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Monday, May 13, 2013 – Tapering Off – A Taste of Honey

Tapering Off – A Taste of Honey by Sinclair Noe DOW – 26 = 15,091SPX + 0.07 = 1633NAS + 2 = 3438 10 YR YLD + .02 = 1.92% OIL – 1.16 = 94.88GOLD – 17.30 = 1431.80SILV – .22 = 23.75 The Murdoch Street Journal ran an article Friday claiming the Federal Reserve has mapped out a plan to exit Quantitative Easing, the Fed’s $85 billion dollar per month bond buying program. The article said the Fed will cut its bond-buying program in careful and potentially halting steps, though the timing of when to start is still being debated. Now, you might think this is good news; the Fed thinks there is a way to exit QE; they are eager too manage market expectations and to prevent chaos; and the entire idea of an exit would possibly indicate an improving economy. Not so fast. Maybe the Fed is getting worried about risks from zero interest rate policy. In a speech devoted to the vulnerabilities in the financial system, Bernanke identified the search for yield, the threat of a run on money-market funds and the possibility that short-term wholesale markets could dry up in a crisis. At a speech at a Chicago banking conference, Bernanke said: “In light of the current low interest-rate environment, we are watching particularly closely for instances of ‘reaching for yield’ and other forms of excessive risk-taking, which may affect asset prices and their relationships with fundamentals.” Bernanke again drew attention to money-market funds, noting the Treasury …

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Levitational Tools by Sinclair Noe DOW + 48 = 15,105SPX + 6 = 1632NAS + 16 = 341310 YR YLD – .02 = 1.76%OIL + .99 = 96.61GOLD + 21.80 = 1475.40SILV – .01 = 24.05 Another day, another record high. What’s behind this? Nouriel Roubini weighed in from a conference in Las Vegas. Roubini is a professor at NYU and former Senior Economist for the White House Council of Economic Advisors, and notably, one of the few economists to anticipate the collapse in the housing market. Roubini identified the levitational forces, the forces lifting the markets, on “QE, zero policy rates, more money coming into the market, not just from the US, but from other economies” as the reason behind rising asset prices. Roubini also said: “Growth is slow. Earnings growth is also slowing down. Top line and bottom line are not as good as they used to be, but margins are high. They could correct somehow over time.” His best guess is that it could go on for a couple more years. Why two years? Roubini says: “recent data have effectively silenced hints by some Federal Reserve officials that the Fed should begin exiting from its current third (and indefinite) round of quantitative easing (QE3). Given slow growth, high unemployment (which has fallen only because discouraged workers are leaving the labor force), and inflation well below the Fed’s target, this is no time to start constraining liquidity.” Let’s take this a step further; with inflation running at about …

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Monday, May 06, 2013 – Wall Street Loves the Mushy Jobs Report

Wall Street Loves the Mushy Jobs Report by Sinclair Noe DOW – 5= 14968SPX + 3 = 1617NAS + 14 = 339210 YR YLD + .02 = 1.77%OIL + .18 = 95.79GOLD – .40 = 1471.30SILV – .09 = 24.14 Friday’s jobs report was great for Wall Street. The Dow Industrials briefly topped 15,000 and managed to close at a record high. The S&P 500 hits new records as well. The actual jobs report was only semi-good. The economy added 165,000 net new jobs in April. The February and March reports were revised higher. That’s certainly better than losing 700,000 jobs, but it wasn’t enough to get the economy up to cruising speed. Wall Street loved it; just enough job growth to avoid recession; not enough job growth to cause the Fed to exit QE to infinity. Wages are still basically flat. Since the financial collapse of 2008, 9.5 million Americans have simply left the workforce. Once you leave the workforce, you stop being counted, you become invisible. About 22 million Americans are unemployed or under-employed or working part-time because they can’t find full-time work. The Federal Reserve last week told us they are pretty well tapped out as far as their ability to fix things; they said: “fiscal policy is restraining economic growth.” A new report from the Brookings Institute puts numbers on fiscal policy. In the 46 months since the official end of the Great Recession, state, local and federal governments have cut about 500,000 jobs. In contrast, …

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Thursday, April 25, 2013 – Austerians v. Keynesians

Austerians v. Keynesians by Sinclair Noe DOW + 24 = 14,700SPX + 6 = 1585NAS + 20 = 328910 YR YLD + .01 = 1.71%OIL + 1.79 = 93.22GOLD + 36.70 = 1469.20SILV + 1.24 = 24.50 Five years ago the banking system nearly imploded and almost resulted in a meltdown of the global financial system. Three years ago Congress passed the Dodd-Frank financial reforms, aimed at correcting some of the problems of 2008. Dodd-Frank may have included some good ideas, but you had to wade through 2,000 pages to find anything worthwhile. Much of the legislation has still not been implemented, and on the issue of averting another banking system implosion, it really didn’t do much; it basically called on regulators to do a better job of catching problems and nipping them in the bud. We all know that’s not going to happen. And so, the biggest banks have been getting bigger than before the financial crisis and it’s widely believed that if a big bank were to fail, they would be bailed out.., again. The government considers these banks to be Systemically Important Financial Institutions, which means they are Too Big to Fail. That implied backing has given firms a green light to engage in risky activities that pose a threat to the financial system. Yesterday, Senators David Vitter and Sherrod Brown introduced legislation that aims to end the implicit guarantee of a government bailout. Brown and Vitter are calling for big banks with more than $500 billion in …

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Tuesday, March 05, 2013 – Milk and Cookies

Milk and Cookies by Sinclair Noe DOW + 125 = 14,253.77SPX + 14 = 1539NAS + 42 = 3224 10 YR YLD + .02 = 1.89%OIL + . 50 = 90.62GOLD + .80 = 1576.40SILV + .16 = 28.80 The Dow has recovered all of its losses from the financial crisis and the small”d”depression, gaining 119 percent from its low in March 2009, making this the third-strongest bull market for the Dow since World War II. Though the Dow has erased its memories of the crisis, many households aren’t so lucky: Neither jobs nor wages have regained their pre-crisis highs. Home prices are still nearly 26 percent below their level when the Dow last peaked, and about 14 million homeowners are still underwater on their mortgages. The job market has recovered only 5.5 million of the 8.7 million jobs lost during the downturn. With the job market weak, worker wages have stagnated. Inflation-adjusted average income is 8 percent lower than in 2007, when the Dow was at its previous high. A chart of the stock market points to the upper right hand corner, while a chart of hourly earnings is just a flat line. Higher stock prices do tend to benefit the more affluent. This might eventually provide a lift for the broader economy, or it might just be enough to sucker Mom and Pop investors into the market again; you remember those folks who were clobbered, twice in the past 13 years; those folks who were steamrolled by the …

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Monday, March 04, 2013 – The Strange Disconnect

I will be speaking at the 2013 Wealth Protection Conference April 5 & 6. Click here for more information or call 800-494-4149 or 480-820-5877. The Strange Disconnect by Sinclair Noe DOW + 38 = 14,127SPX + 7 = 1525NAS + 12 = 318210 YR YLD +.02 = 1.88%OIL – .62 = 90.06GOLD – 3.00 = 1574.80SILV – .06 = 28.62 It seemed like a long weekend, and then suddenly it was over. So, just to make sure we’re still on point, let’s start with a brief recap of last week. One week ago, there was widespread concern about the Italian elections, which ended in gridlock. Fifty-seven percent of the Italian vote went to parties that have vowed to tear up the European Union’s austerity script. It might send a signal of an end to economic reforms in Italy, that could undermine confidence in Italy, that could result in higher borrowing costs; which could result in a new bout of Euro-zone sovereign solvency fears, which could send markets lower until such fears are removed. In the US, Fed Chairman Bernanke testified on Capitol Hill that Fed stimulus would in fact continue into the foreseeable future, and the economy was doing much better, according to Bernanke. The housing and auto sectors and consumer sentiment data showed continuous improvements. The Fed will keep the free money spigot wide open and the banks will be flooded with cash, or some rough equivalent. If there was ever a good excuse to rally off a dip …

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Wednesday, February 27, 2013 – It’s Ben’s World

I will be speaking at the 2013 Wealth Protection Conference in Tempe, AZ, April 5 & 6. For information please click here. This is an excellent conference. Hope to see you there. It’s Ben’s World by Sinclair Noe DOW + 175 = 14,075SPX + 19 = 1515NAS + 32 = 316210 YR YLD +.02 = 1.90%OIL + .22 = 92.85GOLD – 18.40 = 1597.30SILV – .45 = 29.08 Yesterday, Federal Reserve Chairman Ben Bernanke deliver his semi-annual testimony before the Senate; today he talked to the House of Representatives, repeating testimony in which he defended the Fed’s policy of buying bonds to keep interest rates low in order to promote growth and bring down the unemployment rate. Woohoo! Ben is going to continue with QE to infinity and beyond. Wall Street loves free money. The markets moved higher. That pretty much covers it. The stock market tumbled a few days ago. Bernanke promised more free money and the market moved higher yesterday. And then today, Bernanke reiterated that the free money spigot is wide open, and the market moved higher again. That pretty much covers it. So, maybe we can play some music. Start happy hour a little early today if that’s your thing. I’m just saying that you need to keep it all in perspective. If you have friends, call them up and thank them for being friends. If you don’t have friends, go make some. If you are doing something productive, keep doing it. If your not doing …

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Thursday, December 13, 2012 – Federal Reserve Targets

Federal Reserve Targets by Sinclair Noe DOW – 74 = 13,170SPX – 9 = 1419NAS – 21 = 299210 YR YLD +.03 = 1.73%OIL – .67 = 86.10GOLD – 14.30 = 1697.30SILV – .91 = 32.64 What happens when the unemployment rate gets to 6.7%? Or when the inflation rate gets to about 2.4%%? Yesterday, the Federal Reserve announced it would keep interest rates at super-duper low levels and they would buy about $85 billion dollars a month in mortgage backed securities and Treasury bonds until the unemployment rate drops to 6.5% or until inflation kicks up to about 2.5%. So, what happens when the unemployment rate hits 6.7% or inflation hits 2.4%? The next question, and it is probably going to turn into an obsession for market traders trying to figure which target gets hit first, inflation or unemployment. Of course, that is working on the assumption that Fed policy will improve the jobs picture and that the Fed’s policy will result in inflation. Maybe. What we know with greater certainty is that the Fed’s policy is a boon for banks. They can offer loans and keep a very wide spread, also known as a profit. And the banks can be very particular about the quality or vintage of loan they make; which in turn keeps the spread high. The banks don’t really need to make mortgage loans to consumers;Ttey can get an even bigger spread on high interest credit card accounts; they can get an even higher interest …

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Thursday, November 8, 2012 – Tools in the Toolbox

Tools in the Toolbox by Sinclair Noe DOW – 121 = 12,811SPX – 17 = 1377NAS – 41 = 289510 YR YLD un = 1.63%OIL + .60 = 85.04GOLD + 14.60 = 1732.90SILV + .47 = 32.41 Yesterday I was a guest on Bill Tatro’s radio show: All About Money, 2PM Pacific and Mountain, right here on MoneyRadio. Most of the time Bill’s show is Bill, and it’s great; he’s always entertaining and informative and I don’t agree with everything he says but I think he does a great job of saying it; so I’m always a bit honored when he has me on as a guest. It’s a different situation for me, being the guest, but Bill is an excellent interviewer. One of the questions he asked was, paraphrasing: “What tools does the Federal Reserve still have in their toolbox?” I gave the basic answer that they didn’t seem to have many tools left. I thought it was time for fiscal stimulus to match the Fed’s already extraordinary use of monetary stimulus. But, as I said, this was a really good question and so I did a little more research, and today I’m going to talk with you about the tools left in the toolbox. First, whether you like the Fed or not, the Fed’s actions have had an impact on the economy and the economy has shown signs of recovery; I’m not sure what else to call it when you have 32 months of employment growth, the Dow …

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Tuesday, October 23, 2012 – Take Me to the Water

Take Me to the Water by Sinclair noe DOW – 243 = 13,102SPX – 20 = 1413NAS -26 = 299010 YR YLD – .03 = 1.76%OIL – .43 = 88.20GOLD – 21.80 = 1708.70SILV – .78 = 31,77PLAT – 38.00 = 1576.00 I’m still trying to figure out how Iran goes through Syria to gain access to the sea; this might take a while, so let’s consider some other topics while we wait. Today, the Dow Jones ended down 1.8% and the S&P 500 was off 1.4%. Why? Why? Who can explain why? Not me. But I can tell you that the Oracles of CNBC have figured it out and they can tell you why the markets moved, at least they can tell you after the fact. Here’s what they spake: Concerns about the strength of corporate earnings, particularly multinationals like DuPont, IBM and McDonald’s; increased selling by liquidity-seeking Europeans; China’s slowing economy; Wilbur Ross decided it might be better to invest in Spanish banks next year; Spain’s GDP continues to shrink; The short-selling ban in Spain expired yesterday; Obama used the word “sequestration” during last night’s debate, reminding people of the fiscal cliff; Fed policy continues to keep assets prices at some level above their fundamentals, but the fundamentals are worsening; Each round of QE has been decreasingly effective; The technicals of the S&P 500; Romney might win the election; Apple’s roll out of the iPad mini might be underwhelming. The iPad mini roll out; it’s small; I don’t …

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