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Friday, September 21, 2012 – It’s Not Whether You’re Right or Wrong

It’s Not Whether You’re Right or Wrong by Sinclair Noe DOW – 17 = 13,579 SPX – 0.11 = 1460NAS + 4 = 317910 YR YLD – .02 = 1.76%OIL + .47 = 92.89GOLD + 4.50 = 1774.00SILV – .12 = 34.62PLAT + 11.00 = 1641.00 Let’s be very clear on what has happened over the past week or so. You already know the Fed announced QE3 to infinity or 5.5% unemployment plan (whichever comes first). What does that really mean? It is probably a very, very bullish event for stocks and commodities. We talked about commodities and equities moving higher in anticipation, and we saw silver move up about 33% over the past month; gold up 14%; the Dow Industrials picked up almost 600 points; the S&P 500 up about 60. Since March 2009, Gold is up 97%, silver is up 162%, oil is up 122%, and the Continuous Commodity Index (CCI) is up 55%. And then we’ve seen some consolidation over the past week, exactly as we anticipated, because this was the pattern that we saw after previous QE announcements, but you’ve got to suspect QE3 means the Fed has flipped the switch to risk-on. Maybe you also remember that back in the Spring I brought up the old adage about the best and worst 6 months in the market; you remember, “Sell in May and stay sway.” Well, the S&P 500 is up about 50 points from May 1st. If you missed that, don’t feel bad because …

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Thursday, September 20, 2012 – QE3 to 5.5, Bad Banks, Bad Politicians

QE3 to 5.5, Bad Banks, Bad Politicians by Sinclair Noe DOW + 18 = 13,596SPX – 0.79 = 1460NAS -6.66 = 317510 YR YLD unch = 1.78%OIL + .51 = 92.93GOLD – 1.20 – 1769.50SILV – +.07 = 34.74PLAT – 16.00 = 1633.00 So, we know the Federal Reserve has committed to buy mortgage-backed securities at the rate of $40 billion a month until the employment picture gets better; that’s the plan behind QE3 to infinite and beyond. So, when will they stop? Narayana Kocherlakota, president of the Federal Reserve Bank of Minnesota, gave the answer in a speech today. Kocherlakota says that as long as inflation isn’t a problem the Fed should keep its foot all the way on the gas pedal until unemployment drops from its current 8.1 percent down to 5.5 percent. Koacherlakota is not the ultimate decision maker for the Fed, but now we have a target. Why did it take so long? An interesting graph today from the Department of Labor showed the fastest growing industries for new jobs over the next 10 year; the top 4 are Services for elderly, Home health care services, offices of mental health, and masonry contractors. Bank of America has a plan to cut back on expenses by $ 8 billion dollars in annual savings by 2015. How can they possibly find that much in savings? By firing 16,000 by the end of the year, and more than 30,000 total. See how that works? Bank of America keeps the …

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Wednesday, September 19, 2012 – Distortions and Unintended Consequences

Distortions and Unintended Consequences by Sinclair Noe DOW + 13 = 13, 577SPX + 1 = 1461NAS + 4 = 318210 YR YLD – .03 = 1.78%OIL – 3.31 = 91.98GOLD – 1.40 = 1770.70SILV – .21 = 34.67PLAT + 12.00 = 1647.00 It was no surprise last week when the Fed announced a new quantitative easing (QE) program. They had telegraphed the new QE. The Fed will purchase $40 billion of agency and mortgage-backed securities (MBS) per month until the labor market improves. This amounts to about half a trillion dollars per year, give or take a few billion, and there is no specific limit on how long the program will last. Toss in $85 billion a month in the still-in-effect Operation Twist and by 2015, the Fed balance sheet would grow to $4 trillion, from under $3 trillion today. And the European Central Bank is on the path of its own quantitative easing via open-end bond buying like our own Federal Reserve. Some Euro countries are in a flat out depression and even the healthy ones are looking at economic contraction at least through the end of the year, with GDP forecast in the range of negative -0.6% to -0.2%. Now, the Bank of Japan has joined the party, announcing their own bond buying program, hoping to avoid the appearance of a strong currency, or maybe to stimulate economic growth. I don’t know anymore. Pick a reason that suits you. I suspect, the central bankers are doing a …

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Tuesday, September 18, 2012 – Maybe We’ll Just Keep Plugging Along

Maybe We’ll Just Keep Plugging Along -by Sinclair Noe DOW + 11 = 13,564SPX – 1 = 1459NAS -0.87 = 317710 YR YLD -.03 = 1.81%OIL +.24 = 95.53GOLD + 8.60 = 1772.10SILV + .53 = 34.88PLAT – 38.00 = 1635.00 FedEx lowered its outlook for global growth and industrial production when it reported fiscal first-quarter earnings. That has negative implications for energy demand. The world’s No. 2 package delivery company forecast a continued slowdown in global trade. Yesterday, we told you about the little flash crash in oil. The price of a barrel of oil dropped $3 in about one minute for no apparent reason. There were rumors of an announced or leaked SPR release decision, then there were rumors of an algorithmic trade gone bad. The timing was suspect; the equity and other markets have rallied due to all of the announced and expected easing measures from the Fed and the ECB; the belief is that consumption and economic growth will necessarily follow due to extremely low interest rates and the positive effect of inflation on asset values. And commodity prices, including oil, moved higher after QE 1&2. So, it was strange to see prices just drop for no apparent reason; they seemed to collapse of their own weight. Maybe the outlook for the economy is more dire than we think. Maybe demand for oil is far less than projected. Maybe the Fed has done all they can and they’ve run out of firepower. Maybe the odd price …

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Monday, September 17, 2012 – Maybe We Need to Eliminate the Middlemen

Maybe We Need to Eliminate the Middlemen -by Sinclair Noe DOW – 40 = 13,553SPX – 4 = 1461NAS – 5 = 317810 YR YLD -.03 = 1.84%OIL -.04 = 96.58GOLD  – 8.00 = 1763.50SILV – .43 = 34.35PLAT – 42.00 = 1673.00 After the enthusiasm last week for QE3 to infinity and beyond, the markets paused today. It is easy for Wall Street traders to get jacked up like little kiddies on a sugar buzz at the prospect of the Federal Reserve passing out Free Money. Then there is the consolidation phase, where we ask: What Have we done? Where is this leading? From the New York Times: “The Federal Reserve’s experimental effort to spur a recovery by purchasing vast quantities of federal debt has pumped up the stock market, reduced the cost of American exports and allowed companies to borrow money at lower interest rates. “But most Americans are not feeling the difference, in part because those benefits have been surprisingly small. The latest estimates from economists, in fact, suggest that the pace of recovery from the global financial crisis has flagged since November, when the Fed started buying $600 billion in Treasury securities to push private dollars into investments that create jobs…. “A study published in February found that interest rates decreased, but only for companies with top credit ratings, “Rates that are highly relevant for households and many corporations — mortgage rates and rates on lower-grade corporate bonds — were largely unaffected by the policy.”” The …

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Friday, September 14, 2012 – Much More Than a Film

Much More Than a Film -by Sinclair Noe DOW + 53 = 13,593SPX + 5 = 1465NAS + 28 = 318310 YR YLD +.11 = 1.87%OIL + .69 = 99.00GOLD + 3.30 = 1771.50SILV un=34.78PLAT + 25.00 = 1714.00 One crazy little film that never even made it into theaters is all it takes to start World War 3. Go figure. I don’t really think it will be WW3 but you never know. I mean, I can understand how people get passionate and caught up in any film featuring Cindy Lee Garcia of Bakersfield, California. How many Oscars has she won? And any movie produced by Sam Bacile, you know it has a certain production quality. Say it slowly S A Mbacile (Is a Embicile). And you just have to think somebody is behind this otherwise very obscure movie. Authorities now believe the filmmaker is a guy in Cerritos Californa named Nakoula Nakoula, who just recently got out of prison after pleading guilty to bank fraud in 2010. Maybe this guy is a complete idiot or maybe he’s a puppet; I’m guessing the latter. Someone who has interests somewhere was pulling the strings. The results are nowhere near obscure. The bodies of 4 US diplomats killed in Libya were returned to US soil today at Andrews Air Force Base. Flags across the country are at half-staff. There are protests against the US in at least 18 countries in the Middle East, Africa, and Asia. About 50 Marines landed in Yemen …

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Thursday, September 13, 2012 – QE to Infinity and Beyond

QE to Infinity and Beyond -by Sinclair Noe DOW + 206 = 13,539SPX + 23 = 1459NAS + 41 = 315510 YR YLD -.01 = 1.76%OIL – .24 = 98.07GOLD + 35.80 = 1768.20 SILV + 1.37 = 34.78PLAT + 36.00 = 1690.00 I told you what I thought the Fed would do and today they did it. That doesn’t make me a genius, because the Fed has been telegraphing today’s action for about a month. The Federal Reserve wrapped up their Federal Open Market Committee meeting and announced a big new plan to stimulate the economy. The Fed said that it would expand its holdings of mortgage-backed securities and potentially take other steps to encourage borrowing and financial risk-taking. Perhaps more significant than those details was the basic change in its approach, for the first time pledging to act until the economy improves rather than creating programs with fixed endpoints; this is open ended quantitative easing; QE to infinity and beyond. In its measures, the Fed said it would add $23 billion of mortgage bonds to its portfolio by the end of September, a pace of $40 billion in purchases per month. It would then announce a new target at the end of this month, and every subsequent month, until the outlook for the labor market improves “substantially” and so long as inflation remains in check. The statement did not further explain either standard. The scale of the new QE is actually smaller than the Fed’s previous rounds of …

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Wednesday, September 12, 2012 – I Remain Optimistically Antiquated

I Remain Optimistically Antiquated -by Sinclair Noe DOW +9.99 = 13,333SPX + 3 = 1436NAS + 9 = 311410 YR YLD +.07 = 1.76%OIL – .16 = 96.85GOLD – 1.10 = 1732.40SILV -.17 = 33.41PLAT +42.00 = 1653.00 As we get down to FOMC crunch time, the skeptics come out of the woodwork. The Murdoch Street Journal ran a story saying that economists doubt the benefits of another round of bond-buying by the Federal Reserve. They surveyed 47 people, we don’t know how many were just walking through the newsroom, and they generally expect the Fed to start another round of large-scale asset purchases, known as quantitative easing, at its September policy-setting meeting. Another seven expect a move later this year, but not tomorrow. Just five respondents don’t believe the Fed will take action this year. And then there are others who say the economy is horrendous and jobs are not coming back and housing is still weak and all that, but the Fed doesn’t necessarily need to do anything to help support the markets. Some economists don’t see a large impact from a large bond-buying program. On average, they estimate that $500 billion in purchases would only reduce the unemployment rate by 0.1 percentage points and increase gross domestic product by 0.2 points over a one-year period. They estimate such a program would lift the inflation rate by 0.2 percentage points over 12 months. Others argue that QE1&2 didn’t really get the job done, and QE3 would just extend …

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Tuesday, September 11, 2012 – I Woke Up Early Today

I Woke Up Early Today – by Sinclair Noe DOW + 69 = 13,323SPX + 4 = 1433NAS +0.50 = 310410 YR YLD +.01 = 1.70%OIL – .37 = 96.80GOLD + 7.70 = 1733.50SILV + .14 = 33.58PLAT + 12.00 = 1610.00 Rating agency Moody’s says it likely would cut its “Aaa” rating on US government debt, probably by one notch, if negotiations on the federal budget fail. The lower rating by Moody’s would be the equivalent of the rating that Standard & Poor’s put on the US last year when it downgraded the rating following the debate over raising the debt ceiling. Moody’s says that if Congress and the White House don’t reach a budget deal, $1.2 trillion in spending cuts and tax increases will automatically kick in starting Jan. 2. House Speaker John Boehner says he’s not confident that Congress can reach a deal and avoid a downgrade. No serious negotiations are expected until after the November elections. The Federal Reserve’s FOMC policy making meeting commences on Thursday and the central bank is all but certain to extend its plan to keep interest rates low, moving the possible cutoff to 2015 from 2014. Also, it is widely expected the Fed will launch a bond-buying program targeting the mortgage market, QE3, or some new name to describe the same. The guidance on interest rates is supposed to encourage businesses and consumers to invest and spend, stimulating the economy, while the bond purchases are designed to further lower interest rates. …

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Monday, September 10, 2012 – When the Crack Pipe Fails to Satisfy

When the Crack Pipe Fails to Satisfy -by Sinclair Noe DOW – 52 = 13,254SPX – 8 = 1429NAS – 32 = 310410 YR YLD +.02 = 1.68%OIL -.30 = 96.24GOLD – 10.50 = 1725.80SILV – .34 = 33.44PLAT + 2.00 = 1599.00 Consumer credit shrank by $3.28 billion in July; this marked the first declines in consumer credit in nearly a year as Americans reduced credit card debt. Now for the scary part; I read a couple of stories on this today and they described the news as worrisome for the economy. I disagree. It might be worrisome for the credit card companies; it might be worrisome for the payday loan companies; it might be worrisome for the banks and other loan sharks, but I consider it good news for consumers and the economy in general. Consumer debt does not add to productivity; it doesn’t manufacture things. It’s debt. It’s inflationary. It’s takes resources which could be applied to greater purpose elsewhere. It doesn’t really matter because the Federal Reserve says they revised their earlier estimates for June, and it is likely we’ll all be paying with plastic again in August – you maybe, not me. Credit has been expanding almost continuously since mid-2010 as the country recovered from the 2007-2009 meltdown. The decline in July was the first drop since August of last year. In July, revolving credit, which includes credit cards, shrank by $4.82 billion. The data looks at declining credit as a negative because it is …

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