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Tuesday, July 24, 2012 – The Dog Days of Summer

The Dog Days of Summer– by Sinclair NoeDOW – 104 = 12,617SPX – 12 = 1338NAS – 27 = 286210 YR YLD -.03 = 1.40%OIL +.58 = 90.29GOLD + 4.40 = 1582.10SILV – .10 = 27.06PLAT – 13.00 = 1391.00These are the Dog Days of Summer; those lazy, languid, sultry days where not much happens; theoretically.The economy could use another boost, and it won’t come from fiscal policy. Can the Federal Reserve provide it? Chairman Ben Bernanke keeps insisting that the central bank is not out of ammunition, and in a literal sense he is right. After all, the Fed has not yet exhausted its bag of tricks. It is still twisting the yield curve.  Maybe Bernanke has a few tools he hasn’t pulled out yet. For example, some sort of “funding for lending” plan that favors banks that are actively making loans; lowering the rate the central bank pays financial institutions for parking their reserves at the Fed, currently at 0.25 percent.Or, the Fed can purchase more assets; they are clearly still considering a third bout of quantitative easing, or QE3, and recent weakness in the economy could prompt policymakers to launch such a program as early as September. The problem is that the economy is building up resistance to monetary stimulus that only stimulates the banks and the stimulus never works its way to Main Street. Another alternative is the possibility of cutting the rate of interest on excess bank reserves (IOER), now at a quarter percentage point, all …

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Thursday, July 17, 2012 – Accepting Unacceptable Manipulation or Dude, What Happened To My Pension

Accepting Unacceptable Manipulation or Dude, What Happened To My Pension?-by Sinclair NoeDOW + 78 = 12,805SPX +10 = 1363NAS + 13 = 291010 YR YLD +.04 = 1.50%OIL – .21 = 89.01GOLD – 6.20 = 1583.40SILV unchanged = 27.41PLAT + 1.00 = 1424.00Federal Reserve Chairman Ben Bernanke went to Capitol Hill today. He made some remarks; he took some questions; he did not surprise.  Bernanke said in his testimony:”Reflecting its concerns about the slow pace of progress in reducing unemployment and the downside risks to economic growth, the committee made clear at its June meeting that it is prepared to take further action.” Prepared to act but not acting right this moment. Nothing new. If you were looking for a signal, you didn’t really get it.Bernanke said the risks of a surge in inflation were low and that there was a modest risk of a broad-based decline in prices.Bernanke said  the Fed could also use communications tools, such as extending its pledge to hold rates exceptionally low. He cited the possibility of additional bond buying — whether Treasury debt or mortgage-backed securities — lending through the Fed’s emergency loan window, and lowering the rate the Fed pays banks on reserves held at the central bank. Which is almost a new idea. Holdings of cash and other liquid assets at US industrial corporations rose to $1.7 trillion in March 2012; that’s cash held in short-term and low-risk instruments, which is what the Fed has been selling to buy longer-term as part of …

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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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Tuesday, June 19, 2012 – There is No Escape for the Fed – by Sinclair Noe

06192012 ScriptDOW + 95 = 12,837SPX + 13 = 1357NAS + 34 = 292910 YR YLD +.04 = 1.62%OIL – .12 = 84.23GOLD – 10.80 = 1618.90SILV – .32 = 28.52PLAT – 2.00 = 1487.00The Federal Reserve FOMC is meeting today and tomorrow to determine monetary policy for the next few weeks. Here is what they will probably say tomorrow. They won’t lower interest rates; interest rates are at zero; interest rates are actually already negative when you consider the effects of inflation. Operation Twist is scheduled to expire in about two weeks. The idea behind Operation Twist is that the Fed sells shorter-term securities and buys longer-term securities with the goal of reducing long-term interest rates to encourage borrowing and spending. The yield on the 10-year note is 1.62%, so rates are pretty low even though the Twist hasn’t been able to encourage a big round of borrowing and spending. Low interest rates alone have not been enough to create demand. Operation Twist is the Fed pushing on a string – which is to say, supply side economics is a crock.Here’s the conundrum for the Fed – how do they exit Operation Twist without creating a problem, possibly unwinding those nice, ultra-low interest rates? The Fed might announce a limited extension of the Twist, maybe to September or they might just offer a soft extension – saying something like: “we will monitor long-term rates and stand ready to maintain stability”. As far as QE3 – not likely. Europe hasn’t collapsed, …

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Monday, June 18, 2012 – G-20 Declares Ceviche Tasty and Democracy Messy – by Sinclair Noe

DOW – 25 = 12,741SPX +1 = 1344NAS + 22 = 289510 YR YLD un=1.58%OIL -.26 = 83.01GOLD + 2.00 = 1629.70SILV un= 28.84PLAT – 1.00 = 1489.00The results of the Greek election shows conservative New Democracy taking 29 percent, with the radical leftist Syriza bloc just behind on 27. The Pasok Socialists were set to take 12 percent of the vote. The scenario is similar to the results of an earlier round of voting. ND also came in first in May 6 elections, again with Syriza running a close second, but failed to form a government then. And 38% of eligible voters did not vote yesterday; that’s more votes than any one party received. The headlines say that a pro-bailout, pro-remain in the Euro-union party won the Greek elections; it’s not that simple. There was no majority. The next step is for New Democracy leader Antonis Samaras to form a coalition government; not an easy or certain task, and it must be done within the next 10 days. Look for a combo of the New Democracy conservatives and  the Pasok socialists; the same group that governed Greece into this mess in the first place. Pasok, the Socialist party, called for a government that would include Syriza, the far left party, but  Syriza ruled out joining a coalition that would stick to the punishing bailout terms that have helped condemn Greece to five years of record recession. Alexix Tsipras, the leader of Syriza, had vowed to tear up the terms, betting that …

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Friday, June 1, 2012 – Weak Jobs Report – What’s Next? – by Sinclair Noe

DOW – 274 = 12,118SPX – 32 = 1278NAS – 79 = 274710 YR YLD – .11 = 1.47%OIL – 3.27 = 83.26GOLD + 66.10 = 1627.30SILV + .97 = 28.78PLAT + 32.00 = 1451.00 Yesterday we set the stage for today’s jobs report; anything under 150,000 jobs gained would be considered bad. Mitt Romney called it devastating. In fact it was not quite as devastating as the 598,000 jobs lost in January 2009. The economy isn’t losing jobs, just not gaining enough. Nonfarm payroll employment in May increased by 69,000. The unemployment rate ticked up to 8.2%. This was a weak month, and the previous two months were revised down. The change in total nonfarm payroll employment for March was revised from +154,000 to +143,000, and the change for April was revised from +115,000 to +77,000; combined that works out to 47,000 fewer jobs than originally reported. The Labor Force Participation Rate increased to 63.8% in May. This is the percentage of the working age population in the labor force. This means more people felt good enough about economic conditions to jump back into the labor market and look for a job; the bad news is that they didn’t find many jobs. The U6 rate, which measures unemployed and underemployed was 14.6%. JPMorgan reported today: “Taking down the US growth projection has almost become a summertime ritual, and in keeping with tradition we are shaving our 2012 GDP outlook (Q4/Q4) from 2.3% to 2.1%. Over the first five months …

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Thursday, April 12, 2012

DOW + 181 = 12,986 SPX + 18 = 1387NAS + 39 = 3055 10 YR YLD +.02 = 2.05%OIL +.08 = 103.72GOLD + 15.60 = 1676.30SILV + .77 = 32.48PLAT + 20.00 = 1611.00 The Federal Reserve Propaganda Tour continued last night with performances by Janet Yellen and William Dudley, the head of the New York Fed. Dudley said, “we cannot lose sight of the fact that the economy still faces significant headwinds and that there are some meaningful downside risks… the incoming data on the U.S. economy has been a bit more upbeat of late, suggesting that the recovery may be getting better established. But, while these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods in terms of generating a strong, sustainable recovery. On the inflation front, the year-over-year rate of consumer price inflation has slowed in recent months, and despite the recent rise of gasoline prices, we expect inflation to moderate further in 2012.” To translate, the Fed isn’t worried about inflation and they have given themselves a green light for QE3 and they’ll juice the economy with piles of free money when they feel like it. Of course, that’s not the final word on the matter; St. Louis Fed President James Bullard says he sees the unemployment rate at 7.8% by the end of the year, noted that March’s monthly employment report was just one “mediocre” report and not an immediate concern that would push the …

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Financial Review

Financial Review for Wednesday, April 4, 2012

DOW -124 = 13,074SPX – 14 = 1398NAS – 45 = 306810 YR YLD -.04 = 2.24% OIL +.57 = 102.04 GOLD – 25.40 = 1621.40SILV – 1.32 = 31.46PLAT – 43.00 = 1604.00 So, we made it through the first quarter, and it was just delightful, one of the best first quarter rallies in years; the S&P up about 12%, the NASDAQ up 18%. Do you think the S&P will continue at that pace in the second, third, and fourth quarters? Do you think the S&P will gain 48% this year? Actually a bit more. Do you think the NASDAQ will gain 72%? Let’s sort through what it really means. Are we seeing recovery or was it just a cyclical bull in a secular bear? Remember hearing about green shoots? Remember when they withered on the vine? How do recognize a genuine, sustainable recovery? First you have to realize there is an economic ebb and flow and there are some fairly predictable patterns that emerge. There were good years for investors back in the Great Depression but it was still a Great Depression. And we still have threats to the economy. Treasury Secretary Timothy Giethner said today that fallout from the European debt crisis along with fears of Iran and higher oil prices posed the biggest threats to the U.S. economy. “Europe is still facing a very difficult, very challenging period. They are likely to have weak growth. You have, obviously, the fear of Iran and oil prices, even though that is …

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04032012 Script DOW – 64 = 13,199SPX – 5 = 1413NAS – 6 = 311310 YR YLD +.09 = 2.28%OIL +.07 = 104.08GOLD – 31.20 = 1646.80SILV -.31 = 32.78PLAT – 10.00 = 1647.00 Stocks slumped, bond yields rose, the dollar strengthened, and Wall Street traders experienced DT shakes as they read the Federal Reserve’s March FOMC meeting minutes. There was no direct mention of QE3, the Fed’s big money giveaway to the big banks. And so, the traders started twitching and squirming. Where would they get their next fix of free money? Market expectations for more Fed easing—both quantitative easing or an extension of its ‘operation twist’—have seesawed back and forth in the past several weeks. In the beginning of March, markets factored out quantitative easing based on comments from Fed Chairman Ben Bernanke that it might not be needed and that the economy was showing improvement. At the time, yields rose and stocks also held gains. But some weaker economic reports and new comments from Bernanke last week, defending the Fed’s easing stance, while not new, helped renew expectations for more easing. The minutes of the March 13 FOMC meeting show the voting members talking about more stimulus if the economy deteriorates. It also showed that the recent economic data did not materially change the forecast for 2013, or 2014. They also repeated past concerns about housing and unemployment, as well as discussed recent improvements in employment. Bernanke last week said the improvement in employment may be the …

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March, Wednesday 21, 2012

DOW – 45 = 13,124SPX – 2 = 1402NAS + 1 = 307510 YR YLD -.08 = 2.29%OIL -.36 = 106.91GOLD -.70 = 1651.10SILV +.01 = 32.27PLAT – 16.00 = 1646.00 Federal Reserve Chairman Ben Bernanke  testified on Europe to the House Committee on Government Oversight and Reform. In his prepared remarks, Bernanke said: “Financial strains in Europe have also shown through to our financial markets. During times when financial conditions in Europe were at their most turbulent, investors around the world retreated from riskier assets. In the United States, these pullbacks decreased stock prices increased the costs of issuing corporate debt, and reduced consumer and business confidence. In addition, U.S. financial institutions that were thought to have substantial exposures to Europe saw their stock prices fall and their credit spreads widen.” “The difficulties in the euro area have affected the U.S. economy,” Bernanke said. “The European Union accounts for roughly one-fifth of U.S. exports of goods and services. Not surprisingly, U.S. exports to Europe over the past two years have underperformed our exports to the rest of the world. In addition, weaker demand from Europe has slowed growth in other economies, which has also lowered foreign demand for our products.” Bernanke said: “U.S. financial firms and money market funds have had time to adjust their exposures and hedge their risks to some degree as the European situation has evolved, but the risks of contagion remain a concern for both these institutions and their supervisors and regulators.” In particular, Bernanke …

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