Uncategorized

Wednesday, December 18, 2013 – According to Plan

According to Plan by Sinclair Noe Don’t worry. Everything is going exactly according to plan. The Fed will taper just a little; cutting back to $75 billion a month in Treasury bond and mortgage backed securities; the cuts will trim back equally from both categories. You’ll hardly notice. The Fed said: “In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the committee decided to modestly reduce the pace of its asset purchases.” Great news for people in the hunt for a job; everything is good. And for those of you with two jobs, well your doubled efforts have not gone unnoticed. The Fed expects unemployment to dip to 6.3% to 6.6% by the end of the year, what with more people dropping out of the workforce and the participation rate shrinking. Besides, the current 7% unemployment is apparently just good enough to avoid civil unrest, or as the Fed calls it “progress toward maximum employment.” The central bank also said it “likely will be appropriate” to keep rates near zero “well past the time” that the jobless rate falls below 6.5 percent. Again, this confirms that everything is going exactly according to plan…, for the bankers; for the rest of us – not so much. But if you are a banker, you have to love free money from the Fed. It’s not like they could continue QE forever; they were running out of stuff to buy. The federal deficit has …

READ MORE →
Uncategorized

Wednesday, November 20, 2013 – Fed Minutes, Fed Conundrum

Fed Minutes, Fed Conundrum by Sinclair Noe DOW – 66 = 15,900SPX – 6 = 1781NAS – 10 = 392110 YR YLD + .09 = 2.79%OIL – .01 = 93.33GOLD – 32.40 = 1243.80SILV – .49 = 19.95 The Federal Open Market Committee, Federal Reserve policy makers, met October 29-30, and to no one’s surprise they did not change monetary policy. Today, minutes of that meeting were released. The policy makers “generally expected that the data would prove consistent with the Committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months.” They think the economy is improving, despite the government shutdown and ongoing political dysfunction, the economy is getting better and the FOMC is considering how and when they can exit Quantitative Easing; they would like to scale back $85 billion per month in purchases of Treasuries and mortgage backed securities without triggering a rise in interest rates that could slow economic growth and wipe out gains in the labor market. That is not to say they are ready to raise their Fed Funds target for interest rates. That target has been right at zero and will likely remain at zero for at least a year or more. They want to get out of the bond buying business without the market noticing, and independently pushing interest rates higher. It’ll be a fine trick if they can pull it off. In a speech to the National Economists Club, Ben Bernanke …

READ MORE →
Uncategorized

Monday, November 18, 2013 – Activism from Billionaires and Tweeters

Activism from Billionaires and Tweetersby Sinclair Noe DOW + 14 = 15.976SPX – 6 = 1791NAS – 36 = 394910 YR YLD – .04 = 2.66%OIL – .83 = 93.01GOLD – 14.40 = 1277.00SILV – .38 = 20.50 This one didn’t feel like a record high celebration, in part because the major indices closed well off the intraday high. The Dow had been trading above 16,000 for much of the afternoon, but a late sell-off saw the Dow finish below that nice round number; still, it was good enough for another record high close. The S&P 500 hit an intraday high of 1802, but closed in negative territory. Still we mark today’s gains in the Dow in the “win” column and that means we have now had 39 record high closes on the Dow in 2013. The trend is in place, firmly. The rise in the Dow Jones industrials continues to be confirmed by an associated rise in the Dow Jones Transportation Average. A look at the S&P 500 also shows a clear breakout at the top multiyear resistance level. The breakout may be false, due to the lack of active participation, as evidenced by light volume. So far, it has held up pretty well, contrary to its overbought condition. Everything is pointing higher as long as the Fed continues to pump money into the economy; and it looks like they will continue until March, although they could start to taper in January or December. Or maybe Bernanke will go …

READ MORE →
Uncategorized

Thursday, November 14, 2013 – These are the Days of Milk and Cookies or, If You Prefer, Wine and Neurosis

These are the Days of Milk and Cookies or, If You Prefer, Wine and Neurosis by Sinclair Noe DOW + 54 = 15,876SPX + 8 = 1790NAS + 7 = 397210 YR YLD – .03 = 2.69%OIL + .08 = 93.96GOLD + 5.00 = 1288.30SILV + .13 = 20.85 More record highs for the Dow and the S&P 500. Celebrate with your beverage of choice. You will likely hear a bunch of stupidity with regard to Janet Yellen as she works her way through the confirmation process. Today, she delivered prepared remarks to a Senate Committee. She did not surprise and she did not disappoint. Yellen is dovish; we knew that. She believes in monetary stimulus; we knew that. She believes in regulations to prevent a repeat of past mistakes; we knew that. She is probably the most qualified Fed Chair nominee ever. A little bit of background: Economics degree from Brown University; Phd. From Yale; taught at Harvard, the London School of Economics, and UC Berkeley; Fed Governor from 1994 to 97; San Francisco Fed president in 2004; vice chair of the Fed since 2010; a member of multiple economic councils and committees, including the Council of Economic Advisors, CBO, MIT, etc, etc; married to Nobel Prize winning economist George Akerlof, considered more accurate than her Fed peers in foreseeing the housing crisis and the financial downturn. Indeed, Yellen was “one of the only top Fed policy makers who warned about the housing bubble before the crisis.” – (NYTimes) …

READ MORE →
Uncategorized

Wednesday, November 13, 2013 – Cues for Yellen from Abe

Cues for Yellen from Abe by Sinclair Noe DOW + 70 = 15821SPX + 14 = 1782NAS + 45 = 396510 YR YLD – .07 = 2.70%OIL + .84 = 93.88GOLD + 16.10 = 1283.30SILV – .09 = 20.71 Record high close for the Dow Jones Industrial Average. Record high close for the S&P 500 Index. Janet Yellen starts her confirmation process tomorrow. Yesterday, a couple of Fed presidents, Dennis Lockhart of the Atlanta Fed, and and Minneapolis Fed President Narayana Kocherlakota both suggested that the current state of the economy still warrants aggressive monetary policy action. Yellen is well known for her meticulous preparation, but it will be interesting to see how she handles questions from politicians looking for cheap shots and easy points. Political theatrics aside, Yellen is highly qualified with a very solid academic foundation, extensive policy experience, sound judgment over many years and the most effective researcher at the Fed. Her policy moves will likely be incremental and well communicated. Markets can look to a continuation of the Fed’s current policy stance for now. When the time for taper comes, as it inevitably will, the central bank would partially compensate through more aggressive forward policy guidance. None of that means much of a change and no guarantee the Fed can do much more than it is doing to help the economy break out of the doldrums of the past few years. Of course the Fed could do much more; adding $4 trillion to their balance sheet …

READ MORE →
Uncategorized

Monday, November 11, 2013 – Fed Stuck As Other Central Banks Race to Bottom

Fed Stuck As Other Central Banks Race to Bottom by Sinclair Noe DOW + 21 = 15,783SPX + 1 = 1771NAS + 0.56 = 3919OIL + .54 = 95.14GOLD – 7.60 = 1282.90SILV – .16 = 21.45 A fairly boring day on Wall Street ended with the major averages in positive territory and that was good enough for record highs on the Dow Industrial. The bond market was closed because of the Veterans Day holiday. Volume on the S&P 500 was down by about 23%. Of the 447 S&P 500 companies that have released third-quarter profits so far, 75% have beaten analysts’ forecasts. Earnings per share for the companies that have reported, increased 4.7% in the third quarter. All fairly good news. This will be a relatively light news week. Key economic reports include Thursday’s Sep trade deficit (expected to widen to -$39.0 from -$38.8 in Aug) and Friday’s Oct industrial production report (expected -0.1%). The Treasury this week will conduct its $70 billion quarterly refunding operation. There are speaking engagements by Minneapolis Fed President Kocherlakota and Atlanta Fed President Lockhart on Tuesday and by Philadelphia Fed President Plosser on Thursday. Fed Chairman Bernanke will hold a town hall meeting with educators on Wednesday in Washington D.C. One quick point that I didn’t get to last week, last Thursday, during a speech, New York Fed president William Dudley said that some of America’s largest financial institutions appear to lack respect for the law. Dudley suggested that regulators may be stymied by …

READ MORE →
Uncategorized

Thursday, November 07, 2013 – The Road Not Taken

The Road Not Taken by Sinclair Noe DOW – 152 = 15,593SPX – 23 = 1747NAS – 74 = 385710 YR YLD – .03 = 2.61%OIL – .51 = 94.29GOLD – 10.00 = 1308.60SILV – .14 = 21.77 Big story on Wall Street today was the Twitter IPO. I will now tell you everything you need to know about it in 140 characters or less. TWTR IPO 2day. Priced @ $26. Pop 2 $50. Close @ 44.90 up 72%. Market cap = $24 bil, earnings = < zero. Smooth not Facebook. #bubblicious Economic growth accelerated in the third quarter. Gross domestic product grew at a 2.8 percent annual rate, the quickest pace in a year, after expanding at a 2.5 percent clip in the second quarter. Inventories, however, accounted for a 0.8 percentage point of the advance made in the third quarter, as businesses restocked shelves, but the slowest expansion in consumer spending in two years suggested an underlying loss of momentum. Consumer spending expanded at a 1.5 percent rate, the slowest pace since the second quarter of 2011. It grew at a 1.8 percent rate in the April-June period. So, unless there is a surge in 4thquarter demand, we might see future production reduced to clear out inventories. The economy grew at a 1.8 percent rate in the first half of 2013, expect growth of around 1.5% for the fourth quarter. The private sector decelerated over the summer, providing less of a cushion for the government shutdown in October. …

READ MORE →
Uncategorized

Friday, October 25, 2013 – New Records on Bad News

New Records on Bad News by Sinclair Noe DOW + 61 = 15,570SPX + 7 = 1759NAS + 14 = 394310 YR YLD – .02 = 2.51%OIL + .79 = 97.90GOLD + 5.60 = 1353.90SILV – .13 = 22.70 The S&P 500 closed at a record high. The Nasdaq Composite closed at a 13 year high. The Russell 2000 hit a record high intraday, but closed slightly down on the day. The Dow Industrial Average did not hit a high; maybe next week, but not today, and so no milk and cookies. For the week, the Dow was up 1.1%, the S&P up 0.9%, the Nasdaq up 0.7%. Based on results so far and estimates for companies still to report, S&P 500 earnings are expected to have risen just 3.4 percent in the third quarter, with 69 percent of companies reporting earnings above analysts’ expectations. Revenue growth is seen at 2.2 percent for the quarter, with just 54.2 percent beating sales estimates, below the long-term average of 61 percent. Consumer sentiment dropped in October to its lowest level since the end of last year. The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment fell to 73.2 in October from 77.5 in September and was the lowest final reading since December 2012. This report covered the time when the government shutdown. Consumer confidence is often linked to consumer spending expectations, and so there is some concern this report might foretell a weak holiday spending season. Meanwhile …

READ MORE →
Uncategorized

Thursday, October 10, 2013 – Goodbye Jamaica

Goodbye Jamaica by Sinclair Noe DOW + 323 = 15,126SPX + 36 = 1692NAS + 82 = 376010 YR YLD + .03 = 2.68%OIL + 1.35 = 102.96GOLD – 20.60 = 1287.40SILV – .21 = 21.78 Over the past few days we’ve been hearing that a government default wouldn’t be a big deal; that a default wouldn’t actually mean default. But it turns out that avoiding a default is a very good thing indeed. Hope over a deal in Washington put the bid back in stocks; and for right now it is just hope for a deal on the debt ceiling, not an actual deal yet; and quite possibly no deal on the government shutdown. We may not get the government running again but the politicians finally realized that they can’t strap a suicide bomb vest on US Treasuries. We may have a bunch of idiot politicians in Washington…, Yeah, we do have a bunch of idiot politicians in Washington. And they still have a lot of work to do. Republicans in the House of Representatives offered a plan to postpone the default for 6 weeks; President Obama has indicated that if a clean debt limit bill is passed, he would sign it, even if the government remains shut down. That might be a stumbling point. In another potential wrinkle, the GOP plan might permanently ban the Treasury Department from using extraordinary measures to avoid default; so in some ways it isn’t a truly clean bill; plus it is very …

READ MORE →
Uncategorized

Wednesday, October 09, 2013 – Scum in the Steam Room

Scum in the Steam Room by Sinclair Noe DOW + 26 = 14,802SPX + 0.95 = 1656NAS – 17 = 367710 YR YLD + .01 = 2.65%OIL – 2.03 = 101.46GOLD – 11.90 = 1308.00SILV – .40 = 21.99 We’ll get to Janet Yellen in a bit. First, I’m getting sick and tired of this stupidity oozing out of Washington; you are too, I know. Americans’ confidence in the economy has deteriorated more in the past week during the partial government shutdown than in any week since Lehman Brothers collapsed on Sept. 15, 2008, which triggered a global economic crisis. Gallup’s Economic Confidence Index tumbled 12 points to -34 last week, the second-largest weekly decline since Gallup began tracking economic confidence daily in January 2008. And that poll was taken at the end of last week. Since then, we’ve hit a new low. The government is still shut down. I don’t know why. John McCain delivered a speech on the Senate floor; he said: “To think that we were going to repeal Obamacare, which would have required 67 Republican votes, of course, was a false premise.” So, I really don’t know why we are still having a shutdown. He then went on to recognize the five families of US soldiers killed last weekend in Afghanistan; 21 soldiers have died since the shutdown started. When a soldier is killed in battle, the family receives about $100,000 in death benefits. A month ago, the Pentagon warned the politicians on Capitol Hill that …

READ MORE →