Financial Review

Friday, June 27, 2014 – Biscuits on the Table

Biscuits on the Table by Sinclair Noe   DOW + 5 = 16,851 SPX + 3 = 1960 NAS + 18 = 4397 10 YR YLD  + .01 = 2.53% OIL – .10 = 105.74 GOLD – 1.80 = 1316.10 SILV – .25 = 20.97   The major stock indices traded lower for most of the day, and only in the final minutes turned to positive territory. For the week, the Dow slipped 0.6 percent and the S&P 500 declined 0.1 percent, while the Nasdaq gained 0.7 percent. Volume spike today as the Russell Indices were reconstituted.   The Russell Indices are compiled by Russell Investments. The Russell 3000 is an index of the 3000 largest stocks in the US. The Russell 2000 is the 2000 smallest stocks in the Russell 3000. Once a year, the Russell indices are reconstituted, to reflect changes such as acquisitions, bankruptcies, or just changes in the size of the companies listed in the index. The reconstitution probably explains the increase in volume and the last minute increase in prices today.   Some things we need to know heading into the weekend; including Ukraine, Iraq, and Argentina. We’ll start with the situation in Ukraine. The European Union signed a free-trade pact with Ukraine today and warned it could impose more sanctions on Moscow unless pro-Russian rebels act to wind down the crisis in the east of the country by Monday. Georgia and Moldova signed similar deals, holding out the prospect of deep economic integration and …

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Financial Review

Thursday, June 26, 2014 – Buffers and Filibusters

Buffers and Filibusters by Sinclair Noe   DOW – 21 = 16,846 SPX – 2 = 1957 NAS – 0.71 = 4379 10 YR YLD – .03 = 2.52% OIL – .80 = 105.70 GOLD  – .70 = 1317.90 SILV + .10 = 21.22   Yesterday, the Commerce Department downgraded the first quarter gross domestic product to a negative 2.9%, meaning the economy shrank by 2.9%. Today, St. Louis Federal Reserve president James Bullard says it’s likely an aberration; the weak report for the first quarter was likely distorted by inventories, weather, and by the challenges of accounting for health-care spending under the new law. Bullard says he isn’t worried, “the market’s right to shake this off. Looking forward over the next four quarter, most forecasters have 3% growth.”   Well, that’s good. No worries. Nothing to see hear, move along, move along.   It’s just that the fall was so nasty, it’s hard not to look and linger over the carnage. It really was ugly. And while we can blame it on the weather, that doesn’t seem right. We always have weather. Minneapolis is underwater today. Bad weather is a fairly constant aberration. We should be past the point of excuses; we are 5 years into a recovery; granted it has been a stealth recovery.   I wonder if Mr. Bullard is confusing the stock market with the economy. A down day in the bull market would just be a blip on the tape, but the stock market is …

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Financial Review

Wednesday, June 25, 2014 – Use Your Library Card at a Copy Shop for a Horseback Ride to the Moon

Use Your Library Card at a Copy Shop for a Horseback Ride to the Moon by Sinclair Noe   DOW + 49 = 16,867 SPX + 9 = 1959 NAS + 29 = 4379 10 YR YLD – .02 = 2.56% OIL + .74 = 106.77 GOLD – .60 = 1319.40 SILV + .09 = 21.12 One of the jobs of the Commerce Department is to calculate the gross domestic product of the country; clearly it is a difficult task to figure out the value of all the goods and services produced, and so they tend to revise the numbers as they gather information. In April the Commerce Department figured the economy grew, just barely, 0.1% in the first quarter; last month they revised their GDP numbers to negative1.0%; today they revised GDP even lower. The economy shrank by 2.9%.   To understand the big move, you first have to realize that the GDP number is supposed to measure everything; construction and demolition, marriages and divorces, broccoli sales and cigarette sales, yoga classes and cancer treatments. One of the big reasons for the negative number is that the cost of healthcare dropped significantly.   The US spent $6.4 billion less on health care in the first quarter than in the last quarter of 2013. Government statisticians initially forecast a 9.9% increase in health-care spending, and what we got was a 1.4% decline. Considering all the millions of previously uninsured people who are gaining access to health insurance under the Affordable …

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Financial Review

Monday, June 16, 2014 – Manic Monday

Manic Monday by Sinclair Noe DOW + 5 = 16,781 SPX + 1 = 1937 NAS + 10 = 4321 10 YR YLD – .01 = 2.59% OIL – .12 = 106.79 GOLD – 4.20 = 1272.70 SILV un = 19.77   It’s Monday, and that means mergers. Today’s acquisition news comes from Medtronics, the medical device maker, announcing it will acquire Covidien for nearly $43 billion. Medtronics was founded in a garage in Minneapolis in 1949, but they will change their headquarters to Ireland, which is where Covidien has been headquartered since 2009. Covidien is actually a Massachusetts company, and they operate out of Massachusetts. Medtronics will continue to operate out of Minneapolis; the whole deal is about a lower tax rate, and for Medtronics, the ability to repatriate $20 billion in offshore profits, without paying tax.   Meanwhile, the IPO market remains white hot, and 14 companies will come to market this week. So far this year 124 companies have priced in the US, up 57% from a year ago. Total proceeds raised come to $25.8 billion, up almost 41% from 2013. Data today showed industrial production climbed more than forecast in May. Output at factories, mines and utilities rose 0.6% after a revised 0.3% drop in April that was smaller than previously estimated. In a separate report, the New York Fed’s Empire manufacturing report rose to 19.28, better than expectations.   The Fed FOMC meets later this week to determine monetary policy. After their meeting concludes Wednesday, …

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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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