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Wednesday, January 30, 2013 – GDP Shrinks, Fed Stands Pat

GDP Shrinks, Fed Stands Pat by Sinclair Noe DOW – 44 = 13,910SPX – 5 = 1501NAS – 11 = 314210 YR YLD + .02 = 2.01OIL + .46 = 98.03GOLD + 12.50 = 1677.40SILV + .64 = 32.12 GDP shrank in the fourth quarter, and we had that report on the same day as the Fed wraps up an FOMC meeting. So, I’ve been reading a bunch o’ blogs and articles about how the Fed has been printing money, expanding its balance sheet to more than $3 trillion, failing to generate economic growth, failing to generate jobs, diluting the dollar, and generally condemning the American economy to the inevitable tortures of hyper-inflation. The internets are offering up the full spectrum of opinions: from the idea that the GDP Shows Federal Reserve Just Screwing the Average American to the apologetic Five Reasons the GDP Report is Misleading (hint: the economy will bounce back in a heartbeat, by golly gosh) to Fed Stays the Course: Is Its Monetary Policy Wrong? Let’s start with the GDP report. The economy shrank from October through December for the first time since the recession officially ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles. The Commerce Department said the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That’s a sharp slowdown from the 3.1 percent growth rate in the July-September quarter, and well below expectations of 1% growth. The …

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Tuesday, January 29, 2013 – Stimulus Truths and Tweaks

Stimulus Truths and Tweaks by Sinclair Noe DOW + 72 = 13,954SPX + 7 = 1507NAS – 0.6 = 315310 YR YLD +.03 = 2.00%OIL + .88 = 97.32GOLD + 9.40 = 1664.90SILV + .54 = 31.48 We have a gaggle of economic reports this week and we’ll try to keep up. The Conference Board reported that its gauge of consumer confidence dropped to 58.6 in January, the lowest level since November 2011. Consumers are more pessimistic about the economic outlook and, in particular, their financial situation. The hike in the payroll tax is taking the brunt of the blame for the less-than-rosy outlook. Disposable income is actually declining. It’s hard to be happy when your purse shrinks. The sales price on existing homes dropped in November according to the S&P/Case-Shiller home-price index, down a non-seasonally adjusted 0.1% decrease in November following a 0.2% decline in October. After seasonal adjustments, the 20-city home-price index rose 0.6% in November. Despite the recent decline, prices were 5.5% higher than during the same period in the prior year, for the strongest year-over-year growth since August 2006. Tomorrow, we’ll get a glimpse of 4thQuarter GDP. The economy likely grew at a 1% pace, which is very weak. Also tomorrow, The Federal Reserve wraps up its first FOMC meeting for the new year. They will likely continue with a fairly aggressive approach to stimulate the economy. In December, the Fed committed to adding $45 billion of monthly Treasury purchases to the existing QE3 program to …

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Monday, December 10, 2012 – The Fed After the Twist, Italy After Monti, China After 2030, Warming After Doha

The Fed After the Twist, Italy After Monti, China After 2030, Warming After Doha by Sinclair Noe DOW + 14 = 13169SPX +0.48 = 1418NAS + 8 = 298610YR YLD -.01 = 1.62%OIL -.25 = 85.68GOLD + 8.10 = 1713.60SILV + .16 = 33.37 Economic reports due this week are not likely to be market movers. Tomorrow we’ll see data on wholesale trade, plus the trade deficit; a report on how many new job opening exist. Later in the week, we’ll find out about retail sales. The big event this week is the Federal Reserve FOMC meeting Tuesday and Wednesday. The Fed will be looking at the unemployment numbers from Friday. The unemployment rate fell to 7.7% from 7.9%, but that was because more people dropped out of the labor force. Usually that’s not a good sign because it means jobs are harder to find. Ultimately the Fed wants to see the jobless rate fall to 6% or less, the same levels that prevailed before the 2008 meltdown. Nobody seems to think there will be a big uptick in new jobs. Lackluster hiring means consumer spending is unlikely to rocket higher. Too many people remain out of work and the growth in the average worker’s paycheck isn’t even keeping up with the low increase in annual inflation. Business are waiting for the consumer to spend, consumers are waiting for businesses to hire. Something needs to happen to kick start the economy, a jolt of stimulus, but don’t hold out for …

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Monday, November 19, 2012 – Debtmageddon: the Non-Problem Problem

Debtmageddon: the Non-Problem Problem by Sinclair Noe DOW + 207 = 12,795SPX + 27 = 1386NAS + 62 = 291610 YR YLD +.04 = 1.61%OIL + 1.22 = 86.67GOLD + 18.20 = 1732.90 SILV + .80 = 33.21 Pete Domenici and Alice Rivlin are co-chairs of the Bipartisan Policy Center for Debt Reduction Task Force, offering the following recommendations in an article in the New York Times over the weekend: Economic growth must precede full-scale debt restraint. Congress should take action now to pass legislation phasing in tax reform that yields new revenues and restructuring entitlements to curb the continued growth of federal spending, particularly for health care. We cannot resort to such ham-handed mechanisms as the approaching sequester cuts, large across-the-board tax increases and other elements of the “fiscal cliff.” In late 2010, the task force recommended a holiday from the full 12.4 percent Social Security payroll tax, not the partial 2 percent cut that Congress ultimately passed. The idea is that whether it comes in the form of a payroll tax holiday, an income tax rebate or another similar mechanism, the most pressing priority is to get the economy out of “stall speed.” The task force also suggested a possible “framework” for the lame-duck Congress to pass a modest down payment on deficit reduction in December, while pursuing a comprehensive agreement, a “grand bargain” of sorts, in 2013. If I may break it down in a nutshell; growth before austerity. Federal Reserve Board Chairman Ben Bernanke will travel …

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Wednesday, October 24, 2012 – Do the Hustle

Do the Hustle by Sinclair Noe DOW – 25 = 13,077 SPX – 4 = 1408 NAS – 8 = 298110 YR YLD +.01 = 1.77%OIL – .43 = 88.30GOLD – 6.20 = 1702.50SILV + .06 = 31.83PLAT – 12.00 = 1566.00 Someday, we’ll get through a whole week without having to report on the never-ending string of bad behavior by the big banks. I thought this might be the week. There were other things in the news; the Presidential debate on Monday; the Federal Reserve FOMC meeting today. We even had a proxy for the bad banks; the giant insurance company AIG reached a settlement with 39 states for creating a death list, where they would stop paying on annuities when someone died but they wouldn’t look for beneficiaries of a life insurance policy. Then to top it off the CEO, Robert Benmosche, said he was indignant that nobody in the government had thanked him for paying back the bailout money that kept the company from total collapse 4 years ago. And over the past couple of weeks, Chase and Wells Fargo were sued for shoddy and virtually non-existent underwriting of mortgages that failed. Who was left? You might think the big bad banks would take the week off from the news cycle. Yes, someday, we’ll break the bonds of this gruesome litany of dirty deeds; someday this war will end. But not today. The latest federal lawsuit over alleged mortgage fraud paints an unflattering picture of a doomed …

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Tuesday, October 23, 2012 – Take Me to the Water

Take Me to the Water by Sinclair noe DOW – 243 = 13,102SPX – 20 = 1413NAS -26 = 299010 YR YLD – .03 = 1.76%OIL – .43 = 88.20GOLD – 21.80 = 1708.70SILV – .78 = 31,77PLAT – 38.00 = 1576.00 I’m still trying to figure out how Iran goes through Syria to gain access to the sea; this might take a while, so let’s consider some other topics while we wait. Today, the Dow Jones ended down 1.8% and the S&P 500 was off 1.4%. Why? Why? Who can explain why? Not me. But I can tell you that the Oracles of CNBC have figured it out and they can tell you why the markets moved, at least they can tell you after the fact. Here’s what they spake: Concerns about the strength of corporate earnings, particularly multinationals like DuPont, IBM and McDonald’s; increased selling by liquidity-seeking Europeans; China’s slowing economy; Wilbur Ross decided it might be better to invest in Spanish banks next year; Spain’s GDP continues to shrink; The short-selling ban in Spain expired yesterday; Obama used the word “sequestration” during last night’s debate, reminding people of the fiscal cliff; Fed policy continues to keep assets prices at some level above their fundamentals, but the fundamentals are worsening; Each round of QE has been decreasingly effective; The technicals of the S&P 500; Romney might win the election; Apple’s roll out of the iPad mini might be underwhelming. The iPad mini roll out; it’s small; I don’t …

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Thursday, October 4, 2012 – If I Didn’t Hear It, Did It Happen?

If I Didn’t Hear It, Did It Happen? By Sinclair Noe DOW + 80 = 13,573SPX + 10 = 1461NAS + 14 = 314910 YR YLD +.04 = 1.66%OIL + 3.47 = 91.61GOLD + 11.30 = 1791.30SILV + .33 = 35.07PLAT + 31.00 = 1725.00 Initial claims for state unemployment benefits climbed 4,000 last week to a seasonally adjusted 367,000, the Labor Department. But that followed a drop of 22,000 and a four-week average, which offers a view of trends, held steady at 375,000. The monthly jobs report is tomorrow morning. Today, the Federal Reserve released the minutes of the FOMC’s September 13meeting. Of course, we know the Fed launched QE to Infinity and Beyond, or at least $40 billion dollars a month in mortgage-backed securities, until such time as we see maximum employment or until inflation becomes a problem. From the meeting minutes we learn that there might be limits on QE. The report says: “Most participants agreed that the use of numerical thresholds could be useful in providing more clarity about the conditionality of the forward guidance but thought that further work would be needed to address the related communications challenges.” In other words, there might be limits to acceptable unemployment. Maybe 7%, maybe 5%? We don’t know. And there might be limits to acceptable inflation. Maybe 2%, maybe 3%? We don’t know. We would like to know. If we knew, we could bet on the numbers. Unemployment at 8.2% and inflation at 1.5% equals risk on. Unemployment …

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Wednesday, September 12, 2012 – I Remain Optimistically Antiquated

I Remain Optimistically Antiquated -by Sinclair Noe DOW +9.99 = 13,333SPX + 3 = 1436NAS + 9 = 311410 YR YLD +.07 = 1.76%OIL – .16 = 96.85GOLD – 1.10 = 1732.40SILV -.17 = 33.41PLAT +42.00 = 1653.00 As we get down to FOMC crunch time, the skeptics come out of the woodwork. The Murdoch Street Journal ran a story saying that economists doubt the benefits of another round of bond-buying by the Federal Reserve. They surveyed 47 people, we don’t know how many were just walking through the newsroom, and they generally expect the Fed to start another round of large-scale asset purchases, known as quantitative easing, at its September policy-setting meeting. Another seven expect a move later this year, but not tomorrow. Just five respondents don’t believe the Fed will take action this year. And then there are others who say the economy is horrendous and jobs are not coming back and housing is still weak and all that, but the Fed doesn’t necessarily need to do anything to help support the markets. Some economists don’t see a large impact from a large bond-buying program. On average, they estimate that $500 billion in purchases would only reduce the unemployment rate by 0.1 percentage points and increase gross domestic product by 0.2 points over a one-year period. They estimate such a program would lift the inflation rate by 0.2 percentage points over 12 months. Others argue that QE1&2 didn’t really get the job done, and QE3 would just extend …

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Tuesday, September 11, 2012 – I Woke Up Early Today

I Woke Up Early Today – by Sinclair Noe DOW + 69 = 13,323SPX + 4 = 1433NAS +0.50 = 310410 YR YLD +.01 = 1.70%OIL – .37 = 96.80GOLD + 7.70 = 1733.50SILV + .14 = 33.58PLAT + 12.00 = 1610.00 Rating agency Moody’s says it likely would cut its “Aaa” rating on US government debt, probably by one notch, if negotiations on the federal budget fail. The lower rating by Moody’s would be the equivalent of the rating that Standard & Poor’s put on the US last year when it downgraded the rating following the debate over raising the debt ceiling. Moody’s says that if Congress and the White House don’t reach a budget deal, $1.2 trillion in spending cuts and tax increases will automatically kick in starting Jan. 2. House Speaker John Boehner says he’s not confident that Congress can reach a deal and avoid a downgrade. No serious negotiations are expected until after the November elections. The Federal Reserve’s FOMC policy making meeting commences on Thursday and the central bank is all but certain to extend its plan to keep interest rates low, moving the possible cutoff to 2015 from 2014. Also, it is widely expected the Fed will launch a bond-buying program targeting the mortgage market, QE3, or some new name to describe the same. The guidance on interest rates is supposed to encourage businesses and consumers to invest and spend, stimulating the economy, while the bond purchases are designed to further lower interest rates. …

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Tuesday, September 4, 2012 – Review of the Economic News

Review of the Economic News DOW – 54 = 13,035SPX – 1 = 1404NAS + 8 = 307510 YR YLD +.02 = 1.58%OIL +.26 = 95.56GOLD + 3.60 = 1697.20SILV + .26 = 32.46PLAT  + 21.00 = 1576.00 The Institute for Supply Management manufacturing index fell to 49.6% in August, lower than the 49.8% in July and the worst reading since July 2009. Readings below 50% indicate contraction in manufacturing companies surveyed. It appears to be part of a global trend; there has been a slowdown in manufacturing activity in Asia and Europe. Only eight of 18 industries as tracked by ISM were growing in August, led by printing, primary metals and food. August’s new-orders index fell to 47.1% from 48.0% in July; this points to manufacturers ratcheting down production activity, and that might also lead to a slowdown in hiring. The employment index fell to 51.6% from 52%; still positive but heading in the wrong direction. Another ISM survey of the services sector — things like banking, health care and entertainment — is also expected to show an economy plodding ahead. The services index is forecast to edge down to 52.5 from 52.6. The monthly jobs report is always an important chunk of economic data, and this Friday’s report takes on a little added significance because the Federal Reserve FOMC will be meeting next week to determine policy, and most likely announce something like QE3. It’s expected the economy added about 120,000 new jobs in August. While that’s enough …

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