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Friday, January 03, 2014 – Trust Me

Trust Me by Sinclair Noe DOW + 28 = 16,469SPX – 0.61 = 1831NAS – 11 = 413110 YR YLD + .01 = 2.99%OIL – 1.30 = 94.14GOLD + 15.00 = 1239.00SILV + .14 = 20.25 Fed Chairman Ben Bernanke will retire from public service at the end of the month, and likely wander off to be a well paid consultant or director at one or more banks or private equity firms. Today he gave what might be his final speech as the Fed head. Speaking at the American Economic Association forum in Philadelphia, Bernanke said that even though the FOMC announced taper in December, they were still committed to highly accommodative monetary policy for as long as needed; “Rather, it reflected the progress we have made toward our goal of substantial improvement in the labor market outlook that we set out when we began the current purchase program in September 2012.” He tempered the good news in housing, finance and fiscal policies by repeating that the overall recovery “clearly remains incomplete”, adding that the number of long-term unemployed Americans “remains unusually high.” This is something like the doctor telling you the cancer has been cured but there is still a massive tumor. As of the November jobs report, the labor market has 1.3 million fewer jobs than December of 2007. In a healthy environment, we would have seen jobs added as the population grew; the economy would have needed to add 6.6 million jobs just to maintain the level …

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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 …

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Tuesday, December 17, 2013 – The Year in Financial Review

The Year in Financial Review by Sinclair Noe They say you can’t know where you’re going if you don’t know where you’re coming from, so today on the Review, we’ll review some of the financial milestones of 2013. You may recall that 12 months ago, we were headed over the fiscal cliff. The fiscal cliff really started in 2001 with the Economic Growth and Tax Relief Reconciliation Act, also known as the Bush tax cuts; after various extensions, they were set to expire at the end of 2012. And they did. In the end, Congress did not approve an extension of most of the tax cuts until late on New Year’s Day. Because all the Bush tax cuts had technically expired, Republicans could say they had not violated their No New Taxes pledge. The marginal rate on incomes over $400k increased, plus cap gains, and qualified dividends for high-income taxpayers, plus some estate tax changes, and the holiday on the payroll tax ended; just to be sure everybody felt some pain. President Obama signed the American Taxpayer Relief Act of 2012 on January 2. The ATRA is usually described as a tax increase although technically it might be a tax cut. The confusion arises because there were so many expiring provisions at the end of 2012.  ATRA could be described as either a $618 billion tax increase, relative to maintenance of all of the provisions that had been in place – that is, relative to so-called “current policy”; or a $4 …

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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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Wednesday, October 30, 2013 – Fed Holds Steady and Floats a Balloon

Fed Holds Steady and Floats a Balloon by Sinclair Noe DOW – 61 = 15,618SPX – 8 = 1763NAS – 21 = 393010 YR YLD + .02 = 2.52%OIL – .85 = 97.35GOLD – 1.40 = 1343.90SILV + .22 = 22.84 Nobody expected the Fed to make any major policy changes at the conclusion of today’s 2-day FOMC meeting. And the Fed surprised no one as they kept their cheap money policy in place. So why are the markets down today, with the Fed continuing its easy money giveaway? I’ll explain in a moment. Language in the October statement mirrored the “moderate pace” of economic improvement that the Fed saw at its last meeting in September. The statement, though, did omit a reference from last month that fiscal tightening could slow growth in jobs and the broader economy. Let’s dig into the Fed statement: …economic activity has continued to expand at a moderate pace. Indicators of labor market conditions have shown some further improvement, but the unemployment rate remains elevated. Available data suggest that household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months. Fiscal policy is restraining economic growth. Apart from fluctuations due to changes in energy prices, inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable. …economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. …

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Monday, October 28, 2013 – Markets Are All About the Fed

10282013 Script Markets Are All About the Fed by Sinclair Noe DOW – 1 = 15,568SPX + 2 = 1762NAS – 3 = 394010 YR YLD + .01 = 2.51%OIL + .69 = 98.54GOLD + .30 = 1354.20SILV – .09 = 22.61 The Federal Open Market Committee, the FOMC, is the Fed’s policy making arm; they will meet on Tuesday and Wednesday to determine possible changes or adjustments to monetary policy. The broad consensus right now is that nothing will change. The government shutdown and a mixed batch of economic data convinced many the Fed would delay any move to begin trimming its stimulus into next year. The longer the Fed keeps its policy loose, the longer US yields will stay low, making the dollar less attractive. The dollar index was just a smidge higher today, but still trading very close to a 9 month low just under 79, reached on Friday, while the euro has been trading near 2 year highs. As long as the Fed’s easy money policy remains in effect it provides abundant liquidity for Wall Street. Last week the S&P 500 hit records and many global stock markets were also near record highs. The MSCI world equity index has been moving higher for 4 consecutive sessions and is near records of January 2008. The Fed’s easy money policy has served to support gold and other metals markets. After all the recent bullish movement, you might think the Fed’s dovish policy stance has been well priced into …

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Friday, September 20, 2013 – The Real Reason for No Taper

The Real Reason for No Taper by Sinclair Noe DOW – 185 = 15,451SPX – 12 = 1709NAS – 14 = 377410 YR YLD – .02 = 2.73%OIL – 1.72 = 104.67GOLD – 39.50 = 1326.60SILV – 1.29 = 21.90 The big news for investors over the next couple of weeks will be whether Congress can shoot itself in the foot. This past week’s big news for investors was no news from the Fed; no taper; although today St. Louis Fed President James Bullard said taper could begin as early as October. What does the no taper decision really mean? Since the major beneficiary of QE is the banks, it would seem logical that the main reason not to taper is because the banks are not as healthy as we are led to believe, or they’re involved in more risky business. Ellen Brown wrote Web of Debt and a new book called the Public Bank Solution. I’ve talked with Ellen on multiple occasions and she recently posted an article on her blog. Ellen did a great job of explaining the risks of the shadow banking system. Please click hereto read her article.

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Wednesday, September 18, 2013 – Surprise, Surprise, Surprise

Surprise, Surprise, Surprise by Sinclair Noe DOW + 147 = 15,676SPX + 20 = 1725NAS + 37 = 378310 YR YLD – .16 = 2.68%OIL + .43 = 108.50GOLD + 55.30 = 1366.30SILV + 1.23 = 23.06 Record highs for the Dow Industrials and the S&P 500, topping the highs of August 2. Surprise, surprise, surprise. It was not guaranteed the Fed would start to taper, but it was widely expected. We’ve talked about the reasons why the Fed might taper; the timing of the remaining FOMC meetings this year, some improvement in the economy, fear of frothy markets. Fouhgetaboutit. After two days of meetings, the FOMC decided to continue with the current quantitative easing policy of purchasing $85 billion a month in mortgage backed securities and treasuries. The punchbowl is full and the party is still rocking. In addition to record highs for the Dow and S&P 500, we saw 5-year Treasury’s biggest yield drop since March 2009, the US dollar’s third worst day in a year, home-builders had their biggest rally since last summer, and gold had its best day since January 2009. At least Wall Street institutions and traders love the accommodative policy and the morphine drip of free money from the Fed. So the patient is still on morphine and the reason is because of extreme weakness. The economy just isn’t strong enough to survive on its own. The stock market no longer rallies to the tune of increased retail sales, growing export markets or improved …

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Friday, September 06, 2013 – Fed Policy Creates Inequality

Fed Policy Creates Inequality by Sinclair Noe DOW – 14 = 14,922SPX + .09 = 1655NAS + 1 = 366010 YR YLD – .04 = 2.93%OIL+ 1.86 = 110.23GOLD + 21.10 = 1389.80SILV + .63 = 23.94 The war hasn’t started …, yet. This morning we got the big monthly jobs report. Nonfarm payrolls increased by 169,000 jobs last month falling short of the 175,000 to 180,000 Wall Street had expected. Not only did hiring miss expectations last month, but the job count for June and July was revised to show 74,000 fewer positions added than previously reported. While the unemployment rate fell a tenth of a percentage point to 7.3 percent, its lowest level since December 2008, the decline reflected a drop in the share of working-age Americans who either have a job or are looking for one. That participation measure reached its lowest point since August 1978, a further sign of underlying economic weakness. The rate for men touched a record low. U-6, a measure of underemployment that includes people who want a job but who have given up searching and those working part time because they cannot find full-time jobs fell three tenths of a percentage point to a 4-1/2-year low of 13.7 percent. The private sector accounted for the bulk of the job gains last month, but government payrolls increased 17,000 as local governments hired teachers for the new school year. Factory employment rebounded after falling in July. Construction payrolls were flat as both residential and …

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Thursday, September 05, 2013 – Mustering Support

Mustering Support by Sinclair Noe DOW + 6 = 14,937SPX + 2 = 1655NAS + 9 = 365810 YR YLD + .08 = 2.98%OIL + 1.23 = 108.46GOLD – 23.90 = 1368.70SILV – .25 = 23.31 The war hasn’t started, yet. President Obama is in St. Petersburg Russia for the G-20 summit, he received a cordial but cool greeting from Russian President Vlad Putin, however Putin had harsh words for Secretary of State John Kerry, calling him flat out a “liar”, referring to his testimony regarding Syria, a close ally of Russia.The United States has given up trying to work with the U.N. Security Council on Syria, accusing Russia of holding the council hostage. Russia, backed by China, has used its veto power three times to block council resolutions condemning Assad’s government and threatening it with sanctions.  Yesterday, a Senate panel authorized military action in a “limited and specified manner”. A full vote is expected next week. Syria is dominating a summit with an official agenda focused on economic growth, monetary policy and global banking and tax rules. Obama began meeting with other leaders of the Group of 20 nations, trying to persuade allies to give the US a measure of political cover even if they withhold military support. Obama has already met with Shinzo Abe of Japan, Francois Hollande of France – who may be the only US ally taking part in a strike against Syria, and also a meeting with Dilma Rousseff of Brazil. Brazil won’t be part …

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