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Monday, August 20, 2012 – Diminished Expectations

Diminished Expectations-by Sinclair Noe DOW – 3 = 13,271SPX -0.03 = 1418NAS -0.38 = 307610 YR YLD un = 1.81%OIL – .05 = 97.70GOLD + 5.40 = 1622.20SILV +.72 = 28.91PLAT + 12.00 = 1496.00 Apple already boasts the largest market value of any public company. Today it became the most highly valued public company ever. With an increase in its share price, Apple broke the record for the biggest market capitalization, $616.34 billion, set by Microsoft on Dec. 27, 1999. Of course, shortly thereafter, Y2K hit and destroyed modern civilization as we know it; or maybe it was because Apple invented the iPod and the iPhone and the iPad, and Microsoft gave us Zune. Who knows?  Apple’s stock closed at $665.15, giving it a market value of $623.52 billion. Microsoft’s 1999 market value is still far higher than Apple’s when adjusted for inflation. The Microsoft of late 1999 would be worth $850 billion in today’s dollars. To beat Microsoft’s inflation-adjusted market value, Apple needs to close at $910. The Microsoft of August 2012 is worth $257 billion. I’m not sure what it says about our economy, that Apple is the most valuable company ever, but I suspect it is problematic.  ECB President Mario Draghi is scheduled to speak at this year’s Jackson Hole symposium. A fellow named Ben Bernanke is already scheduled to speak at the symposium, and so there has been a little speculation that there might be some coordinated action that will be announced. I’m not sure …

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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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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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Wednesday, April 25, 2012 – Bernanke Approximately Right, UK Approximately Wrong, Students Approximately Taxed

DOW + 89 = 13,090 SPX + 18 = 1390NAS + 68 = 302910 YR YLD +.02 = 1.98%OIL -.11 = 104.01GOLD + 2.80 = 1645.30SILV – .12 = 30.81PLAT + 8.00 = 1559.00 If you own shares in Apple, congratulations. It gained nearly $50 to finish at $610, up nearly 9%. If you don’t own Apple, don’t worry about it, don’t chase it. Realize that a big chunk of the move today for the broader market, was really just Apple, but it was a good day, with gainers outpacing losers by 3 to 1. The Federal Reserve wrapped up their FOMC meeting and announced no changes. Wow, what a surprise. The Fed didn’t raise rates – they can’t. They didn’t lower rates – they can’t. They didn’t announce QE3, but they didn’t take it off the table. Bernanke told reporters at a press conference, “We see monetary policy as being approximately in the right place at this point.” He said, “Our intention is to maintain highly accommodative stance of policy for the foreseeable future.” Kind of like QE in Perpetuity. Bernanke stressed that the Fed could purchase more assets if it looked like the economy needed help, but he said some ways to boost the economy, like tolerating higher inflation, would be “reckless.” At the same time, he said it was too early to raise rates, “I think it’s a little premature to declare victory. I think that keeping interest rates low is still appropriate for our economy.” 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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