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Thursday, May 23, 2013 – Premature Punch Bowl Withdrawal

Premature Punch Bowl Withdrawal by Sinclair Noe DOW – 12 = 15,294SPX – 4 = 1650NAS – 3 = 345910 YR YLD un = 2.02%OIL + .01 = 94.29GOLD + 21.80 = 1392.50SILV + .36 = 22.73 Yesterday, Fed Chairman Bernanke delivered testimony before the Joint Economic Council and then the minutes from the most recent FOMC meeting were released. The Fed policymakers seem concerned about bubbles. Stock markets have been hanging out near record highs, the S&P is up about 15% year to date. Look back to earlier this year. The boring stocks led us higher. Your mega-cap, super-safe, dividend-paying names were the stocks to own. These stodgy companies sprinted higher for weeks. Safe became the new speculative. Next, the rally broadened. First, it was short squeezes. Then, the rally focused on the more cyclical names. Energy stocks have found a second wind. Small-caps were. Technology names began pushing the market higher. Bloomberg reports that the most indebted US companies are rallying more than any time in almost four years compared with the rest of the market. The bulls argue that stocks will keep going up,even if the Fed takes away the QE punchbowl; the argument is that there are record corporate profits. But then we have to ask why there are record corporate profits. The answer is the Fed’s accommodative monetary policy. The Fed is effectively subsidizing earnings by providing cheap credit for the federal government. Government spending replaces paychecks as a source of income for consumers to consume. Corporations …

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Tuesday, May 21, 2013 – Apple Gimmicks

Apple Gimmicks by Sinclair Noe DOW + 52 = 15,387SPX + 2 = 1669NAS + 5 = 350210 YR YLD – .02 = 1.94%OIL – .98 = 95.95GOLD – 18.10 = 1377.00SILV – .49 = 22.53 It’s Tuesday. The markets moved higher. It’s almost inevitable. The Dow Industrials have closed higher every Tuesday this year, with the exception of January 8th; 19 consecutive Tuesdays. No, I don’t know why. Well, today, part of the reason could be traced to the Federal Reserve. A couple of Fed heads were talking up easy money. New York Fed President William Dudley said he cannot be sure whether policymakers will next reduce or increase the amount of purchases, due to the “uncertain” economic outlook. The QE taper may end up being a QE expansion. Dudley worries about investor over-reaction to a “normalization” of policy and suggests the FOMC may need to update what it needs to see to move in that direction. Earlier, James Bullard, president of the Federal Reserve Bank of St. Louis, urged the European Central Bank to consider employing a US style quantitative easing program to counter slowing inflation and recession in the euro zone. Tomorrow, Fed Chairman Ben Bernanke will speak before a congressional panel, the Joint Economic Committee. The minutes of the Fed’s latest policy-setting meeting will be released on Wednesday afternoon. When the Fed showers liquidity, the money flows to the markets, but I can’t give a good reason for the Tuesday winning streak. There is a certain …

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Friday, May 17, 2013 – Squirrel

Squirrel by Sinclair Noe DOW + 121 = 15354SPX + 17 = 1667NAS + 33 = 349810 YR YLD +.08 = 1.95%OIL + .83 = 95.99GOLD – 25.70 = 1361.20SILV – .43 = 22.36 Record highs for the Dow and the S&P 500; marking the fourth consecutive week of gains. For the week, the Dow gained 1.6%, the S&P 500 gained 2%, and the Nasdaq was up 1.8%. The S&P 500 is up about 13% year to date. Someone asked me yesterday if I intended to talk about the scandals in Washington; you know, the Benghazi scandal, the IRS scandal, and the Associated Press scandal. I suppose we can talk about that if you want.The issue I might address right now is, what does all the scandal-mongering mean for the economy? Well, we could look to the Clinton years, which continued to perform handsomely, but I think that had more to do with the dot.com boom than with Clinton’s proclivity. Greenspan warned about irrational exuberance while fostering policy that just pumped the markets to higher highs. Not so different really from Bernanke’s warnings about excessive risks while continuing with QE to infinity and beyond. The market has been profiting from the indulgences of the Fed’s easy money, and the Chairman seems more worried that Congress will busy itself with more fiscal austerity in the form of quick-timed spending sequesters and additional tax increases than he is about inflation from easy money. Unspoken is the fear certainly in the Fed quarters …

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Levitational Tools by Sinclair Noe DOW + 48 = 15,105SPX + 6 = 1632NAS + 16 = 341310 YR YLD – .02 = 1.76%OIL + .99 = 96.61GOLD + 21.80 = 1475.40SILV – .01 = 24.05 Another day, another record high. What’s behind this? Nouriel Roubini weighed in from a conference in Las Vegas. Roubini is a professor at NYU and former Senior Economist for the White House Council of Economic Advisors, and notably, one of the few economists to anticipate the collapse in the housing market. Roubini identified the levitational forces, the forces lifting the markets, on “QE, zero policy rates, more money coming into the market, not just from the US, but from other economies” as the reason behind rising asset prices. Roubini also said: “Growth is slow. Earnings growth is also slowing down. Top line and bottom line are not as good as they used to be, but margins are high. They could correct somehow over time.” His best guess is that it could go on for a couple more years. Why two years? Roubini says: “recent data have effectively silenced hints by some Federal Reserve officials that the Fed should begin exiting from its current third (and indefinite) round of quantitative easing (QE3). Given slow growth, high unemployment (which has fallen only because discouraged workers are leaving the labor force), and inflation well below the Fed’s target, this is no time to start constraining liquidity.” Let’s take this a step further; with inflation running at about …

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Monday, April 22, 2013 – Airplanes, Austerity, and Flying Bulls

Airplanes, Austerity, and Flying Bulls by Sinclair Noe DOW + 19 = 14,567SPX + 7= 1562NAS + 27 = 3233 10 YR YLD – .01 = 1.70%OIL + .80 = 88.81GOLD + 19.80 = 1427.30SILV + .12 = 23.51 It’s Monday but it’s a better Monday than last Monday. No bombings to report today, at least not in our country. Over the weekend, the cover story on Barron’s magazine featured a cartoon drawing of a bull on a pogo stick, leaping through the air. You may recall that 6 months ago, Barron’s poll of big money, institutional investors were bearish on the market; that was about 1,000 points ago. Now they’re bullish. This would be a contrary indicator. But not today. Today, the bulls were buying the dips. The market started negative but finished positive. It’s all about momentum. Many fundamentally-oriented investors have been licking their wounds. And the nature of momentum-driven investing is that it can work longer than more sober-minded souls would think possible. An open question is the odd continued rise of stock prices even as corporate earnings weaken. Why are investors paying more for companies whose earnings are declining in aggregate? In normal bull markets, you see a new leadership group emerge, and late in cycle, investors increasingly favor conservative stocks. This time the leaders are defensive plays, high quality companies that pay healthy dividends. While bulls say that this is predictable given ZIPR, we’ve had ZIPR for years now.When this disconnect ends is anyone’s guess. But markets like this …

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Friday, February 08, 2013 – The State of the Union is Contradictory

The State of the Union is Contradictory by Sinclair Noe DOW + 48 = 13,992SPX + 8 = 1517NAS + 28 = 319310 YR YLD un = 1.95%OIL -.06 = 95.77GOLD – 3.80 = 1668.20SILV – .03 = 31.53 The State of the Union is… Tuesday. Do we have a solid economic recovery underway? The evidence will leave you whipsawed. Everywhere you turn, it seems, there is an economic contradiction. Housing is up, but gross domestic product was sharply down in December, almost to recessionary territory. The economy has lost 3.2m jobs since 2007, but 5.2m have been created since 2009. Even so, the number of unemployed far outpaces the number of jobs. The Center on Budget and Policy Priorities says: “In November 2012, 12 million workers were unemployed but there were only 3.7m job openings. That is about 10 unemployed workers for every three available positions – in other words, even if every available job were filled by an unemployed individual, about seven of every 10 unemployed workers would still be unemployed.” The jobless rate keeps dropping, but the ratio of employed-to-unemployed people is about the same as last year. The economy gained 181,000 jobs a month last year, but the percentage of people who have been unemployed for more than 27 weeks has stayed relatively steady. People are working more hours, but productivity is falling. And economic output has almost ground to a halt, growing by 0.1% in December. Households are becoming less indebted, which is a welcome …

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Friday, December 14, 2012 –

A Sad Day by Sinclair Noe DOW – 35 = 13,135SPX – 5 = 1413NAS – 20 = 297110 YR YLD -.02 = 1.71%OIL +.97 = 86.86GOLD – 1.10 = 1697.20SILV – .23 = 32.31 A total of 27 people dead at school in Newtown, Connecticut; 20 children, 6 adults, and the shooter; the kids were between the ages of 5 and 10. There was possibly another person shot before the massacre at the school. The shooter’s mother was a teacher at the school and she was killed, but it is pretty clear this was more than just an attack on the mother. So, if you see the flags at half mast today, this is why. We’ve seen it before at Columbine, at Virginia Tech, at Aurora, and just earlier this week in a mall in Portland. This time it was especially horrible because it was mostly children; the innocents. It is estimated that there are 87 gun related deaths per day in the US, and this week it was kids. I understand that tragedy is a part of life. I understand that other places in the world experience tragedy. What is happening in Syria is tragic, what is happening in the Sudan is tragic. What is happening in Afghanistan is tragic. None of that discounts the tragedy in Connecticut. Thoughts and prayers and consolation for the victims are appropriate and comforting to some extent, but there should be something more. Something is wrong in this country. I have no …

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Friday, December 7, 2012 – A Date Which Will Live in Infamy, Plus the Jobs Report

A Date Which Will Live in Infamy, Plus the Jobs Report by Sinclair Noe DOW + 81 = 13,155SPX + 4 = 1418 NAS – 11 = 297810 YR YLD +.05 = 1.63%OIL – .27 = 85.99 GOLD + 4.50 = 1704.50SILV + .08 = 33.11 Today marks the 71st anniversary of the attack on Pearl Harbor. There were of course, memorials in Hawaii and around the country. I’ve seen a few of the pictures. Each year the number of Pearl Harbor survivors that attend these memorials, their number grows smaller and their ranks thin. If you know a veteran of World War II, be sure to take time to recognize their stories, be sure to say thanks. Today’s major economic data was the monthly jobs report; widely expected to be weak due to the effects of Hurricane Sandy. Instead, it came in relatively strong. The headline numbers: the economy added 146,000 jobs in November, and the unemployment rate dropped to 7.7%, a four year low. The Labor Department claimed that the effect of Sandy on the report was minimal, saying in a statement, “Our analysis suggests that Hurricane Sandy did not substantively impact the national employment and unemployment estimates for November.” In other words, we should not look at this report as surprisingly good given the effect of the hurricane. Rather, the Labor Department claims that the jobs numbers should be analyzed without taking the storm into account at all. And by that standard, not only were the job …

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Tuesday, August 28, 2012 – I Won’t Be Going to Jackson Hole

I Won’t Be Going to Jackson HoleSinclair Noe DOW – 21 = 13,102SPX – 1 = 1409NAS + 3 = 307710 YR YLD -.02 = 1.63%OIL + .57 = 97.48GOLD + 3.00 = 1667.60SILV +.18 = 31.00PLAT – 23.00 = 1524.00 The ECB announced that Mario Draghi had canceled plans to attend the Kansas City Federal Reserve’s annual economic symposium in Jackson Hole, Wyoming citing “a heavy workload”. So, I would just like to announce that I’m not going to be able to attend either. Further, I can tell you that none of that makes much difference; the markets are waiting on a Federal Reserve announcement and an ECB announcement. Relax, it’ll happen. Draghi faces a tougher row to hoe. ECB staff are still weighing a variety of approaches. Draghi, meanwhile, remains in conflict with Germany’s Bundesbank, which has reiterated its opposition to bond purchases of any kind. Meanwhile Fitch has downgraded ratings on 7 mid-sized Italian banks, based on the “current challenges in the operating enviroment” and the difficult of accessing wholesale funding. At the same time, the ECB is in a standoff with Spain, which remains reluctant to seek help from the euro-zone’s rescue fund, an action that Draghi and other ECB officials have made clear is an absolute prerequisite for any new bond-buying efforts. Apparently the Spanish have figured out that the medicine is worse than the ailment and they don’t want to be economically indentured for the foreseeable future. I can understand that Draghi is busy these …

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Wednesday, April 25, 2012 – Bernanke Approximately Right, UK Approximately Wrong, Students Approximately Taxed

DOW + 89 = 13,090 SPX + 18 = 1390NAS + 68 = 302910 YR YLD +.02 = 1.98%OIL -.11 = 104.01GOLD + 2.80 = 1645.30SILV – .12 = 30.81PLAT + 8.00 = 1559.00 If you own shares in Apple, congratulations. It gained nearly $50 to finish at $610, up nearly 9%. If you don’t own Apple, don’t worry about it, don’t chase it. Realize that a big chunk of the move today for the broader market, was really just Apple, but it was a good day, with gainers outpacing losers by 3 to 1. The Federal Reserve wrapped up their FOMC meeting and announced no changes. Wow, what a surprise. The Fed didn’t raise rates – they can’t. They didn’t lower rates – they can’t. They didn’t announce QE3, but they didn’t take it off the table. Bernanke told reporters at a press conference, “We see monetary policy as being approximately in the right place at this point.” He said, “Our intention is to maintain highly accommodative stance of policy for the foreseeable future.” Kind of like QE in Perpetuity. Bernanke stressed that the Fed could purchase more assets if it looked like the economy needed help, but he said some ways to boost the economy, like tolerating higher inflation, would be “reckless.” At the same time, he said it was too early to raise rates, “I think it’s a little premature to declare victory. I think that keeping interest rates low is still appropriate for our economy.” The …

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