under the Affordable …

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Financial Review

Tuesday, June 24, 2014 – A Funny Thing Happened

DOW – 119 – 16,818SPX – 12 = 1949NAS – 18 = 435010 YR YLD – .04 = 2.58%OIL + .81 = 106. 84GOLD + .70 = 1320.00SILV + .03 = 21.03 Let’s start with a couple of reports on housing; the Commerce Department says new home sales increased 18.6% to a seasonally adjusted annual rate of 504,000 units, the highest level since May 2008. The increase in sales was the biggest since January 1992. Compared to May of last year, sales were up 16.9%. Meanwhile, the S&P/Case-Shiller index of existing home prices rose 0.2% in April; the smallest gain since March of last year, with the year-on-year increase slowing to 10.8%. Today’s reports seem to indicate a strong new home market and a weak existing home market, but that’s probably not quite accurate. Homebuilders are working through inventory, while existing home inventories are low and starting to rise; for existing homes that means we’ve mainly worked through most of the distressed sales that were out there. The housing market is moving forward modestly, but also in fits and starts. The Conference Board said its index of consumer confidence rose to 85.2 from 82.2 in May, with optimism about the labor market. June’s reading was the highest since January 2008. Consumers think jobs are more widely available. The survey found 14.7% of consumers think jobs are “plentiful,” the best reading since May 2008, while the share characterizing jobs as “hard to get” fell to a three-month low of 31.8%. While …

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Financial Review

Monday, June 23, 2014 – Calm Before the Storm

DOW – 9 = 16,937 SPX – 0.26 = 1962 NAS + 0.64 = 4368 10 YR YLD un = 2.62% OIL  – .13 = 106.04 GOLD + 3.60 = 1319.30 SILV + .02 = 21.00 The economic data today from the National Association of Realtors shows existing home sales picked up in May. Total sales rose 4.9% to 4.89 million units from an upwardly revised 4.66 million in April. While that marks a month to month increase, sales are down from the 5.15 million level of May one year ago.  Total housing inventory increased 2.2% in May. Unsold inventory is 6% higher than a year ago. Meanwhile, Market’s US Flash manufacturing PMI report for June, increased to 57.5 from 56.4 in May. The stock market has drifted slightly higher over the past couple of months. Yes we hit record highs last week, but the movement has been very slow, volume has been light, and volatility is almost non-existent. Volume is down about 50% since 2008. The VIX, or volatility index, sometimes known as the fear index, is down below 12, which means that the only people in the options market are all maxxed out on Ambien, or Valium. The S&P 500 hasn’t had a daily move of 1% in more than 2 months. Russia invades Ukraine – wake me when it’s over. Radical militants threaten to tear apart Iraq – we’ve seen this story before. The US economy is weak right now but growth is right around the corner …

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Financial Review

Friday, June 20, 2014 – Wall Street’s Midsummer Night’s Dream

DOW + 25 = 16,947 SPX + 3 = 1962 NAS + 8 = 4368 10 YR YLD un = 2.62% OIL + .83 = 107.26 GOLD – 5.60 = 1315.70 SILV + .12 = 20.98 Both the Dow and the S&P closed at new records, with the Dow hitting an intraday high of 16,978. For the week, the Dow was up about 1 percent, the S&P 500 was up 1.4 percent and the Nasdaq was up 1.3 percent. Today is the last day of spring. The solstice will occur tomorrow morning at 6:51 AM Eastern time, so tomorrow is technically the first day of summer, and the longest day of the year, or at least the day with the most daylight. For the western states, we’ll have solstice at 3:51AM, so there really will be some Midsummer Night’s Dreams. The markets have been drifting in and out of fantasy and reality this week. On Wednesday, Federal Reserve Chairwoman Janet Yellen said the Fed would keep doing what the Fed does, and all the markets heard “buy, buy, buy.” Wall Street traders opened their eyes from a Midsummer Night’s Dream and fell in love with the first trade they saw. Yellen said inflation was just “noisy” and interest rates could stay “well below longer-run normal values at the end of 2016.” Yellen nonetheless cited reasons for optimism about the economy, including resilient household spending and an improving jobs market, even as the Fed lowered some of its economic forecasts. This …

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Financial Review

Thursday, June 19, 2014 – Market Hits Record Highs and Supreme Court Hands Down More Decisions

DOW + 14 = 16,921 SPX + 2 = 1959 NAS – 3 = 4359 10 YR YLD + .01 = 2.62% OIL + .48 = 106.07 GOLD + 42.80 = 1321.30 SILV + .86 = 20.86 Taking a look at economic data, weekly claims for jobless benefits fell 6,000 to 312,000; the labor market still has plenty of slack but still shows signs of modest improvement. The Philly Fed manufacturing index was up to its highest reading since last September. And the Conference Board’s index of leading economic indicators rose 0.5% to 101.7 in May. President Obama said today that the United States would deploy up to 300 military advisers to Iraq to help its Iraqi government forces fend off Sunni militants. Obama emphasized again that he would not send combat troops to Iraq, although there seems to be a fine line between combat troops and advisers; he said the United States would help the Iraqis “take the fight” to the militants, who he said pose a threat to Iraq’s stability and to American interests, because Iraq could become a sanctuary for terrorists who could strike the United States or its allies. Secretary of State John Kerry will go to Europe and the Middle East this weekend to build support among Iraq’s Arab neighbors for a multisectarian government in Baghdad. Markets were in negative territory most of the day, nothing big, then we recovered near the end of the session, nothing big; the S&P 500 hit its 21st record high …

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Financial Review

Wednesday, June 18, 2014 – Forecasts Are Subject to Change

Forecasts Are Subject to Change by Sinclair Noe   DOW + 98 = 16,906 SPX + 14 = 1956 NAS + 25 = 4362 10 YR YLD – .04 = 2.61% OIL – .15 = 105.72 GOLD + 5.80 = 1278.50 SILV + .14 = 20.00   The Federal Reserve FOMC meeting wrapped up today. The Fed issued a statement that was almost a carbon copy of the April statement. The Fed said that growth “has rebounded in recent months” and the labor market indicators “generally showed further improvement.” The central bankers noted that business fixed investment had “resumed its advance” after saying that it “edged down” in April. The only negative comment was that the housing sector “remained slow.”   The Fed will hold interest rates steady for now, and probably well into next year; and they will continue to cut back on their large scale asset purchase program by another $10 billion per month. So, starting in July, the Fed will only buy $35 billion in Treasuries and mortgage backed securities.   The Fed statement was generally upbeat: “Economic activity will expand at a moderate pace and labor market conditions will continue to improve gradually. Household spending appears to be rising moderately and business fixed investment resumed its advance.”   Fed Chairwoman Janet Yellen held a press conference and the topic of inflation was brought up. The feeling is that the Fed wants to see solid signs of recovery, and inflation isn’t a concern; those inflation numbers are …

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Financial Review

Tuesday, June 17, 2014 – What Could Go Wrong?

What Could Go Wrong? by Sinclair Noe   DOW + 27 = 16,808 SPX + 4 = 1941 NAS + 16 = 4337 10 YR YLD + .06 = 2.65% OIL – .30 = 106.60 GOLD un = 1272.70 SILV + .09 = 19.86 The FOMC, the Federal Open Market Committee started two days of meetings today; tomorrow they are expected to announce more of the same. The FOMC is largely expected to taper its asset purchase program by $10 billion to $35 billion. Effective July 1, the Fed is expected to lower its asset purchases to $15 billion in agency mortgage backed securities (MBS) and $20 billion in Treasuries. The Fed is also expected to maintain its current forward guidance language on federal funds rate support; in other words, they will keep telling us that rates might increase sometime next year.   The committee is likely to make some upgrades to its description of the economic outlook in its economic projections. The committee will probably need to reduce its 2014 real GDP growth forecast to take into account the Q1 disappointment, and we can probably expect the committee to reduce its unemployment rate forecast and lift its inflation forecast slightly.   The consumer-price index climbed a seasonally adjusted 0.4% in May from a month earlier. It marked the fastest increase since February 2013 and doubled the pace of economists’ forecasts. Excluding food and energy components, so-called core prices increased 0.3%, the fastest pace since August 2011. From a year …

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Financial Review

Monday, June 16, 2014 – Manic Monday

Manic Monday by Sinclair Noe DOW + 5 = 16,781 SPX + 1 = 1937 NAS + 10 = 4321 10 YR YLD – .01 = 2.59% OIL – .12 = 106.79 GOLD – 4.20 = 1272.70 SILV un = 19.77   It’s Monday, and that means mergers. Today’s acquisition news comes from Medtronics, the medical device maker, announcing it will acquire Covidien for nearly $43 billion. Medtronics was founded in a garage in Minneapolis in 1949, but they will change their headquarters to Ireland, which is where Covidien has been headquartered since 2009. Covidien is actually a Massachusetts company, and they operate out of Massachusetts. Medtronics will continue to operate out of Minneapolis; the whole deal is about a lower tax rate, and for Medtronics, the ability to repatriate $20 billion in offshore profits, without paying tax.   Meanwhile, the IPO market remains white hot, and 14 companies will come to market this week. So far this year 124 companies have priced in the US, up 57% from a year ago. Total proceeds raised come to $25.8 billion, up almost 41% from 2013. Data today showed industrial production climbed more than forecast in May. Output at factories, mines and utilities rose 0.6% after a revised 0.3% drop in April that was smaller than previously estimated. In a separate report, the New York Fed’s Empire manufacturing report rose to 19.28, better than expectations.   The Fed FOMC meets later this week to determine monetary policy. After their meeting concludes Wednesday, …

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Financial Review

Friday, June 13, 2014, – Infallible Source Predicts Economic Collapse!

Infallible Source Predicts Economic Collapse! by Sinclair Noe   DOW + 41 = 16,775 SPX + 6 = 1936 NAS + 13 = 4310 10 YRYLD + .02 = 2.60% OIL + .38 = 106.91 GOLD + 2.80 = 1276.90 SILV + .15 = 19.77   For the week, the Dow was down 0.9%, the S&P fell 0.7 percent and the Nasdaq was down 0.25%. The week’s decline was the first after three weeks of consecutive gains on the S&P 500. For the year, the broad market index is up about 4.8%. So, it was a rough week, but a good Friday the 13th. The Producer Price Index measures prices at the wholesale level; the PPI was down 0.2% in May. The decline was driven lower by cheaper food and gas, and follows two months of strong gains. In the past 12 months, producer prices have risen 2%, matching the Federal Reserve’s inflation target. That’s down from an annual gain of 2.1% in April. Excluding the volatile food, energy and profit margin categories, (for all you people who don’t eat food or drive in cars) core producer prices were unchanged in May. Inflation, as measured by the consumer price index, has been mostly below 2% for the past two years.   Of course, that might change, at least for people who eat and drive cars. The price of oil has jumped the past few days, now standing at $106.91 a barrel, mainly on fears of a civil war in Iraq. …

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