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Thursday, January 31, 2013 – Friedman, Von Mises, Adam Smith, and Inflation

Friedman, Von Mises, Adam Smith, and Inflation by Sinclair Noe DOW – 49 = 13,860SPX – 3 = 1498NAS – 0.18 = 314210 YR YLD – .02 = 1.99%OIL – .49 = 97.45GOLD – 12.90 = 1664.50SILV – .56 = 31.56 Let’s cover some of the economic news and then I’ll try to tackle one of the most pressing questions of our time. The Commerce Department reports personal incomes rose a seasonally adjusted 2.6% in December, the fastest pace in eight year. Sounds good, but the numbers are a bit of a fluke. Personal dividend income jumped 34.3% in December, pushed forward by concerns about the fiscal cliff. That is income that won’t be paid out on a regular schedule, so the big increase will be matched by a later decrease in dividend income. Excluding the dividends and other distortions, personal income rose 0.4% in December. Wages and salaries rose 0.6% in December after a 0.8% gain in November and were up 5.4% year-on-year. Consumer spending rose 0.2% in December, in line with expectations. With incomes running faster than spending, the personal savings rate rose to 6.5% of disposable income from 4.1% in November. It was the highest savings rate since May 2009. Initial jobless claims jumped 38,000 to a seasonally adjusted 368,000 in the week ended Jan. 26. A separate survey this week produced by the payroll processor ADP said the U.S. gained 192,000 private-sector jobs in January, the highest in nearly a year. The ADP report is not …

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Wednesday, January 30, 2013 – GDP Shrinks, Fed Stands Pat

GDP Shrinks, Fed Stands Pat by Sinclair Noe DOW – 44 = 13,910SPX – 5 = 1501NAS – 11 = 314210 YR YLD + .02 = 2.01OIL + .46 = 98.03GOLD + 12.50 = 1677.40SILV + .64 = 32.12 GDP shrank in the fourth quarter, and we had that report on the same day as the Fed wraps up an FOMC meeting. So, I’ve been reading a bunch o’ blogs and articles about how the Fed has been printing money, expanding its balance sheet to more than $3 trillion, failing to generate economic growth, failing to generate jobs, diluting the dollar, and generally condemning the American economy to the inevitable tortures of hyper-inflation. The internets are offering up the full spectrum of opinions: from the idea that the GDP Shows Federal Reserve Just Screwing the Average American to the apologetic Five Reasons the GDP Report is Misleading (hint: the economy will bounce back in a heartbeat, by golly gosh) to Fed Stays the Course: Is Its Monetary Policy Wrong? Let’s start with the GDP report. The economy shrank from October through December for the first time since the recession officially ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles. The Commerce Department said the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That’s a sharp slowdown from the 3.1 percent growth rate in the July-September quarter, and well below expectations of 1% growth. The …

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Tuesday, January 29, 2013 – Stimulus Truths and Tweaks

Stimulus Truths and Tweaks by Sinclair Noe DOW + 72 = 13,954SPX + 7 = 1507NAS – 0.6 = 315310 YR YLD +.03 = 2.00%OIL + .88 = 97.32GOLD + 9.40 = 1664.90SILV + .54 = 31.48 We have a gaggle of economic reports this week and we’ll try to keep up. The Conference Board reported that its gauge of consumer confidence dropped to 58.6 in January, the lowest level since November 2011. Consumers are more pessimistic about the economic outlook and, in particular, their financial situation. The hike in the payroll tax is taking the brunt of the blame for the less-than-rosy outlook. Disposable income is actually declining. It’s hard to be happy when your purse shrinks. The sales price on existing homes dropped in November according to the S&P/Case-Shiller home-price index, down a non-seasonally adjusted 0.1% decrease in November following a 0.2% decline in October. After seasonal adjustments, the 20-city home-price index rose 0.6% in November. Despite the recent decline, prices were 5.5% higher than during the same period in the prior year, for the strongest year-over-year growth since August 2006. Tomorrow, we’ll get a glimpse of 4thQuarter GDP. The economy likely grew at a 1% pace, which is very weak. Also tomorrow, The Federal Reserve wraps up its first FOMC meeting for the new year. They will likely continue with a fairly aggressive approach to stimulate the economy. In December, the Fed committed to adding $45 billion of monthly Treasury purchases to the existing QE3 program to …

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Monday, January 28, 2013 – What’s Going On

What’s Going On by Sinclair Noe DOW – 14 = 13,881SPX – 2 = 1500NAS + 4 = 315410 YR YLD + .03 = 1.97%OIL + .69 = 96.57GOLD – 4.80 = 1655.50SILV – .34 = 30.94 This will be a big week of economic reports, including: the Federal Reserve concludes its first policy meeting of 2013 on Wednesday; the monthly jobs report on Friday (look for a gain of 165,000 jobs and the unemployment rate to hold steady at 7.8%); earnings reporting season continues according to expectations; tomorrow brings an update on fourth quarter GDP; later in the week we’ll see reports on incomes, spending, and sentiment. Today we learned orders for durable goods, the big-ticket items made in the US, increased 4.6% in December, fanned by a big batch of bookings for military and commercial aircraft. Demand also improved for most other makers of long-lasting goods, suggesting that US manufacturers could be poised for a modest rebound in 2013. Then Caterpillar issued a less than bright outlook for 2013, which put a damper on the sector. Toyota Motors retook the title of world’s largest auto maker, posting a 23% gain in global sales to a record 9.75 million vehicles in 2012. General Motors moved to second place in global sales at 9.29 million; Volkswagen was in third place with 9.07 million sales. The National Association of Realtors reports pending home sales fell 4.3% in December, with low inventory cutting results. The trade group’s pending-home-sales index declined to 101.7 …

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Friday, January 25, 2013 – Closing In On the Days of Milk and Cookies

Closing In On the Days of Milk and Cookies by Sinclair Noe DOW + 70 = 13,895SPX + 8 = 1502NAS + 19 = 314910 YR YLD + .10 = 1.95% OIL + .06 = 96.01GOLD – 8.10 = 1660.30SILV – .44 = 31.28 Once upon a time, about five years ago to be more precise, we lived in a land of milk and cookies. Some of you are old enough to remember those happy days when the Dow Industrials hit the dizzying heights of 14,164 in October 9, 2007. The all-time high on the S&P 500 index was 1565, made on October 9, 2007. Of course, the heady, happy days full of hubris were followed by cataclysmic, economic catastrophe as the global financial meltdown followed in short dis-order. Some of us saw it coming, even if we weren’t quite sure how it would hit us. Still, it’s an old and oft repeated story. “Pride goeth before destruction, and an haughty spirit before a fall”; but with humility comes wisdom. If only. What can we expect if we hit new highs? Likely a crash. That’s the pattern. Build it up to watch it fall. Part of the reason for the pattern is that the main driver for market gains has been the Federal Reserve’s near constant injections of stimulus into the markets; and if we hit highs, the thinking is that the Fed could back off the juice, and when that happens, the financial markets get a nasty case of the …

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Thursday, January 24, 2013 – Financial Talk Radio Content Enhancement Bill of 2013

Financial Talk Radio Content Enhancement Bill of 2013 by Sinclair Noe DOW + 46 = 13,285SPX +0.01 = 1494NAS – 23 = 313010 YR YLD +.01 = 1.84%OIL + .84 = 96.07GOLD – 17.10 = 1668.70SILV – .59 = 31.74 Archived audio at www.moneyradio.com (financial review) First, let’s deal with Apple and then we’ll move on. Interesting side note, on this day in 1984, then-Apple Chairman Steve Jobs introduced the Macintosh, one of the first and most successful personal computers to use a mouse and a graphical user interface Late yesterday, the company announced mediocre earnings. That’s when everyone started freaking out. Analysts dissected every second of the conference call, trying to predict the specs of the next iPhone or what the company might do with its mountain of cash. CNBC’s coverage was especially hilarious. The talking heads asked their expert guests over and over again to tell the people when they should buy this stock; which is like telling people when to catch a falling knife. The price action has been horrible. The chart’s broken. There’s really no reason to try and catch shares as they continue to flame out. Apple’s fall from grace isn’t the big story here. Just six months ago, Apple stock was trading near $700. The stock made up a whopping 20% of the NASDAQ-100. So every single tick moved the market. If Apple had a bad day, there was a good chance it would drag the rest of the Nasdaq down with it. What’s …

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Wednesday, January 23, 2013 – Never Been To Davos

Never Been To Davos by Sinclair Noe DOW + 67 = 13,779SPX + 2 = 1494NAS + 10 = 315310 YR YLD un = 1.83%OIL – 1.13 = 95.55GOLD – 7.00 = 1685.80SILV + .02 = 32.33 I want to go back to a couple of reports from the past week which I hope will bring us to today’s news. First, JPMorgan’s management task force report on the bank’s $6.2 billion in losses from the “London whale” trade. JPMorgan is a huge institution with more than $2 trillion in assets. Banks typically lend their deposits, but for the tens of billions that JPMorgan cannot lend, this remainder is turned over to its chief investment office. This unit is charged with earning returns on this money and also using these billions to hedge the enormous financial institution against bad events. So, the London Whale was gambling with excess deposits. The idea was to earn returns on this money and also use these billions to hedge the enormous financial institution against bad events, but the trading position became so large, more than $50 billion, that the JPMorgan traders couldn’t liquidate it without hundreds of millions of dollars in losses. Instead of liquidation, they doubled down, adding some $30 billion more in bets on bets, hoping this would save them. That trade still didn’t work, and JPMorgan lost an estimated $169 million in the first two months of 2012. It was then that the traders added another $40 billion to the portfolio. Like …

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Tuesday, January 22, 2013 – Forward

Forward by Sinclair Noe DOW + 62 = 13,712SPX + 6 = 1492NAS + 8 = 314310 YR YLD – .01 = 1.84%OIL + .63 =96.67GOLD + 1.70 = 1692.80SILV + .19 = 32.31 Yesterday was a fairly momentous day; the second inauguration of President Obama, featuring a fairly important inaugural speech laying out the major themes and vision for the next four years; it was also Martin Luther King, Jr. Day. The inauguration was fun to watch; it was also infuriating, and not just because of the hours of fawning media coverage on Michelle Obama’s wardrobe. Literally, hours. Also a bit infuriating was the whole fuzzy picture of how the Inaugural was financed. The Presidential Inaugural Committee won’t say how much they have already collected or even what their goal was. Apparently these are “moving budgets,” which won’t stabilize until after the inauguration. Four years ago, promising a new openness, the president banned corporate giving to the inauguration, limited gifts from individuals to $50,000 and released a full accounting of donations. This year, the Inaugural Committee was offering packages between $10,000 and $1 million. Maybe you get a nice set of steak knives with the million dollar package. It will probably be a few months before we find out if they met their sales quota. Still, it was a nice inauguration and the President’s speech was interesting for multiple reasons. He hit on some big ideas: gay rights, climate change, immigration, and gun control. This weekend was also, by …

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Friday, January 18, 2013 – Happy Inauguration Weekend

Happy Inauguration Weekend by Sinclair Noe DOW + 53 = 13,649SPX + 5 = 1485NAS – 1 = 313410 YR YLD -.03 = 1.84%OIL – .15 = 95.79GOLD – 2.40 = 1685.70SILV + .16 = 31.99 The Dow Industrials and the S&P 500 closed at 5 year highs today. We have now seen gains over the first three weeks of the new year. While many Main Street investors remain wary of the the market that bit them in the financial crisis of 2008, they are missing out on historic gains. Since the turnaround that began March 9, 2009, the market has chalked up gains of 118%, putting it in the top nine bull markets in which the S&P 500 gained more than 100%. The current bull, which followed the worst bear market, or market plunge, since the Great Depression, is also 1,407 days old, which ranks eighth and also puts it in the “1,000 Day Club.” In cash terms, the stock market has generated $10.5 trillion in paper wealth since the bear market ended. For much of the last 44 months, most investors, many of them psychologically and financially scarred by the 2008-09 financial crisis, have sworn off the stock market. In the five years ended in 2012, individual investors have yanked an estimated $557 billion out of U.S. stock mutual funds, while $1 trillion has been funneled into bond funds. Once bitten, twice shy. Investors don’t really trust the market itself, so they don’t trust the rally. Of course, …

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Earnings, Kitchen Sinks, Whining By Sinclair Noe DOW + 84 = 13,596SPX + 8 = 1480NAS + 18 = 313610 YR YLD +.05 = 1.88%OIL + .94 = 95.18GOLD + 7.10 = 1688.10SILV +.24 = 31.83 The Dow Jones Transportation Average logged a record high today, ending the day up 37.44, or 0.66%, at 5,681.28. The transports average logged its best opening 15 days in January in more than a quarter century. The Dow Jones Industrial Average is still well off its October, 2007 all-time high of 14,164.53. So Dow Theory purists will have to be patient for a while yet. The Nasdaq still has a way to go. But Silicon Valley is back on top. Is it 2000 all over again? The Best Performing Cities Index from the Milken Institute may have a familiar ring to it. The country’s top metro area in 2012, based on jobs, pay and technology—is San Jose, Calif. It has been over a decade since the region ranked first on the index. Coming in second place on the index is Austin, Texas, another hub for tech innovation. The Milken Institute reported that for every job added to the tech sector, five outside jobs were created. The number of Americans filing new claims for unemployment aid hit a five-year low last week and residential construction increased in December. Initial claims for state unemployment benefits fell 37,000 to a seasonally adjusted 335,000, the lowest level since January 2008. It was the largest weekly drop since February …

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