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Tuesday, October 16, 2012 – Big Bank Complexity, Debate Drinking Games, Food Supplies Not a Game

Big Bank Complexity, Debate Drinking Games, Food Supplies Not a Game -by Sinclair Noe DOW + 127 = 13,551SPX + 14 = 1454NAS + 36 = 310110 YR YLD +.06 = 1.72%OIL + .11 = 91.96GOLD + 10.90 = 1749.30SILV + .26 = 33.06PLAT + 5.00 = 1650.00 (audio at MoneyRadio.com) Today was the biggest gain for the stock markets since early September. What was behind the move? Was it a debate day rally? Was it a Vikram Pandit exit? Was it great earnings reports from some such company? Who knows? It’s rarely any one item that moves the market significantly. It is more likely that trading has reached a certain level or a particular moment in time, and the news events catch up with the charts. Yesterday, the earnings news centered around Citigroup which reported something I still can’t figure out; lots of debt that is counted as profit. Today, Vikram Pandit, the CEO of Citi, is gone. Pandit says he left voluntarily; others think he was forced out in a disagreement with the board of directors. The strange part is that Citi has seen a rebound of about 22% in the past 12 months. Pandit has been on the job for about 5 years; he took the job as the credit crisis was about to send the economy into the abyss; now, he walks away when the company has learned to turn debt into profit and appears to be finding stable ground. Citi shares have dropped 90% under …

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Monday, October 15, 2012 – Coffee First Then the Prize

Coffee First Then the Prize -by Sinclair Noe DOW + 95 = 13,424SPX + 11 = 1440 NAS + 20 = 306410 YR YLD un = 1.66%OIL- .11 = 91.74GOLD – 16.90 = 1738.40SILV – .78 = 32.80 PLAT – 14.00 = 1646.00 Americans Alvin Roth and Lloyd Shapley were awarded the Nobel economics prize on Monday for research that helps explain the market processes at work when doctors are assigned to hospitals, students to schools and human organs for transplant to recipients. The Royal Swedish Academy of Sciences cited the two economists for “the theory of stable allocations and the practice of market design.” Roth, 60, is a professor at Harvard. Shapley, 89, is a professor emeritus at UCLA. “This year’s prize concerns a central economic problem: how to match different agents as well as possible,” the academy said. Shapley made early theoretical inroads into the subject, using game theory to analyze different matching methods in the 1950s and ’60s. He examined “pairwise matching”. Roth took it further by applying it to the market for US doctors in the ’90s. “Even though these two researchers worked independently of one another, the combination of Shapley’s basic theory and Roth’s empirical investigations, experiments and practical design has generated a flourishing field of research and improved the performance of many markets,” the academy said. While I think it’s safe to say most of us believe that capitalism is the best economic system, in part because of the ability to efficiently allocate resources, …

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Friday, October 12, 2012 – Peace Out

Peace Out by Sinclair Noe DOW + 2 = 13,328SPX – 4 = 1428NAS – 5 = 304410 YR YLD -.01 = 1.66%OIL – .43 = 91.64GOLD – 12.90 = 1755.30SILV – .52 = 33.58PLAT – 23.00 = 1660.00 Two down, two to go; debates that is. So far, it has been great entertainment; and we all get to play critic; too polite, too disrespectful, too vague, too mendacious, big flag pin, little flag pin, too much style and not enough substance. In addition to a dearth of veracity, there were other glaring omissions, such as details, specifics, and of course, the Federal Reserve. Pay no attention to the man behind the curtain. Maybe the marching orders came from Jamie Dimon, speaking before the CFR the other day, Dimon discounted all this QE stuff. Dimon says QE1, 2, and 3 added together are only about $3 trillion dollars,… so far. Now that might sound like a significant sum to a bumpkin like me, but Dimon puts it in perspective; it is just a small part of the total financial assets of America, $80 trillion dollars. I didn’t see much in the itemized columns about that $80 trillion but it seems that much of it is securitized debt, backstopped by the Federal Reserve, and without the Fed “Put”, that $80 trillion in financial assets might just be so much paper; in other words, it remains susceptible to massive deleveraging. Profit for JPMorgan rose 34% to $5.71 billion, or $1.40 a share, …

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Thursday, October 11, 2012 – The Bigger Debate

by Sinclair Noe DOW – 18 = 13,326SPX +0.28 = 1432NAS – 2 = 304910 YR YLD – .02 = 1.67% OIL + 1.22 = 92.47GOLD + 4.60 = 1768.00SILV +.06 = 34.10PLAT + 4.00 = 1682.00 Archived audio at http://www.moneyradio.com/Audio-Archive A fairly remarkable thing happened today. I doubt you’ll hear much of it on the nightly news because after all, there is a big debate this evening, but the news out of Tokyo this morning centered around and even bigger debate. The International Monetary Fund and the World Bank are holding their annual meeting in Japan and the Managing Director of the IMF, Christine Lagarde announced that the harsh austerity measures that European monetary officials have been pushing could produce the opposite effect on struggling nations like Greece and Spain and Portugal and Ireland. In other words, austerity has not worked and it probably isn’t the solution to Europe’s problems after all. For those of you that have been alert and attentive, you know that Euro-crisis has served as the testing ground for major economic theory. The IMF announcement today marks a dramatic turning point moving forward, or at least it marks a dramatic sounding announcement and a surprising admission of policy failure. Still to be determined is how the Euro-crisis plays out from here. Large parts of the Euro-zone are now in economic depression that threaten not just the weak nations but even the strongest. We are familiar with the situation in Greece; unemployment is running at 25%; the …

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Wednesday, October 10, 2012 – Great Fun and Very Entertaining

Great Fun and Very Entertaining -by Sinclair Noe DOW – 128 = 13,344SPX – 8 = 1432NAS – 13 = 305110 YR YLD – .03 = 1.69% OIL – 1.04 = 91.35 GOLD – 1.30 = 1763.60SILV +.08 = 34.08 PLAT – 13.00 = 1678.00(to listen to audio visit Financial Review at MoneyRadio.com) It’s earnings season. Chevron took a hit after announcing third quarter earnings would be substantially lower. Alcoa took a hit because law suits and remediation costs are part of their business model and not one time exclusions. FedEx announced it will fire workers and park planes to cut $1.7 in expenses. S&P cut Spain’s sovereign credit rating to BBB-minus, just a notch above junk status. Less than 4 weeks to the election. Tomorrow we can watch the vice-presidential debate. It’s all great fun and very entertaining. Last week, the first presidential debate produced a bump in the polls for Romney. The latestPew Research Center poll shows Mitt Romney ahead of President Barack Obama among likely voters, 49% to 45%. But the latest Gallup poll shows President Obama leading Romney among likely voters, 50% to 45%. If you’re wondering about the discrepancy, the reason is simple. The Pew poll covered the days immediately following last Wednesday’s presidential debate, but it didn’t include last weekend. The Gallup poll, included the weekend and that means it also included Friday’s September’s jobs report which showed unemployment down to 7.8 percent for the first time in more than three years.Romney got a bump …

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Diminished Expectations by Sinclair Noe (to listen to Financial Review audio visit MoneyRadio.com) DOW – 110 = 13,473SPX – 14 = 1441NAS – 47 = 306510 YR YLD – .03 = 1.72%OIL – .23 = 92.16GOLD – 11.60 = 1764.90SILV – .08 = 34.00PLAT – 8.00 = 1692.00 On this day five years ago, the Dow and S&P 500 hit record highs; the Dow closed at 14,164 and the S&P 500 closed at 1,545. The Dow is currently 4 percent below that peak, the S&P is 7 percent below its record. So, will the current cyclical bull market end tomorrow? It’s not a crazy question; it happened on this date 5 years ago. It looked a little like it today. It’s earnings reporting season. Back in July, analysts said they expected Alcoa to report earnings of 12 cents per share, then expectations were lowered and now the hope was for break even. Alcoa reported a net loss of $143 million, or 13 cents per share, compared with a profit of $172 million, or 15 cents per share, in the same quarter last year. Revenue decreased 9 percent to $5.83 billion from $6.42 billion a year ago. The first report I read on Alcoa earnings after the close said, Alcoa reported quarterly earnings and revenue that topped analysts’ expectations. Excluding charges from the settlement of a civil lawsuit and environmental remediation of a New York state river, earnings were 3 cents per share. Here’s the thing; lawsuits and environmental remediation are …

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Monday, October 8, 2012 – The 11th Anniversary

The 11thAnniversary by Sinclair Noe DOW – 26 = 13,583SPX – 5 = 1455NAS – 23 = 3112 10 YR YLD OIL+.30 = 89.63GOLD – 5.80 = 1776.50SILV – .53 = 34.08PLAT -12.00 = 1699.00 Due to the Columbus Day holiday, US bond markets were closed and there was no interesting data to speak of. Trading volume was on the lighter side. After equity futures opened the day 5 points lower in the S&P 500, stocks drifted slightly higher on the day. This was also an important anniversary; yesterday actually. When the Taliban refused to give up the al-Qaida leaders who orchestrated 9/11, the US invaded Afghanistan on Oct. 7, 2001. With any luck our troops will be out of there by the end of 2014. When the Soviets withdrew from Afghanistan in the 1990s, the country fell apart and eventually fell under the control of the Taliban. In time we’ll learn how the country will manage after the US leaves. The Afghan people already view their government as weak and corrupt and those doubtful of a peaceful future say that if the upcoming presidential election is rigged and yields an illegitimate leader, civil war could erupt between ethnic groups backed by neighboring countries trying to influence Afghanistan’s future. We don’t speak much about war. We have had very little public discourse on the longest war in US history. War, for some, is a business. And across this country we have a strong infrastructure of military industries that produce instruments …

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Friday, October, 5, 2012 – Slow, Steady, Weak, Uncooked Growth in Jobs Report

Slow, Steady, Weak, Uncooked Growth in Jobs Report by Sinclair Noe DOW + 34 = 13,610SPX -0.47 = 1460NAS – 13 = 3136 10 YR YLD +.07 = 1.73%OIL – 1.79 = 89.92GOLD – 9.00 = 1782.30 SILV – .46 = 34.61PLAT – 13.00 = 1710.00 The first Friday of each month brings the jobs report and it is always important economic data. This is the first Friday in October, in an election year; so, it is really big news. We’ve discussed at great length that the jobs report is imperfect; even after revisions, the report is imperfect. Still, the report provides a manner of comparison, and it is the best we have. It provides an apples to apples comparison. The economy added 114,000 jobs in September. The unemployment rate fell to 7.8% from 8.1% The unemployment rate is the lowest since 2009, and the first time the rate has dropped under 8% during the Obama administration. The private sector has now added jobs for 31 consecutive months. Still, 114,000 new jobs would have to be considered weak growth. The best guesses are that the economy would have to generate at least 250,000 jobs each month for several years to reduce unemployment to around 6%. So, the first question is why did the unemployment rate drop when the number of new jobs was only showing weak growth? The Labor Department revised employment figures for August and July to show somewhat faster job growth in late summer, mostly because of government …

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Thursday, October 4, 2012 – If I Didn’t Hear It, Did It Happen?

If I Didn’t Hear It, Did It Happen? By Sinclair Noe DOW + 80 = 13,573SPX + 10 = 1461NAS + 14 = 314910 YR YLD +.04 = 1.66%OIL + 3.47 = 91.61GOLD + 11.30 = 1791.30SILV + .33 = 35.07PLAT + 31.00 = 1725.00 Initial claims for state unemployment benefits climbed 4,000 last week to a seasonally adjusted 367,000, the Labor Department. But that followed a drop of 22,000 and a four-week average, which offers a view of trends, held steady at 375,000. The monthly jobs report is tomorrow morning. Today, the Federal Reserve released the minutes of the FOMC’s September 13meeting. Of course, we know the Fed launched QE to Infinity and Beyond, or at least $40 billion dollars a month in mortgage-backed securities, until such time as we see maximum employment or until inflation becomes a problem. From the meeting minutes we learn that there might be limits on QE. The report says: “Most participants agreed that the use of numerical thresholds could be useful in providing more clarity about the conditionality of the forward guidance but thought that further work would be needed to address the related communications challenges.” In other words, there might be limits to acceptable unemployment. Maybe 7%, maybe 5%? We don’t know. And there might be limits to acceptable inflation. Maybe 2%, maybe 3%? We don’t know. We would like to know. If we knew, we could bet on the numbers. Unemployment at 8.2% and inflation at 1.5% equals risk on. Unemployment …

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Wednesday, October 3, 2012 – Happy Anniversary

Happy Anniversary by Sinclair Noe DOW + 12 = 13,494SPX + 5 = 1450NAS + 15 = 313510 YR YLD +.01 = 1.62%OIL – 3.86 = 88.03GOLD + 4.60 = 1780.00SILV +.02 = 34.74PLAT + 10.00 = 1692.00 So, how are we doing? Well, we’re seeing some stronger employment figures, a surge in refinancing applications, and expansion in the services sector. The Institute for Supply Management’s service sector index rose to 55.1 from 53.7 last month – well ahead of expectations for a small decline. The Mortgage Bankers Association’s latest weekly survey showed mortgage applications jumped 20 per cent over the previous seven days to the highest level since April 2009. The average interest rate on a 30-year fixed-rate mortgage fell to 3.53 per cent from 3.63 per cent last week, a new historic low. The increase in mortgage applications comes on top of already strong refinancing activity. We’ve seen 10 months of improving existing home sales and prices. The Federal Reserve stepped in with QE to Infinity and Beyond; maybe the Fed is leading this parade; maybe the Fed just jumped on the bandwagon; we’ll see in a couple of months. The big monthly jobs report is Friday. Economists are expecting an increase in payrolls in the neighborhood of 115,000 to 130,000 but also a rise in the overall unemployment rate to 8.2 per cent. Today, the payroll processing company ADP reported private companies added 162,000 jobs in September. That sounds good but the ADP numbers are not a …

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