Wednesday, August 1, 2012 – The Fed’s Gone Fishing – The Machines Take Control – The Check is in the Mail

The Fed’s Gone Fishing -The Machines Take Control – The Check is in the Mail-by Sinclair NoeDOW – 37 = 12,971SPX – 4 = 1375NAS – 19 = 292010 YR YLD +.05 = 1.54%OIL + .71 = 90.38GOLD – 14.80 = 1601.10SILV -.56 = 27.54PLAT – 20.00 = 1403.00The economy has slowed down over the past few months; I know it; you know it; the Federal Reserve knows it; anybody who can fog a mirror knows it. And so, it was widely anticipated the Federal Reserve would acknowledge the slowdown today as they wrapped up a two-day FOMC meeting. They did. They issued a statement saying:  “economic activity decelerated somewhat over the first half of this year. Growth in employment has been slow in recent months, and the unemployment rate remains elevated.” And then they did absolutely nothing. The did not extend their Zero Interest Rate Policy into the next millennium and beyond; they did not cut the interest they pay member banks for not making loans; and they did not announce another round of quantitative easing. Nobody seriously expected QE3 but it was expected the Fed would make some small, incremental concession. Nope. They did nothing. Squat, zilch, zip, nada. They couldn’t even throw a dog a bone. Generally they expect inflation to be under control and employment to slowly improve just a smidge, and apparently Bernanke is going trout fishing in Wyoming. They promised to keep an eye on things; if it goes to hell in a handbasket, they’ll …

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Monday, July 16, 2012 – Strong Demand for Negative Interest

Strong Demand for Negative Interest-by Sinclair NoeDOW – 49 = 12,727SPX – 3 = 1353NAS – 11 = 289610 YR YLD -.03 = 1.46%OIL -.32 = 88.11GOLD – .80 = 1589.60SILV – .03 = 27.41PLAT – 15.00 = 1423.00The International Monetary Fund cut its forecast for global economic growth and warned that the outlook could get worse if policymakers in Europe do not act with enough force and speed to control the financial crisis. The IMF said emerging market nations, long a global bright spot, were now being dragged down by Europe. It said a drop in exports in these countries would combine with earlier policies meant to prevent overheating and slow growth more sharply than hoped. The IMF cut its 2013 forecast for global growth to 3.9 percent from the 4.1 percent it projected in April, trimming projections for most advanced and emerging economies. It left its 2012 forecast unchanged at 3.5 percent. The IMF said advanced economies would only grow 1.4 percent this year and 1.9 percent in 2013.It also trimmed its forecast for emerging economies, projecting they will expand 5.9 percent in 2013 and 5.6 percent in 2012. Both figures are 0.1 of a percentage point lower than in April. The IMF cut its 2013 growth forecast for the crisis-hit euro zone to 0.7 percent, while maintaining its projection of a 0.3 percent contraction this year.The IMF cut its US forecasts slightly, largely based on concerns over a political battle brewing in Washington over how to avoid painful …

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Tuesday, June 26, 2012 – Grapes of Wrath

Grapes of Wrath by Sinclair NoeDOW + 32 = 12,534SPX + 6 = 1319NAS + 17 = 285410 YR YLD +.02 = 1.63%OIL +.23 = 79.59GOLD – 12.70 = 1573.60SILV – .43 = 27.21PLAT – 17.00 = 1433.00The S&P/Case-Shiller reports shows home prices rose 1.3% in April.  The Conference boards Consumer Confidence Index fell for a fourth straight month; the index hit 62 last month, which is still above average and better than last year at this time. We are not officially in the Dog Days of Summer; it just feels like it. The European Union has released a road map outlining the path to tighter fiscal integration. Nothing too flashy and it might take a year or more to implement. German Chancellor Angela Merkel  had played down large moves such as the issuance of common debt until euro-area countries agree to broad oversight of their budgets.  Egan Jones downgraded Germany from A+ to AA-. Today, Reuters reported Merkel told politicians in her ruling coalition that Europe would not have shared total debt liability “as long as I live.” So, that pretty much kills any idea of a euro-bond. Mario Monti, the technocratic non-elected Prime Minister of Italy now denies he said: “Eurobonds or I resign.” Meanwhile, Spanish and Italian bonds aren’t feeling healthy as yields rose again. Spain had to pay the highest yields since last November to sell 3.08 billion euros in short-term debt as demand from its ailing banks dwindled. Spain has officially requested a $125 billion dollar bank bailout. Details …

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Thursday, June 21, 2012 – Like Crack for Bankers – by Sinclair Noe

DOW – 250 = 12,573SPX – 30 = 1325NAS – 71 = 285910 YR YLD – .02 = 1.62%OIL – 3.20 = 78.25GOLD – 41.60 = 1566.20SILV – 1.24 = 26.98PLAT – 19.00 = 1445.00Here is the bottom line on today’s declines; Wall Street has become addicted to free money from the Federal Reserve. Stimulus from the Fed is like crack for the Wall Street bankers. Yesterday, the Fed refused to pass out more free money. Today, Wall Street got a bad case of the shakes.One of the concerns when Bernanke and pals fail to act is that they can’t really think of anything they might do that would have any real effect, or maybe they’re satisfied with 2% inflation and 8.2% unemployment. So what if Bernanke doesn’t have any more ammo?Then we are left to the devices of fiscal policy, in other words; what can the politicians in Washington do to stimulate the economy? The most likely answer is that the politicians can drive the economy over a cliff. While that might seem cynical, it’s really just pragmatic. And then, of course there is the Lehman Brothers event with subtitles looming in Europe. If Europe collapses, the thinking is that Bernanke will find a few more bullets in the form of QE3, and he will once again toss money at the Wall Street bankers. The Wall Street crack whores will fire up their pipes and place “risk-on” trades with the certainty that the Fed will place a put against any …

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Wednesday, June 20, 2012 – A Twisted World – by Sinclair Noe

DOW  – 12 = 12,824SPX – 2= 1355NAS +0.69 = 293010 YR YLD +.02 = 1.64%OIL – 3.25 = 81.10GOLD – 11.10 = 1607.80SILV – .30 = 28.22PLAT – 23.00 = 1464.00Quite frankly the Federal Reserve FOMC meetings have become a bit too predictable. They didn’t lower interest rates because rates are already at zero. They didn’t raise interest rates because that would be a total freak out and the financial markets would collapse. The Fed does not have an exit plan from their zero interest rate policy. They didn’t announce QE3 because that would be a blatant destruction of the currency which would send the price of gold soaring; also because they are holding back and waiting just in case Europe hits the self destruct button. The Fed expanded Operation Twist by $267 billion, meaning it will sell short-term securities and buy long-term ones in an effort to keep borrowing costs down. The program, which was due to expire this month, will now run through the end of the year. Operation Twist is a wash; it really doesn’t cost anything; they buy, they sell, it all equals out. The next question is whether Operation Twist actually does anything. Here the results are inconclusive. Long term rates are at historic lows but we don’t know if rates would have been low even without Operation Twist. Perhaps the most pathetic part of the FOMC statement was this: “Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The …

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Thursday, June 14, 2012 – Just In Case There is a Glitch in the Vote – by Sinclair Noe

DOW + 155 = 112,651SPX + 14 = 1329NAS + 17 = 283610 YR YLD +.01 = 1.61 OIL +.44 = 84.35GOLD + 5.70 = 1624.30SILV – .22 = 28.74PLAT + 27.00 = 1498.00All righty class, it is time for a pop quiz. Please answer the following question: What is the Ironclad Rule of Wall Street?Put down you pencils.And the answer is: Wall Street loves free money.And where does free money come from? And the answer is: Central banks. If you answered the Federal Reserve and Helicopter Ben, give yourself a partial credit; if you answered taxpayers, give yourself partial credit; while those answers are technically correct it is outdated and more than a tad provincial. Think bigger, think globally.Today, Greek bank stocks surged more than 20 percent, with speculators betting on a favorable pro-bailout outcome after Sunday’s election. The action there drew the attention of traders on Wall Street. Officials from the G-20 confirmed today that the central banks from major economies stand ready to take steps to stabilize financial markets by providing liquidity and preventing a credit squeeze if the outcome of Greek elections on Sunday causes tumultuous trading even if the Greek election will not provide “the definitive signal on what happens next” in the euro-zone economic crisis.The Greek election is Sunday and then there is a G20 summit of world leaders in Los Cabos, Mexico, on Monday and Tuesday, with Europe’s escalating crisis topping the agenda. Leaders will be accompanied by finance ministers playing an advisory role. Depending on …

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Monday, June 11, 2012 – The Non-Bailout Spanish Bank Bailout – by Sinclair Noe

DOW – 142 = 12,411  SPX – 16 = 1308NAS – 48 = 280910 YR YLD -.04 = 1.60%OIL – 1.50 = 81.20GOLD + 1.40 = 1597.10SILV + .05 = 28.58PLAT + 13.00 = 1450.00 So, here’s the headline from the Murdoch Street Journal: “US Stocks Tumble as Spain Bank Bailout Optimism Fades”. And my question is how many phones did they have to hack before they found someone who was optimistic about the Spanish Bank Bailout? Over the weekend, Spain requested a bailout of up to 100 billion euros ($125 billion) in loans from the European Union to assist its banks. Statements about the deal left several open questions, including the exact amount of aid the country will need and how the funds will be distributed. What exactly is there to be optimistic about? Oh, the Euro did not explode over the weekend – that’s a relief but not a reason to be a big time buyer of equities. It’s not like the Spanish Bank Bailout makes anything better, except for the specific Spanish Banks being Bailed-Out. Europe still has a nasty circle of slow or no growth and increasing debt burdens. Greece’s first bailout in 2010 sparked a healthy 1.3 percent rally in the S&P 500 stock index on the following day, but subsequent rescues fostered more muted responses. The reaction after Spain’s bank bailout has been the most downbeat of the lot. The four prior bailouts – for Greece and Ireland in 2010, Portugal in 2011 and …

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Friday, May 25, 2012 – It’s Better Than It Looks, Striving For Happiness Amidst the Cow Pies – by Sinclair Noe

DOW – 74 = 12,454SPX – 2= 1317NAS – 1 = 283710 YR YLD – .01 = 1.75%OIL -.06 = 90.60GOLD + 15.90 = 1574.70SILV +.21 = 28.63PLAT + 14.00 = 1436.00 For the week, the S&P 500 rose 1.7 percent.  I’m of the opinion that life is better than it appears. We look around sometimes and the world can seem scary. Sometimes we have to look a little deeper to find the good, the decent, the delightful and the potentially pluperfect. And that brings us to today’s topic on the possibility of the Federal Reserve pumping money into the banking system through asset purchases, in other words, Quantitative Easing Part 3. Inflation expectations are falling, if you consider Treasury bonds as a gauge of inflation. The lower outlook for inflation gives the Fed wiggle room to stimulate the economy. Although, right now the Dow looks like a better QE indicator, and it is not indicating QE. The banks can always make a case for QE, but what about the Fed officials who make the actual decisions? St. Louis Federal Reserve President James Bullard says he expects the U.S. economy to perform better than many forecasters anticipate and that the Fed will therefore need to raise interest rates in late 2013, not late 2014 as its policy committee is currently indicating. Minneapolis Federal Reserve President Narayana Kocherlakota thinks the current labor market performance is much closer to maximum employment than the data alone would suggest. A few weeks back, Kocherlakota …

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Monday, May 7, 2012 – The Revolution in Greece and France

DOW – 29 = 13,008SPX +.48 = 1369NAS + 1 = 295710 YR YLD unch = 1.88% OIL +.07 = 98.01GOLD – 3.60 = 1639.50SILV -.25 = 30.19PLAT + 2.00 = 1535.00 The results pretty much followed expectations: An anti-austerity backlash by voters in Greece an France. First attempt at forming Greek coalition fails. Hollande seeks to augment fiscal pact with growth plan. Merkel tells French president-elect “no renegotiation”. Greece, where Europe’s sovereign debt crisis began in 2009, was slightly discombobulated after the election boosted left and right-wing fringe parties, stripping the two mainstream parties that backed a the EU/IMF bailout of their parliamentary majority. Uncertainty over whether the country could avert bankruptcy and stay in the euro deepened on Monday when the leader of the conservative New Democracy party which won the biggest share of the vote, failed within hours to cobble together a government. The leaders of the New Democracy party had been given 3 days to form a government but this morning they said it was impossible. Next in line to try to form a government will be Left Coalition leaders, whose party came second on a platform of rejecting the austerity conditions of Greece’s latest bailout program. So, that might be interesting. The Left Coalition is considered a splinter group of the communist party, and now they are in the spotlight because the socialists were too centrist. The far right Golden Dawn party, essentially neo-nazis, achieved a parliamentary breakthrough. In hard times, voters are receptive to …

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March, Thursday 22, 2012

DOW – 78 = 13,046SPX – 10 = 1392NAS – 12 = 306310 YR YLD -.02 = 2.28%OIL +.16 = 105.51GOLD – 5.20 = 1645.90SILV -.58 = 31.69PLAT – 17.00 = 1624.00 Do you remember hearing that there will be no more bailouts? Well, it’s not just a lone voice. The Dallas Federal Reserve has just issued its annual report and the title is “Choosing the Road to Prosperity. Why We must End Too Big to Fail – Now”. Ending bailouts is not a new idea, but we’ve never really heard it from one of the branches of the Fed. The letter also voices strong opposition to Dodd-Frank, but not for the reasons you might think; rather, that Dodd-Frank doesn’t go far enough. Dallas Fed President Richard Fisher, generally known as one of the most hawkish and conservative Fed Presidents wrote the letter; I’ll share some of the highlights: Letter from thePresidentIf you are running one of the “too-big- to-fail” (TBTF) banks—alternatively known as “systemically important financial institutions,”—I doubt you are going to like what you read in this annual report. Memory fades with the passage of time. Yet it is important to recall that it was in recognition of the precarious position in which the TBTF banks and SIFIs placed our economy in 2008 that the U.S. Congress passed into law the Dodd–Frank Wall Street Reform and Consumer Protection Act. While the act established a number of new macroprudential features to help promote financial stability, its overarching purpose, as …

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