Financial Review

Third Quarter Wrap

http://media.blubrry.com/eatthebankers/p/content.blubrry.com/eatthebankers/SINCLAIR_NOE-SEG_1-09-30-2014.mp3Podcast: Play in new window | Download (Duration: 13:15 — 6.1MB)Subscribe: Apple Podcasts | Android | RSSFinancial Review DOW – 28 = 17,042 SPX – 5 = 1972 NAS – 12 = 4493 10 YR YLD + .02 = 2.51% OIL – 3.14 = 91.43 GOLD – 6.30 = 1209.70 SILV – .49 = 17.07 We wrap up the third quarter of 2014. The Dow Jones Industrial Average is up 3.4% year to date; and it is up about 11% from the lows of February. Ten of the 30 Dow stocks are up more than 10% year to date. Eight of the Dow stocks are in negative territory for the year, even after adding in divdends. The best performing Dow stocks are Intel (up 37% ytd) and Microsoft (up 28% ytd). The worst performing Dow stocks are Boeing (down 5% ytd) and United Technologies (down 6% ytd). The Dow lost 55 points, or 0.3%, for the month, and for the third quarter the Dow added 217 points or 1.3%. The S&P 500 dropped 31 points, or 1.5% in September, and added 12 points for the quarter; and that was good enough for the seventh consecutive quarterly gain, the best run for the S&P 500 since 1998. The Nasdaq Composite lost 87 points, or 1.8%, for the month, but added 85 points for the third quarter. The Russell 2000 index of small cap stocks lost 69 points, or 5.8% in September; and posted a loss of 98 points, or 8.1% for …

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Financial Review

Incredibly Orwellian Record High

http://media.blubrry.com/eatthebankers/p/content.blubrry.com/eatthebankers/SINCLAIR_NOE-SEG_1-09-17-2014.mp3Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB)Subscribe: Apple Podcasts | Android | RSSFinancial Review DOW + 24 = 17,156 SPX + 2 = 2001 NAS + 9 = 4562 10 YR YLD + .01 = 2.60% OIL – .90 = 93.98 GOLD – 11.70 = 1224.20 SILV – .16 = 18.62 The Dow Jones Industrial Average closed at a record high of 17,156.85; the first record high for the Dow since July. The Dow set an all-time intraday high of 17,221.11. It was the sixteenth record close for the blue chip index in 2014. The stock market action today was focused on the Federal Reserve. I suppose we could say the same thing about the past 6 years. Today, the Federal Reserve wrapped up its FOMC meeting. The FOMC stands for Federal Open Market Committee, which sounds incredibly Orwellian. The meeting was a rousing success; we know this because the media coverage can’t quite figure out whether the Fed will raise interest rates sooner or later, or whether the economy is weaker or stronger. While the much analyzed phrase “considerable time” remained in the FOMC statement, the newly announced scheme for interest rate normalization shows that higher rates are in the cards. The FOMC also said labor market conditions improved but a significant amount of slack remains. The Fed said it would end the bond-buying program known as quantitative easing in October. The Fed will purchase $15 billion of mortgage and Treasury bonds in October and …

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Financial Review

Wednesday, June 18, 2014 – Forecasts Are Subject to Change

Forecasts Are Subject to Change by Sinclair Noe   DOW + 98 = 16,906 SPX + 14 = 1956 NAS + 25 = 4362 10 YR YLD – .04 = 2.61% OIL – .15 = 105.72 GOLD + 5.80 = 1278.50 SILV + .14 = 20.00   The Federal Reserve FOMC meeting wrapped up today. The Fed issued a statement that was almost a carbon copy of the April statement. The Fed said that growth “has rebounded in recent months” and the labor market indicators “generally showed further improvement.” The central bankers noted that business fixed investment had “resumed its advance” after saying that it “edged down” in April. The only negative comment was that the housing sector “remained slow.”   The Fed will hold interest rates steady for now, and probably well into next year; and they will continue to cut back on their large scale asset purchase program by another $10 billion per month. So, starting in July, the Fed will only buy $35 billion in Treasuries and mortgage backed securities.   The Fed statement was generally upbeat: “Economic activity will expand at a moderate pace and labor market conditions will continue to improve gradually. Household spending appears to be rising moderately and business fixed investment resumed its advance.”   Fed Chairwoman Janet Yellen held a press conference and the topic of inflation was brought up. The feeling is that the Fed wants to see solid signs of recovery, and inflation isn’t a concern; those inflation numbers are …

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Financial Review

Monday, June 16, 2014 – Manic Monday

Manic Monday by Sinclair Noe DOW + 5 = 16,781 SPX + 1 = 1937 NAS + 10 = 4321 10 YR YLD – .01 = 2.59% OIL – .12 = 106.79 GOLD – 4.20 = 1272.70 SILV un = 19.77   It’s Monday, and that means mergers. Today’s acquisition news comes from Medtronics, the medical device maker, announcing it will acquire Covidien for nearly $43 billion. Medtronics was founded in a garage in Minneapolis in 1949, but they will change their headquarters to Ireland, which is where Covidien has been headquartered since 2009. Covidien is actually a Massachusetts company, and they operate out of Massachusetts. Medtronics will continue to operate out of Minneapolis; the whole deal is about a lower tax rate, and for Medtronics, the ability to repatriate $20 billion in offshore profits, without paying tax.   Meanwhile, the IPO market remains white hot, and 14 companies will come to market this week. So far this year 124 companies have priced in the US, up 57% from a year ago. Total proceeds raised come to $25.8 billion, up almost 41% from 2013. Data today showed industrial production climbed more than forecast in May. Output at factories, mines and utilities rose 0.6% after a revised 0.3% drop in April that was smaller than previously estimated. In a separate report, the New York Fed’s Empire manufacturing report rose to 19.28, better than expectations.   The Fed FOMC meets later this week to determine monetary policy. After their meeting concludes Wednesday, …

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Financial Review

Wednesday, April 09, 2014 – Feeding Time at the ZIRP Trough

Feeding Time at the ZIRP Troughby Sinclair Noe DOW + 181 = 16,437SPX + 20 = 1872NAS + 70 = 418310 YR YLD un = 2.68%OIL + 1.04 = 103.60GOLD + 4.30 = 1313.30SILV  – .22 = 19.95 In an otherwise light week for economic news, the big report is today’s release of the FOMC minutes from last month’s meeting. No surprises. You may recall that after the last meeting, Chairwoman Janet Yellen talked about the possibility of raising the fed funds target rate after a “considerable time”; when pressed she indicated a “considerable time” was about six months after the Fed ends it asset purchases under Quantitative Easing. That would mean late spring or summer of 2015. Fed policymakers were unanimous in wanting to ditch the thresholds they had been using to telegraph a policy tightening; no hard and fast target of 6.5% unemployment or 2% inflation. The minutes indicate the Fed would like to see more improvement in the economy; the emphasis on quality rather than quantity. In other words, the Fed remains dovish, and they will taper but they will also keep rates low for a long time. And also, those “dots” are over-rated. The dots are actually charts suggesting the fed funds rate would top 2% by the end of 2016. In the minutes published today, several policy-makers claim the charts overstated the shift in projections, which would suggest the Fed is not ready to tighten policy. A couple of the voting members wanted to commit …

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Thursday, March 13, 2014 – White Smoke

White Smokeby Sinclair Noe DOW – 231 = 16,108SPX – 21 = 1846NAS – 62 = 426010 YR YLD – .07 = 2.65%OIL + .25 = 98.24GOLD + 3.90 = 1372.10SILV – .15 = 21.28 Let’s start with some economic news, and then we’ll get to today’s anniversary (yes, we have another one to talk about). The federal budget deficit narrowed in February, shrinking 5% from a year earlier as receipts jumped and spending only modestly rose. The shortfall was $194 billion for February, versus the $204 billion recorded in the same month a year ago. The deficit has been steadily improving in the past several years, dropping to $680 billion in fiscal 2013. Retail sales increased 0.3% from January to February; December to January sales were revised lower by 0.4%; sales were up 1.5% from February a year ago. Retail sales excluding gasoline increased by 2.2% on a year to year basis. Initial claims for unemployment benefits for the week ending March 8, decreased by 9,000 to 315,000. Since federal unemployment insurance expired on Dec. 28, an estimated two million Americans have missed out on the benefits. Today, a bipartisan group of Senators reached a deal to extend federal long-term unemployment insurance for 5 months. The deal would be distributed retroactively to when benefits ended in December. The cost of about $10 billion would be offset by some tricky accounting known as “pension smoothing”. The bill still needs to clear a Senate vote, probably in late March; then it …

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Wednesday, February 26, 2014 – Inequality With a Dash of Salt

Inequality With a Dash of Salt by Sinclair Noe DOW + 18 = 16,198SPX + .04 = 1845NAS + 4 = 429210 YR YLD – .03 = 2.67%OIL +72 = 102.55GOLD – 11.80 = 1330.80SILV – .68 = 21.32 Sales of new single-family homes started 2014 with surprising strength, with January posting the fastest pace in more than five years. Home sales jumped 9.6% in January to a seasonally adjusted annual rate of 468,000, hitting the highest level since July 2008. Today’s sales news follows a string of recent reports signaling recent sputtering in the housing market. The data, to be fair, have a huge confidence interval—plus or minus 17.9% in January. That means we can’t know for certain whether sales rose or fell during the month. On a three-month average, sales rose 1.2% in January. Sometimes you have to take a look at economic data with a dash of salt. Bank earnings jumped in the fourth quarter, but not solely because of increased net income. According to the Federal Deposit Insurance Corporation, financial institutions in the US earned a whopping $40.3 billion in net income in the fourth quarter of 2013, up 16.9% from a year earlier. More than half of the 6,812 FDIC insured institutions reported a year-over-year growth in quarterly earnings. And the portion of unprofitable banks dropped to 12.2% from 15% in the fourth quarter of 2012. But it’s not all good news. The improvement in earnings was largely attributable to an $8 billion decline in …

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Tuesday, January 21, 2014 – Real Risks

Real Risks by Sinclair Noe DOW – 44= 16,414SPX + 5 = 1843NAS + 28 = 422510 YR YLD unch = 2.82%OIL + .67 = 95.26GOLD – 13.00 = 1242.70SILV – .41 = 20.01 Wall Street’s attention this week will mainly focus on earnings reports given the dearth of economic data. There are only a few important economic reports this week, all of which will be released on Thursday. Thursday’s reports include the November FHFA housing price index (expected +0.3% m/m), December existing home sales (expected +1.0%), and December leading indicators (expected +0.2%). The Treasury on Thursday will sell $15 billion of 10-year TIPS. The markets will be looking to next week’s FOMC meeting where the consensus is that the FOMC will taper QE3 by another $10 billion to $65 billion per month. Global stocks found support as Chinese money-market rates dropped after the People’s Bank of China added funds and expanded access to a lending facility after the 7-day repurchase rate had surged 153 basis points to a 1-month high of 6.32% on Monday. In an attempt to alleviate a liquidity squeeze, the PBOC added more than 255 billion yuan ($42 billion) into the financial system and will allow small and medium-sized Chinese banks to access its Standing Lending Facility for loans of up to 2-weeks on a trial basis before China’s Lunar New Year holiday begins on Jan 31; this was in addition to a liquidity injection made just yesterday for an unspecified amount. The yield on Portugal’s …

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Wednesday, January 15, 2014 – A Few Pages of Pork

A Few Pages of Pork by Sinclair Noe DOW + 108 = 16,481SPX + 9 = 1848.38NAS + 31 = 4214 10 YR YLD + .01 = 2.88%OIL + 1.75 = 94.34GOLD – 3.00 = 1243.00SILV – .05 = 20.30 The S&P 500 hit a record high close, just a few pennies better than December 31st. The market has had a weak start to January but we’re still at elevated levels. The Dow Industrials are about another day like today away from records; that close was 16,576 on New Year’s Eve. A $1.1 trillion compromise spending bill that funds the government through September won approval today from the House of Representatives and now goes to the Senate for consideration. The Senate is expected to also pass the so-called “omnibus” bill and send it to President Barack Obama to be signed into law. The 1,582-page bill eases most of the automatic spending cuts that were part of the sequester and keeps the federal government funded through Sept. 30. The budget bill calls for 1% increases in the paychecks of federal workers and military personnel, the first raises in three years for most agency workers. The spending measure also would protect disabled veterans and some military spouses from a pension cut set to go into effect in 2015.The bill would provide nearly $92 billion for US military operations abroad, mostly in Afghanistan, plus about $7 billion for disasters and other emergencies. That was just slightly less than last year’s war spending but …

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Tuesday, October 08, 2013 – Low Probability High Consequence

10082013 Script Low Probability High Consequence by Sinclair Noe DOW – 159 = 14,776SPX – 20 = 1655NAS – 75 = 369410 YR YLD un = 2.63%OIL + .53 = 103.56GOLD – 3.50 – 1319.90SILV – .06 = 22.39 The Dow Industrials are down for 11 of the past 14 sessions, posting a loss of nearly 900 points. It’s not exactly a crash; Wall Street is still expecting a resolution to the debt ceiling and the shutdown. The debt ceiling will likely be resolved with some short-term band-aid, but there is a chance that the idiots will mess it up and there will be a default. There is a low probability of default but a high consequence; that’s a nasty mix and the reason I don’t play Russian Roulette. Most financial markets are only slowly getting worried about the possibility of a debt default, but in one tiny corner of the bond market things are starting to look a little panicky. Today, investors dumped one-month Treasury bills due for payment after October 17, the date the Treasury Department has warned it will no longer have the cash to pay all of its obligations unless Congress raises its borrowing limit, known as the debt ceiling. Every day that passes after that date raises the risk the government will default on some of its debt. These short-term bills will probably be the first to go unpaid. Interest rates and bond prices move in opposite directions; so as prices dropped today, rates spiked, …

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