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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) …

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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 …

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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 …

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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. …

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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 …

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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 …

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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 …

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Tuesday, September 17, 2013 – Everything is on Hold at a Bad Level

Everything is on Hold at a Bad Level by Sinclair Noe DOW + 34 = 15,529SPX + 7 = 1704NAS + 27 = 374510 YR YLD – .02 = 2.84%OIL + .22 = 105.64GOLD – 3.90 = 1311.00 SILV- .08 = 21.84 Market players are focusing on the Fed right now. Yesterday, Larry Summers withdrew his name from consideration to be the next Fed Chairman; maybe it doesn’t matter who the next Fed chair is, they are likely to continue on the same path. Today, Jim Rogers said the role of Fed Chair is nothing more than a lapdog for the establishment. Harsh, but not necessarily inaccurate. Still, the Fed Chair is a powerful role and it looks like a woman almost nobody knows will soon take over. Give yourself 3 points if you know her name and her current job title. (Janet Yellen, Fed Vice Chair) The Federal Open Market Committee, the FOMC, was meeting today; they’ll continue meeting tomorrow to determine monetary policy. It’s widely expected the FOMC will announce taper, in part because of logistics. The FOMC meets tomorrow, another meeting in October, another meeting in December, and then Bernanke retires. Market participants are expecting taper, and the Fed usually avoids surprises. September and December are the two most likely times for an announcement, in part because the October FOMC meeting does not include a scheduled press conference to explain any significant changes; also October will be right in line with budget battles If there is a …

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Monday, September 16, 2013 – Do It Again

Do it Again by Sinclair Noe DOW + 118 = 15,494SPX + 9 = 1697NAS – 4 = 371710 YR YLD – .02 = 2.86%OIL – .53 = 106.06GOLD – 14.00 = 1314,90SILV – .45 = 21.92 The Bank of International Settlements is a Swiss based central bank for the central banks, kind of a global clearing house. The BIS has just issued its quarterly economic review. The conclusion: it’s 2007 all over again, but even worse. All the previous imbalances are still there, but total public and private debt has grown to more than 30% of GDP in advanced economies, and bubbles are forming in emerging markets. Subordinated debt has in Europe and the US has ballooned. Leveraged loans are at an all time high. The BIS said interbank credit to emerging markets has reached the highest level on record while the value of bonds issued in off-shore centers by private companies from developing nations exceeds total issuance by firms from rich economies for the first time. So, there is more debt than ever, and a greater appetite for risk. And if the Fed raises interest rates this week there will almost certainly be a spill-over effect; global borrowing costs will rise. The international financial system is more unbalanced than 5 years ago, and there is a concern that markets can remain liquid under stress. If there is a problem with liquidity, the BIS figures there are fewer lifelines than before. The global markets, including the US, have become …

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Friday, August 09, 2013 – May All Your Wishes Come True

May All Your Wishes Come True by Sinclair Noe DOW – 72 = 15,425SPX – 6 = 1691NAS – 9 = 3660 10 YR YLD – .01 = 2.57%OIL + 2.57 = 105.97GOLD + 2.30 = 1315.70SILV + .31 = 20.66 As we started the week, I warned that August can be fairly volatile in the stock market; it seems like the lazy days of summer and volume is usually lackluster, as it was today, but sometimes that just intensifies price swings. The markets were down again today, the fourth decline in the week, and the first weekly decline on the heels of six weeks of gains. The Dow was down 1.5% for the week. The S&P pushed back to 1700 a few times but couldn’t break through. This week’s declines don’t seem to tell us much; we could go either way next week. Yes, I know the rally is long in the tooth; going back to March 2009, the rally is 4.4 years old, longer than the average rally, but it really is too early to start catching falling knives. There wasn’t much in the way of economic reports this week; earnings reporting season is winding down, Congress is away on Summer recess. I guess it’s been about a week since we saw the guesstimates on second quarter GDP, and you’ll recall that the guesstimates included revisions that go back 83 years. The government is recalculating the numbers to try to get a more accurate picture. One of the …

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