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Thursday, February 06, 2014 – Waiting on the Friday Jobs Report

Waiting on the Friday Jobs Report by Sinclair Noe DOW + 188 = 15,628SPX + 21 = 1773NAS + 45 = 405710 YR YLD + .04 = 2.70%OIL + .57 = 97.95GOLD + .20 = 1258.80SILV + .05 = 20.05 The number of Americans filing new claims for unemployment benefits fell more than expected last week. Initial claims for state unemployment benefits declined 20,000 last week to a seasonally adjusted 331,000. There have been some interesting reports this past week on jobs, including the controversial research from the CBO and the other from the New York Fed. Competition for jobs is still fierce. Although it varies with the company and the job, on average 250 resumes are received for each corporate job opening. In addition, out of every 1000 people who view an online job posting, 100 people will apply, 4 – 6 will be selected for an interview, 1 – 3 will be invited for a final interview, 1 will be offered the job, and 80% of those who get a job offer accept it. The Wall Street Journal shows how the very backbone of the labor market, men in their prime (for measurement purposes, 25 to 54), are out of work to an unprecedented degree. More than one in six men ages 25 to 54, prime working years, don’t have jobs—a total of 10.4 million. Some are looking for jobs; many aren’t. Some had jobs that went overseas or were lost to technology. Some refuse to uproot for …

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Friday, January 31, 2014 – January Out

January Out by Sinclair Noe DOW – 149 = 15,698SPX – 11 = 1782NAS- 19 = 410310 YR YLD  – .03 = 2.67%OIL – .76 = 97.47GOLD + 2.80 = 1246.90SILV + .03 = 19.27 The Dow started the year and the month at 16,572 (-926). The S&P 500 started the month at 1845 (-63). The Nasdaq Comp, for the month, went from 4160 (– 57). For the week, the Dow fell 1.1 percent, the S&P 500 slipped 0.4 percent and the Nasdaq dropped 0.6 percent. In January, the Dow slumped 5.3 percent, the S&P 500 lost 3.6 percent and the Nasdaq fell 1.7 percent. January marked the worst month for the Dow and the S&P 500 since May 2012, and the worst for the Nasdaq since October of that year. Yield on the 10 year Treasury note dropped from 2.99% to (- 32bp). And this is a little telling, the Vix, the volatility index went from 14.32 to 18.22    (-3.9) The Vix might be indicating that the market is not sufficiently scared of the emerging market contagion; certainly the Vix is higher than the start of the month, but remember that December saw record highs for the major indices, and a really scary Vix reading would be around $49, for those of you who remember the beginning of 2009. In other words, there are a whole bunch of people who haven’t figured out that we’re in a downturn in the markets. So far the US markets are just experiencing …

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Wednesday, January 15, 2014 – A Few Pages of Pork

A Few Pages of Pork by Sinclair Noe DOW + 108 = 16,481SPX + 9 = 1848.38NAS + 31 = 4214 10 YR YLD + .01 = 2.88%OIL + 1.75 = 94.34GOLD – 3.00 = 1243.00SILV – .05 = 20.30 The S&P 500 hit a record high close, just a few pennies better than December 31st. The market has had a weak start to January but we’re still at elevated levels. The Dow Industrials are about another day like today away from records; that close was 16,576 on New Year’s Eve. A $1.1 trillion compromise spending bill that funds the government through September won approval today from the House of Representatives and now goes to the Senate for consideration. The Senate is expected to also pass the so-called “omnibus” bill and send it to President Barack Obama to be signed into law. The 1,582-page bill eases most of the automatic spending cuts that were part of the sequester and keeps the federal government funded through Sept. 30. The budget bill calls for 1% increases in the paychecks of federal workers and military personnel, the first raises in three years for most agency workers. The spending measure also would protect disabled veterans and some military spouses from a pension cut set to go into effect in 2015.The bill would provide nearly $92 billion for US military operations abroad, mostly in Afghanistan, plus about $7 billion for disasters and other emergencies. That was just slightly less than last year’s war spending but …

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Wednesday, October 23, 2013 – Rally Fizzles

Rally Fizzles by Sinclair Noe DOW – 54 = 15,413SPX – 8 = 1746NAS – 22 = 390710 YR YLD – .03 = 2.48%OIL – 1.05 = 97.25GOLD – 7.50 = 1334.70SILV – .15 = 22.66 So, after a five day rally we finally got the fizzle. The markets don’t go straight up and the market had run quite a bit. The S&P 500 advanced 23 percent this year through yesterday, pulling within a half percentage point of the 23.5 percent gain in 2009. The S&P 500 was valued at 15.9 times estimated earnings as of yesterday, the highest since December 2009. While that’s up 16 percent this year and starting to feel a bit frothy, it’s still below the multiples at the market’s two previous peaks, when the ratio reached 16.5 in October 2007 and 25.7 in March 2000. Of the 169 S&P 500 companies that have reported results this season, 76 percent exceeded analysts’ predictions for profit, while 54 percent beat sales estimates. And 87% of stocks in the S&P 500 traded above their average prices from the past 50 days. Today, though 7 out of 10 main industries in the S&P 500 declined, with commodity, consumer-discretionary and financial companies dropping at least 0.6 percent to lead the retreat. Treasury yields fell to their lowest in three months on more bets that the Federal Reserve will maintain its stimulus efforts until next year. The Fed is kind of handcuffed from doing any tapering; the consensus is pushing it …

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Wednesday, September 25, 2013 – Imagine

Imagine by Sinclair Noe DOW – 61 = 15,273SPX – 4 = 1692NAS – 7 = 376110 YR YLD – .04 = 2.61%OIL – .83 = 102.30GOLD + 10.10 = 1334.10SILV + .07 = 21,90 The stock markets have gone through a bad patch; five consecutive declines have knocked 400 points off the Dow Industrials; no surprise. According to the Stock Traders Almanac, the week after September options expiration (this week) has consistently been one of the worst of the year. Since 1988, weekly declines average from –0.93% for NASDAQ to –1.49% for Russell 2000 and S&P 500 has only posted gains five times in 25 years. Meanwhile, bonds have enjoyed a nice little rally since the Fed announced “no taper”. We can understand how quantitative easing benefits Treasuries, but the threat of a government shutdown or default benefiting Treasuries? Go figure. I read today that a chief investment strategist at a trading house that will go unnamed is predicting that the S&P 500 may go to 1,900 now that the Federal Reserve has decided to not taper its asset purchasing program. He is correct. It might go to 1,900. Then again, it might not.  It might go to 600. Then again, it might not. Why should market players be nervous? No worries! We finally got bipartisan cooperation in Congress; after weeks of wrangling and posturing, Senate Democrats and Republicans came together in a near-unanimous vote to shutdown Senator Ted Cruz. The vote shuts down all non-essential function of Senator Cruz; so …

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Tuesday, September 24, 2013 – Give Me Energy

Give Me Energy by Sinclair Noe DOW – 66 = 15,334SPX – 4 = 1697NAS + 2 = 376810 YR YLD – .05 = 2.65%OIL – .30 = 103.29GOLD + .80 = 1324.10SILV + .10 = 21.84 The big unknown this week is the possibility of a government shutdown Sunday night. A few moments on that and then I’ll get to my main topic here, which deals with energy. The shutdown could happen; with Congress, anything could happen. I’ve been trying to figure out the likelihood, and I don’t think it is likely, although it could still happen. Of course the battle is over defunding Obamacare. And I remember the old rules for how a bill becomes law, and the checks and balances of our democratic republic. The Affordable Care Act was duly enacted by a majority of both houses of Congress, signed into law by the President, and even upheld by the Supreme Court. The Constitution of the United States does not allow a majority of the House of Representatives to repeal the law of the land by defunding it. If that were the case, no law is safe. A majority of the House could get rid of unemployment insurance, federal aid to education, Social Security, Medicare, or any other law they didn’t like merely by deciding not to fund them. If that were the case, then you could control everything in government with a simple majority in the House of Representatives; it would render every other branch of …

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Tuesday, September 10, 2011 – Infinite Monkey Diplomacy Theorem

Infinite Monkey Diplomacy Theorem by Sinclair Noe DOW + 127 = 15,191SPX + 12 = 1683NAS + 22 = 372910 YR YLD + .06 = 2.96%OIL – 2.29 = 107.23GOLD – 23.20 = 1364.30SILV – .75 = 23.07 The war hasn’t started…, yet. We had an off the cuff comment from Secretary of State John Kerry that set off a new peace plan. Kerry told reporters in London that President Bashar al-Assad of Syria could avert a strike if he turned over his chemical weapons stockpile within a week, adding that such an outcome was unlikely. This is apparently a new diplomatic policy based upon the infinite monkey theorem; which postulates that if you had a roomful of monkeys with typewriters, the monkeys would almost surely, eventually type out the complete works of William Shakespeare. In this context, the monkey is not an actual monkey but a metaphor for an abstract device or perhaps a Secretary of State, and given enough time to talk he would almost surely, eventually stumble across a peace plan. Last night his apparently off-the-cuff proposal had gained broad support, including a warm welcome from both Syria and Russia, which said it would bring Syria’s chemical weapons under international control. France has introduced a proposal with the UN. Kerry has denied the whole thing, calling the remark nothing more than a rhetorical exercise. Methinks he doth protest too much; for what is politics but a rhetorical exercise? If you don’t like the infinite monkey theorem, then …

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Friday, September 06, 2013 – Fed Policy Creates Inequality

Fed Policy Creates Inequality by Sinclair Noe DOW – 14 = 14,922SPX + .09 = 1655NAS + 1 = 366010 YR YLD – .04 = 2.93%OIL+ 1.86 = 110.23GOLD + 21.10 = 1389.80SILV + .63 = 23.94 The war hasn’t started …, yet. This morning we got the big monthly jobs report. Nonfarm payrolls increased by 169,000 jobs last month falling short of the 175,000 to 180,000 Wall Street had expected. Not only did hiring miss expectations last month, but the job count for June and July was revised to show 74,000 fewer positions added than previously reported. While the unemployment rate fell a tenth of a percentage point to 7.3 percent, its lowest level since December 2008, the decline reflected a drop in the share of working-age Americans who either have a job or are looking for one. That participation measure reached its lowest point since August 1978, a further sign of underlying economic weakness. The rate for men touched a record low. U-6, a measure of underemployment that includes people who want a job but who have given up searching and those working part time because they cannot find full-time jobs fell three tenths of a percentage point to a 4-1/2-year low of 13.7 percent. The private sector accounted for the bulk of the job gains last month, but government payrolls increased 17,000 as local governments hired teachers for the new school year. Factory employment rebounded after falling in July. Construction payrolls were flat as both residential and …

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Thursday, August 08, 2013 – Shining Light on the Bright Economy

Shining Light on the Bright Economy by Sinclair Noe DOW + 27 = 15,498SPX + 6 = 1697 NAS + 15 = 3669 10 YR YLD – .01 = 2.58%OIL -.59 = 103.78GOLD + 25.10 = 1313.40SILV + .66 = 20.35 After three down days and a negative start to today’s trading, the major market indices finished in positive territory. Three day losing streaks have been rare for the past nine months. You have to go back to December last year where we had more than a three day losing streak and any kind of decline that caused a scare; that was the fiscal cliff brouhaha, you’ll recall. This certainly is not a market for short sellers, it has been about eight months since the bears have been able to put any real fear on the table. The market may go down for three days, but then it pops back up; the down days are apparently nothing more than a pause that refreshes, and then the buyers rush back in. Despite taper talk, the Fed has not committed to taper, just a bit of jawboning, and they are still pumping $85 billion a month into mortgage backed securities and treasuries, and then the cherry on top is that $40 billion managed to flow into equity funds in July. Earnings growth is decent even if revenue growth is underwhelming. There is still cash on the sidelines. Maybe too much cash on the sidelines. Wealthy Americans put away about 37 cents for …

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Wednesday, July 17, 2013 – Good Markets, Bad Economy

Good Markets, Bad Economy by Sinclair Noe DOW + 18 = 15,470SPX + 4 = 1680NAS + 11 = 361010 YR YLD – .04 = 2.49%OIL + .59 = 106.59GOLD – 16.90 = 1275.60SILV – .72 = 19.29 Let’s start today with a quick rundown of a few earnings reports. Intel reported second quarter net income of $2 billion, down from $2.8 billion a year ago. Revenue was $12.8 billion, and they expect third quarter revenue around $13.5 billion, both revenue numbers and guidance were below current estimates. IBM posted earnings of $4.3 billion on revenue of $24.9 billion. Earnings were up slightly from a year ago, while revenue was down slightly. Bank of America reports net income rose 63 percent, to $4 billion from $2.5 billion in the period a year earlier, while revenue increased to $22.7 billion from $22 billion. The bank benefited from higher revenue from equities sales and trading and a reduction in expenses, but its mortgage unit continued to struggle. This seems to be a recurring trend for the big banks; more profits from the Wall Street business side, less revenue from the old fashioned loan business, less money set aside for reserves. The concerns are that trading performance tends to be uneven over time, and cutting costs can only go so far, it doesn’t increase revenue. June housing starts fell 9.9% to an annualized rate of 836,000—the lowest level since August 2012. The drop in housing starts was led by a decline in multifamily …

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