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November, Thursday 03, 2011

DOW + 208 = 12,044SPX  +23 = 1261NAS + 57 = 269710 Yr YLD += 2.06% OIL – .27 = 94.02GOLD + 27.00 = 1765.40SILV + .21 = 34.58PLAT + 32.00 = 1643.00 Yesterday, Greek Prime Minister George Papandreaou went to Cannes, France whistling a tune about democracy and calling for a referendum on the bailout; let the Greek people vote on the deal; Papandreou trusted the people; he trusted democracy; and then he met with Sarkozy and Merkel. The late night conclusion of the meeting resulted in an admission that Greece might have to leave the European Monetary Union. Nobody knows for sure what that means – best guess is that the European Central Bank and all private and public creditors would have to write off their claims on Greece is one fell swoop. That would be followed by a Lehman Brothers style credit crunch. Money would stop dead in its tracks. The chain reaction would spread across Europe. The contagion would spread rapidly and uncontrollably. Call it Eurogeddon. We would all turn into brain chomping zombies. That was yesterday. Today, the Greek Prime Minister thinks a referendum is a bad idea. Democracy is anathema to the markets. It’s simple math. In the markets, money is power. If you have a billion dollars, you have power. If you have 100-billion you have even more power. In a democracy, you have one vote. A poor taxi cab driver in Athens who doesn’t have two drachmas to rub together has the …

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November, Wednesday 02, 2011

Uppity Greeks. Gloomy FOMC DOW + 159 = 11817SPX + 17 = 1235NAS + 28 = 263510 YR YLD = 2.00%OIL +.37 = 92.56GOLD = 17.50 = 1738.40SILV =.82 = 34.37PLAT + 13.00 = 1611.00 Yesterday I told you the Euro powers-that-be would not take kindly to their debt slaves acting all uppity. Today, German Chancellor Angela Merkel and French president Nicky Sarkozy met with the Greek Prime Minister Papandreaou – and they place their boot heel firmly on the throat of the Greeks. The Greeks were told that if they want a referendum on the bailout package, they must hold it by December 18, maybe as early as December 4th; they were told that if they reject the bailout plan, they will be considered in default and bankrupt and kicked out of the Eurozone; they were told that until such time as they vote, they will not get any more aid. The 8-billion-euro installment that was going to be paid in the next week – not gonna happen. Greece will likely run out of money within the next month, possibly before the December 18th referendum deadline. Surveys show the Greek voters overwhelmingly oppose the bailout plan. If the Greeks didn’t like the austerity plan being shoved down their throats, now they get to see how they like running out of money. Meanwhile, Papandreou is trying to calm politicians in his own party and a no-confidence vote is scheduled for Friday. If nothing else, the Eruoleaders are going to have …

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November, Tuesday 01, 2011

Financial Review: Greek Referendum, MF Thieves, BofA Fees, Food Stamps and Soup Kitchens DOW – 297 = 11657SPX  – 35 = 1218NAS – 77 = 260610 YR YLD – 0.17 bp = 2.00%OIL – .94 = 91.55GOLD + 4.80 = 1720.90SILV – .79 = 33.55PLAT – 7.00 = 1593.00 Greece is insolvent. According to the Grand Plan announced last week, Greece will continue to be insolvent for another 20 to 30 years, give or take. Even if the Greeks take the bailout money it will be insolvent.  And over that next few decades, the Greeks will be forced to tighten their belts, forced to pay higher taxes, forced to privatize big chunks of the government, public services will be cut even more, unemployment will rise, the Greek economy will contract, and the standard of living will fall. All the sacrifices won’t make Greece solvent again. And so Greek Prime Minister George Papandreou decided to put the bailout to a vote of the people; he has called for a referendum. If Greek voters reject the draconian terms of the bailout, there will be default, the Greeks will get tossed out of the European Union, unemployment will go higher, the economy will contract, and the standard of living of most Greeks will deteriorate. And then in about six months to 2 years – things will get better; Greece will be solvent and they will get a fresh start.  The Greeks’ economy will grow without the bankers’ boot heel pressing down on their …

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October, Monday 31, 2011

DOW – 276 = 11955SPX – 31 = 1253NAS – 52 = 268410 YR YLD –0.13 bp = 2.17%OIL – .46 = 92.73GOLD – 28.30 = 1716.10SILV – 1.05 = 34.34PLAT – 52.00 = 1601.00 For the month, the Dow rose more than 1,000 points. It gained 9.5 percent, its best showing since October 2002. The Standard & Poor’s 500 index, the broadest major market average, rose 10.8 percent for the month, the best since December 1991. On Oct. 3, both the Dow and the S&P closed at their lows of the year. The market had been through a brutal summer and was one bad day away from falling into bear market territory, down 20 percent from its most recent peak. So, did October “Turn the Bear Market”? We won’t know till after the fact, but there are several factors that gave us the rally. Seasonality – we moved into the best six months of the year, we’re headed for the holiday season, the presidential election cycle. Also, oil prices going inot October – oil prices were down Oil soared 17.7 percent in October. West Texas Intermediate, the benchmark oil in the U.S., jumped from about $79 to $93 per barrel during the month. Recession? Oil market says different. Emerging market demand – 7 billion people. Can we continue a rally with oil prices moving higher? And then there is the concern that the European situation could crumble, and the debt problems in the US – we postponed those until …

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October, Friday 28, 2011

DOW + 22 = 12231SPX +0.5 = 1285NAS – 1 = 273710 YR YLD – = 2.30OIL – .47 = 93.49GOLD –2.30 = 1744.40SILV +.20 = 35.39PLAT + 14.00 = 1651.00 It’s Friday! Just in time; I think my brain is going soft; a spongy degenerative condition perhaps. I just can’t seem to grasp the fine points of the Grand Plan that came out of Europe yesterday. I think I get the dominant theme – the Europeans are going to hand out FREE MONEY to the banks, but I just can’t seem to comprehend the non-existent details. What has me troubled is the notion that banks will take a 50% haircut but only on the condition that it does not trigger Credit Default Swap hedges. The plan asks Greece’s private creditors to take losses of 50 per cent on the country’s bond they hold. Along with new loans and other measures, that is meant to bring Greece’s debt down to 120 per cent of economic output by 2020. After the private creditors have swapped their Greek bonds for new ones with a lower value, the country’s rating is likely to remain in the ‘B’ category, only a few notches up from its current CCC grade. Fitch rating agency says the deal would result in a temporary default. However, the ISDA, the International Swaps and Derivatives Association, claims the default is not a default and will not trigger a payout on Credit Default Swaps because acceptance of the haircut is voluntary. …

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October, Thursday 27, 2011

DOW + 339 = 12208SPX + 42 = 1284NAS + 87 = 273810 Yr. YLD +0.19 = 2.39%OIL – .21 = 93.75GOLD + 20.20 = 1746.70SILV + 1.72 = 35.19PLAT + 40.00 = 1643.00 Over the past few weeks I’ve been reading newsletters and blogs that seemed to have a recurring theme and similar screaming headlines: Euro collapse, Euro Crisis, Euro Armageddon, Global Meltdown. I didn’t read much saying the Euro leaders would play a game of extend and pretend and we’ll probably see an imperfect deal and there will probably be a rally on Wall Street, but that was my conclusion – that’s what I’ve been telling you – You’re welcome. The S&P 500 was up 3.4% sending its October gain to 14 percent, the biggest monthly gain since 1974, and erasing its 2011 loss. The 20 percent monthly advance for the Dow Jones Transportation Average, a proxy for the economy, is the biggest since 1939. Benchmark gauges in France, Italy and Germany rose more than 5 percent as German and emerging-market stocks extended gains from this year’s lows to more than 20 percent. The euro surged the most in more than a year and 10-year Treasury note yields rose 17 basis points to 2.38 percent. Maybe I’ve been too kind in calling it an imperfect deal; it is a lousy deal; it will result in more problems down the road. So the Euro leaders worked until the wee small hours of the night to hammer out a Grand …

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October, Wednesday 26, 2011

Euro Grand Plan and Catholics Occupying Wall Street DOW + 162 = 11869SPX + 12 = 1242NAS + 12 = 165010 YR YLD += 2.20% OIL +.75 = 90.95 GOLD + 20.90 = 1726.50SILV +.10 = 33.47PLAT + 29.00 = 1599.00 Today was the deadline – this was the day when the Europeans would announce the Grand Plan to solve the European Sovereign Debt Crisis. It was a day straight out of central casting. The Germans were stern and unyielding. The French were disdainful. The Greeks were tragic, and the Italians were confused and dramatic. Italian Prime Minister Silvio Berlusconi whipped up a last minute “letter of intent” promising to cut Italy’s huge public debt and promising to take action to boost growth in Italy and promising to balance the Italian budget by 2013 and promising to have all the details by November 15th. The German parliament voted to allow the EFSF, the rescue fund to leverage bailout funds. Chancellor Angela Merkel warned against complacency, saying: “No one should take for it for granted that there will be peace and affluence in Europe in the next half century. The world is watching Germany and Europe to see if we are ready and able to take responsibility. If the euro fails, Europe fails.” And so it appears the Eurozone will leverage its 440-euro bailout fund several times over, btu details are not expected until sometime in November. French President Sarkozy said he would speak with the Chinese about helping out with the …

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October, Tuesday 25, 2011

DOW – 207 = 11,706SPX – 25 = 1229NAS –61 = 263810 YR YLD – = 2.12%OIL – .55 = 92.62GOLD + 51.30 = 1705.60SILV + 1.53 = 33.37PLAT + 19.00 = 1573.00 Tomorrow is the big European summit to resolve the sovereign debt crisis. The idea is to present a plan to reduce Greece’s debt burden, pump money into the European banks to cover their bond losses, and pump money into the EFSF rescue fund to prevent market contagion. Global equity markets have been jumping and retreating based upon the rumor of the day coming out of Europe. Today, the rumor is that there are many details to be worked out. There is a self-imposed deadline of tomorrow to iron out the details. We might not get everything worked out in the next 24 hours. The sky is falling. My view is that the whole euro problem is getting a bit tiresome. The ECB and the Fed and the other central bankers will come up with some sort of a plan. The plan won’t really solve any problems. Right now, the real negotiation is to get the casino players to accept losses on bonds without triggering CDS defaults; in exchange, the plan will give away big gobs of FREE MONEY to the banks. Eventually, the cold, hard facts will hit – but I don’t think it will be tomorrow. For now the game plan is extend and pretend. The best bet right now is that the financial sector will …

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October, Monday 24, 2011

DOW + 104 = 11913SPX + 15 = 1254NAS + 61 = 269910 YR YLD +=2.23%OIL +.32 = 91.58GOLD + 11.30 = 1654.30SILV + .34 = 31.84PLAT + 34.00 = 1545.00 Five years ago, the real estate bubble started to leak. Three years ago, the global financial economy nearly collapsed. Today, we got a plan to save all the embattled, underwater homeowners of America. Hallelujah and pass the potato salad. Now you realize that 23% of all existing mortgages are underwater; plus banks are sitting on home equity loans and second mortgages at the original values, not market values. If you marked to market all the negative equity – then all of the big banks in America would be insolvent. The big banks are living on life support tossed their way by the government and the Federal Reserve; this is a situation that seems destined to result in another crisis. And so today, the Obama administration announced plans to help troubled homeowners. Actually, homeowners who benefit would just be coincidental – understand that this plan is really designed to help the banks. The Home Affordable Refinance Program, or HARP, was started in 2009. It lets homeowners refinance their mortgages at lower rates. But few people have signed up. Many “underwater” borrowers — those who owe more than their homes are worth — couldn’t qualify under the program. Roughly 22.5 percent of U.S. homeowners, about 11 million, are underwater, according to CoreLogic, a real estate data firm. As of Aug. 31, …

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October, Friday 21, 2011

DOW + 267=11808SPX + 22 = 1238NAS + 38 = 263710 YR YLD +=2.20%OIL +1.46 = 87.53GOLD +21.80 = 1643.00SILV +. 82 = 31.50PLAT +20.00 = 1516.00 Today we had two bits of news that bolster the stock market. First, the rumors that the Federal Reserve might, maybe, possibly consider Quantitative Easing Round 3 – in other words the Federal Reserve might throw FREE MONEY at the markets. The second bit to bolster the markets was a jolt of optimism that there is at least slightly improved visibility on the path to nearing a resolution of the European sovereign debt crisis and the troika would pass out FREE MONEY. Just in case you were wondering why Wall Street is hated – this is it. Wall Street should have been celebrating the fact that a coalition of allies managed to take out Kadaffi in Libya in a relatively short period of time and with zero loss of US soldiers lives AND President Obama announced this morning that the United States will withdraw nearly all troops from Iraq by the end of the year, effectively bringing the war in Iraq to an end. He said the last American troops will depart the country by January 1 “with their heads held high, proud of their success, and knowing that the American people stand united in our support for our troops.”  The truth is that Wall Street doesn’t give a tinker’s dam about supporting our troops; there is no recognition of the sacrifices made …

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