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Thursday, August 23, 2012 – No QE? Step Away From the Crack Pipe

No QE? Step Away From the Crack Pipe-by Sinclair Noe DOW – 115 = 13,057SPX – 11 = 1402NAS – 20 = 3053 10 YR YLD -.05 = 1.67%OIL – 1.05 = 97.69GOLD + 17.00 = 1672.10SILV + .75 = 30.68PLAT + 6.00 = 1548.00 The Federal Reserve FOMC minutes were released yesterday and the interpretation called for monetary accommodation sooner rather than later; so we’ll see QE3 August 31 at Jackson Hole on September 13 at the next FOMC meeting. They might not call it QE3, they might do some variation on the theme but the promise was that there will be big time accommodation unless the economy shows a strong and sustainable improvement. And if the Fed fails to deliver on QE3, you can expect a severely negative response from Wall Street; expect a move that would make today’s 115 point drop look small; the economy would tank and the Fed would be forced to step in with QE3, only in crisis mode.  So, this morning on CNBC, James Bullard, president of the Fed’s St. Louis bank, said the minutes from the July 31-Aug. 1 meeting were “stale” because the economy had picked up since then. If it becomes “a bit stronger,” he said, the Fed will hold off. And then he went back to smoking  his crack pipe.  What do the economic reports suggest? The HSBC Flash China manufacturing purchasing managers index, a preliminary reading that provides an early peek at data for August,  fell this month to …

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Wednesday, August 22, 2012 – QE Soon, Inequality Grows

QE Soon, Inequality Grows– by Sinclair Noe DOW – 30 = 13,172SPX + 0.32 = 1413NAS + 6 = 307310 YR YLD -.09 = 1.72%OIL – .28 = 96.40GOLD + 15.50 = 1655.10SILV + .50 = 29.93PLAT + 26.00 = 1541.00 The Federal Reserve released minutes of their most recent Federal Open Market Committee meeting. Here’s the money quote from the FOMC minutes: “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.” In other words, a majority of the FOMC members think it is time for QE3, unless we see an economic miracle, say hallelujah! So, when will they make an announcement? Well, there is a symposium in Jackson Hole, Wyoming on August 31. There is another FOMC meeting September 12 and 13. The language in today’s minutes is not a guarantee of QE3, but if they do not make an announcement of QE3, then the lack of action will be interpreted as highly political and obstructionist. They have now obligated themselves to some sort of accommodation; it might not be called QE3, but a rose by any other name… The economy is ready for help; GDP is growing at less than 2%; inflation is running less than 2%; unemployment is lingering at 8.3%; Europe could implode and hurt the US economy. So, what will happen when the Fed provides additional monetary accommodation? Kansas City Federal Reserve President Esther …

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Tuesday, August 21, 2012 – A Crash? Your Guess is as Good as the Economists, Maybe Better

A Crash? Your Guess is as Good as the Economists, Maybe Better -by Sinclair Noe DOW – 68 = 13,203SPX – 4 = 1413NAS – 8 = 306710 YR YLD -.01 = 1.80%OIL -.30 = 98.16GOLD + 17.40 = 1639.60SILV + .52 = 29.43PLAT + 25.00 = 1516.00 Normally, these are the slow,  sultry, dog days of summer; that’s what we’ve seen lately. Volume has been so light that you wondered if everyone had gone to sleep. And then this morning, people started trading, or maybe the computers started trading. Who can say which? Volume jumped to the highest in 3 weeks and prices flopped.  David Kostin, Goldman Sachs chief US equity strategist, has sent a note to clients advising them to get out of stocks; Kostin is forecasting a 12 percent drop ahead, down to about 1250, believing that Congress will fail to address the fiscal cliff before the election, and maybe even before the end of the year. Kostin says: “Political realities and last year’s precedent suggest the potential that Congress fails to reach agreement in addressing the fiscal cliff is greater than what most investors seem to believe based on our client conversations.” According to Goldman Sachs economists, the worst case scenario this year is that a lame duck Congress does absolutely nothing after the election – not even kick the can down the road by voting in a short extension of the tax breaks and spending plans. Under that scenario, 2013 GDP would actually contract. Now normally …

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Monday, August 20, 2012 – Diminished Expectations

Diminished Expectations-by Sinclair Noe DOW – 3 = 13,271SPX -0.03 = 1418NAS -0.38 = 307610 YR YLD un = 1.81%OIL – .05 = 97.70GOLD + 5.40 = 1622.20SILV +.72 = 28.91PLAT + 12.00 = 1496.00 Apple already boasts the largest market value of any public company. Today it became the most highly valued public company ever. With an increase in its share price, Apple broke the record for the biggest market capitalization, $616.34 billion, set by Microsoft on Dec. 27, 1999. Of course, shortly thereafter, Y2K hit and destroyed modern civilization as we know it; or maybe it was because Apple invented the iPod and the iPhone and the iPad, and Microsoft gave us Zune. Who knows?  Apple’s stock closed at $665.15, giving it a market value of $623.52 billion. Microsoft’s 1999 market value is still far higher than Apple’s when adjusted for inflation. The Microsoft of late 1999 would be worth $850 billion in today’s dollars. To beat Microsoft’s inflation-adjusted market value, Apple needs to close at $910. The Microsoft of August 2012 is worth $257 billion. I’m not sure what it says about our economy, that Apple is the most valuable company ever, but I suspect it is problematic.  ECB President Mario Draghi is scheduled to speak at this year’s Jackson Hole symposium. A fellow named Ben Bernanke is already scheduled to speak at the symposium, and so there has been a little speculation that there might be some coordinated action that will be announced. I’m not sure …

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Friday, August 17, 2012 – We All Want Justice but You’ve Got to Have Money to Buy It

We All Want Justice but You’ve Got to Have Money to Buy It-by Sinclair Noe  DOW + 25 = 13,275SPX + 2 = 1418NAS + 14 = 307610 YR YLD -.02 = 1.82%OIL + .61 = 96.21GOLD + 1.10 = 1616.80SILV – .13 = 28.19 PLAT + 34.00 = 1479.00 We had a bunch of economic reports this week. Here’s a quick review:The Consumer Price Index, or CPI, measures inflation at the retail level; in July the overall consumer prices were unchanged, while the core gauge rose 0.2%. The CPI rose 1.4% over the year through July, the smallest 12-month change since late 2010.  The Producer Price Index, or PPI, measures inflation at the wholesale level; it rose 0.3% in July. Higher  food prices were only slightly offset by lower energy prices. In the 12 months ending in July, producer prices rose 0.5%, the smallest gain since October 2009.  However, food prices jumped, with corn prices leading the way, up 34.5% for the month. That will filter through the economy. Energy prices were down in July, but they’ve been moving higher. Inflation is not a problem right now, but wait.  Initial filings for unemployment benefits climb by 2,000 to 366,000 in the latest week, but the four-week moving average dropped to its lowest level since March. While the July unemployment figure rose a tenth of a point from June to 8.3 percent, the government says 44 states saw their jobless rates increase. Nevada has the highest unemployment rate at 12%. California …

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Thursday, August 16, 2012 – The Solar Power Update

The Solar Power Update– by Sinclair Noe DOW + 85 = 13,250SPX + 9 = 1415NAS + 31 = 306210 YR YLD +.03 = 1.84OIL +.92 = 95.25GOLD + 11.60 = 1615.70SILV +.39 = 28.32PLAT + 42.00 = 1445.00 Last Sunday morning a caller to the radio show asked about solar projects in the desert. Let me tell you a little of what I’ve found out. Solar power in California has been growing rapidly, because of a Renewable Portfolio Standard which requires that 20% of California’s electricity come from renewable resources by 2010, and 33% by 2020. Much of this is expected to come from solar power. At the end of 2010, California had 1,386 MW of solar and 3,177 MW of wind farms. According to a recent report by the California Public Utilities Commission, California failed to meet the 20% renewables by 2010 target. Pacific Gas & Electric and Southern California Edison were the closest to meeting the goal. PG&E generated 17.7% of the electricity it sold in 2010 from renewable sources while SCE was the closest to hitting the goal by producing 19.4% of its electricity from renewable sources in 2010. San Diego Gas & Electric, on the other hand, generated only 11.9% of its electricity from renewable sources in 2010 The California Solar Initiative is a 2006 initiative to install 3,000 MW of additional solar power by 2016. Included in it is the million solar roof initiative. In 2011, this goal was expanded to 12,000 MW by …

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Wednesday, August 15, 2012 – I’ve Never Been to Spain and I’ve Never Seen a Flash Flamenco

I’ve Never Been to Spain and I’ve Never Seen a Flash Flamenco– by Sinclair Noe DOW – 7 = 13,164SPX  + 1 = 1405NAS + 13 = 303010 YR YLD +.08 = 1.80%OIL -.07 = 94.26GOLD + 4.10 = 1604.10SILV un = 27.93PLAT un = 1400.00 JPMorgan Chase, Barclays, UBS,  Deutsche Bank, Royal Bank of Scotland, HSBC Holdings, and Lloyd’s are the seven banks subpoenaed in the past week in New York and Connecticut’s investigation into alleged manipulation of Libor. Citigroup and UBS received subpoenas earlier this year as part of the investigation. New York Attorney General Eric Schneiderman and Connecticut Attorney General George Jepsen are jointly investigating alleged manipulation of the London interbank offered rate, or Libor.  Meanwhile, HSBC has handed over details of current and former employees to the US authorities as part of a tax probe that almost sank rival bank UBS in 2009. As a result, the bank may be sued by the former employees claiming banks infringed the criminal code and Swiss privacy laws. HSBC claims it has avoided breaching strict Swiss banking secrecy laws by redacting from the documents any information that could lead to the identification of clients. Yesterday, I told you that Standard Chartered had reached a settlement with New York State regulators. There will be no criminal prosecutions as a result of the settlement, mainly because the New York state regulator doesn’t have prosecutorial powers. You may also recall that when this story broke last week, one of the first things …

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Tuesday, August 14, 2012 – Go Figure

Go Figure– by Sinclair Noe DOW + 2 = 13,172SPX – 0.18 = 1403NAS – 5 = 301610 YR YLD +.07 = 1.73%OIL +.60 = 95.30GOLD – 10.90 = 1600.00SILV un = 27.93PLAT + 12.00 = 1403.00 I have always been fascinated with Pi; not the apple or blueberry pie (although that’s good), rather Pi, the ratio of a circle’s circumference to its diameter. Pi is considered a transcendental number; you can’t square the circle. It is an irrational number which cannot be expressed as a ratio of two integers. The number is 3.141, but that’s just the beginning. It is a number that cannot be fully expressed. People have tried. Mathematicians have used computers to extend the decimal out to 10 trillion digits, and then they give up; the decimal representation never ends and it never repeats; the number appears random but there has never been proof of the randomness. As best we know, Pi is infinite, and yet the definition of Pi relates to the circle, which is a closed loop. There are links to Pi in music and in the pyramids and in scripture and most likely in all sorts of things we haven’t yet begun to understand. Go figure. The US Census Bureau population clock hit 314,159,265; which is 100 million times Pi. Beyond the obvious conclusion that there are more births than deaths, I don’t know what it means. Maybe the world is more inscrutable; maybe it has always been so.  The next time you’re …

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Monday, August 13, 2012 – The World Slows Down but Refuses to Admit or Deny Slowing

The World Slows Down but Refuses to Admit or Deny Slowing– by Sinclair Noe DOW – 38 = 13,169SPX – 1 = 1404NAS + 1 = 302210 YR YLD +.01 = 1.65%OIL +.01 = 92.74GOLD – 10.60 = 1610.90SILV – .30 = 27.93PLAT – 13.00 = 1391.00 The S&P 500 closed slightly negative, but the interesting part was the volume, or the lack thereof on the New York Stock Exchange. It was the lowest non-holiday-trading day volume in over a decade; only 380 million shares changed hands. You’ve got to wonder if the problems with Knight Capital last week have exposed a problem. Clearly something broke with Knight’s algorithm software glitch. Could it be that the volume on the exchange has been artificially inflated? Yep. And what did we get for having a company like Knight Capital scalping with High Frequency trades? We all lost a little.  The S&P 500 and Dow have risen every week for the past five weeks. The S&P 500 last wrapped up a five-week climb in mid-March. The Dow hasn’t done so since last October. The Dow has fallen for 10 out of the past 11 Mondays, and the S&P 500 has finished down five of the last six. Japan’s economy grew in the second quarter at a 1.4 percent annual rate, slower than expected. Last week, China released dismal figures on retail sales and exports in July. There was some speculation Beijing would roll out stimulus measures over the weekend. That did not happen. …

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Friday, August 10, 2012 – The Case for Silver and a Few Odd Notes

The Case for Silver and a Few Odd Notes-by Sinclair Noe DOW  + 42 = 13,207SPX + 3 = 1405NAS + 2 = 302010 YR YLD- .04 = 1.65OIL – .15 = 94.69GOLD + 3.50 = 1621.50SILV -.01 = 28.23PLAT – 14.00 = 1404.00 The case for silver:  April last year, silver peaked just shy of $50 an ounce, and then fell back hard. Since then, silver has been either off the radar or hated. It has been hovering around $27 since May, testing people’s patience. As a rule, silver prices usually follow the direction of gold. But as long time silver investors recognize, the moves are amplified both on the downside and the upside. Silver prices are simply more volatile than gold prices. Already in this decade, silver has risen by a factor of 12 from its ten-year low ($48.70 vs. $4.07), while gold has seen about a sevenfold climb ($255.95 vs. $1,895).  The three biggest silver corrections in the current bull market average to 42.1%. Silver corrections are deeper and nastier and take longer for recovery. The average 42.1% correction took 98 weeks and 4 days to recover; using the same ratio, a 46.3% correction would take 108 weeks and 3 days. Counting from the previous peak of April 28, 2011, we wouldn’t break the $48.70 high until May 26, 2013. Based on this same correlation of corrections to recovery in the gold market, we can expect gold to challenge old highs in the October to November time frame. …

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