Financial Review

Another Glass of Kool-Aid

http://media.blubrry.com/eatthebankers/p/content.blubrry.com/eatthebankers/SINCLAIR_NOE-SEG_1-09-03-2014.mp3Podcast: Play in new window | Download (Duration: 13:15 — 6.1MB)Subscribe: Apple Podcasts | Android | RSSFinancial Review DOW + 10  = 17,078 SPX – 1 =  2000 NAS – 25 = 4572 10 YR YLD – .01 = 2.41% OIL – .36 = 95.18 GOLD + 3.50 = 1270.30 SILV + .02 = 19.27   The Commerce Department reports orders for goods produced in US factories rose 10.5% higher in July, mainly due to a big surge in contracts for commercial aircraft. Yet excluding transportation goods, factory orders fell 0.8% in July.   Meanwhile, auto sales rose to a seasonally adjusted annual rate of 17.5 million in August, up from 16.5 million in July. Recalls finally caught up with General Motors and sales declined 1%; Chrysler sales were up 20%; Ford sales were up less than 1%; VW slipped 13%; Nissan sales were up 12%; and Toyota gained 6%.   Tesla is expected to announce tomorrow that it has selected Nevada to be the home of its gigafactory, which will build batteries. Arizona, California, New Mexico, and Texas were also in the running for the $5 billion plant, a key part of Tesla’s plan to scale up its production and launch a mass-market car in the next couple of years. The factory is expected to employ more than 6,000 people.   The Federal Reserve gathers information from its districts two weeks before they get together for the FOMC policy meetings. They publish the information in a beige folder, and …

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Financial Review

Wednesday, June 04, 2014 – An Airtight Defense

An Airtight Defense by Sinclair Noe   DOW + 15 = 16,737 SPX + 3 = 1927 (record close) NAS + 17 = 4251 10 YR YLD + .01 = 2.60% OIL – .27 = 102.39 GOLD – 1.30 = 1244.60 SILV – .01 = 18.90   Eight times a year the Federal Reserve gathers economic updates from the 12 districts and publishes the information about two weeks before its FOMC meetings. The data is published in a beige folder, and that is why it is called the Beige Book, although it might actually refer to the writing style. Anyway, economic activity expanded all across the country, with most districts reporting moderate or modest growth. Consumer spending expanded across almost all districts. Tourism was another bright spot and manufacturing activity expanded across the country. Home sales were described as “mixed across the country” even as home prices continue to rise. Labor markets were described as steady. Inflation was tame, with a slight exception for higher food prices in some areas.   In other words, when the Fed meets in a couple of weeks, there won’t be any big changes in monetary policy.   The Institute for Supply Management said its services index rose to 56.3%, its highest level since August, from 55.2% in April. That’s the number and they’re sticking with it.   The US trade deficit grew to $47 billion in April, up from $44 billion in March. Exports slowed in April, down slightly to $193 billion. Imports, meanwhile, …

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Financial Review

Wednesday, April 16, 2014 – What is Really Plausible

What is Really Plausible by Sinclair Noe DOW + 162 = 16,424SPX + 19 = 1862NAS + 52 = 408610 YR YLD + .01 = 2.63%OIL + .05 = 103.81GOLD – .20 = 1303.20SILV + .07 = 19.73 Let’s start with some earnings news and then we’ll move over to economic data. Google posted $3.4 billion in net income, or $5.04 per share, in the three months ended March 31, compared to $3.3 billion, or $4.97 per share, in the year-ago period. Revenue rose 19% to $15.4 billion, but analysts had estimated $15.5 billion, and the shares were getting clobbered in late trades. IBM reported its lowest quarterly revenue in five years; IBM reported revenue of $21.7 billion for the quarter, but that marks the eighth consecutive decline in quarterly revenue. The company has been restructuring its business by cutting jobs and selling its low-end server business. This is not what you would call a growth model. Also, from the faulty business model file: Bank of America posted a $276 million loss for the most recent quarter. The financial results included a pre-tax expense of $6 billion, or approximately 40 cents a share after tax, to cover litigation costs as the bank moved to resolve mortgage-related litigation fallout from the financial crisis that began in 2007 and other issues; far worse than the $3.7 billion investors had braced for. The bank today agreed to a $584 million settlement of litigation over nine residential mortgage-backed securitizations insured by the Financial Guaranty …

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Wednesday, March 05, 2014 – Not Much Change

Not Much Change by Sinclair Noe DOW – 35 = 16,360SPX – 0.1 = 1873NAS + 6 = 435710 YR YLD + .01 = 2.70%OIL – 2.40 = 100.93GOLD + 2.40 = 1337.80SILV + .02 = 21.26 ADP, a payroll processing company, reports its own monthly jobs estimate each month, just before the government comes out with its monthly jobs report. Today, ADP said the economy added 139,000 new jobs in February; they revised the January number down to 127,000 from the previously reported 175,000. When the Labor Department reports on jobs Friday morning the best guess is about 150,000 jobs and the unemployment rate holding at 6.6%. So, the ADP report is reasonably close. Separately, initial jobless claims for the past week did not point to any improvement in the labor market with initial claims up 14,000 in the February 22 week to a 348,000 level. In other news, the Institute for Supply Management’s non-manufacturing index slipped to 53.5 in February from 54 the previous month. This afternoon the Federal Reserve published its Beige Book, which is a compilation of reports and observations from the 12 Fed districts. Growth slowed in Chicago and activity was stable in Kansas City. While the other eight districts reported growth, the Fed said it was characterized as “modest to moderate” in most cases, an overall downgrade from its last report on January 15, which showed “moderate” growth in nine regions. Business contacts were still upbeat, and real estate activity picked up in some …

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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, December 04, 2013 – The Defining Challenge

The Defining Challenge by Sinclair Noe DOW – 24 = 15,889SPX – 2 = 1792NAS +0.80 = 403810 YR YLD + .05 = 2.83%OIL + 1.25 = 97.29GOLD + 19.00 = 1244.30SILV + .54 = 19.82 December can be a cold, cold month. At least that’s how the equity markets are starting the month; four losing sessions. Part of this might be the big institutional investors, the big hedge funds and money managers, looking around and realizing the market is up 30% or so, and that would be a good year, so why no lock in a few profits. No need to worry about the budget battle in Washington; no need to worry about the Federal Reserve surprising people with a premature taper; no need to worry about a strong jobs report on Friday. In this crazy market where good economic news gets traders worried about the Fed taking away the punch bowl, today we had some reasonably decent economic news and another drop in the markets. Let’s start with the economic reports. ADP, the payroll processing firm, has a monthly report on private jobs; they issue the report just before the monthly official government report on jobs, the BLS non-farm payroll report. The ADP report is not great at predicting the government report, but its one of the better guidelines we have. Today, ADP reported companies added to their payrolls by a net 215,000 in November, and they revised the October number higher to 184,000. Manufacturers, builders and other …

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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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Wednesday, June 05, 2013 – Agree to Disagree

Agree to Disagree by Sinclair Noe DOW – 216 = 14,960SPX – 22 = 1608NAS  – 43 = 3401 10 YR YLD 0 .03 = 2.10%OIL + .38 = 93.69GOLD + 2.70 = 1403.70SILV unch = 22.65 The big economic news this week will be the Friday morning jobs report. ADP, the payroll processing company does its own jobs report, and today they estimated the economy added 119,000 new jobs in May. The ADP report is not a good indicator of Friday’s report, but taken on its own, today’s analysis shows a softening labor market, dragged down by the sequester. Then, this afternoon we read the Federal Reserve Beige Book; here’s how they described things: “Overall economic activity increased at a modest to moderate pace since the previous report across all Federal Reserve Districts except the Dallas District, which reported strong economic growth. The manufacturing sector expanded in most Districts since the previous Beige Book. Most Districts noted slight to moderate gains in consumer spending and a moderate increase in vehicle sales. Tourism showed signs of strength in several Districts. A wide variety of business services expanded, and transportation traffic increased for producer, consumer, and trade goods. Residential real estate and construction activity increased at a moderate to strong pace in all Districts. Commercial real estate and construction activity grew at a modest to moderate pace in most Districts.” And fade to beige, actually a modest to moderate shade of beige. After reading the Beige Book, I know what you’re probably thinking; yes, it is properly titled. …

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Wednesday, April 17, 2013 – Austerity Oops

Austerity Oops by Sinclair Noe DOW – 138 = 14, 618SPX – 22 = 1552NAS – 59 = 320410 YR YLD – .01 = 1.70%OIL – 2.35 = 86.37GOLD + 8.20 = 1378.50SILV – .03 = 23.41 The Federal Reserve released its Beige Book this morning. The Beige Book is just a survey of the 12 Fed Districts and the name is due to the fact that it has a beige cover. The survey covers the time from late February to early April. The info is more anecdotal than precise measurements. Of the Fed’s 12 districts, five reported “moderate” growth, five reported “modest” growth, and New York and Dallas reported slight accelerations. “Particular strength” was seen in residential construction and automobiles, which confirms the report on Monday dealing with industrial output. Consumer spending grew modestly, with higher gasoline prices, the expiration of the payroll tax cut and winter weather restraining growth. Lat week, the Commerce Department reported that retail sales were at a 9 month low. The sequester has rattled the defense industry with the automatic budget cuts; no surprise there. Overall, the Fed remains optimistic, but still concerned about fiscal policy. On the fiscal policy front, one of the main arguments for budget cuts and austerity comes from a 2010 study by two Harvard economists, Ken Rogoff and Carmen Reinhart. The study concluded that when a nation’s debt grows too big, it can slow growth. The idea is that when the debt to GDP ratio hits 90%, the result …

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Wednesday, January 16, 2013 – Fuzzy Justice

Fuzzy Justice by Sinclair Noe DOW – 23 = 13,511SPX +0.29 = 1472NAS + 6 = 311710 YR YLD – .01 = 1.82%OIL + .88 = 94.16GOLD + .10 = 1681.00SILV + .12 = 31.59 The National Association of Home Builders/Wells Fargo housing market index was flat at a seasonally adjusted level of 47 in January. This is a gauge of homebuilders’ confidence. Conditions in the housing market look much better now than at the beginning of 2012 and an increasing number of housing markets are showing signs of recovery, which should bode well for future home sales later this year. The builder-confidence gauge is up 88% from the same period in the prior year, even though the number was essentially flat for the January reading. Industrial production increased 0.3% in December and now stands at the highest level since the summer of 2008. Production is up for 2 months, indicating a recovery from Hurricane Sandy. The House of Representatives finally passed a $51 billion aid package to provide emergency relief for Hurricane Sandy. It was a partisan vote, but 49 Republicans voted for the aid package, mainly representatives from the affected areas. The Consumer Price index was flat in December. The core rate of inflation, excluding food and energy, rose 0.1%. Gasoline prices dropped last month. For all of 2012 consumer prices climbed 1.7%, the third lowest rate in the past 10 years. That’s also down from a 3% increase in the prior year. Core CPI was up 1.9% …

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