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Wednesday, August 8, 2012 – Rogue Regulators, Central Bank Enablers, and a Jolt of Profit for Morgan Stanley

Rogue Regulators, Central Bank Enablers, and a Jolt of Profit for Morgan Stanley-by Sinclair Noe DOW + 7 = 13,175SPX + 0.87 = 1402NAS – 4 = 301110 YR YLD +.01 = 1.64%OIL +.07 = 93.42GOLD + .30 = 1613.60SILV – .06 = 28.14PLAT + 3.00 = 1414.00 The Dog Days Rally on Wall Street extended to day 4 but the dog is looking tired. The S&P 500 closed above 1400. The Nasdaq Composite closed above 3000 but finished slightly lower on the day. The volume was very light, so it’s hard to find strong conviction in the rally; still it is a rally, or it was. The main driver seems to be the idea that the ECB will, in fact, do whatever it takes to prop up the Euro-union. Today, the Bank of England gave little indication that it would rush to pour in further stimulus even as it cut its forecast for medium-term economic growth in Britain. France’s central bank forecast a contraction in growth going into the third quarter, citing weak demand from the periphery and Britain. The strange case of Standard Chartered Bank just keeps getting stranger. The British bank has been accused by a regulator from New York state of doing business with Iran in violation of sanctions. The regulator has threatened the bank’s charter in New York. The bank denies it did the dirty with the Iranians, or at least they deny they did as much as accused, maybe just a few million in …

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Tuesday, August 7, 2012 – Stay Dry My Friends!

Stay Dry My Friends!-by Sinclair Noe DOW + 51 = 13,168SPX + 7 = 1401NAS + 25 = 301510 YR YLD  +.07 = 1.63%OIL – .22 = 95.23GOLD + .70 = 1613.30SILV + .22 = 28.20PLAT + 6.00 = 1413.00 The head of the Federal Reserve Bank of Boston, Eric Rosengren, wants the Fed to undertake “an aggressive, open-ended bond buying program” that would stop only when the economy’s growth rate accelerates and unemployment begins dropping. Last week, following the FOMC meeting, the Fed said it would “closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability. So, that means the Fed will do something we just don’t know what or when, but things would have to get much much better, otherwise the Fed is somewhat obligated to do something. The Fed’s counterpart in Europe, the ECB is obligated to do “whatever it takes”. Mario Draghi, former Goldman man and now head of the European Central Bank, promised to do “whatever it takes” to save Euroland. Whatever it takes, Mario Draghi didn’t seem to have it. Or maybe he did. The situation in Europe is so complicated it’s hard to tell. So, investors have been fearful one day and cheerful the next. At the beginning of last week they thought all was lost. Then, by the end of the week, stocks were rallying again. Draghi …

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Thursday, August 02, 2012 – ECB Does Nothing – Jobs Tomorrow – Dust Bowl Today

ECB Does Nothing – Jobs Tomorrow – Dust Bowl Today– by Sinclair NoeDOW – 92 = 12,878SPX – 10 = 1365NAS – 10 = 290910 YR YLD -.06 = 1.48%OIL – 1.58 = 89.27GOLD – 11.80 = 1589.30SILV – .31 = 27.23PLAT – 12.00 = 1391.00So, last week, you might recall the stock market had a nice little two day rally based largely upon European Central Bank President Mario Draghi claiming within his mandate, he would do whatever it takes to preserve the euro; which turns out to be not so much. Draghi doesn’t have a bazooka, or even a pea shooter.  Yesterday, the Federal Reserve did nothing as they concluded their FOMC meeting. Today the ECB and the Bank of England did nothing. Perhaps Bernanke did not want to take center stage away from Draghi today. Could the Fed be playing it close to the vest, keeping their fingers crossed hoping for good employment numbers on Friday? For whatever reason, Bernanke is unwilling to try to kick start the economy with more stimulants. Why is he hesitating?  Maybe he’s more scared that additional Fed maneuvers won’t have any real effect than he is scared of a deflationary depression. Maybe he’s more scared that new twisting will have no economic effect. The last thing Bernanke wants is the point of recognition where the Fed is seen to no longer have any effective tools.If Bernanke actually unleashed QE3 and the market didn’t rally or worse, sold off, he would lose face.  Maybe …

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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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