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April, Friday 06, 2012

If the employment report falls on a holiday weekend, does it make a sound? Yes it does; the sound is a loud thud. Earlier today the US Department Labor released March employment statistics. The report shows an increase of 120,000 non-farm payrolls, which is significantly lower than the estimated 200,000 new jobs and less than half the average monthly increase in the prior three months. On the other hand, the unemployment rate fell from 8.3% to 8.2%, which is lower than the estimate of 8.3%.So clearly, the correct bet was to take the “unders”. Just in case you were wondering, Goldman Sachs yesterday raised their prediction from 175,000 to 200,000; which means Goldman is either a ship of fools or they were betting that you are a muppet that would take that bet, and they were betting against you. What happened? One explanation is that the warm winter weather across much of the country produced a little boost of economic activity in December, January, and February; and now we’re returning to the more normal rate of growth for the past couple of years, which is fairly weak. There is growth, it just isn’t robust. Prices for U.S. Treasury debt rallied on the report, pushing yields to more than three week lows, as investors anticipated further bond purchases by the Fed. This is not a guarantee of QE3 but the report certainly did not take QE3 off the table. The dollar fell. The US stock markets were closed for Good Friday, …

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Thursday, April 5, 2012

DOW – 14 = 13,060 SPX – 0.88 = 1398NAS + 12 = 308010 YR YLD – .07 = 2.17%OIL + 1.78 = 103.25GOLD + 10.90 = 1632.30SILV +.38 = 31.84PLAT + 7.00 = 1609.00 The big jobs report is due out tomorrow morning 5:30 AM pacific time. The nonfarm payroll report is typically the biggest economic report of the month. And tomorrow’s report will be unique because the stock market will be closed for Good Friday. Today we saw a report that initial claims for state unemployment benefits fell 6,000 to a seasonally adjusted 357,000, the lowest level since April 2008. New claims have fallen sharply in recent months, boosting expectations the end of a long cycle of heavy layoffs will lead to more hiring. The weekly report does not have a direct relationship with the March employment report due on tomorrow morning. In Europe, Spanish bond yields moved higher, renewing concerns about the euro zone’s financial health. Prices for U.S. government debt rose while the euro weakened against the dollar. The European Central Bank’s emergency lending program launched last December was supposed to give Europe’s troubled banks and sovereigns three years of relief. But just months later, the medicine is already wearing off. That’s the problem with trying to fix a solvency problem with liquidity—it doesn’t last. Spain is the new epicenter. Demand for the nation’s debt slumped this week, forcing the government to pay 4.3 percent on five-year bonds, nearly a percentage point more than in March; …

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Financial Review

Financial Review for Wednesday, April 4, 2012

DOW -124 = 13,074SPX – 14 = 1398NAS – 45 = 306810 YR YLD -.04 = 2.24% OIL +.57 = 102.04 GOLD – 25.40 = 1621.40SILV – 1.32 = 31.46PLAT – 43.00 = 1604.00 So, we made it through the first quarter, and it was just delightful, one of the best first quarter rallies in years; the S&P up about 12%, the NASDAQ up 18%. Do you think the S&P will continue at that pace in the second, third, and fourth quarters? Do you think the S&P will gain 48% this year? Actually a bit more. Do you think the NASDAQ will gain 72%? Let’s sort through what it really means. Are we seeing recovery or was it just a cyclical bull in a secular bear? Remember hearing about green shoots? Remember when they withered on the vine? How do recognize a genuine, sustainable recovery? First you have to realize there is an economic ebb and flow and there are some fairly predictable patterns that emerge. There were good years for investors back in the Great Depression but it was still a Great Depression. And we still have threats to the economy. Treasury Secretary Timothy Giethner said today that fallout from the European debt crisis along with fears of Iran and higher oil prices posed the biggest threats to the U.S. economy. “Europe is still facing a very difficult, very challenging period. They are likely to have weak growth. You have, obviously, the fear of Iran and oil prices, even though that is …

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Wednesday, April 4, 2012

DOW -124 = 13,074SPX – 14 = 1398NAS – 45 = 306810 YR YLD -.04 = 2.24% OIL +.57 = 102.04 GOLD – 25.40 = 1621.40SILV – 1.32 = 31.46PLAT – 43.00 = 1604.00 So, we made it through the first quarter, and it was just delightful, one of the best first quarter rallies in years; the S&P up about 12%, the NASDAQ up 18%. Do you think the S&P will continue at that pace in the second, third, and fourth quarters? Do you think the S&P will gain 48% this year? Actually a bit more. Do you think the NASDAQ will gain 72%? Let’s sort through what it really means. Are we seeing recovery or was it just a cyclical bull in a secular bear? Remember hearing about green shoots? Remember when they withered on the vine? How do recognize a genuine, sustainable recovery? First you have to realize there is an economic ebb and flow and there are some fairly predictable patterns that emerge. There were good years for investors back in the Great Depression but it was still a Great Depression. And we still have threats to the economy. Treasury Secretary Timothy Giethner said today that fallout from the European debt crisis along with fears of Iran and higher oil prices posed the biggest threats to the U.S. economy. “Europe is still facing a very difficult, very challenging period. They are likely to have weak growth. You have, obviously, the fear of Iran and oil prices, even though that is …

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04032012 Script DOW – 64 = 13,199SPX – 5 = 1413NAS – 6 = 311310 YR YLD +.09 = 2.28%OIL +.07 = 104.08GOLD – 31.20 = 1646.80SILV -.31 = 32.78PLAT – 10.00 = 1647.00 Stocks slumped, bond yields rose, the dollar strengthened, and Wall Street traders experienced DT shakes as they read the Federal Reserve’s March FOMC meeting minutes. There was no direct mention of QE3, the Fed’s big money giveaway to the big banks. And so, the traders started twitching and squirming. Where would they get their next fix of free money? Market expectations for more Fed easing—both quantitative easing or an extension of its ‘operation twist’—have seesawed back and forth in the past several weeks. In the beginning of March, markets factored out quantitative easing based on comments from Fed Chairman Ben Bernanke that it might not be needed and that the economy was showing improvement. At the time, yields rose and stocks also held gains. But some weaker economic reports and new comments from Bernanke last week, defending the Fed’s easing stance, while not new, helped renew expectations for more easing. The minutes of the March 13 FOMC meeting show the voting members talking about more stimulus if the economy deteriorates. It also showed that the recent economic data did not materially change the forecast for 2013, or 2014. They also repeated past concerns about housing and unemployment, as well as discussed recent improvements in employment. Bernanke last week said the improvement in employment may be the …

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April, Monday 2, 2012

DOW + 52 = 13,264 SPX + 10 = 1419NAS +28 = 311910 YR YLD -.02 = 2.19%OIL – .40 = 104.83GOLD + 8.30 = 1678.00SILV +.71 = 33.09PLAT + 12.00 = 1657.00 The calm before the storm. Maybe I should say storms. This Friday we’ll look at the monthly jobs report for March. The nonfarm payroll is one of the bigger economic reports each month and frequently moves markets. The report this Friday will be strange. I guarantee. This Friday marks the somewhat unusual occurrence of a payrolls report being released on a holiday (Good Friday) that will keep stock markets shut. On Friday, stock futures will be trading for at least 45 minutes after the release, and government bonds will trade until noon. All Canadian and most European markets will be shut. It is widely expected the economy added 200,000 jobs in March; down from an average of 245,000 for the three prior months. The unemployment rate will probably stay at 8.3%. The addition of 200,000 jobs is not enough to lift the economy; it is just treading water, at best. So, the economy is looking pretty good, not great but good. A warm winter may have exaggerated first quarter growth. Consumer confidence is up but spending is outpacing wage gains. It makes for a pretty straightforward scenario for growth. The consumer can rely on high debt and/or growing asset prices to fuel their consumption but if debt gets too high and/or asset prices slip, then the consumer …

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March, Friday 30, 2012

DOW + 66 = 13,212 SPX + 5 = 1408NAS – 3 = 309110 YR YLD +.06 = 2.22%OIL +.15 = 102.93GOLD + 7.30 = 1669.70SILV +.02 = 32.38PLAT + 11.00 = 1645.00 The S&P 500 gained 11.6 percent in the first quarter, its best start of the year since 1998 and the best overall quarter since the third quarter of 2009. The Nasdaq Composite gained 18.7%. The Dow Industrial average gained nearly 1,000 points, up 8.1% – the best first quarter point gain for the Dow – ever. Apple’s share price increased 48%. Bank of America’s share price increased 70%, if you had the stomach for it. Elsewhere Germany’s Dax gained 17%; the Nikkei was up more than 19%; crude oil futures were up 4.2% and gold gained 6.7%. Pretty good, really. If there’s no real bad news and the Fed is pushing money into the economy, markets tend to go higher. For now, the economic news is pretty good. Consumer sentiment rebounded to its highest level in more than a year in March as optimism about jobs and income overcame higher prices at the gasoline pump. Meanwhile, personal spending jumped 0.8% in February as personal income edged up 0.2%; that might qualify as semi-good economic news. An increase in spending, 4 times greater than income growth, doesn’t pencil out on an individual level but it is a positive for the broader economy, consumer spending accounts for about 70% of economic activity; higher spending tends to result in more …

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March, Thursday 29, 2012

DOW + 19 = 13,145 SPX – 2 = 1403NAS – 9 = 309510 YR YLD -.04 = 2.16% OIL +.52 =103.30GOLD – .70 = 1662.40SILV + .22 = 32.36PLAT – 11.00 = 1631.00 Let’s talk about your retirement. The numbers that are selected with the highest frequency are: 48, 36, 53, 12, 27, 31, 51, and 52 – that’s for the first selection on the MegaMillions lottery ticket. The most common numbers for the Mega ball are 36, 9,7, 35, and 2. You’re scrambling for a pencil. You can always wait about an hour and we’ll post the audio archives of today’s show at MoneyRadio.com. Of course, even if you pick those numbers, your probability of winning the lottery are beyond astronomical, and the crazy part is that for many people, even with the ridiculous odds, this is their best chance at retirement, or getting out of debt. The estimate is that the jackpot for tomorrow’s drawing is up to about $550 million, so it’s interesting, it’s fun to fantasize. There is some entertainment value. I’m just suggesting that it might be a good idea to have a Plan B. You know, personal discipline, a savings plan, an investment plan, solid information – it’s not that difficult, just keep it tuned to MoneyRadio. It’s not as fast as the lottery, but the odds are much better. While winning the lottery would be sweet, there are some people who seem to have won the legal lottery. They collected get out …

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March, Wednesday 28, 2012

DOW – 71 = 13,126SPX – 6 = 1405NAS – 15 = 310410 YR YLD + .01 = 2.20% OIL +.13 = 105.54GOLD – 18.50 = 1663.10SILV – .55 = 32.14PLAT – 16.00 = 1640.00 Oil prices fell. The United States, France and Britain are in talks about possibly releasing strategic petroleum reserves. The problem is not a lack of supply. Not now anyway. Maybe tomorrow, maybe next week, maybe this summer; not today. The economy faces multiple risks: the Greeks might vote the technocrats out of office and tell the ECB to go to hell; Spain might default next and it would require a firewall that is bigger than the mother of all firewalls to avoid a cascading default; the Euro-banks hold twice as much toxic waste as their American counterparts, and their American counterparts still have extremely significant exposure to the Euro-trash; Japan’s debt to GDP makes the southern European countries look fiscally conservative – oh yeah the country is radioactive; China might slow down and the slowdown might be worse than expected. And then there are a few problems here in the US: unemployment at 8.3% (or is that inflation?), unemployment around 18% if you count all the invisible people that nobody wants to count, and the banks are still behaving badly and with impunity. I get the feeling that something is going to break. I don’t know what, but something is just going to stop working. Maybe it will be a breakdown in the electric grid, …

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March, Tuesday 27, 2012

DOW – 43 = 13, 197 SPX – 3 = 1412NAS – 2 = 312010 YR YLD -.06 = 2.19%OIL – .52 = 106.81GOLD – 9.30 = 1681.60SILV -.25 = 32.69 PLAT + 6.00 = 1656.00 A flat trading day on Wall Street; weakness in financials compared to a little strength in tech; the weakness carried the day. The Standard & Poor’s/Case-Shiller index of 20 American cities fell 0.8% from December to January and 3.8% from January 2011. Sixteen cities tracked by the index posted declines. Eight cities saw average home prices hit new lows. Home values fell for the fifth-straight month and prices dropped to their lowest levels since 2003. In January, Washington, Miami and Phoenix were the only metro areas that posted monthly gains. Robert Shiller, a professor of economics at Yale University and co-creator of the Standard & Poor’s/Case-Shiller Index, says the market has “a chance” of rebounding even though the downward momentum in the real estate market has accelerated in the past five years. Shiller says the problems facing mortgage giants Fannie Mae and Freddie Mac must be resolved before housing can bottom. There is speculation that Fannie and Freddie could sell bundles of foreclosed homes to hedge funds; both Fannie and Freddie are reportedly leaning toward principal mortgage write-downs and loan forgiveness, but don’t hold your breath on that. Of course you don’t make your home buying decisions based on national averages. All real estate is local. There have been several calls of a housing …

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