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Thursday, October 24, 2013 – Liquidity and Leverage and a bit of Levity

Liquidity and Leverage and a bit of Levity by Sinclair Noe DOW + 95 = 15,509SPX + 5 = 1752NAS + 21 = 392810 YR YLD + .04 = 2.52%OIL + .37 = 97.23GOLD + 13.60 = 1348.30SILV + .16 = 22.82 “Liquidity is essential to a bank’s viability and central to the smooth functioning of the financial system,” so says Fed Chairman Ben Bernanke; and so today the Fed proposed that big banks keep enough cash, government bonds and other high-quality assets on hand to survive during a severe downturn like we saw in 2008, and the idea is that we avoid a global financial meltdown like we almost saw in 2008. Liquidity is the ability to access cash quickly; that’s important when nobody is sure about what the bank truly has in the vault. Liquidity is what prevents a bank run; liquidity averts a financial meltdown or credit crunch. The Fed proposal today subjects US banks for the first time to liquidity requirements. The big banks, with more than $250 billion in assets, would be required to hold enough cash and securities to fund their operations for 30 days during a time of market stress. Smaller banks, those with more than $50 billion and less than $250 billion, would have to keep enough to cover 21 days. Fed officials said the rules are stronger than new international standards for banks. The public has 90 days to comment on them. After that, they would be phased in starting in …

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Thursday, September 19, 2013 – Shine On You Crazy Dimons

Shine On You Crazy Dimons by Sinclair Noe DOW – 40 = 15,636SPX – 3 = 1722NAS + 5 = 378910 YR YLD +.06 = 2.75%OIL + .04 = 106.43GOLD – .20 = 1366.10SILV + .13 = 23.19 No taper, despite hints and great expectations. Having announced the intention to taper, ultimately, a few weeks later, the proposal was shelved. The reasons given were concerns about the strength of the economic recovery and the impact of high rates on the ability of an over-indebted world to continue to meet its obligations. All these factors were largely unchanged between the time of the original announcement and the repudiation. What did change was the taper tantrum, the unpleasant market reaction to the hint of taper. Bond yields rose sharply; the Fed’s tough talk has already led to a 140 basis point rise in 10-year Treasury yields, which would be roughly equivalent to six rate increases; that in turn resulted in pushing mortgage rates higher, putting a crimp in the housing recovery. Today we learned home sales were up. Sales of previously owned homes unexpectedly rose in August to the highest level in more than six years as buyers rushed to lock in interest rates before they jumped even higher. The labor “participation rate” dropped to 63.2% in July, the lowest level since the late 1970s. The rate for men is at an all-time low. The unemployment rate has been falling, but chiefly because so many people are giving up hope and dropping …

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