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February, Wednesday 1, 2012

DOW + 83 = 12,716SPX +11 = 1324NAS +34 = 284810 YR YLD +.05 = 1.85%OIL -1.31 = 97.17GOLD + 6.30 = 1744.00SILV +.58 = 33.81PLAT +31.00 = 1622.00 MF Global’s customers’ money didn’t just vaporize. Investigators have determined what happened to nearly all of the customer money that disappeared from MF Global around the time of its bankruptcy last Oct. 31, but have not publicly disclosed their progress, fearing that doing so might cripple efforts to recover the cash and pursue potential wrongdoing. Dealbook reports authorities have traced hundreds of millions of dollars to banks, MF Global’s trading partners and even the firm’s securities customers, but investigators remain uncertain about whether they can retrieve the money. Some recipients were entitled to payouts from MF Global, which could make clawing back the money difficult. For instance, securities customers withdrawing their money as MF Global began to collapse were paid from accounts that belonged to futures clients. A significant impediment has been clashes among the parties trying to resolve the MF Global mess: three federal agencies and two bankruptcy trustees. As of late December, investigators had obtained more than 10,000 e-mails, interviewed more than 50 witnesses and subpoenaed about 20 people. Customers, including farmers, hedge funds and other small traders, have been very frustrated with the pace of the investigation and the dearth of updates about their missing money. Even regulators are growing anxious about how long the investigation is taking. In November, investigators said they began to worry that money …

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January, Tuesday 31, 2012

DOW – 20 = 12,632SPX – 0.6 = 1312 NAS + 1 = 281310 YR YLD  –  .04 = 1.80%OIL  –  .50 = 98.28GOLD + 6.40 = 1737.70SILV -.37 = 33.23PLAT – 23.00 = 1591.00 Greece has worked out a debt swap agreement with private bondholders where the creditors will take a loss of about 70%, but they won’t make an announcement until later in the week; there is still some unfinished business. The Greek technocrats must beat the local population into submission; the government will demand commitments on reforms, labor issues and the pension system. The Greek technocrats are very aware that further austerity measures would likely deepen the recession and impose additional hardships. And then there is the prospect of an election in April which could spell the end of the technocrats. And then there is the prospect of more protests in the streets, which tends to make governments nervous; just ask Hosni Mubarak.  Average, everyday Greeks on the street are more than miffed that the economists find it so easy to dispatch democracy to the dustbin when they are convinced they have the right technical answers. But other than that, the Greeks have apparently cobbled together a deal; it’s just not cobbled enough to show to anybody. Why? Well, one of the big stumbling blocks is that the European Central Bank holds Greek bonds, and while it might be fine for private bondholders to take a  70% haircut, the ECB is still hoping to make a profit. …

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January, Monday 30, 2012

DOW – 6 = 12653SPX – 3 = 1313NAS – 4 = 281110 YR YLD – .06 = 1.84%OIL – .61 = 98.94GOLD – 7.00 = 1731.30SILV – .49 = 33.60 PLAT – 10.00 = 1616.00 The stock market moved lower this morning; the justification was that Greece had not resolved its debt crisis. The 27 nations of the European Union held their 17th Summit in the past 2 years. The Greeks have been trying put together a deal with private bondholders to restructure about 200 billion euros of debt. But they couldn’t come up with completed deal. You’re shocked; I know; I’m shocked. And so the EU leaders can’t do anything until a deal gets done in Greece. To push things forwar, the Germans proposed a European Commissar take control of Greek public finances to ensure it meets its fiscal targets. Greek Finance Minister Evangelos Venizelos said that to make his country choose between national dignity and financial assistance ignored the lessons of history. The German call won cautious backing from the Dutch and Swedish prime ministers. Apparently everyone forgot that the EU has already installed an unelected technocrat to run the country, Prime Minister Lucas Papademos. Then the Europeans talked about increasing the bailout funds to make at least a trillion dollar fire-ring around the economies of Portugal and Ireland and Greece, in hopes that the default problem doesn’t jump to Spain and Italy and get out of control.Treasury Secretary Tim Geithner went to the World Economic Forum …

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January, Thursday 26, 2012

DOW – 22 = 12,734 SPX – 7 =1318NAS – 13 = 280510 YR YLD -.08 = 1.93OIL +.48 = 99.88GOLD + 9.70 = 1721.50SILV +.20 = 33.57PLAT + 24.00 = 1614.00 Remember back before the holidays I told you the European Central Bank was following the Federal Reserve’s playbook?  The ECB was going to loan the Euro-banks plenty of capital, which would allow the big Euro-banks to report adequate capital ratios when they file their annual reports – which is a way of saying the banks get a big bailout, and then the banks could buy sovereign bonds. And the bottom line is they were not going to allow a deflationary collapse in Europe. And then yesterday, the Federal Reserve said they will keep interest rates at zero, and when you consider inflation, it really is less than zero, but the Fed said they aren’t thinking about inflation; they set a target for inflation and they’ll check back in a few years. The new Fed policy is negative real interest rates, but no new stimulus, no QE3 today.  JP Morgan Chase CEO Jamie Dimon says Europe is not a problem:”The direct impact of a Greek default is almost zero. There’s a teeny chance of a catastrophic outcome, which is why the muddle-through is the only good strategy. There is no other good strategy,” Dimon believes the ECB’s long term refinance operations took the liquidity problem off the table in Europe. Dimon did not address the difference between liquidity and …

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January, Thursday 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 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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January, Tuesday 24, 2012

DOW – 33 = 12,675SPX – 1 = 1314NAS + 2 = 278610 YR YLD unch = 2.06%OIL -.37 = 99.21GOLD -9.90 =1666.40SILV -.30 = 32.15PLAT -11.00 = 1554.00 Greece‘s private creditors are negotiating how much of a discount they will take on Greek bonds. Under the agreement drawn up in October, bondholders would take a 50 percent write-down on the notional value of their Greek holdings; in other words, they would swap their bonds for new bonds worth 50 cents on the dollar. Last week the two sides were converging on an agreement that would see private creditors accepting a real loss of 65 to 70 percent and new bonds with 30-year maturity. This week the negotiations seem stuck on the interest rate the new bonds would pay – 4% or 3.5%. Private creditors say a 4% coupon is their final offer; the Greeks say they can only go 3.5%. The idea is that the bond swap would allow Greece to cut its debt from around 160% of GDP to 120% of GDP over the next 8 years. The clock is ticking on a deal because Greece has more than 14-billion Euro in bond redemptions that come due in March. Without a deal, Greece would be forced into a hard default, which would freak out the Eurozone. If they can come to a deal, then Greece is looking at a selective default, meaning they swap the bonds and nobody freaks out. A deal needs to be struck soon. Everything …

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January, Monday 23, 2012

DOW – 11 = 12,708SPX + 0.6 = 1316  NAS – 2 = 278410 YR YLD +.04 = 2.07%OIL + 1.61 = 99.94GOLD + 9.30 = 1677.30 SILV + .15 = 32.45PLAT +25.00 = 1567.00 The stock market is off to its best start in a good 15 years. Stock market sectors leading the rally include:materials, homebuilders, semiconductors, and financials. The 50 worst performing stocks in 2011 are up over 10% so far this year; the 50 best are up a mere 2%. Bonds are off to their worst start since 2003 with the 10-year note yield back up to 2%. The S&P 500 is now up 20% from the early October low and just 3.5% away from the April 2011 recovery high (in euro terms, it has rallied 30% and at its best level since 2007). Meanwhile, a new report from Bespoke Investment Group says stocks are trading at their cheapest levels since at least 1990, according to such commonly used valuations as price-to-earnings and price-to-book ratios as well as dividend yield. Also, the manufacturing sector has been a pocket of strength, while the employment picture is really beginning to show improvement. To start 2012, the S&P500 had an earnings multiple of 13, the lowest since 1990 and below the 80-year average of 15. It would take a move back to 1,484 to get the benchmark back to this long-term mean P/E. The price-to-book ratio is 2.05, below the average since the late 1970s of 2.43. To get back …

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January, Friday 20, 2012

DOW +96 = 12,720SPX +1 = 1315NAS -1 = 278610 YR YLD +.06 = 2.03%OIL -2.19 = 98.19GOLD + 10.30 = 1668.00SILV +1.56 = 32.30PLAT +11.00 = 1541.00 Today, Wall Street was just muddling along. GE and Google posted weak earnings. The Dow advanced and the broader market were flat. Still, stocks have posted three weeks of gains to start the New Year on weak volume. Nobody wants to believe the rally; maybe they’ve decided it’s safer to sit it out. Stocks may muddle higher but it is difficult to sustain gains on light volume and it leaves the market vulnerable to selling pressure. Nihil sub sole novum. That’s Latin for nothing new under the sun. It seems to prove the point when you say it in a dead language. And so, we go from archaic to the contemporary medium for information sharing, the internet. If you think the internet is only about sharing new, original, unique, and innovative information the you really need to move into the 20th century (for starters). There are many things that are inequitable about current copyright and patent laws, but even if we gloss over that discussion, the idea that legislators wanted to make it illegal to share information over the internet was remarkably stupid. It seems several legislators just lined up to do the bidding of their corporate paymasters, without regard to the consequences. The SOPA and PIPA legislation was bipartisan stupidity. The bills were championed by former democratic Senator Chris Dodd, who …

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January, Thursday 19, 2012

  DOW + 46 = 12,625SPX + 6 = 1314NAS + 18 = 278810 YR YLD +.07 = 1.97%OIL -.28 = 100.30GOLD – 2.20 = 1657.70SILV + .12 = 30.74PLAT – 3.00 = 1525.00 The robo-signing scandal, in which mortgage servicers, that is – the big banks, were accused of initiating foreclosures based on inaccurate and sometimes fraudulent documents, “exposed a whole slew of problems in servicing these mortgages that need to be fixed.” Now, the Department of Housing says it’s close to a $25 billion dollar settlement with servicers. Such a deal could result in principal reductions for up to one million homeowners and the settlement would provide cash payments to a smaller number of families who were directly harmed by the servicers’ conduct. One of the big hold-ups to a settlement is that many of the state’s that started out in the settlement talks have since bailed out on a settlement, because the settlement was turning into a sweetheart deal for the big banks. More earnings reports today: Morgan Stanley reported a loss of $227 million, compared with a profit of $871 million a year earlier.  Bank of America posted a profit of $1.99 billion, or 15 cents on a per-share basis, compared to the prior-year loss of $1.24 billion, or 16 cents. The results were in line with estimates, however the results were full of asset sales and one-time charges and gains, and accounting prestidigitation so prodigious as to transmogrify transparency into something beyond the pale of obfuscation. …

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