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Thursday, June 21, 2012 – Like Crack for Bankers – by Sinclair Noe

DOW – 250 = 12,573SPX – 30 = 1325NAS – 71 = 285910 YR YLD – .02 = 1.62%OIL – 3.20 = 78.25GOLD – 41.60 = 1566.20SILV – 1.24 = 26.98PLAT – 19.00 = 1445.00Here is the bottom line on today’s declines; Wall Street has become addicted to free money from the Federal Reserve. Stimulus from the Fed is like crack for the Wall Street bankers. Yesterday, the Fed refused to pass out more free money. Today, Wall Street got a bad case of the shakes.One of the concerns when Bernanke and pals fail to act is that they can’t really think of anything they might do that would have any real effect, or maybe they’re satisfied with 2% inflation and 8.2% unemployment. So what if Bernanke doesn’t have any more ammo?Then we are left to the devices of fiscal policy, in other words; what can the politicians in Washington do to stimulate the economy? The most likely answer is that the politicians can drive the economy over a cliff. While that might seem cynical, it’s really just pragmatic. And then, of course there is the Lehman Brothers event with subtitles looming in Europe. If Europe collapses, the thinking is that Bernanke will find a few more bullets in the form of QE3, and he will once again toss money at the Wall Street bankers. The Wall Street crack whores will fire up their pipes and place “risk-on” trades with the certainty that the Fed will place a put against any …

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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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Wednesday, June 13, 2012 – To Hedge or Not to Hedge – by Sinclair Noe

DOW – 77= 12,496SPX – 9 = 1314NAS – 24 = 281810 YR YLD -.06 = 1.60%OIL – .86 = 84.03GOLD + 7.80 = 1618.60SILV -.11 = 28.96PLAT + 11.00 = 1471.00If I went before the Senate Banking Committee and told lies, you can bet they would throw me into the gray bar hotel and toss the key. Today, Jamie Dimon, the CEO of JPMorgan Chase went before the Senate Banking Committee and as he took his seat in the Senate hearing room a protestor yelled, “This man is a crook and he needs to go to jail.” And then Jamie Dimon started talking and proved the protestor’s point. During questioning, Dimon was asked if the Volcker rule would have prevented the trades that led to $2 billion in losses (give or take a few billion) at JPMorgan? Dimon answered: “I don’t know what the Volcker Rule is, it hasn’t been written yet.” The proposed rule, mandated by the Dodd-Frank legislation, was published in November in the Federal Register and opened for public comment. Financial regulators are now in the process of finalizing it. Jamie Dimon is a board member of the New York Federal Reserve and as such is charged with regulating banking activity in accord with legislation such as the Dodd-Frank reforms and the Volker Rule; as CEO of JPMorgan, Dimon must certainly be familiar with the Volker Rule which would dramatically alter the rules of trading for a major part of his company. Of course the other option is …

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Thursday, May 24, 2012 – Banks Issue Instructions for the Euro-Crisis – by Sinclair Noe

DOW + 33 = 12,529SPX + 1 = 1320NAS – 10 = 283910 YR YLD +.04 = 1.76%OIL +.95 = 90.85GOLD – 4.50 = 1558.80SILV +.48 = 28.42PLAT – 7.00 = 1424.00 The Dow Industrials moved lower this morning, then recovered, then dropped, then rallied into the close. Stocks moved down, up, down, up. If you can figure out what it means, send me a note. I’m not sure it means much. Treasury prices declined a little and yields inched up. The Treasury Department sold 7-year notes at auction. One economic report today showed 370,000 people filed for first-time jobless claims last week. Another report showed durable good orders rose 0.2% in April. Nobody was surprised by the reports. The euro jumped up against the Swiss Franc on rumors the Swiss government might implement a tax on Swiss franc-denominated deposits. In the past the biggest argument against a tax was that it would drive Swiss banking activity off shore. So, how does a rumor like that get rolling? Well, there are wheelbarrows full of euros being deposited into Swiss banks right now. Meanwhile, JPMorgan issued a report on the European Central Bank, or maybe they issued instructions; I’m not sure which. The economic downturn will lead the ECB to ease monetary policy even further with a combination of interest rate cuts and another round of the LTRO, Long -Term Refinance Operation, also known as Free Money. Of course, if the ECB lowers rates and injects more liquidity into the banking …

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Tuesday, May 22, 2012 – Bank Scum – by Sinclair Noe

DOW – 1 = 12,502 SPX +0.64 = 1316NAS – 8 = 283910 YR YLD +.06 = 1.79%OIL – .92 = 91.65GOLD – 24.10 = 1569.30SILV – .27 = 28.30PLAT – 23.00 = 1451.00 Morgan Stanley, JPMorgan and Goldman Sachs are just pure scum. No wait, I shouldn’t say that; it’s much too kind; they are lying, stinking, thieving, dangerous scum. Maybe you heard about a little company called Facebook; it went public last Friday. Today, Reuters is reporting Morgan Stanley, JPMorgan and Goldman Sachs all cut their earning forecasts for Facebook in the middle of the IPO roadshow. You didn’t hear about that? No, you did not hear about that because the big banksters didn’t tell you. Why didn’t they tell you? Because they thought it would be much better to screw the public and try to make a quick buck on insider information, which they are required by law to report. Instead, the banksters passed the information only to a handful of big investor clients. This is a problem because earnings forecasts are material information, especially when they are prepared by analysts who have special access to company information and company management. Everybody who invested in Facebook would consider this material information when making an informed decision. The handful of big investors that did receive the information about reduced revenue forecasts were reportedly shocked. The change in Morgan Stanley’s estimates came on the heels of Facebook’s filing of an amended prospectus with the U.S. Securities and Exchange Commission (SEC), in …

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Monday, May 21, 2012 – Markets Bounce, Greece Doesn’t, JPMorgan Stonewalls – by Sinclair Noe

DOW + 135 = 12,504SPX + 20 = 1315NAS + 68 = 284710 YR YLD +.03 = 1.74% OIL + .12 = 92.69GOLD +.30 = 1593.40SILV -.25 = 28.57PLAT + 13.00 = 1474.00 Remember last summer, when the living was easy and the Dow Industrials dropped like bricks from 12,724 down to 10,719? Two-thousand points in just a few weeks? Remember in October, the Dow had recovered from the Dog Days of Summer and climbed all the way back to 12, 078, only to fall more than 800 points in just a couple of weeks? The past three weeks have been kind of like that. Of course, there will be bounces. Today we bounced. Why did we bounce today? Make up any reason you wish. Europe didn’t collapse, Greeks shifted to a pro-bailout party, the Facebook frenzy is finished, Jamie Dimon hypnotized investors to forget about losses at JPMorgan, the G8 is feeling optimistic, China isn’t planning to crush the US economy – at least not this week; the sun was eclipsed by the moon but it was only temporary. Pick a reason or create your own. Stocks bounce. One day does not make a trend. Over the weekend the G8 met at Camp David. It might have made better sense to hold the meeting in Chicago, where NATO was holding a meeting, a rare United States based NATO summit, but there would have been too many protesters. So the G8 met in the wooded seclusion of Maryland and they …

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Thursday, May 17, 2012 – Banks Start to Run – by Sinclair Noe

DOW – 156 = 12,442SPX – 19 = 1304NAS – 60 = 281310 YR YLD -.06 = 1.70%OIL +.17 = 92.73GOLD + 34.00 = 1575.30SILV +.78 = 28.15PLAT + 19.00 = 1459.00 The Dow Industrials have now dropped for 11 out of the past 12 trading sessions, giving back all the gains going back to the start of the year. Greece’s caretaker Cabinet was sworn in this morning and they’ll hold power at least until next month’s election.  The European Central Bank has stopped providing funds to Greek banks. People have been pulling euros out of the Greek banks, concerned about a possible exit from the Euro-zone common currency and a return to the Drachma, which would be an effective devaluation. So Greek citizens take their money out the front door of the bank and the ECB refuses to replenish supplies, and something has to give. There will be an election in about one month. There will be attempts to find a resolution. German Chancellor Merkel is even considering lifting the jackboot of austerity from the necks of the Greeks. It is one thing to demand fealty, it is another to consider the very real possibility of a Greek exit from the Euro-union. Germans are starting to realize that a Greek exit from the Euro-union will be very expensive. Everybody is now doing a study to determine how much a Greek exit might cost; the numbers seem to run in the trillions. So, why not find a cheaper solution? Which …

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Tuesday, May 15, 2012 – JPMorgan is Scary, the California Budget is Easy – by Sinclair Noe

05152012 Script DOW – 63 = 12,632SPX – 7 = 1330NAS – 8 = 289310 YR YLD =.01 = 1.78% OIL – .57 = 93.41GOLD – 12.20 = 1545.30SILV -.46 = 27.82PLAT – 5.00 = 1437.00 So, JPMorgan shareholders held their annual meeting. They decided to pay Jamie Dimon $23 million. They can still afford it; despite a $2 billion dollar loss, JPMorgan is still the largest publicly traded company, the largest bank in the US, and the largest derivatives dealer in the world. JPMorgan invented credit default swaps, they wrote the legislation to reform the derivatives markets, and when JPMorgan went insolvent in the 1980s and in 2007, they were bailed out by taxpayers.A $2 billion dollar loss is not the end of the world, JPMorgan is not in imminent danger, but I don’t think this will end well. The really scary part isn’t the loss, but that it only represents one-tenth of the annualized profit. What are they doing to make that kind of money? And if these are supposed to be the best and brightest bankers, what does it say about the others? The FBI has opened an investigation into the trading losses. We don’t know what the FBI is looking at and I won’t hold my breath waiting. The SEC has opened an inquiry into JPMorgan’s disclosures and accounting practices. JP Morgan maintains that the purpose of the trades that resulted in the $2 billion loss was to hedge exposure elsewhere, as opposed to being proprietary …

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Monday, May 14, 2012 – Problems in Greece, Euro, California, and JPMorgan – No Surprise

DOW – 125 = 12,695SPX – 15 = 1338NAS – 31 = 290210 YR YLD -.05 = 1.79%OIL – .70 = 94.08GOLD – 23.80 = 1557.50SILV – .71 = 28.28PLAT – 29.00 = 1442.00 Back in early April I started telling you to heed the old market maxim: “Sell in May and Stay Away”. You are welcome. The Dow Industrial Average has now dropped 8 out of the last 9 sessions; no surprise. Of course, we had the weekend to think about the shenanigans of JPMorgan Chase; a too big to fail bank acting irresponsibly while simultaneously demanding less regulation; no surprise. Today’s declines started in Europe; no surprise. In Germany, Angela Merkel’s Christian Democratic Union Party suffered more losses in a local election for the second straight week. Merkel’s CDU party received just 26% of the vote while a coalition of left-leaning Social Democrats and Green party candidates received over 50%. In light of the recent French elections, we are starting to see a trend. In Greece, the various leaders of the various political parties failed to form a coalition government over the weekend; no surprise. The Greeks will likely need to call another election. And the fate of Greece hangs over the markets just as the possibility of exiting the Euro-Union hangs over the heads of the Greeks. And I think that is the correct application of the metaphor, with Angela Merkel in the role of Dionysius and the Greeks in the role of Damocles. I don’t know …

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Friday, May 11, 2012 – JPMorgan Moving On

DOW – 34 = 12,820SPX – 4 = 1353NAS +0.18 = 293310 YR YLD -.04 = 1.84%OIL – 1.51 = 95.57GOLD – 13.00 = 1581.40SILV – .15 = 28.99PLAT – 21.00 = 1471.00 So, let’s break down the problems at JP Morgan Chase. The bank lost net $800 million, on a $2 billion dollar trading loss in synthetic credit derivatives. They won’t go broke today. JPM made $5.4 billion in profit in the first quarter. Still, a couple of billion dollars is significant, and it raises questions about the regulation of banks, the valuation and suitability of derivatives, the size of the world’s largest firms and the systemic risk they may pose to the financial system. For the past few years, JPM has been increasing the size and importance of its proprietary trading desk based in London. Theoretically, a proprietary trading desk trades stocks, bonds, currencies, commodities, derivatives and other financial instruments with the firm’s own money – as opposed to using customers’ money. If the bank makes money, they keep it and Jamie Dimon gets a big bonus. If they lose big, Jamie Dimon could lose his job, but he gets to keep the bonus. If the proprietary trading department screws up royally and the trades implode and pose a possible systemic threat, then the taxpayers cover the losses, and Jamie Dimon gets to keep his bonus. Once upon a time, the proprietary trading department of a bank was not the major part of the banks’ profits. The bankers …

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