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Wednesday, August 07, 2013 – A Crack in QE

A Crack in QE by Sinclair Noe DOW – 48 = 15,470SPX – 6 = 1690NAS – 11 = 365410 YR YLD – .04 = 2.60%OIL – 1.12 = 104.18GOLD + 4.70 = 1288.30SILV + .11 = 19.69 Remember back in late May when Ben Bernanke hinted that the Fed might not continue Quantitative Easing forever; there might actually be a time when the Fed stopped pouring $85 billion into mortgage backed securities and Treasuries. The stock market took a hit on the whim of a whisper of a hint that the punchbowl might be removed. Bernanke did some backtracking, and the markets rebounded to hit record highs on the Dow and the S&P, and we all enjoyed milk and cookies. This week, we’ve seen several Fed officials talking about QE again, and again the markets are pulling back; down for three days. On Monday, it was Dallas Fed Bank President Richard Fisher; yesterday it was Charles Evans, president of the Chicago Fed Bank, and Dennis Lockhart, President of the Atlanta Fed Bank. Today, Federal Reserve Bank of Cleveland President Sandra Pianalto said that the central bank would be prepared to scale back asset purchases if the labor market remains on the stronger path followed since last fall. Pianalto said that there have been “clearer signs of a more sustained recovery” in the labor market in the last few months. “In light of this progress, and if the labor market remains on the stronger path that it has followed since …

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Tuesday, August 06, 2013 – Dog Days

Dog Days by Sinclair Noe DOW – 93 = 15,518SPX – 9 = 1697NAS – 27 = 366510 YR YLD + .02 2.63%OIL – .86 = 105.70GOLD – 21.20 = 1283.60SILV – .23 = 19.58 If the markets are boring you this summer, you just aren’t paying attention. August trading in this post-financial crisis landscape has been anything but boring. For the past four years, the market has offered tremendous gains and harrowing losses during the month of August. The boring, flat market many of us have grown to expect just hasn’t materialized. Investors were treated to big gains in August 2009 and August 2012. But in August 2010 and 2011, the broad market coughed up about 5%. In 2010, August ended up marking the final lows of a summer correction. In 2011, the eurozone crisis pulled stocks underwater by as much as 12% during the month of August, only to claw their way back from the brink of a new bear market. So much for the dog days of summer. This time around, nothing should surprise you.  The US trade deficit declined in June to its lowest level in more than 3-1/2 years as imports fell and exports touched a record high. The Commerce Department says the trade gap fell 22.4 percent to $34.2 billion, the smallest since October 2009. The percentage decline was the largest since February 2009. May’s shortfall on the trade balance was revised to $44.1 billion from the previously reported $45.0 billion. Exports of goods …

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Tuesday, June 18, 2013 – The Fed, and the Brazilian Protests

The Fed, and the Brazilian Protests by Sinclair Noe DOW + 138 = 15,318SPX + 12 = 1651NAS + 30 = 348210 YR YLD + .01 = 2.18%OIL + .63 = 98.02GOLD – 16.40 = 1369.30SILV – .16 = 21.78 The past couple of years, the financial markets have been very dependent on the Federal Reserve, perhaps overly dependent. Much of the fundamental analysis of companies and the economy has taken a backseat to the Fed’s unprecedented monetary policy of Quantitative Easing. The outlook for the financial markets for the remainder of the year boils down to potential changes in policy. The Federal Open Market Committee has begun its regularly scheduled policy meeting and tomorrow they will issue a policy statement followed by a press conference by Fed Chairman Bernanke. So, this time tomorrow we’ll know more but given the importance of monetary policy, it’s worthwhile to consider possibilities and possible market response. There are four possible scenarios to consider: The first scenario has the Fed announcing preparations for tapering off QE; they won’t actually stop QE tomorrow, they’ll just announce their intention to exit QE policy at some identifiable point down the road; and of course, it would be conditional on economic developments between now and the determined exit date; it would most like involve scaling back securities purchases without any specific targets for changing interest rates. This seems to be the most probable scenario right now. Since the Fed announced QE3 last September, the Bank of Japan has …

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Monday, September 17, 2012 – Maybe We Need to Eliminate the Middlemen

Maybe We Need to Eliminate the Middlemen -by Sinclair Noe DOW – 40 = 13,553SPX – 4 = 1461NAS – 5 = 317810 YR YLD -.03 = 1.84%OIL -.04 = 96.58GOLD  – 8.00 = 1763.50SILV – .43 = 34.35PLAT – 42.00 = 1673.00 After the enthusiasm last week for QE3 to infinity and beyond, the markets paused today. It is easy for Wall Street traders to get jacked up like little kiddies on a sugar buzz at the prospect of the Federal Reserve passing out Free Money. Then there is the consolidation phase, where we ask: What Have we done? Where is this leading? From the New York Times: “The Federal Reserve’s experimental effort to spur a recovery by purchasing vast quantities of federal debt has pumped up the stock market, reduced the cost of American exports and allowed companies to borrow money at lower interest rates. “But most Americans are not feeling the difference, in part because those benefits have been surprisingly small. The latest estimates from economists, in fact, suggest that the pace of recovery from the global financial crisis has flagged since November, when the Fed started buying $600 billion in Treasury securities to push private dollars into investments that create jobs…. “A study published in February found that interest rates decreased, but only for companies with top credit ratings, “Rates that are highly relevant for households and many corporations — mortgage rates and rates on lower-grade corporate bonds — were largely unaffected by the policy.”” The …

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Friday, September 14, 2012 – Much More Than a Film

Much More Than a Film -by Sinclair Noe DOW + 53 = 13,593SPX + 5 = 1465NAS + 28 = 318310 YR YLD +.11 = 1.87%OIL + .69 = 99.00GOLD + 3.30 = 1771.50SILV un=34.78PLAT + 25.00 = 1714.00 One crazy little film that never even made it into theaters is all it takes to start World War 3. Go figure. I don’t really think it will be WW3 but you never know. I mean, I can understand how people get passionate and caught up in any film featuring Cindy Lee Garcia of Bakersfield, California. How many Oscars has she won? And any movie produced by Sam Bacile, you know it has a certain production quality. Say it slowly S A Mbacile (Is a Embicile). And you just have to think somebody is behind this otherwise very obscure movie. Authorities now believe the filmmaker is a guy in Cerritos Californa named Nakoula Nakoula, who just recently got out of prison after pleading guilty to bank fraud in 2010. Maybe this guy is a complete idiot or maybe he’s a puppet; I’m guessing the latter. Someone who has interests somewhere was pulling the strings. The results are nowhere near obscure. The bodies of 4 US diplomats killed in Libya were returned to US soil today at Andrews Air Force Base. Flags across the country are at half-staff. There are protests against the US in at least 18 countries in the Middle East, Africa, and Asia. About 50 Marines landed in Yemen …

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Thursday, September 13, 2012 – QE to Infinity and Beyond

QE to Infinity and Beyond -by Sinclair Noe DOW + 206 = 13,539SPX + 23 = 1459NAS + 41 = 315510 YR YLD -.01 = 1.76%OIL – .24 = 98.07GOLD + 35.80 = 1768.20 SILV + 1.37 = 34.78PLAT + 36.00 = 1690.00 I told you what I thought the Fed would do and today they did it. That doesn’t make me a genius, because the Fed has been telegraphing today’s action for about a month. The Federal Reserve wrapped up their Federal Open Market Committee meeting and announced a big new plan to stimulate the economy. The Fed said that it would expand its holdings of mortgage-backed securities and potentially take other steps to encourage borrowing and financial risk-taking. Perhaps more significant than those details was the basic change in its approach, for the first time pledging to act until the economy improves rather than creating programs with fixed endpoints; this is open ended quantitative easing; QE to infinity and beyond. In its measures, the Fed said it would add $23 billion of mortgage bonds to its portfolio by the end of September, a pace of $40 billion in purchases per month. It would then announce a new target at the end of this month, and every subsequent month, until the outlook for the labor market improves “substantially” and so long as inflation remains in check. The statement did not further explain either standard. The scale of the new QE is actually smaller than the Fed’s previous rounds of …

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Wednesday, September 12, 2012 – I Remain Optimistically Antiquated

I Remain Optimistically Antiquated -by Sinclair Noe DOW +9.99 = 13,333SPX + 3 = 1436NAS + 9 = 311410 YR YLD +.07 = 1.76%OIL – .16 = 96.85GOLD – 1.10 = 1732.40SILV -.17 = 33.41PLAT +42.00 = 1653.00 As we get down to FOMC crunch time, the skeptics come out of the woodwork. The Murdoch Street Journal ran a story saying that economists doubt the benefits of another round of bond-buying by the Federal Reserve. They surveyed 47 people, we don’t know how many were just walking through the newsroom, and they generally expect the Fed to start another round of large-scale asset purchases, known as quantitative easing, at its September policy-setting meeting. Another seven expect a move later this year, but not tomorrow. Just five respondents don’t believe the Fed will take action this year. And then there are others who say the economy is horrendous and jobs are not coming back and housing is still weak and all that, but the Fed doesn’t necessarily need to do anything to help support the markets. Some economists don’t see a large impact from a large bond-buying program. On average, they estimate that $500 billion in purchases would only reduce the unemployment rate by 0.1 percentage points and increase gross domestic product by 0.2 points over a one-year period. They estimate such a program would lift the inflation rate by 0.2 percentage points over 12 months. Others argue that QE1&2 didn’t really get the job done, and QE3 would just extend …

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Monday, September 10, 2012 – When the Crack Pipe Fails to Satisfy

When the Crack Pipe Fails to Satisfy -by Sinclair Noe DOW – 52 = 13,254SPX – 8 = 1429NAS – 32 = 310410 YR YLD +.02 = 1.68%OIL -.30 = 96.24GOLD – 10.50 = 1725.80SILV – .34 = 33.44PLAT + 2.00 = 1599.00 Consumer credit shrank by $3.28 billion in July; this marked the first declines in consumer credit in nearly a year as Americans reduced credit card debt. Now for the scary part; I read a couple of stories on this today and they described the news as worrisome for the economy. I disagree. It might be worrisome for the credit card companies; it might be worrisome for the payday loan companies; it might be worrisome for the banks and other loan sharks, but I consider it good news for consumers and the economy in general. Consumer debt does not add to productivity; it doesn’t manufacture things. It’s debt. It’s inflationary. It’s takes resources which could be applied to greater purpose elsewhere. It doesn’t really matter because the Federal Reserve says they revised their earlier estimates for June, and it is likely we’ll all be paying with plastic again in August – you maybe, not me. Credit has been expanding almost continuously since mid-2010 as the country recovered from the 2007-2009 meltdown. The decline in July was the first drop since August of last year. In July, revolving credit, which includes credit cards, shrank by $4.82 billion. The data looks at declining credit as a negative because it is …

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Friday, September 7, 2012 – More Than You Want to Know About the Jobs Report

More Than You Want to Know About the Jobs Report By Sinclair Noe DOW + 14 = 13,306SPX + 5 = 1437NAS + 0.61 = 313610 YR YLD – .01 = 1.66%OIL +.89 = 96.42GOLD + 34.00 = 1736.30SILV + .97 = 33.78PLAT + 10.00 = 1597.00 The first Friday of each month the Bureau of Labor Statistics reports on nonfarm payrolls for the previous month. While that sounds rather mundane, the jobs report is a pretty big deal. The results attempt to measure some of the most vital data about the economy; who’s working and where and how much are they being paid; from this we can estimate how much people will or will not spend, the strength or weakness of businesses, the overall health of the economy. The fates of Presidents and political parties can hang on the results. The Federal Reserve will use the report to determine if they will turn on the printing press. This in turn affects the prices we pay for almost everything. So, it’s a pretty big deal. The economy added 96,000 jobs in August, far below the consensus of 125,000 to 150,000. In addition, July’s tally was revised down to 141,000 from 163,000. The unemployment rate unexpectedly fell to 8.1% from 8.3% and the “real” unemployment rate (U6) fell to 14.7% from 15%, but the unemployment rate came down for the wrong reason; a sharp drop in the size of the labor force. The labor participation rate fell to 65.3%, its lowest …

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Wednesday, August 22, 2012 – QE Soon, Inequality Grows

QE Soon, Inequality Grows– by Sinclair Noe DOW – 30 = 13,172SPX + 0.32 = 1413NAS + 6 = 307310 YR YLD -.09 = 1.72%OIL – .28 = 96.40GOLD + 15.50 = 1655.10SILV + .50 = 29.93PLAT + 26.00 = 1541.00 The Federal Reserve released minutes of their most recent Federal Open Market Committee meeting. Here’s the money quote from the FOMC minutes: “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.” In other words, a majority of the FOMC members think it is time for QE3, unless we see an economic miracle, say hallelujah! So, when will they make an announcement? Well, there is a symposium in Jackson Hole, Wyoming on August 31. There is another FOMC meeting September 12 and 13. The language in today’s minutes is not a guarantee of QE3, but if they do not make an announcement of QE3, then the lack of action will be interpreted as highly political and obstructionist. They have now obligated themselves to some sort of accommodation; it might not be called QE3, but a rose by any other name… The economy is ready for help; GDP is growing at less than 2%; inflation is running less than 2%; unemployment is lingering at 8.3%; Europe could implode and hurt the US economy. So, what will happen when the Fed provides additional monetary accommodation? Kansas City Federal Reserve President Esther …

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