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Tuesday, April 01, 2014 – Murderers and Cheats

Murderers and Cheatsby Sinclair Noe DOW + 74 = 16,532SPX + 13 = 1885NAS + 69 = 426810 YR YLD + .04 = 2.76%OIL – 1.99 = 99.59GOLD – 5. 00 = 1280.80SILV un = 19,86 Congratulations Mary Barra, you’ve been named CEO of General Motors, one of the biggest companies in America; now head on over to Capitol Hill to take the blame for the people who used to run the company. Barra’s appearance before a subcommittee of the House Energy and Commerce Committee represented a significant new phase in the company’s crisis since it issued recalls that began in February for 2.6 million Cobalts and other vehicles. The problems with the cars involve faulty ignition switches; GM repeatedly failed to fix faulty ignition switches, despite conducting multiple internal studies of the problem since 2001, and 13 people died in the defective vehicles. Members of Congress and the families of people killed in GM cars are urging Barra to declare the cars unsafe to drive until new ignition switches are installed. So far, GM has said the vehicles are safe to operate as long as there are no objects attached to the ignition key.  GM conducted several internal investigations of the switch problems, dating back as far as 2001. Company engineers learned that the key in the ignition could be inadvertently bumped into the off or accessory position, causing the engine to lose power and disabling air bags. Documents show that GM approved the switch for installation in its …

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Monday, January 27, 2014 – Sniffing Out Weakness

Sniffing Out Weakness by Sinclair Noe DOW – 41 = 15,837SPX – 8 = 1781NAS – 44 = 408310 YR YLD + .04 = 2.76%OIL – .94 = 95.70GOLD – 12.50 = 1257.50SILV – .22 = 19.79 Last week was rough for the Dow Industrial, and today started with the blue chips in the red but not by much; it even looked like we might finish in positive territory. Nahh. The markets have been trending downward over the last week due to a mix of concerns. Emerging market strains, anxiety over tapering by the Federal Reserve, and weak manufacturing data from China likely contributed to a pullback. Also, new home sales were weak in December. The international problems started with a report that Chinese manufacturing may contract for the first time in 6 months. Then Argentina’s central bank limited dollar sales to preserve international reserves that had fallen to a seven-year low. Then there were concerns about a default in the shadow banking system in China. Then there concerns about a corruption scandal for Prime Minister Erdogan’s cabinet in Turkey. Protesters occupied municipal buildings in the Ukraine. Then the South African rand dropped big. Then the whole thing spread. I don’t know what happened in Mexico but the peso took a hit. Bank of America analysts recommended buying the Mexican peso on Nov. 24 as one of their top two Japan-related trades for this year, predicting a rally that would have boosted the currency’s value to 8.4 yen. Instead, the …

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Monday, November 18, 2013 – Activism from Billionaires and Tweeters

Activism from Billionaires and Tweetersby Sinclair Noe DOW + 14 = 15.976SPX – 6 = 1791NAS – 36 = 394910 YR YLD – .04 = 2.66%OIL – .83 = 93.01GOLD – 14.40 = 1277.00SILV – .38 = 20.50 This one didn’t feel like a record high celebration, in part because the major indices closed well off the intraday high. The Dow had been trading above 16,000 for much of the afternoon, but a late sell-off saw the Dow finish below that nice round number; still, it was good enough for another record high close. The S&P 500 hit an intraday high of 1802, but closed in negative territory. Still we mark today’s gains in the Dow in the “win” column and that means we have now had 39 record high closes on the Dow in 2013. The trend is in place, firmly. The rise in the Dow Jones industrials continues to be confirmed by an associated rise in the Dow Jones Transportation Average. A look at the S&P 500 also shows a clear breakout at the top multiyear resistance level. The breakout may be false, due to the lack of active participation, as evidenced by light volume. So far, it has held up pretty well, contrary to its overbought condition. Everything is pointing higher as long as the Fed continues to pump money into the economy; and it looks like they will continue until March, although they could start to taper in January or December. Or maybe Bernanke will go …

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Friday, July 26, 2013 – Notes from the Favela

Notes from the Favela by Sinclair Noe DOW + 3 = 15,558SPX + 1 = 1691NAS + 7 = 3613 10 YR YLD – .01 = 2.56%OIL – .82 = 104.67GOLD – .30 = 1334.80SILV – .26 = 20.09 Earlier in the week, the Dow and S&P hit record highs but the markets slipped; earlier today the Dow was down 150 points. For the week, the Dow rose 0.1 percent, the S&P 500 was flat (even as it hit a record) and the Nasdaq rose 0.7 percent. It’s Friday, and I have a bunch of notes and scraps that have been piling up, so we’ll clean the desk, in no particular order. The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment climbed to 85.1 from 84.1 in June, topping expectations for 84. It was the highest level since July 2007 and was also an improvement from July’s initial reading of 83.9. Of course, if you paid a premium subscription, you could have had that information before the rest of the market. Yesterday, I mentioned former Fed Chairman Paul Volker’s remark that the only real financial innovation in the past 20 years was the ATM, which is actually about 30 years old now. And Volker wasn’t quite right; the banks haven’t done any real innovation but the hackers have. For nearly a decade, a band of cybercriminals rampaged through the servers of a global business who’s who: Among the victims were 7-Eleven, Dow Jones, Nasdaq, JetBlue …

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Monday, June 03, 2013 – Cardboard Cutouts, Inflatable Tanks, and the G-8

Cardboard Cutouts, Inflatable Tanks, and the G-8 by Sinclair Noe DOW + 138 = 15,254SPX + 9 = 1640NAS + 9 = 3465 10 YR YLD – .03 = 2.13%OIL + 1.42 = 93.39GOLD + 22.90 = 1412.20SILV + .48 = 22.84 Have you ever heard the expression “Potemkin Village”? That expression which dates back to the story about the head of Russia’s Crimean military campaign, who allegedly created false villages along the Dnieper River to reassure Czarina Catherine II that all was well as she sailed past. Have you ever heard of the Ghost Army? Also, known as the 23rdHeadquarters Special Troops, an elite force whose specialty was tactical deception, they proved their value in World War II. The Ghost Army, some 1,100 men in all, ended up staging more than twenty battlefield deceptions between 1944 and 1945, starting in Normandy two weeks after D-Day and ending in the Rhine River Valley. They used inflatable tanks and airplanes and recordings of the sounds of an army to trick the Germans into thinking there were troops where there weren’t. Have you heard about the G-8 economic conference coming to Northern Ireland in a couple of weeks? Northern Ireland has had a tough time over the past few decades, and in the small town where the G-8 will be meeting, there are quite a few closed down businesses and shuttered storefronts. So, in anticipation of the economic conference, they have been been doing some purely cosmetic surgery. Painting the windows of …

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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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