Financial Review

Financial Review for Tuesday, April 29, 2014 – Lowering the Bar

Lowering the Barby Sinclair Noe DOW + 86 = 16,535SPX + 8 = 1878NAS + 29 = 410310 YR YLD + .02 = 2.69%OIL – .12 = 100.72GOLD – .40 = 1296.90SILV – .13 = 19.54 The S&P/Case-Shiller home price index for February showed prices up 12.9% from February a year ago, that’s down from the 12-month advance of 13.2% reported in January. The index tracks existing home sales in 20 major metropolitan areas, and this economic report tends to lag, plus it is a 3-month moving average of prices; so maybe we could be seeing one of the last reports to reflect bad winter weather. Home prices fell in 13 of the 20 cities in February compared with the previous month, and it wasn’t just cold weather cities; prices in Las Vegas dipped 0.1% in February from the previous month, the city’s first monthly decline in nearly two years; home prices fell 1.6% in Cleveland and 0.7% in Tampa, Florida. Las Vegas still posted the biggest 12-month gain, with an increase of 23.1%. The Conference Board said its index of consumer attitudes dipped to 82.3 from an upwardly revised 83.9 in March; still, very near a 6-year high. A new report today from the National Employment Law Project finds that as the economy has inched toward recovery, low-wage jobs have returned far more quickly than middle- or high-income work. The report’s finding shows how the housing sector in particular is a key middle-income employer that has failed to rebound. …

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Wednesday, March 26, 2014 – Render to Caesar

Render to Caesar by Sinclair Noe DOW – 98 = 16,268SPX – 13 = 1852NAS – 60 = 417310 YR YLD – .03 = 2.70%OIL + 1.03 = 100.22GOLD – 5.90 = 1306.80SILV – .27 = 19.84 Durable goods orders increased 2.2% in February, ending 2 straight months of declines. Durable goods are items like refrigerators, cars, and airplanes that are built to last for several years. But we need to dig into this report just a little; orders for non-defense goods, excluding aircraft, were actually down 1.3%. This might also indicate that first quarter business investment is weak. The US Census Bureau began releasing data from its 2012 Economic Census, a survey of American businesses taken every 5 years. The enormous boom in domestic oil and gas production helped make the mining, quarrying and oil and gas extraction industry one of the fastest growing sectors of the US economy. The number of businesses rose 26% from 2007 to 2012, employment in the sector rose 24% and revenue surged 34%. Meanwhile, from 2007 to 2012 manufacturing lost 2.1 million jobs, now down to just 11.3 million people employed in manufacturing. The finance and insurance sector shed 390,000 jobs between 2007 and 2012 and industry revenue fell by $137 billion, nearly 4%. But revenues in 2012 were still up 61% from 15 years earlier. There were one million retail stores operating in 2012. But the retail trade sector shed 65,000 establishments and nearly 778,000 jobs from five years earlier. Internet-based selling …

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Tuesday, October 08, 2013 – Low Probability High Consequence

10082013 Script Low Probability High Consequence by Sinclair Noe DOW – 159 = 14,776SPX – 20 = 1655NAS – 75 = 369410 YR YLD un = 2.63%OIL + .53 = 103.56GOLD – 3.50 – 1319.90SILV – .06 = 22.39 The Dow Industrials are down for 11 of the past 14 sessions, posting a loss of nearly 900 points. It’s not exactly a crash; Wall Street is still expecting a resolution to the debt ceiling and the shutdown. The debt ceiling will likely be resolved with some short-term band-aid, but there is a chance that the idiots will mess it up and there will be a default. There is a low probability of default but a high consequence; that’s a nasty mix and the reason I don’t play Russian Roulette. Most financial markets are only slowly getting worried about the possibility of a debt default, but in one tiny corner of the bond market things are starting to look a little panicky. Today, investors dumped one-month Treasury bills due for payment after October 17, the date the Treasury Department has warned it will no longer have the cash to pay all of its obligations unless Congress raises its borrowing limit, known as the debt ceiling. Every day that passes after that date raises the risk the government will default on some of its debt. These short-term bills will probably be the first to go unpaid. Interest rates and bond prices move in opposite directions; so as prices dropped today, rates spiked, …

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Monday, October 07, 2013 – Already Bankrupt

Already Bankrupt by Sinclair Noe DOW – 136 = 14, 936 SPX – 14 = 1676NAS – 37 = 377010 YR YLD – .02 = 2.63%OIL – .67 = 103.17GOLD + 11.20 = 1323.40SILV + .61 = 22.45 The markets gave up Friday’s gains. The political dysfunction is hurting; right now it’s just the economic uncertainty; that’s a phrase I hate because businesses always face uncertainty but the shutdown and the looming debt ceiling are significant uncertainties. Let’s start with the debt ceiling. Businessweek is describing it as “an economic calamity like none the world has ever seen.” Here’s the not so rosy scenario: “Failure by the world’s largest borrower to pay its debt — unprecedented in modern history — will devastate stock markets from Brazil to Zurich, halt a $5 trillion lending mechanism for investors who rely on Treasuries, blow up borrowing costs for billions of people and companies, ravage the dollar and throw the U.S. and world economies into a recession that probably would become a depression. Among the dozens of money managers, economists, bankers, traders and former government officials interviewed for this story, few view a U.S. default as anything but a financial apocalypse. “ Sure, if the US misses a payment it would be much bigger than 2008 because the US government is so much bigger and more interconnected than Lehman Brothers; and after the collapse of Lehman, the government stepped in to clean up the mess. Who cleans up the mess when the mess is …

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Friday, June 28, 2013 – Halftime

Halftime by Sinclair Noe DOW – 114 = 14,909SPX – 6 = 1606NAS + 1 = 340310 YR YLD – .05 = 2.48%OIL – .49 = 96.49GOLD + 34.50 = 1236.30SILV + 1.15 = 19.76 What a long strange trip it’s been, and we’ve only just reached the halfway mark of 2013. It started with the fiscal cliff, and after the lemmings jumped, we still had payroll tax hikes, debt ceiling battles, sequestration, mixed with assorted dysfunction; and through it all the stock market climbed. The S&P 500 hit a record high of 1687 in May; the Dow hit a high of 15,542. Those were the days of milk and cookies. And then Bernanke did a little tap dance around the punchbowl, sparking the animal spirits of the marketplace, and transforming bond market vigilantes into feral hogs, raising their snouts in the air and sniffing a whiff of blood. Volatility spiked, with more than 15 consecutive days of 100-point swings for the Dow. The bond market swooned, and June turned gloomy. Still, the first half was generally positive. The best first half for stocks since 1998. The S&P 500 closed the first half of 2013 up 12.6 percent. For the second quarter, the Dow rose 2.3%, the S&P 500 gained 2.4% and the Nasdaq Composite climbed 4.2% We are at a policy inflection point, or at least we are at a point where we can think about an inflection point, which may or may not be a bad thing if …

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Wednesday, June 26, 2013 – Still Some Work to be Done

Still Some Work to be Done by Sinclair Noe DOW + 149 = 14,910SPX + 15 = 1603NAS + 28 = 337610 YR YLD – .05 = 2.54%OIL + .17 = 95.49GOLD – 52.40 = 1226.20SILV – 1.12 = 18.62 Today we’ll cover the Supreme Court decisions, but first the economic news. As you know, the Commerce Department reports the Gross Domestic Product, or GDP of the nation on a quarterly basis. They issue an initial guesstimate, then they settle on a revised number; for example, they said the first quarter GDP was 2.4%; and then today, they revised the revision of the guesstimate. The economy did not grow at 2.4% in the first quarter, instead it was just anemic 1.8% growth. The latest numbers show that both consumer spending and trade were weaker than the earlier estimates showed. Consumers did not increase spending on health care, foods, hotel, travel, legal or personal care; big ticket purchases such as autos and electronics were flat. Investment in business structures including office buildings and plants dropped 8.3%; worse than the earlier estimates of 3.5%. Exports dropped 1.1% in the Q1; imports were down 0.4%. Now, the GDP numbers will be revised yet again. Every five years the Commerce Department overhauls GDP data to try and provide a more accurate picture of the economy; they’ll conduct that overhaul next month. And you may be wondering why this is important; after all, we’re talking about 1Q GDP and we’re almost finished with the second …

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Monday, June 17, 2013 – Preaching, Practicing, and Doing

Preaching, Practicing, and Doing by Sinclair Noe DOW + 109 = 15,179SPX + 12 = 1639NAS + 28 = 345210 YR YLD + .05 = 2.17%OIL + .07 = 97.92GOLD – 6.80 = 1385.70SILV – .24 = 21.94 President Obama is in Northern Ireland today, part of a three-day European tour that includes a G-8 summit meeting. Maybe we could call this the “Practice what I preach, not what I practice Tour”. Obama kicked off the tour with a speech in Belfast to celebrate Northern Ireland’s peace process; later he’ll talk with Euro leaders, including Russian President Putin about lifting a European arms embargo to arm Syrian rebels. The G-8 summit generally deals with economic issues, and tops on the list will be tax evasion. The Brits, lead by David Cameron and George Osborne will pressure for a comprehensive deal to include developing countries while preventing developed countries from trying to water down proposals. The two big ideas include having the beneficial ownership of offshore accounts made public and then having the G-8 countries commit to a global agreement on exchange of tax information that developing countries can join. The concern for poorer countries is that the G8 will deliver a “gold standard” for itself but offer a less satisfactory agreement for poor countries, which lose three times as much in tax evasion as they gain from aid. The Syrian conflict might actually be a positive for pushing through a deal on tax havens. It is unlikely there will be an …

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Wednesday, February 20, 2013 – Seeds of Change

Seeds of Change by Sinclair Noe DOW – 108 = 13,927 SPX – 18 = 1511NAS – 49 = 316410 YR YLD – .01 = 2.02%OIL – 2.28 = 94.82GOLD – 40.50 = 1565.10SILV – .87 = 28.67 We may be seeing the seeds of change. Today, the Federal Reserve released the minutes from the January 30 meeting of the Federal Open Market Committee. The minutes reveal that several FOMC policymakers think it might be time to shake things up, vary the pace of their $85 billion dollar per month bond purchase program. According to the minutes, the debate “emphasized that the committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved.” The minutes of the FOMC meeting states: “Several participants noted that a very large portfolio of long-duration assets would, under certain circumstances, expose the Federal Reserve to significant capital losses when these holdings were unwound. Others pointed to offsetting factors, and one noted that losses would not impede the effective operation of monetary policy.” The Fed  at its January meeting decided to continue buying $45 billion a month of Treasuries and $40 billion in mortgage- debt without setting a limit on the duration or total size of the purchases. Policy makers also affirmed their pledge to keep the target interest rate near zero “at least as long” as unemployment remains above 6.5 percent and inflation …

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