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Wednesday, January 29, 2014 – Benny Jets

Benny Jets by Sinclair Noe DOW – 189 = 15,738SPX – 18 = 1774NAS – 46 = 405110 YR YLD – .07 = 2.67%OIL – 01 = 97.40GOLD + 12.00 = 1268.70SILV + .15 = 19.81 You’ve heard the old post office creed; “neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds.” Generally true, however I bet some letter carriers are having a tough time delivering mail in Atlanta today. The Federal Reserve apparently has a creed. Who knew? Neither a disappointing December jobs report nor turmoil in emerging markets nor gloom of the US economy shall stay these central bankers from the incremental completion of their taper. Don’t worry; nothing to look at here; keep moving, keep moving. No sonny, that’s not a train wreck on Wall Street, that’s just the debris and detritus stirred up by the whirlybird which will now carry Helicopter Ben into the sunset, or more accurately to the boardroom of some investment bank. Yes, this is the last FOMC meeting for Ben Bernanke. He promised he would set a course for exiting QE, and he has; the problem is that the set course is fraught with perils. The Federal Reserve’s policy making Federal Open Market Committee wrapped up a two day meeting today by announcing they would cut back their bond buying program by $10 billion, to a mere $65 billion per month.  The FOMC added that it was “likely” to continue …

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Tuesday, December 17, 2013 – The Year in Financial Review

The Year in Financial Review by Sinclair Noe They say you can’t know where you’re going if you don’t know where you’re coming from, so today on the Review, we’ll review some of the financial milestones of 2013. You may recall that 12 months ago, we were headed over the fiscal cliff. The fiscal cliff really started in 2001 with the Economic Growth and Tax Relief Reconciliation Act, also known as the Bush tax cuts; after various extensions, they were set to expire at the end of 2012. And they did. In the end, Congress did not approve an extension of most of the tax cuts until late on New Year’s Day. Because all the Bush tax cuts had technically expired, Republicans could say they had not violated their No New Taxes pledge. The marginal rate on incomes over $400k increased, plus cap gains, and qualified dividends for high-income taxpayers, plus some estate tax changes, and the holiday on the payroll tax ended; just to be sure everybody felt some pain. President Obama signed the American Taxpayer Relief Act of 2012 on January 2. The ATRA is usually described as a tax increase although technically it might be a tax cut. The confusion arises because there were so many expiring provisions at the end of 2012.  ATRA could be described as either a $618 billion tax increase, relative to maintenance of all of the provisions that had been in place – that is, relative to so-called “current policy”; or a $4 …

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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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Thursday, June 20, 2013 – Fed Fallout

Fed Fallout by Sinclair Noe DOW – 353 = 14,758SPX – 40 = 1588.19NAS – 78 = 336410 YR YLD + .11 = 2.42%OIL – 3.61 = 94.70GOLD – 73.50 = 1278.80SILV – 1.75 = 19.70 Yesterday the Federal Reserve FOMC issued a formal statement that they were holding steady with their zero interest rate policy and their Quantitative Easing policy which involves buying up $85 billion a month in Treasuries and mortgage backed securities. Then, Chairman Bernanke held a press conference and said the Fed might scale back purchases if the economic data gets better. And while Bernanke was trying to make a very nuanced forecast with no specific call for action, what the market players heard was a threat the Fed would slash the flow of free money; the plug was being pulled on the money printing press. Faced with the economic crisis of 2008, the Fed started creating money at a prodigious pace and giving it to the banks. Catastrophe was averted. The money flowed into the markets and financial asset prices jumped. The US equity markets have been on a 4 year bull run; housing prices have bounced back, at least a partial bounce. The money did not flow into the broader economy. Cheap money and credit, instead, lead to malinvestment. The result is that while some financial asset prices have jumped dramatically, the rest of the economy has stagnated or atrophied. The idea is that the economy did not go through its normal cycle of …

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Friday, April 20, 2012 – Burning Down Spanish Debt, AMR and Unions

DOW + 65 = 13,029SPX + 1 = 1378NAS – 7 = 300010 YR YLD +.02 = 1.97%OIL + 1.05 = 103.32GOLD – .20 = 1643.40SILV – .10 = 31.80PLAT unch = 1586.00 Italian and Spanish bond yields rose after a draft statement released by G-20 finance chiefs who are meeting in Washington said that Europe’s debt crisis still poses a threat to global growth. Spanish bonds briefly pushed above 6%. That helped push the cost of credit-default swaps to insure Spanish government debt up to a record high 503 bp and increased the cost of insuring Italian debt up to 474 bp, a 3-month high. Credit default swaps pay the buyer face value if the borrower – in this instance Spain – fails to meet its obligations, less the value of the defaulted debt. They’re priced in basis points. A basis point equals $1,000 on each $10 million in debt. Credit default swaps, or CDS, are generally considered insurance against default, but it’s not really insurance because anybody can write CDS against anybody else; there is no requirement for “insurable interest”. For example, if insurance worked like CDS, I could write a fire insurance policy on your house and if your house burned down, I would collect the payment. You might think that would give me an incentive to burn down your house. Yep, that might be what you would think. Now the bankers in New York and London might also have a little incentive to burn down Spanish …

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