February, Friday 3, 2012

DOW + 156= 12862SPX + 19 = 1344NAS + 45 = 290510 YR YLD +.12 = 1.95%OIL +1.44 = 97.80GOLD – 32.50 = 1726.90SILV -.69 = 33.77PLAT – 7.00 = 1626.00 The unemployment rate dropped to 8.3 percent in January. The economy added 243,000 jobs, the biggest monthly increase in nine months. The results were about 100,000 stronger than most estimates. Revisions added a total of 60,0000  jobs to payrolls in November and December. Gains in employment last month were broad-based, including manufacturing, construction, temporary help agencies, accounting firms, restaurants and retailers. Manufacturing payrolls increased by 50,000 in January, the most in a year. Construction companies added 21,000 workers last month. We talked about this about one month ago; the mild winter and warm weather across most of the country has really helped construction jobs.  Private payrolls, which exclude government agencies, rose 257,000 in January after a revised gain of 220,000 the prior month, marking the biggest back-to-back gain since March-April. Government payrolls decreased by 14,000 in January. If it weren’t for public sector cutbacks, the labor market would be looking even better. Average hourly earnings rose 0.2 percent to $23.29, today’s report showed. The average work week for all workers increased to 34.5 hours (from 34.4) The underemployment rate — which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking — decreased to 15.1 percent from 15.2 percent. Whenever the unemployment rate drops, economically savvy observers know to ask …

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February, Thursday 02, 2012

DOW – 11 = 12,705SPX + 1 = 1325NAS + 11 = 2859 10 YR YLD – .02 = 1.83%OIL – 1.25 = 96.36GOLD + 15.40 = 1759.40SILV +.65 = 34.46PLAT + 11.00 = 1635.00 Tomorrow is the big monthly jobs report. We all want to know the condition of the economy and jobs are the key to the other elements of a healthy economy such as: consumption, profits, credit, debt, deficit reduction, tax revenues, and the financial markets. The jobs report can move the markets and yet the jobs report tomorrow won’t really provide as much information as we want and need. The jobs report is based on a survey sample and there are errors in the sampling rate and the response rate. Then the report will be revised over the next two months. Then the report will be benchmarked against state reports. And we’re still dealing with guesstimates for job creation, and those guesses for job losses tended to lag as the economy turned down, and the best guess is that the guesstimates for job creation are lagging as the economy turns up. And then 8 months from now, we’ll get a number that shows how many “net” jobs were added to the economy, largely based on tax rolls. We know that jobs are being lost. We rarely hear that the economy is creating about 7 million jobs per quarter. The long-running decline in the proportion of Americans still tied to the labor force relative to the nation’s …

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February, Wednesday 1, 2012

DOW + 83 = 12,716SPX +11 = 1324NAS +34 = 284810 YR YLD +.05 = 1.85%OIL -1.31 = 97.17GOLD + 6.30 = 1744.00SILV +.58 = 33.81PLAT +31.00 = 1622.00 MF Global’s customers’ money didn’t just vaporize. Investigators have determined what happened to nearly all of the customer money that disappeared from MF Global around the time of its bankruptcy last Oct. 31, but have not publicly disclosed their progress, fearing that doing so might cripple efforts to recover the cash and pursue potential wrongdoing. Dealbook reports authorities have traced hundreds of millions of dollars to banks, MF Global’s trading partners and even the firm’s securities customers, but investigators remain uncertain about whether they can retrieve the money. Some recipients were entitled to payouts from MF Global, which could make clawing back the money difficult. For instance, securities customers withdrawing their money as MF Global began to collapse were paid from accounts that belonged to futures clients. A significant impediment has been clashes among the parties trying to resolve the MF Global mess: three federal agencies and two bankruptcy trustees. As of late December, investigators had obtained more than 10,000 e-mails, interviewed more than 50 witnesses and subpoenaed about 20 people. Customers, including farmers, hedge funds and other small traders, have been very frustrated with the pace of the investigation and the dearth of updates about their missing money. Even regulators are growing anxious about how long the investigation is taking. In November, investigators said they began to worry that money …

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January, Tuesday 31, 2012

DOW – 20 = 12,632SPX – 0.6 = 1312 NAS + 1 = 281310 YR YLD  –  .04 = 1.80%OIL  –  .50 = 98.28GOLD + 6.40 = 1737.70SILV -.37 = 33.23PLAT – 23.00 = 1591.00 Greece has worked out a debt swap agreement with private bondholders where the creditors will take a loss of about 70%, but they won’t make an announcement until later in the week; there is still some unfinished business. The Greek technocrats must beat the local population into submission; the government will demand commitments on reforms, labor issues and the pension system. The Greek technocrats are very aware that further austerity measures would likely deepen the recession and impose additional hardships. And then there is the prospect of an election in April which could spell the end of the technocrats. And then there is the prospect of more protests in the streets, which tends to make governments nervous; just ask Hosni Mubarak.  Average, everyday Greeks on the street are more than miffed that the economists find it so easy to dispatch democracy to the dustbin when they are convinced they have the right technical answers. But other than that, the Greeks have apparently cobbled together a deal; it’s just not cobbled enough to show to anybody. Why? Well, one of the big stumbling blocks is that the European Central Bank holds Greek bonds, and while it might be fine for private bondholders to take a  70% haircut, the ECB is still hoping to make a profit. …

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January, Monday 30, 2012

DOW – 6 = 12653SPX – 3 = 1313NAS – 4 = 281110 YR YLD – .06 = 1.84%OIL – .61 = 98.94GOLD – 7.00 = 1731.30SILV – .49 = 33.60 PLAT – 10.00 = 1616.00 The stock market moved lower this morning; the justification was that Greece had not resolved its debt crisis. The 27 nations of the European Union held their 17th Summit in the past 2 years. The Greeks have been trying put together a deal with private bondholders to restructure about 200 billion euros of debt. But they couldn’t come up with completed deal. You’re shocked; I know; I’m shocked. And so the EU leaders can’t do anything until a deal gets done in Greece. To push things forwar, the Germans proposed a European Commissar take control of Greek public finances to ensure it meets its fiscal targets. Greek Finance Minister Evangelos Venizelos said that to make his country choose between national dignity and financial assistance ignored the lessons of history. The German call won cautious backing from the Dutch and Swedish prime ministers. Apparently everyone forgot that the EU has already installed an unelected technocrat to run the country, Prime Minister Lucas Papademos. Then the Europeans talked about increasing the bailout funds to make at least a trillion dollar fire-ring around the economies of Portugal and Ireland and Greece, in hopes that the default problem doesn’t jump to Spain and Italy and get out of control.Treasury Secretary Tim Geithner went to the World Economic Forum …

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January, Thursday 26, 2012

DOW – 22 = 12,734 SPX – 7 =1318NAS – 13 = 280510 YR YLD -.08 = 1.93OIL +.48 = 99.88GOLD + 9.70 = 1721.50SILV +.20 = 33.57PLAT + 24.00 = 1614.00 Remember back before the holidays I told you the European Central Bank was following the Federal Reserve’s playbook?  The ECB was going to loan the Euro-banks plenty of capital, which would allow the big Euro-banks to report adequate capital ratios when they file their annual reports – which is a way of saying the banks get a big bailout, and then the banks could buy sovereign bonds. And the bottom line is they were not going to allow a deflationary collapse in Europe. And then yesterday, the Federal Reserve said they will keep interest rates at zero, and when you consider inflation, it really is less than zero, but the Fed said they aren’t thinking about inflation; they set a target for inflation and they’ll check back in a few years. The new Fed policy is negative real interest rates, but no new stimulus, no QE3 today.  JP Morgan Chase CEO Jamie Dimon says Europe is not a problem:”The direct impact of a Greek default is almost zero. There’s a teeny chance of a catastrophic outcome, which is why the muddle-through is the only good strategy. There is no other good strategy,” Dimon believes the ECB’s long term refinance operations took the liquidity problem off the table in Europe. Dimon did not address the difference between liquidity and …

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January, Thursday 25, 2012

DOW +81 = 12,756SPX + 11 =1326NAS + 31 = 281810 YR YLD -.06 = 2.01OIL +.79 = 99.74GOLD  + 44.40 = 1711.80SILV + 1.22 = 33.37PLAT + 35.00 = 1585.00 The Federal Reserve will leave interest rates unchanged. That is the biggest non-news event of the day, but wait, there’s more! The Fed wrapped up their FOMC meeting with a new twist, they issued an official inflation target of 2 percent and they published individual policymakers’ forecasts for the Fed funds rate. A 2 percent target for inflation isn’t really new, and it wasn’t really on target because the rate for 2011 was 3 percent. The individual policymakers offered a wide range of views; three policymakers expect rates will need to rise this year and two others don’t think rates will need to rise until about 2016. The consensus seemed to be that rates should stay unchanged until the end of 2014. The Fed says the economy faces “significant downside risks” but it offered little to suggest it was close to launching another round of bond-buying to prop up growth. It did say, however, that it would maintain a “highly accommodative” monetary policy stance. The statement also dropped a reference saying the Fed was monitoring inflation and inflation expectations. Let’s break this down a bit further; the biggest change was that the Zero Interest Rate Policy has been unofficially extended from 2013 to 2014; this could be considered dollar negative; meanwhile, there was no announcement on QE3 – no …

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Financial Review

Financial Review for Thursday, January 25, 2012

DOW +81 = 12,756SPX + 11 =1326NAS + 31 = 281810 YR YLD -.06 = 2.01OIL +.79 = 99.74GOLD  + 44.40 = 1711.80SILV + 1.22 = 33.37PLAT + 35.00 = 1585.00 The Federal Reserve will leave interest rates unchanged. That is the biggest non-news event of the day, but wait, there’s more! The Fed wrapped up their FOMC meeting with a new twist, they issued an official inflation target of 2 percent and they published individual policymakers’ forecasts for the Fed funds rate. A 2 percent target for inflation isn’t really new, and it wasn’t really on target because the rate for 2011 was 3 percent. The individual policymakers offered a wide range of views; three policymakers expect rates will need to rise this year and two others don’t think rates will need to rise until about 2016. The consensus seemed to be that rates should stay unchanged until the end of 2014. The Fed says the economy faces “significant downside risks” but it offered little to suggest it was close to launching another round of bond-buying to prop up growth. It did say, however, that it would maintain a “highly accommodative” monetary policy stance. The statement also dropped a reference saying the Fed was monitoring inflation and inflation expectations. Let’s break this down a bit further; the biggest change was that the Zero Interest Rate Policy has been unofficially extended from 2013 to 2014; this could be considered dollar negative; meanwhile, there was no announcement on QE3 – no …

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January, Tuesday 24, 2012

DOW – 33 = 12,675SPX – 1 = 1314NAS + 2 = 278610 YR YLD unch = 2.06%OIL -.37 = 99.21GOLD -9.90 =1666.40SILV -.30 = 32.15PLAT -11.00 = 1554.00 Greece‘s private creditors are negotiating how much of a discount they will take on Greek bonds. Under the agreement drawn up in October, bondholders would take a 50 percent write-down on the notional value of their Greek holdings; in other words, they would swap their bonds for new bonds worth 50 cents on the dollar. Last week the two sides were converging on an agreement that would see private creditors accepting a real loss of 65 to 70 percent and new bonds with 30-year maturity. This week the negotiations seem stuck on the interest rate the new bonds would pay – 4% or 3.5%. Private creditors say a 4% coupon is their final offer; the Greeks say they can only go 3.5%. The idea is that the bond swap would allow Greece to cut its debt from around 160% of GDP to 120% of GDP over the next 8 years. The clock is ticking on a deal because Greece has more than 14-billion Euro in bond redemptions that come due in March. Without a deal, Greece would be forced into a hard default, which would freak out the Eurozone. If they can come to a deal, then Greece is looking at a selective default, meaning they swap the bonds and nobody freaks out. A deal needs to be struck soon. Everything …

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January, Monday 23, 2012

DOW – 11 = 12,708SPX + 0.6 = 1316  NAS – 2 = 278410 YR YLD +.04 = 2.07%OIL + 1.61 = 99.94GOLD + 9.30 = 1677.30 SILV + .15 = 32.45PLAT +25.00 = 1567.00 The stock market is off to its best start in a good 15 years. Stock market sectors leading the rally include:materials, homebuilders, semiconductors, and financials. The 50 worst performing stocks in 2011 are up over 10% so far this year; the 50 best are up a mere 2%. Bonds are off to their worst start since 2003 with the 10-year note yield back up to 2%. The S&P 500 is now up 20% from the early October low and just 3.5% away from the April 2011 recovery high (in euro terms, it has rallied 30% and at its best level since 2007). Meanwhile, a new report from Bespoke Investment Group says stocks are trading at their cheapest levels since at least 1990, according to such commonly used valuations as price-to-earnings and price-to-book ratios as well as dividend yield. Also, the manufacturing sector has been a pocket of strength, while the employment picture is really beginning to show improvement. To start 2012, the S&P500 had an earnings multiple of 13, the lowest since 1990 and below the 80-year average of 15. It would take a move back to 1,484 to get the benchmark back to this long-term mean P/E. The price-to-book ratio is 2.05, below the average since the late 1970s of 2.43. To get back …

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