Uncategorized

December, Friday 09, 2011

DOW +186 = 12,184SPX +20 = 1255NAS +50 = 264610 YR YLD +.08 = 2.05%OIL +1.47 = 99.80GOLD +5.50 = 1712.30SILV +.57 = 32.33PLAT + 20.00 = 1519.00 The European Union has come up with an economic treaty for 26 Euro nations. The UK did not sign on. The new treaty replaces the old treaty. The new treaty is supposed to require stricter fiscal and financial discipline in future budgets. The New Euro will pump hundreds of billions into the IMF and the Euro Stabilization Mechanism, and the ECB, and there will be more printing of money. And I am more convinced it is straight out of the Federal Reserve Playbook, with subtitles. So let’s review the playbook. I talked about this yesterday, but it deserves a little more attention today: the Government Accounting Office conducted an audit of the Federal Reserve, the first independent audit of the Fed in its 99-year history. The audit dealt with emergency measures conducted by the Fed and it was NOT a complete audit of all Fed functions, but the GAO produced a 251-page report. If you want a link to the report, then drop me an email and I’ll send you the link. http://www.gao.gov/new.items/d11696.pdf The report documents that Wall Street Bailouts by the Fed dwarf the $700 billion TARP, and everything else you’ve heard about. Page 131 – The total lending for the Fed’s “broad-based emergency programs” was $16,115,000,000,000. That’s right, more than $16 trillion. The four largest recipients, Citigroup, Morgan Stanley, Merrill …

READ MORE →
Uncategorized

December, Thursday 08, 2011

DOW –198 = 11,997SPX – 26 = 1234NAS – 52 = 259610 YR YLD -.05 = 1.97%OIL –2.50 = 97.98GOLD –37.30 = 1706.80SILV .85 = 31.76PLAT –30.00 = 1498.00 We start with Europe. The European Central Bank, the ECB, cut interest rates by a quarter percentage point to 1 percent, matching a record low. They also loosened collateral rules so that banks can borrow more from the ECB and announced two unlimited three-year loans. ECB president Mario Draghi said the measures “should ensure enhanced access of the banking sector to liquidity.” Perhaps more important than what was said, was what was not said: The headline event today was that Draghi made it absolutely and explicitly clear that there would be no ECB bond buying bazooka. They’ll stay in the market but will only buy small amounts. It’s governments who’ll have to do the heavy lifting. In a separate speech, German Chancellor Angela Merkel confirmed the outlook by saying there will be no “big-bang” solution coming from the summit, which gets underway in Brussels tonight.  On the eve of this summit, the ECB started passing out, essentially, free money; making it easier for banks to borrow cash from the ECB. Credit claims such as bank loans will become eligible as collateral and the central bank reduced the rating threshold on asset-backed securities. This is the Euro version of cash for trash. The ECB also cut in half banks’ reserve ratio, which determines the amount of money they have to deposit with their …

READ MORE →
Uncategorized

December, Wednesday 07, 2011

DOW +46 = 12,196SPX + 2 = 1261NAS –0.35 = 264910 YR. YLD. -.08 = 2.20% OIL -.73 = 100.55GOLD +13.70 = 1744.10SILV -.25 = 32.61PLAT +1.00 = 1533.00 (#1)(#2) A Day that will live in infamy. Under calm skies 70 years to the day of the attack on Pearl Harbor, about 120 survivors gathered this morning in Hawaii to mark the anniversary with ceremonies that began with a moment of silence for the 2,400 Americans who lost their lives. (#3)About half of the casualties were from the USS Arizona. For 24 of the survivors, it was their first time back to Pearl Harbor in the last 70 years. Today only 7 survivors of the Arizona attended the ceremony at Pearl Harbor. The ashes of Vernon Olsen, who was on the Arizona during the attack, were placed on his ship today. Today was the last day for such ceremonies; the Pearl Harbor Survivors Association announce that it would disband at the end of this month; the remaining members of the association are getting too old and are in poor health. (#4) Once again Europe is dominating the headlines and determining the direction of the markets. I had an email from a listener that gave a good summation: Sinclair, The EU leaders are now discussing a second bailout fund without even agreeing on how to fund the first one.  In either case, the amounts they are discussing are way too low.  They are going to need tens of trillions not billions. So far, the …

READ MORE →
Uncategorized

December, Tuesday 06, 2011

DOW + 52 = 12150SPX + 1 = 1258NAS – 6 = 264910 YR YLD +.04 = 2.09%OIL +.21 = 101.20GOLD + 6.20 = 1729.40SILV +.68 = 32.86PLAT + 6.00 = 1532.00 The single most important thing you need to know today: The Green Bay Packers have offered 250,000 shares in the franchise for sale at $250 per share. They’ll use the money to make improvements to Lambeau Field. That brings the total number of shares outstanding to 5 million. The max you can buy is 200 shares. The shares are not traded on an open market. The shares don’t pay a dividend; the value doesn’t change; it is difficult to transfer shares, unless somebody dies or something – maybe it is a good investment. Our technical director, James Tidwell, a true cheesehead – tells me this is important. What else is going on in the world? Oh, Financial Armageddon, collapse, redemption, recovery, betrayal. Another quiet day. Let’s start with Financial Armageddon. It did not happen today. Despite the fact that Standard & Poor’s threatened to downgrade 15 European countries to negative outlook or actually cut their ratings or even call them bad dressers. The markets shrugged off the ratings agency threats like water off a ducks back. S&P pushed their point – they might downgrade the powerful countries of France and Germany. Yawn. Shrug. They might even downgrade the European Financial Stability Facility. Which was met with derision. Now, the markets seem to think credit downgrades are really nothing …

READ MORE →
Uncategorized

December, Monday 05, 2011

DOW =78 = 12097SPX +12 = 1257NAS +28= 265510 YR YLD +.01 = 2.05OIL –3.16 = 97.80GOLD – 22.10 = 1724.20SILV – .56 = 32.18PLAT – 27.00 = 1526.00 Well, I survived. My apologies for missing our regular Friday get together. Throat and sinus. I survived. That is my segue to the situation in Europe. The Euro has survived. A couple of weeks ago, it looked like the end was near. The headlines warned of Financial Armageddon. I told you not to underestimate the strength of the bankers and the powers that be; I told you they were bright boys and girls and they had a game plan. But the financial markets wobbled. There was the threat that contagion would spread from Greece to Portugal to Italy to Germany to London to New York, and eventually right into your pocket book. The bankers cried ‘Havoc!” and let slip the dogs of debt. The bond vigilantes prowled the markets and pushed demands that the hoi poloi must pay the hoi oligoi; the great unwashed were indebted to the bankers; the demands were simple and constant from at least 3 years past: the profits were privatized but the losses must be socialized. The Greeks and Italians did not vote for the governments that now run their countries, just as we did not vote for the Federal Reserve and their grand bailout here in the US. Germany’s Merkel and France’s Sarkozy demanded change; apparently Sarkozy is too young to remember the definition of …

READ MORE →
Uncategorized

December, Thursday 01, 2011

DOW – 25 = 12020SPX – 2 = 1244NAS + 5 = 262610 YR YLD +.05 = 2.12%OIL – .37 = 99.98GOLD – 4.10 = 1746.30SILV – .10 = 32.83PLAT + 5.00 = 1565.00 Today was a fairly quiet day in the financial markets; I guess that is to be expected the day after the central banks saved the world! With 24 hours to reflect, the world didn’t look particularly saved. Europe still looked like Europe. The head of the European Central Bank says the ECB stands ready to act more aggressively to fight Europe’s debt crisis; that script hasn’t changed in two years. Europe’s political leaders will meet next week to work on tighter budgets for the euro zone. They’ve been holding meetings next week for the past couple of years. The ECB can’t legally act as a lender of last resort, so the idea du jour  is to force individual countries’ central banks to make contributions to the International Monetary Fund and the IMF will serve as lender of last resort. Germany wants the European Commission to grant it power to veto other nations’ budgets; in other words, they want to hold a gun to the head of their euro zone partners; this is a business model that has not worked well in Europe. And I don’t know how it could work now. Is fiscal integration meant to involve some kind of democratic political control of fiscal policy? If so, one can only wonder what sort of voting …

READ MORE →
Uncategorized

November, Wednesday 30, 2011

DOW + 490 = 12045SPX +51 = 1246NAS + 104 = 262010 YR YLD +.07 = 2.07%OIL +.71 = 100.50GOLD +34.00 = 1750.40SILV + .91 = 32.93PLAT + 21.00 = 1566.00 Who wants some free money? Anybody who wants some free money raise your hand and get in line. The Federal Reserve has teamed up with the European Central bank, the Bank of Japan, the Bank of Canada, the Bank of England, and the Swiss National Bank and they are handing out cash. Unfortunately, you probably won’t be getting any of this free cash, but Wall Street loves the idea of free money. Today’s announcement from the Central Banks actually involves lowering the cost of emergency U.S. dollar funding for banks and expanding currency swap lines between countries. So, the cash will go to the banks; the moves will reduce funding costs and improve liquidity. It’s not completely free money – it’s just a half off sale. The dollar market had been drying up; today’s move might help prevent a credit freeze. Maybe, maybe not. There is still a big problem of solvency. Many European countries still have unsustainable levels of debt. Many European banks have government assets on their books. There used to be an assumption that those assets were “riskless”; the idea was that Greek bonds or Spanish or Portuguese or Italian bonds were safe – backed by the European Union. Well.., it turns out they weren’t safe. And so the cash needed for day to day operations …

READ MORE →
Uncategorized

November, Tuesday 29, 2011

DOW + 32 = 11,555 SPX + 2 = 1195NAS – 11 = 2515 10 YR YLD +.04 = 2.00% OIL + 1.29 = 99.50GOLD +5.50 = 1716.40SILV -.14 = 32.02PLAT – 4.00 = 1540.00 It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way – in short, the period was so like the present period that comparisons would seem inevitable. In the eight decades before the recent depression, there was never a period when as much as 9 percent of American gross domestic product went to companies in the form of after-tax profits. Now the figure is over 10 percent. During the same period, there never was a quarter when wage and salary income amounted to less than 45 percent of the economy. Now the figure is below 44 percent. Corporate profits after taxes were estimated to be $1.56 trillion, or 10.3 percent of the size of the economy – the highest ever. Wage and salary income was only 43.7 percent of G.D.P., the lowest number for any period going back to 1929. Corporations …

READ MORE →
Uncategorized

November, Monday 28, 2011

DOW +291 = 11523SPX + 33 = 1192NAS +85 = 252710 YR YLD -.01 = 1.96%OIL +.98 = 97.75GOLD +29.60 = 1710.90SILV + 1.08 = 32.16PLAT + 15.00 = 1549.00 Europe was totally copasetic, at least for today; I’ll get to the details in a moment. Here in the USSA, we spent the weekend doing what we do best, overeating and over-shopping. I want to start today with a news item that did not move the markets, but it is worth noting. A US District Judge in Manhattan actually stood up to Wall Street and refused to let the SEC sweep yet another case of high-level criminal malfeasance under the rug; the judge refused to let a major bank walk away with a slap on the wrist. There is a chance we could see actual justice, and the odds of that happening are so rare, the probabilities so astronomical – you are more likely to see a team of pink unicorns and Haley’s Comet. The SEC had brought an action against Citigroup for misleading investors about the way a certain package of mortgage-backed assets had been chosen. The case is very similar to the Abacus Case  involving Goldman Sachs, in which Goldman allowed short-selling billionaire John Paulson (who was betting against the package) to pick the assets, then told a pair of European banks that the “designed to fail” package they were buying had been put together independently.   This case was similar, but worse. Here, the SEC accused Citi …

READ MORE →
Uncategorized

November, Wednesday 23, 2011

DOW – 236 = 11,257SPX – 26 = 1161NAS –61 = 246010 YR YLD -.06 = 1.88% OIL – 2.19 = 95.82GOLD – 7.10 = 1693.30SILV – 1.01 = 31.86PLAT – 23.00 = 1554.00 Today’s lesson is on basic supply and demand. Let’s say you manufacture widgets; and let’s say you produce 100 widgets and you have enough customers to sell all 100 widgets. Now let’s say that you start producing 1,000 widgets, even though your market hasn’t changed. What happens to the price of each widget? That’s right, the price of widgets goes down, and you might not be able to sell all the widgets you’ve produced. Yesterday the IMF said they would backstop European nations with loans up to 10 times their quota. Now imagine that you are a European nation trying to sell bonds and the IMF just announced that the supply of bonds might increase by 1,000%. What happens to the price of each bond? That’s right, the price of bonds goes down, and you might not be able to sell all the bonds you’ve printed. Germany held a bond auction this morning; they failed to get bids on 35% of the 10 year bonds that were offered for sale. The auction was basically a disaster. Germany is the strongest nation in Europe and if they have this kind of difficulty in raising capital then you have big questions about upcoming auctions in other Euro countries.  Wait a second; Germany has Europe’s strongest economy, and traders …

READ MORE →