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Wednesday, May 16, 2012 – Admit Nothing – by Sinclair Noe

DOW – 6.66 = 12,496 SPX + 2 = 1318NAS + 11 = 285010 YR YLD -.07 = 1.72OIL +.62 = 90.51GOLD – 6.00 = 1563.30SILV -.36 = 27.94PLAT – 20.00 = 1430.00 A listener writes: Maybe they should have renamed the company “Two Facedbook” at the IPO for all of the double dealing and back door insider information. One face for Joe public and the other face for Joe privileged… My .02 worth. We are learning details, and we will learn many more details as the Facebook Fiasco works its way through the courts. Zuckerberg made a boatload of money but he will spend a large part of his life dealing with lawyers and the legal system. At first blush it appears the bankers were behaving badly. Go figure. The latest revelation is that Facebook officials told the analysts for the banks that were underwriting the IPO to reduce revenue and earnings forecasts. Facebook backed off and said, “hey, get your models down.” Facebook’s advisory came around May 9, the day it published an amended prospectus that included a cautionary note about lower advertising revenue. It isn’t known which analysts from the 33 IPO underwriters were contacted by Facebook with the revised guidance. It also isn’t clear exactly who from Facebook gave the guidance. The analysts cut their estimates because a Facebook executive told them to. The information about the estimate cut was then verbally conveyed to sophisticated institutional investors who were considering buying Facebook stock, but not to smaller investors. The …

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Tuesday, May 22, 2012 – Bank Scum – by Sinclair Noe

DOW – 1 = 12,502 SPX +0.64 = 1316NAS – 8 = 283910 YR YLD +.06 = 1.79%OIL – .92 = 91.65GOLD – 24.10 = 1569.30SILV – .27 = 28.30PLAT – 23.00 = 1451.00 Morgan Stanley, JPMorgan and Goldman Sachs are just pure scum. No wait, I shouldn’t say that; it’s much too kind; they are lying, stinking, thieving, dangerous scum. Maybe you heard about a little company called Facebook; it went public last Friday. Today, Reuters is reporting Morgan Stanley, JPMorgan and Goldman Sachs all cut their earning forecasts for Facebook in the middle of the IPO roadshow. You didn’t hear about that? No, you did not hear about that because the big banksters didn’t tell you. Why didn’t they tell you? Because they thought it would be much better to screw the public and try to make a quick buck on insider information, which they are required by law to report. Instead, the banksters passed the information only to a handful of big investor clients. This is a problem because earnings forecasts are material information, especially when they are prepared by analysts who have special access to company information and company management. Everybody who invested in Facebook would consider this material information when making an informed decision. The handful of big investors that did receive the information about reduced revenue forecasts were reportedly shocked. The change in Morgan Stanley’s estimates came on the heels of Facebook’s filing of an amended prospectus with the U.S. Securities and Exchange Commission (SEC), in …

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Monday, May 21, 2012 – Markets Bounce, Greece Doesn’t, JPMorgan Stonewalls – by Sinclair Noe

DOW + 135 = 12,504SPX + 20 = 1315NAS + 68 = 284710 YR YLD +.03 = 1.74% OIL + .12 = 92.69GOLD +.30 = 1593.40SILV -.25 = 28.57PLAT + 13.00 = 1474.00 Remember last summer, when the living was easy and the Dow Industrials dropped like bricks from 12,724 down to 10,719? Two-thousand points in just a few weeks? Remember in October, the Dow had recovered from the Dog Days of Summer and climbed all the way back to 12, 078, only to fall more than 800 points in just a couple of weeks? The past three weeks have been kind of like that. Of course, there will be bounces. Today we bounced. Why did we bounce today? Make up any reason you wish. Europe didn’t collapse, Greeks shifted to a pro-bailout party, the Facebook frenzy is finished, Jamie Dimon hypnotized investors to forget about losses at JPMorgan, the G8 is feeling optimistic, China isn’t planning to crush the US economy – at least not this week; the sun was eclipsed by the moon but it was only temporary. Pick a reason or create your own. Stocks bounce. One day does not make a trend. Over the weekend the G8 met at Camp David. It might have made better sense to hold the meeting in Chicago, where NATO was holding a meeting, a rare United States based NATO summit, but there would have been too many protesters. So the G8 met in the wooded seclusion of Maryland and they …

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Friday, May 18, 2012 – Europe, Before the Flood – by Sinclair Noe

DOW – 73 = 12,369SPX – 9 = 1295NAS – 34 = 277810 YR YLD un = 1.70%OIL – .57 = 93.41GOLD + 17.80 = 1593.10SILV +.67 = 28.82 PLAT + 2.00 = 1461.00 “He hath indeed better bettered expectation than you must expect of me to tell you how.” The Facebook Frenzy turned out to be a fairly orderly IPO. Share prices fluctuated but did not collapse nor did they soar; which means the price and quantity were about right; the underwriter was competent and reasonably accurate. The NASDAQ had some trouble executing trades but that was a relatively minor problem. Now, the new Facebook millionaires and billionaires have some heavy lifting to prove their value. Time will tell, and good luck to them in their efforts. FB +.23 = 38.23 I know its the biggest internet IPO ever, but in reality it’s much ado about nothing. The European economic crisis is expected to top the agenda at the G8 meeting tomorrow at Camp David. In Greece, voters will soon head to the polls for another round of elections which will be viewed by many as a referendum on the euro. The European Commission and the European Central Bank have been working on contingency plans in the event of a Greece exit from the 17-nation euro zone. Concern about whether Greece’s troubles would spread to other European nations hit the market last fall. It’s hard to imagine between what went on last fall and now, that a lot of …

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Thursday, May 17, 2012 – Banks Start to Run – by Sinclair Noe

DOW – 156 = 12,442SPX – 19 = 1304NAS – 60 = 281310 YR YLD -.06 = 1.70%OIL +.17 = 92.73GOLD + 34.00 = 1575.30SILV +.78 = 28.15PLAT + 19.00 = 1459.00 The Dow Industrials have now dropped for 11 out of the past 12 trading sessions, giving back all the gains going back to the start of the year. Greece’s caretaker Cabinet was sworn in this morning and they’ll hold power at least until next month’s election.  The European Central Bank has stopped providing funds to Greek banks. People have been pulling euros out of the Greek banks, concerned about a possible exit from the Euro-zone common currency and a return to the Drachma, which would be an effective devaluation. So Greek citizens take their money out the front door of the bank and the ECB refuses to replenish supplies, and something has to give. There will be an election in about one month. There will be attempts to find a resolution. German Chancellor Merkel is even considering lifting the jackboot of austerity from the necks of the Greeks. It is one thing to demand fealty, it is another to consider the very real possibility of a Greek exit from the Euro-union. Germans are starting to realize that a Greek exit from the Euro-union will be very expensive. Everybody is now doing a study to determine how much a Greek exit might cost; the numbers seem to run in the trillions. So, why not find a cheaper solution? Which …

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Wednesday, May 16, 2012 – An All Out Jog to the Finish – by Sinclair Noe

DOW – 33= 12,598SPX – 5 = 1324NAS – 19 = 287410 YR YLD -.01 = 1.76%OIL – 1.16 = 92.82GOLD – 4.00 = 1541.30SILV -.45 = 27.37PLAT + 3.00 = 1439.00 A Judge has been appointed to lead Greece until the next round of elections in June; leading Greece is a misnomer. The judge will be the caretaker prime minister, replacing another caretaker prime minister. Yesterday, we told you about the run on the banks. On Monday, Greeks pulled out about $900 million dollars, Euros actually. Makes sense. If you think your country will exit or be kicked out of the Euro-union, and be forced back to the drachma at about half the value, you might want to grab some Euros and hold on. Having the actually paper money in your hands prevents the banks from cutting the value in half; banks will do that sort of thing. Right now, it’s not really a bank run, more of a jog. Paul Krugman explained why it is a problem: “Where are the euros coming from? Basically, banks are borrowing them from the Greek central bank, which in turn must borrow them from the European Central Bank. The question then becomes how far the ECB is willing to go here; is it willing, in effect, to lend enough money to buy up the entire balance sheet of the Greek banking sector, given the likelihood that this sector will be left insolvent by Greek default? Yet if the ECB says no more, …

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Tuesday, May 15, 2012 – JPMorgan is Scary, the California Budget is Easy – by Sinclair Noe

05152012 Script DOW – 63 = 12,632SPX – 7 = 1330NAS – 8 = 289310 YR YLD =.01 = 1.78% OIL – .57 = 93.41GOLD – 12.20 = 1545.30SILV -.46 = 27.82PLAT – 5.00 = 1437.00 So, JPMorgan shareholders held their annual meeting. They decided to pay Jamie Dimon $23 million. They can still afford it; despite a $2 billion dollar loss, JPMorgan is still the largest publicly traded company, the largest bank in the US, and the largest derivatives dealer in the world. JPMorgan invented credit default swaps, they wrote the legislation to reform the derivatives markets, and when JPMorgan went insolvent in the 1980s and in 2007, they were bailed out by taxpayers.A $2 billion dollar loss is not the end of the world, JPMorgan is not in imminent danger, but I don’t think this will end well. The really scary part isn’t the loss, but that it only represents one-tenth of the annualized profit. What are they doing to make that kind of money? And if these are supposed to be the best and brightest bankers, what does it say about the others? The FBI has opened an investigation into the trading losses. We don’t know what the FBI is looking at and I won’t hold my breath waiting. The SEC has opened an inquiry into JPMorgan’s disclosures and accounting practices. JP Morgan maintains that the purpose of the trades that resulted in the $2 billion loss was to hedge exposure elsewhere, as opposed to being proprietary …

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Monday, May 14, 2012 – Problems in Greece, Euro, California, and JPMorgan – No Surprise

DOW – 125 = 12,695SPX – 15 = 1338NAS – 31 = 290210 YR YLD -.05 = 1.79%OIL – .70 = 94.08GOLD – 23.80 = 1557.50SILV – .71 = 28.28PLAT – 29.00 = 1442.00 Back in early April I started telling you to heed the old market maxim: “Sell in May and Stay Away”. You are welcome. The Dow Industrial Average has now dropped 8 out of the last 9 sessions; no surprise. Of course, we had the weekend to think about the shenanigans of JPMorgan Chase; a too big to fail bank acting irresponsibly while simultaneously demanding less regulation; no surprise. Today’s declines started in Europe; no surprise. In Germany, Angela Merkel’s Christian Democratic Union Party suffered more losses in a local election for the second straight week. Merkel’s CDU party received just 26% of the vote while a coalition of left-leaning Social Democrats and Green party candidates received over 50%. In light of the recent French elections, we are starting to see a trend. In Greece, the various leaders of the various political parties failed to form a coalition government over the weekend; no surprise. The Greeks will likely need to call another election. And the fate of Greece hangs over the markets just as the possibility of exiting the Euro-Union hangs over the heads of the Greeks. And I think that is the correct application of the metaphor, with Angela Merkel in the role of Dionysius and the Greeks in the role of Damocles. I don’t know …

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Friday, May 11, 2012 – JPMorgan Moving On

DOW – 34 = 12,820SPX – 4 = 1353NAS +0.18 = 293310 YR YLD -.04 = 1.84%OIL – 1.51 = 95.57GOLD – 13.00 = 1581.40SILV – .15 = 28.99PLAT – 21.00 = 1471.00 So, let’s break down the problems at JP Morgan Chase. The bank lost net $800 million, on a $2 billion dollar trading loss in synthetic credit derivatives. They won’t go broke today. JPM made $5.4 billion in profit in the first quarter. Still, a couple of billion dollars is significant, and it raises questions about the regulation of banks, the valuation and suitability of derivatives, the size of the world’s largest firms and the systemic risk they may pose to the financial system. For the past few years, JPM has been increasing the size and importance of its proprietary trading desk based in London. Theoretically, a proprietary trading desk trades stocks, bonds, currencies, commodities, derivatives and other financial instruments with the firm’s own money – as opposed to using customers’ money. If the bank makes money, they keep it and Jamie Dimon gets a big bonus. If they lose big, Jamie Dimon could lose his job, but he gets to keep the bonus. If the proprietary trading department screws up royally and the trades implode and pose a possible systemic threat, then the taxpayers cover the losses, and Jamie Dimon gets to keep his bonus. Once upon a time, the proprietary trading department of a bank was not the major part of the banks’ profits. The bankers …

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Thursday, May 10, 2012 – JP Morgan Chase Goes Boom

DOW +19 = 12,855SPX + 3 = 1357 NAS – 1 = 2933 10 YR YLD + .05 = 1.88%OIL – .26 = 96.55GOLD + 4.00 = 1594.40SILV -.23 = 29.14PLAT – 13.00 = 1492.00 So, it was a quiet day in the markets, not much going on; the Dow and the S&P managed to eke out modest gains, and this was welcome following 6 days of losses. Back in early April I told you to start getting out of the market, based in part, on the the idea of “Sell in May and stay away”. Sure, enough, May has been ugly, but not every day is ugly. There will be ups and downs. The past six days have been down; today the markets stopped banging their head against a wall, but the headache hasn’t gone away. All in all, an uneventful trading day. And then after the closing bell – boom! JP Morgan Chase lost about $2 billion on mark-to-market accounting tied to synthetic credit securities after positions taken by its chief investment office were riskier than expected. JPMorgan’s chief investment office, or CIO has been transformed in recent years under Chief Executive Officer Jamie Dimon, into a unit that makes bigger and riskier speculative bets with the bank’s money, five former employees of the bank said earlier this year. Some of the bets were so big that the bank probably couldn’t unwind them without losing money or roiling financial markets. Losses in CIO’s synthetic credit portfolio have been …

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