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Friday, January 24, 2014 – Bulls, Bears, and Bonuses

Bulls, Bears, and Bonuses by Sinclair Noe DOW – 318 = 15,879SPX – 38 = 1790NAS – 90 = 412810 YR YLD – .04 = 2.73%OIL – .41 = 96.91GOLD + 4.40 = 1270.00SILV – .11 = 20.01 The Dow has fallen every day this week, leaving it down more than 3%. That decline is the Dow’s worst weekly performance since mid-May 2012. Meanwhile, the S&P 500 is down 2.5% since last Friday. That’s the index’s worst weekly slide since early November 2012. All of the sudden, everybody seemed concerned about political and economic problems in Turkey, Argentina, and of course, China. The Turkish lira hit a record low and the South African rand fell to five-year low against the dollar. The Argentine peso had its sharpest decline in 12 years, going back to the 2002 financial crisis in that country; and the government abandoned its long standing policy of intervening to support the peso currency. Such moves are crucial factors for big, institutional foreign investors because exchange rate losses can easily wipe out any gains in stocks and bonds of emerging countries. Right now, the losses haven’t turned into a rout, but there is concern that the turn may push big institutional investors to cut losses and run as the effect of falling currencies becomes too painful to bear. Every emerging market crisis is first-and-foremost a currency crisis. For example, South African government debt was slightly positive in rand terms in 2013. But in dollars terms, it lost more …

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Monday, December 09, 2013 – Corrupt Practices

Corrupt Practices by Sinclair Noe DOW + 5 = 16,025SPX + 3 = 1808NAS + 6 = 406810 YR YLD + .01 = 2.75%OIL – .41 = 97.24GOLD + 9.70 = 1241.40SILV + .30 = 19.94 Next week the Fed FOMC will meet to determine policy. Today, three Fed big wigs gave speeches. We start with James Bullard, president of the St. Louis Federal Reserve Bank; Bullard says: “A small taper might recognize labor market improvement while still providing the [Fed] the opportunity to carefully monitor inflation during the first half of 2014,” and if inflation doesn’t return to something approaching a target of 2%, well the Fed could pause the taper. In separate remarks, Richmond Fed President Jeffrey Lacker said that the central bankers would discuss pulling back the pace of its asset purchase program but gave no indication of how the discussion could go.  Dallas Fed President Richard Fisher said the central bank should begin to scale back its bond-buying “at the earliest opportunity,” because, “Money is cheap and liquidity is abundant. Indeed, it is coursing over the gunwales of the ship of our economy, placing us at risk of being submerged in financial shenanigans rather than in conducting business based on fundamentals.” The taper talk spooked Wall Street traders but it’s unlikely the Fed will taper at the December meeting. There is little harm in postponing the decision till the new year, particularly compared to the risks of pulling back too soon. Meanwhile, the Federal Reserve reports …

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Tuesday, November 19, 2013 – Too Good To Be True

Too Good To Be True by Sinclair Noe DOW – 8 = 15,967SPX – 3 = 1787NAS – 17 = 393110 YR YLD + .04 = 2.70%OIL + .31 = 93.34GOLD – .80 = 1276.20SILV – .06 = 20.44 No record high today; not a surprise; it can’t happen every day. So, we’ll see if this is a pause or whether we have to wait six years till we have milk and cookies again. Likely the former, but you never know. JPMorgan Chase and the Justice Department have reportedly finalized a $13 billion settlement and resolves an array of state and federal investigations into JPMorgan’s sale of troubled mortgage securities to pension funds and other investors from 2005 through 2008. The government accused the bank of not fully disclosing the risks of buying such securities which, as we know, failed. JPMorgan had to acknowledge a statement of facts that outline the bank’s wrongdoing in the case. JPMorgan also backed down from demands that prosecutors drop a related criminal investigation into the bank and largely forfeited the right to try to later recoup some of the $13 billion from the Federal Deposit Insurance Corporation. The $13 billion deal also comes just days after the bank struck a separate $4.5 billion deal with a group of investors over the sale of toxic mortgage-backed securities. The breakdown of the money includes a $2 billion fine to prosecutors in Sacramento and $4 billion in relief to struggling homeowners in hard hit areas like Detroit …

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Monday, October 21, 2013 – JPMorgan’s Deal

JPMorgan’s Deal by Sinclair Noe DOW – 7 = 15, 392SPX + 0.16 = 1744NAS + 5 = 392010 YR YLD + .02 = 2.61% OIL – 1.63 = 99.48GOLD – .80 = 1317.60SILV + .28 = 22.34 Apparently, over the weekend, JPMorgan Chase reached a $13 billion settlement with the Department of Justice and the New York Attorney General over the sale of mortgage backed securities back in the days of the housing bubble. We’re still waiting for details, but it looks like the tentative deal would resolve charges that JPMorgan misrepresented the quality of loans that had been packaged as mortgage backed securities, including mortgage backed securities packaged by Bear Stearns and Washington Mutual, the two failed institutions acquired by JPMorgan in 2008. And one of the unique features of this settlement is that it does not end a criminal investigation of the bank. Prosecutors did not want to end the criminal probe before they were sure of its findings. The investigation could take another several months. Ending the criminal probe was a long shot and the bank was not interested in holding up all the other settlements to wait for that. Civil cases require a lower burden of proof than criminal cases, and can often be wrapped up quicker than parallel criminal proceedings. In other words, they knew they could lose; so they took a deal. Now, $13 billion sounds like a lot of money, and it is for you or me, but not so much for …

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Friday, October 11, 2013 – We Have Met the Enemy

We Have Met the Enemy by Sinclair Noe DOW + 111 = 15,237SPX + 10 = 1703NAS + 31 = 379110 YR YLD un = 2.68%OIL – 1.22 = 101.79GOLD – 13.20 = 1274.20SILV – .34 = 21.44 The Nobel Peace Prize was awarded to the OPCW, the Organization for the Prohibition of Chemical Weapons, the international chemical weapons watchdog helping to eliminate the Syrian army’s stockpiles of poison gas. Its inspectors have just begun working in the active war zone, and the Norwegian Nobel Committee said it hopes the award offers “strong support” to them as they face arduous and life-threatening tasks. Overall consumer confidence decreased from 77.5 in September to 75.2 in October, according to the Index of Consumer Sentiment published by Thomson Reuters and the University of Michigan. The economic expectations index in the survey also fell from 67.8 in September to 63.9 for October, reaching the lowest level so far this year as consumers reported less optimism about the course of the economy for the next 12 months. In what has become an almost daily occurrence, Thursday night brought another poll, this one from NBC and the Murdoch Street Journal, showing that Americans really don’t like the politicians. A recap: Only 24% of Americans had a favorable view of Republicans, the lowest figure in the poll’s multi-year history and four percentage points lower than last month. Another low: only 21% had a favorable view of the tea party. Obama’s standing was relatively stable, moving from 45% …

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Friday, October 04, 2013 – This Is Not A Game

This Is Not A Game by Sinclair Noe DOW + 76 = 15,072SPX +11 = 1690NAS + 33 = 380710 YR YLD + .04 = 2.65%OIL + .39 = 103.70GOLD – 5.50 = 1312.20SILV + .04 = 21.84 The government showdown continues. So, there isn’t much actually happening. We don’t have a jobs report to analyze. The next jobs report will be so screwed up by the shutdown that it won’t be possible to make heads or tails of it, whenever it is reported. We don’t need a functioning government to tell us that the job market is lousy. But we do need one to help make the job market better. It’s the first Friday of the month, usually the day we get a bunch of random numbers from the government telling us what we already knew: Good jobs are scarce. This month, the government is too busy being held hostage by House Republicans to give us those random numbers. But there’s plenty of evidence already that September was grimly similar to many of the months that came before it in this grinding recovery. With sagging consumer confidence and hiring surveys, September may even have been worse than August. Whenever Bureau of Labor Statistics workers stop being furloughed by a government shutdown, economists, on average, expect it to report 185,000 new jobs on nonfarm payrolls in September and an unemployment rate holding at 7.3 percent. And if we look at this week’s ADP report and the ISM hiring survey, we …

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Wednesday, October 02, 2013 – Genie Out of the Bottle

Genie Out of the Bottle by Sinclair Noe DOW – 58 = 15,133SPX – 1 = 1693NAS – 2 = 381510 YR YLD – .02 = 2.63%OIL + 1.76 = 103.80GOLD + 28.80 = 1317.30SILV + .57 = 21.83 So, the heads of the biggest banks, including Lloyd Blankfein of Goldman Sachs and Jamie Dimon of JPMorgan and Brian Moynihan of Bank of America, and a list of others (apparently Dick Fuld from Lehman Brothers couldn’t afford the bus fare); so all these big banksters went to the White House today to discuss the shutdown. Heaven help us all. The President is getting advice on the economy from the very people who crashed the economy a few years ago. And then later in the afternoon the president met with lawmakers, not to negotiate but just to meet with the people that created the shutdown. Can everybody, please, just step away from the crack pipe? Maybe the politicians should try meeting with people that didn’t cause the problems. The meeting with the banksters, set up by the Financial Services Forum, a Washington-based trade group representing CEOs of the largest Wall Street banks, was part of an effort by the administration to leverage the business community’s clout in breaking the stalemate. Administration officials said pressure from the business community was effective in past fiscal fights. In other words, the financial industry threatened to take away the campaign contributions if the politicians persist in driving the economy off a cliff. The impending debt …

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Monday, September 30, 2013 – Politically Dysfunctional Insanity

Politically Dysfunctional Insanityby Sinclair Noe DOW – 128 = 15,129SPX – 10 = 1681NAS – 10 = 377110 YR YLD – .04 = 2.61%OIL – .56 = 102.31GOLD – 8.30 = 1328.90SILV – .07 = 21.81 We’ll get to the shutdown and all that fun politically dysfunctional insanity in just a moment, but first we need to wrap up the third quarter. The Dow Industrials are up about 260 points for the third quarter, and the S&P500 is up 80 points. Year to date the Dow has gained about 2000 points and the S&P has gained about 260. Since the start of the year, the yield on the 10 year Treasury note has climbed from around 1.75% to 2.51% at the end of the second quarter (briefly touching 3%). Oil prices dropped from around $110 in just about a week’s worth of trading, but prices are up about $10 dollars since the start of the year, and down about $1 for 3Q. If you’re wondering how the Sell in May idea has worked out, well the Dow is down about 130 points from the May sell signal and the S&P is down 35 points. So, Sell in May is looking good and could look a whole lot better if the government shuts down in a little less than 5 hours. Tomorrow, the fourth quarter begins. A potential federal government shutdown looms at midnight.So, the question is whether underperforming Wall Street traders will push prices higher in the face of government …

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Thursday, September 26, 2013 – The Quotas Must Be Filled

The Quotas Must Be Filled by Sinclair Noe DOW + 55 = 15,328SPX + 6 = 1698NAS + 26 = 378710 YR YLD + .03 = 2.64%OIL + .20 = 102.86GOLD – 9.30 = 1324.80SILV – .07 = 21.83 A couple of economic reports this morning with conflicting signals. The National Association of Realtors said its Pending Homes Sales Index, based on contracts signed last month, decreased 1.6 percent. At the same time, labor market data was more positive. Initial claims for state unemployment benefits dropped 5,000 last week to a seasonally adjusted 305,000. And a little bit of research from the Atlanta Fed’s macroblog that you probably didn’t see; they report the pace of research and development (R&D) spending has slowed. The National Science Foundation defines R&D spending as “creative work undertaken on a systematic basis in order to increase the stock of knowledge” and application of this knowledge toward new applications. R&D spending is often cited as an important source of productivity growth within a firm, especially in terms of product innovation. But R&D is also an inherently risky endeavor, since the outcome is quite uncertain. On top of that, the federal funding of R&D activity remains under significant budget pressure. In the Countdown to the Shutdown, the Senate is expected to pass a government spending bill and send it back to the House of Representatives on Saturday, minus the defunding of Obamacare; the bill would be a so-called “clean” spending bill, dealing with spending and nothing else. House Speaker …

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Thursday, September 19, 2013 – Shine On You Crazy Dimons

Shine On You Crazy Dimons by Sinclair Noe DOW – 40 = 15,636SPX – 3 = 1722NAS + 5 = 378910 YR YLD +.06 = 2.75%OIL + .04 = 106.43GOLD – .20 = 1366.10SILV + .13 = 23.19 No taper, despite hints and great expectations. Having announced the intention to taper, ultimately, a few weeks later, the proposal was shelved. The reasons given were concerns about the strength of the economic recovery and the impact of high rates on the ability of an over-indebted world to continue to meet its obligations. All these factors were largely unchanged between the time of the original announcement and the repudiation. What did change was the taper tantrum, the unpleasant market reaction to the hint of taper. Bond yields rose sharply; the Fed’s tough talk has already led to a 140 basis point rise in 10-year Treasury yields, which would be roughly equivalent to six rate increases; that in turn resulted in pushing mortgage rates higher, putting a crimp in the housing recovery. Today we learned home sales were up. Sales of previously owned homes unexpectedly rose in August to the highest level in more than six years as buyers rushed to lock in interest rates before they jumped even higher. The labor “participation rate” dropped to 63.2% in July, the lowest level since the late 1970s. The rate for men is at an all-time low. The unemployment rate has been falling, but chiefly because so many people are giving up hope and dropping …

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