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Tuesday, July 31, 2012 – Waiting on Godot, Draghi, Bernanke, DeMarco, the Flood, and For The Lights to Come Back On

Waiting on Godot, Draghi, Bernanke, DeMarco, the Flood, and For The Lights to Come Back On-by Sinclair NoeDOW – 64 = 13,008SPX – 5 = 1379NAS – 6 = 293910 YR YLD -.01 = 1.49 OIL – 1.78 – 89.89GOLD – 7.00 = 1615.90SILV – .18 = 28.10PLAT + 1.00 = 1421.00We wrap up the month of July. Let’s look at the scorecard; for the month, the Dow Industrial gained 128 points; the S&P 500 index gained 17 points; the yield on the 10 year treasury note dropped 9 basis points. S&P Case Shiller index of home prices rose  2.2% in May. All 20 cities in the index saw monthly gains. On a year-over-year basis, prices are down 0.7% nationally, the smallest fall in 18 months. Phoenix prices have climbed 11.5% – the strongest in the nation, while Atlanta’s have dropped 14.5%. Meanwhile, Corelogic reports there were about 60,000 completed foreclosures in June, down from about 80,000 in the same month last year. According to the report there were roughly 3.7 million homes lost to foreclosures since  2008. Ed DeMarco, the acting chief of the regulator for Fannie and Freddie, the Federal Housing Finance Agency, said in a letter to the top Republican and Democrat on the Senate Banking Committee that “after much study,” he has concluded that Fannie and Freddie’s participation in the Obama administration’s program to cut the amount owed by underwater borrowers would “not make a meaningful improvement in reducing foreclosures in a cost effective way for taxpayers.”Treasury Secretary Tim …

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Monday, July 30, 2012 – A Convergence of Central Bankers

A Convergence of Central Bankers-by Sinclair NoeDOW – 2 = 13,073SPX – 0.67 = 1385NAS – 12 = 294510 YR YLD -.05 = 1.50%OIL – .11 = 89.95GOLD – 1.70 = 1622.90SILV +.39 = 28.28PLAT + 5.00 = 1422.00This week features a convergence of central bankers: the ECB, the BOE, and the Fed; toss in a jobs report to finish the week and the fate of the global economy hangs in the balance. Maybe, maybe not;what we can say is that the game of kick the can down the road is running out of road. A quarter point rate cut from the ECB will not satisfy anybody. ECB President Mario Draghi has promised to do whatever it takes; now he is being put to the test. Germany will be required to step up; the ECB will be required to function as a global central bank and throw off its limitations. If Draghi and the ECB can’t control the downward spiral of the debt debacle in Spain and Italy, the entire global economy could start to crumble. Too dramatic? Consider China, India and Brazil are facing slower economic growth and a broken credit cycle; the US is facing the prospect of a fresh round of QE or some other tool to lift us out of a downturn – and let’s not even spend time today on the fiscal cliff. The International Monetary Fund issued this warning:  “the euro area crisis has reached a new and critical stage … raising questions about the …

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Thursday, April 26, 2012 – Everybody Loves Free Money

Everybody Loves Free Money– by Sinclair NoeDOW +211 = 12,887SPX + 22 = 1360NAS + 39 = 289310 YR YLD +.02 = 1.43%OIL +.02 = 89.41GOLD + 11.30 = 1617.10SILV + .20 = 27.64PLAT + 5.00 = 1411.00Pop Quiz: What do Wall Street bankers love? Free money. They swoon at the prospect of  money being redistributed from taxpayers to bankers. You might say they are socialists, in this regard; if redistribution of wealth is your definition of socialism. This morning European Central Bank President Mario Draghi declared “the ECB is ready to do whatever it takes to preserve the euro…and believe me, it will be enough.”We don’t know the details. Draghi wasn’t actually handing out euros to the bankers, but the idea is that there will be a European version of Quantitative Easing, possibly a direct bond purchase program.The euro rallied against the dollar. European stock exchanges jumped. Commodity prices jumped. The Yield on Spanish and Italian bonds dropped. Yields on German and US bonds rose as prices dropped. And US stocks moved higher. The ECB announcement was a put, a floor under the markets. For bankers and traders, the announcement flicked the switch to “risk on”, because even if they lose money, the ECB will just print more. Draghi opening the door to a Bernanke-style monetary policy in Europe is a big deal — at least for the financial markets. This sort of stimulative policy does a poor job of circulating money through the broader economy. Still, the market was …

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Thursday, July 5, 2012 – The Incredibly Massive Libor Scandal, Snakes, Plus the Halftime Report

The Incredibly Massive Libor Scandal, Snakes, Plus the Halftime Reportby Sinclair NoeDOW – 47 = 12,896SPX – 6 = 1367NAS +.03 = 297610 YR YLD -.03 = 1.60OIL +4.46 = 92.12GOLD – 12.80 = 1604.90SILV – .59 = 27.80PLAT – 16.00 = 1479.00It was a busy day for the central bankers. It started with the Bank of England. A couple of months ago, the BoE stopped bond purchases; today they resumed the practice. The Bank of England Governor, Mervyn King announced they will increase bond purchase to 375-billion-pounds, or about $585-billion-dollars. They think this will help pull the UK from recession but they admit output will likely remain sluggish after contracting for the past two months. A few minutes later, the People’s Bank of China cut its key interest rate for the second time in a month  and allowed banks to offer bigger discounts on their own lending costs. The one-year lending rate will fall by 31 basis points to 6 percent and the one-year deposit rate will drop by 25 basis points to 3 percent effective tomorrow. Banks can offer loans of as much as 30 percent less than benchmark rates.A few minutes later, the European Central Bank cut its key interest rate by 25 basis points to a record low of 0.75 percent. ECB President Mario Draghi questioned the economic impact of cutting rates but did it anyway. He said the ECB is not “running low on policy options” but he didn’t say what the other options are. Draghi claimed …

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Friday, June 29, 2012 – It’s Almost Like Free Money, Woohoo!

It’s Almost Like Free Money, Woohoo! – by Sinclair NoeDOW + 277 = 12,880SPX + 33 = 1362NAS + 85 = 293510 YR YLD + .08 = 1.66%OIL + 7.18 = 84.87GOLD + 47.10 = 1600.10SILV + 1.17 = 27.59PLAT + 58.00 = 1454.00All right gang – what do the markets love? Free money. When central banks give free money to the banks (and let’s be clear, they only give free money to banks not to regular people) the bank traders grab the loot and scamper off to the casino or to the trading desk (same difference), and it’s risk on.  Next thing you know the Dow is up 277. Woohoo, this economics stuff is easy. Sometimes, just the promise of free money is enough.The past couple of days the big wigs in Euro-land held an emergency summit in Brussels. This was their 20th emergency summit, so expectations were diminished. And just when it looked like an unproductive weekend full of waffles and chocolates; they announced a blockbuster deal (think John Carter, not Avatar). They have a plan for long term fiscal union, and a plan to save Spain and Italy from contagion. They’ll use the ESM, the European Slush Mechanism to directly inject capital straight into the banks, just like junkies on the mainline. And this bailout money would not be senior to existing debt. You may remember that caused  a problem for the Greek bailout, when the ECB forced Greek bondholders to take big haircuts but the ECB debt was not discounted at …

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Friday, June 1, 2012 – Someday the Violence Will End – by Sinclair Noe

DOW + 93 = 12,554SPX + 10 = 1325NAS +  27 = 285810 YR YLD -.02 = 1.64%OIL – .47 = 84.35GOLD + 6.20 = 1595.70SILV -.06 = 28.63PLAT – 10.00 = 1437.00 For the week, the Dow advanced 3.6 percent, the S&P 500 rose 3.7 percent and the Nasdaq jumped about 4 percent. It was the best percentage weekly gain for all three indexes since December. President Obama held a White House press conference this morning. The initial focus of the prepared remarks dealt with the European economic problem, not a Euro-debt crisis as the president noted. Obama went on to talk about the US economy and a few other issues. Obama tried to explain how the European economic problems could impact the American recovery and pushed Congress to pass parts of his “to-do” list aimed to stimulate economic growth. But during a question and answer session, the president said the private sector is “doing fine,” and he referenced the importance of jobs losses in the public sector. Mitt Romney criticized him for being “out of touch,” and so Obama backtracked and said the economy is not doing fine and he said: we’ve actually seen some good momentum in the private sector… record corporate profits…so that has not been the greatest drag on the economy.” He once again pressed Congress to provide aid to states to employ public sector workers including teachers and provide small businesses with tax breaks to help rejuvenate a sluggish recovery. Of course that isn’t …

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Thursday, June 7, 2012 – Mr Bernanke Goes to Washington – by Sinclair Noe

DOW + 46 = 12460 SPX -0.14 = 1314NAS – 13 =283110 YR YLD unch = 1.65%OIL – 1.14 = 83.68GOLD -31.20 = 1589.50SILV -.84 = 28.69PLAT – 23.00 = 1447.00 The European Union released GDP was unchanged month to month and declined 0.1% from a year ago. Mari Draghi, the President of the European Central Bank announced that interest rates would stay at 1%. Draghi did not make a major policy announcement although it was widely anticipated that he would. However, he did state that the ECB would continue its main refinancing operations to provide liquidity to European banks. Fitch just cut its credit rating for Spain from A to BBB with a negative outlook. That’s the same credit rating as Kazakhstan. Fitch estimates the Spanish banking system will need between $60 and $120 billion in additional capital to cover potential losses on their domestic loan portfolios. Apparently the Grand Euro-plan is to maintain unbending monetary policy over multiple and diverse and increasingly frail economies with the justification that there is no gain without pain and suffering will eventually make you feel better, combined with a lack of unity and failure to cooperate on anything other than the destruction of democratic processes imbued with a hint of hubris that the technocrats are much smarter than the hoi polloi despite a seemingly non-stop rainstorm of random policy blunders and dogged consistency in remaining behind the curve. Yesterday I told you: “Still, the market was looking for the Fed to ride …

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Wednesday, June 06, 2012 – Rally for Central Bank Juice – by Sinclair Noe

DOW + 286 = 12,414 SPX + 29 = 1315NAS + 66 = 284410 YR YLD +.10 = 1.65%OIL +.51 = 85.53GOLD + 2.80 = 1620.70SILV +.90 = 29.53PLAT + 26.00 = 1468.00 There have been several ideas floated to explain today’s rally on Wall Street: the markets were oversold, it was a technical bounce off the 200 day moving average, it was a dead cat bounce, traders who have shorted the market had to cover their positions, a response to Election Tuesday results, seller exhaustion, re-balancing, or my favorite – bargain hunting. How quick we forget. Goldman Sachs has already announced they expect the Federal Reserve to juice the economy and soon. So, apparently the work order has been submitted and now we just wait to see if Helicopter Ben can deliver the goods. Today, the general market feeling was that some central bank somewhere would start throwing money at the banksters. European Central Bank President Mario Draghi suggested that further stimulus to tackle the euro zone’s debt crisis would not necessarily be forthcoming, but speculation persisted that the ECB could act if financial market tensions intensify further. The ECB left interest rates unchanged following its policy meeting today. The Euro economy is standing at the edge; unemployment is soaring; the Spanish banking system is on the verge of collapse; Greece is already toast. And it looks like the ECB is trying to make sure the Euro-politicians know they won’t get any relief unless they enforce even more austerity …

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Tuesday, May 29, 2012 – Dithering About Europe – by Sinclair Noe

DOW + 125 = 12,580SPX + 14 = 1332NAS + 33 = 287010 YR YLD -.01 = 1.73%OIL +.08 = 90.84GOLD – 18.90 = 1555.80SILV -.55 = 27.98PLAT – 9.00 = 1432.00 The reason du jour for today’s market gains: positive news regarding Greece. Really? I’m not buying it. Make up your own reason for today’s gains because we are just as likely to see declines tomorrow. Still, Europe is important. Philadelphia Federal Reserve Bank President Charles Plosser said Monday that people in the United States have no need “to get all in a dither” over Europe’s debt crisis. Plosser feels that Europe’s economic problems could even benefit the US in the short term. It is “not an unreasonable argument,” he said, that low US interest rates and gas prices in response to the uncertainty in Europe’s financial situation could offset any potential difficulties for the American economy. Plosser said Europe “is just throwing a lot of noise into the system right now. It makes reading the tea leaves particularly difficult right now.” He noted, however, that a “flood of liquidity” into the US seems much more likely than investors running from US financial institutions. But, he added, the Fed will be able to deal with any fallout from Europe’s economic troubles. He believes the Fed has the necessary tools to deal with the situation, no matter what the situation. So, how is the Euro situation likely to be resolved? Well, the Greek election is June 16, so the Euro …

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Friday, May 18, 2012 – Europe, Before the Flood – by Sinclair Noe

DOW – 73 = 12,369SPX – 9 = 1295NAS – 34 = 277810 YR YLD un = 1.70%OIL – .57 = 93.41GOLD + 17.80 = 1593.10SILV +.67 = 28.82 PLAT + 2.00 = 1461.00 “He hath indeed better bettered expectation than you must expect of me to tell you how.” The Facebook Frenzy turned out to be a fairly orderly IPO. Share prices fluctuated but did not collapse nor did they soar; which means the price and quantity were about right; the underwriter was competent and reasonably accurate. The NASDAQ had some trouble executing trades but that was a relatively minor problem. Now, the new Facebook millionaires and billionaires have some heavy lifting to prove their value. Time will tell, and good luck to them in their efforts. FB +.23 = 38.23 I know its the biggest internet IPO ever, but in reality it’s much ado about nothing. The European economic crisis is expected to top the agenda at the G8 meeting tomorrow at Camp David. In Greece, voters will soon head to the polls for another round of elections which will be viewed by many as a referendum on the euro. The European Commission and the European Central Bank have been working on contingency plans in the event of a Greece exit from the 17-nation euro zone. Concern about whether Greece’s troubles would spread to other European nations hit the market last fall. It’s hard to imagine between what went on last fall and now, that a lot of …

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