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Wednesday, April 4, 2012

DOW -124 = 13,074SPX – 14 = 1398NAS – 45 = 306810 YR YLD -.04 = 2.24% OIL +.57 = 102.04 GOLD – 25.40 = 1621.40SILV – 1.32 = 31.46PLAT – 43.00 = 1604.00 So, we made it through the first quarter, and it was just delightful, one of the best first quarter rallies in years; the S&P up about 12%, the NASDAQ up 18%. Do you think the S&P will continue at that pace in the second, third, and fourth quarters? Do you think the S&P will gain 48% this year? Actually a bit more. Do you think the NASDAQ will gain 72%? Let’s sort through what it really means. Are we seeing recovery or was it just a cyclical bull in a secular bear? Remember hearing about green shoots? Remember when they withered on the vine? How do recognize a genuine, sustainable recovery? First you have to realize there is an economic ebb and flow and there are some fairly predictable patterns that emerge. There were good years for investors back in the Great Depression but it was still a Great Depression. And we still have threats to the economy. Treasury Secretary Timothy Giethner said today that fallout from the European debt crisis along with fears of Iran and higher oil prices posed the biggest threats to the U.S. economy. “Europe is still facing a very difficult, very challenging period. They are likely to have weak growth. You have, obviously, the fear of Iran and oil prices, even though that is …

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March, Monday 26, 2012

DOW + 160 = 13,241SPX + 19 = 1416NAS + 54 = 312210 YR YLD +.01 = 2.24% OIL + .08 = 107.11GOLD + 27.10 = 1690.90SILV +.60 = 32.94PLAT + 1.36 = 22.00 Last week was the worst week of 2012 for the S&P 500. No big collapse last week, just a down week. The S&P 500 is still up 25% since the end of September. We have a nice bull market, likely a cyclical bull underway, and with good reason. We’ve seen some improvement in the economy; the unemployment rate has been moving lower; economic activity has picked up in the manufacturing and services sectors; central banks have been shoveling money out of helicopters from Athens to Rome to New York. C’est si bon! Let the good times roll. Of course, you probably remember the almost total collapse and meltdown of the global financial system a few years back and you might be wondering what was done to correct the malinvestment; and the answer is nothing. Everything is still as screwed up as ever; nothing was fixed. And then you remember that even though we have this nice cyclical bull market, we are still in a secular bear, at least for now; and that means the recovery is perilous at best. Fed chairman Ben Bernanke gave a speech today and he basically said we’re not out of the woods just yet. Bernanke said he’s encouraged by the unemployment rate’s decline to 8.3 percent, continued accommodative monetary policy will …

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March, Wednesday 07, 2012

DOW + 78 = 12,837SPX + 9 = 1352NAS + 25 = 293510 YR YLD +.03 = 1.97%OIL + 1.46 = 106.16GOLD + 9.70 = 1685.30SILV +.48 = 33.53PLAT + 18.00 = 1633.00 Yesterday the Dow Industrials dropped a couple of hundred points. That was all it took; now the talk is about more free money from the Fed. The Murdoch Street Journal is reporting the Fed is considering a new type of bond-buying program. The Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates. I’m sure we’ll hear more details in the days and weeks ahead, but this goes in line with the idea that the Fed will try to juice the housing market in an election year. The initial guess is that this move might lower long term rates and mortgage rates. This quantitative easing, the article calls it “sterilized” quantitative easing, would use reverse-repurchase agreements to keep the money from flowing to bank reserves, the thinking there is that it would not be a big boost of inflation. The Fed has an existing program in place to lower long-term interest rates. Since September, the Fed has been replacing short-term securities on its balance sheet with longer-term securities, a program known as Operation Twist. This $400 billion program ends in mid-June. So, this is no surprise. We’ve been telling you the Fed would have some form of QE3 and …

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February, Monday 27, 2012

DOW – 1 = 12,981SPX + 1 = 1367NAS + 2 = 296610 YR YLD -.06 = 1.92%OIL – 1.07 = 108.70GOLD – 5.50 = 1769.10SILV +.05 = 35.56PLAT – 3.00 = 1711.00 Let’s look at the price of a gallon of gas and the factors that have been pushing prices higher. You may recall that last May, oil prices moved up to $114 per barrel. So one of the first considerations is that this is a seasonal move. You will also recall that last spring, the oil production in Libya was disrupted. After a while, Khadafi was deposed and by last October, prices had dropped to $75 a barrel. Now the concern is Iran, and any disruption in Iranian oil supply would be considerably larger than Libya, and might lead to even more widespread disruption of oil transportation through the Strait of Hormuz. Iran produces about 4.3 million barrels per day. So, now we are looking at the imposition of sanctions on Iran. What are the implications? The most likely result of sanctions is that the countries participating in the sanctions would have to cut back demand and find new sources, and the countries not participating could buy the oil from Iran. China and India would buy more oil from Iran, while Europe would buy more oil from Saudi Arabia. There would still be the same amount of oil in the global market, just have to buy it from different sources. Maybe sanctions could alter global production, or maybe …

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February, Friday 24, 2012

DOW  – 1 = 12,982SPX + 2 = 1365 NAS + 6 = 296310 YR YLD – .01 = 1.98% OIL +1.86 = 109.69 GOLD – 6.50 = 1774.60 SILV +.04 = 35.51PLAT – 13.00 = 1717.00 We’ve almost made it through the first two months of the year and if you haven’t noticed, things are getting better. This is not to say that everything is good or even great, just that things are getting better. And of course, there is the caveat that things might get worse and that could happen fast and it could be severe, but for this specific moment in time, things are getting better. Some people would like to deny this; they claim this getting better notion is a false meme; we’re being manipulated into believing that things are getting better when they are not. Despite the presence of bright sunlight, we know that the darkness of night is right around the corner; and even cold, hard numbers are unconvincing. Let’s look at the numbers: the S&P 500 has doubled in less than 3 years, and it’s up more than 8% year to date; just this week home sales showed strength and inventories dropped, the unemployment rate has been steadily dropping and the initial claims for jobless benefits fell to the lowest level since March, 2008; and consumer confidence in January moved to its best level in a year. Maybe these numbers don’t apply to you personally; fair enough. And it’s easy to claim the …

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February, Thursday 23, 2012

DOW + 46 = 12,984SPX + 5 = 1363NAS +23 = 295610 YR YLD -.02 = 1.98%OIL +2.41 = 108.69GOLD +4.30 = 1781.10SILV + 1.11 = 35.47PLAT – 2.00 – 1728.00 How much does it cost you to get to work each week? How much do you spend on gasoline? Is it $10 a day? $50 a week? Maybe a couple of hundred a month? Maybe more? For a whole lot of people, when the price of gas starts to go up, it has a definite impact on their budgets and on their lifestyles. Last year, the average American family spent 8.4% of their incomes on gasoline; that percentage has doubled over the last ten years. And the price of gas doesn’t just affect people who drive long miles; the price of energy gets factored into almost everything because almost everything we buy has to be transported. When the price of gas goes up, it tends to push prices up on everything. The strength of the economy is largely predicated on cheap oil. When the price of oil goes higher, we tend to cut back to compensate. Americans are using less gasoline; as the price has increased, demand has dropped; we drive less, and still the price at the pump moves higher. The average price across the country is now up to $3.53 a gallon. In California, the average price is 3.96. The price is up 25 cents a gallon since the start of the year. The Oil Price Information …

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February, Wednesday 22, 2012

DOW  – 27 = 12,938SPX – 4 = 1357NAS – 15 = 293310 YR YLD -.04 = 2.00%OIL -.30 = 105.95GOLD + 15.50 = 1776.80SILV – .09 = 34.36PLAT + 12.00 = 1727.00 So, the Euro-Union bailed out Greece and the thinking is that the lazy, shiftless, socialists in Greece can roll around in the cash. The reality is that Greece won’t be getting any cash. The bailout money will go into an escrow account and most of the money will ultimately go to the European banks; the creditors have senior claims over any bailout cash. The Greek citizens will never see a penny of the bailout cash. All the money will be used to fund debt interest and maturity payments. Now anybody who has ever had a mortgage will probably remember that there are fees associated with establishing an escrow account. So, not only do the Greek citizens not get a single penny, they have to pay for the bailout. It’s a negative bailout. Remember a couple of months ago, I told you the Europeans were going to follow the Federal Reserve Playbook for dealing with debt crises. The playbook called for privatized profits and socialized losses. So, where is the bailout money going? The banks. The socialists are the banks. And then let’s put some salt on the wound. Fitch downgraded its credit rating on Greece to Triple-C. Which is just one step above default, and is basically very dangerous, very speculative junk status. The Greek parliament still …

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February, Tuesday 21, 2012

DOW +15 = 12965 SPX +0.98 = 1362NAS – 3 = 294810 YR YLD +.04 = 2.05% OIL +2.64 = 105.88GOLD + 26.20 = 1761.30SILV + .74 = 34.45PLAT + 44.00 = 1694.00 The European Union has approved a $170 billion-dollar bailout package for Greece. No surprise; they had to come up with a deal, they were running out of time. The Euro-crisis is now officially under control; at least for a couple of days. There is still the little problem of making sure the ring-fences hold. The Euro-Union has set up massive pools of money to make emergency loans. The ECB has loaned more than $600 billion to Euro-banks. It still remains to be seen if the loans do anything more than allow the Euro-banks to kick the can down the road. Meanwhile, the Euro-zone is in a recession and the prescribed medicine is austerity. The cure may be worse than the affliction. And when all is said and done, the cure may not actually cure anything. Part of the plan is to bring down Greek debt to 120% of GDP within the next 8 years, but if Greece misses a few economic assumptions, they might end up with debt to GDP at 160%. And the truth is that whether it is 120% or 160%, the debt is going to bury Greece, and the bailout won’t stop it. Countries like Germany might demand even tougher conditions on loans. Politics and democracy might destabilize the markets. Part of the deal …

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February, Monday 20, 2012

What would happen if the Federal Reserve was shut down? Most Americans don’t really think about the Fed much. Most Americans think the Federal Reserve is just another government agency that sets our interest rates. But that is not the case at all. Most Americans don’t realize the Fed isn’t really a government agency, and that we haven’t always had a central bank. The Federal Reserve’s stated mission is to conduct the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates; to supervise and regulate banking and financial systems to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers; and to maintain the stability of the financial system and contain systemic risk that may arise in financial markets. The truth is that the Federal Reserve is a private banking cartel that has  systematically destroyed the value of our currency, diminished the wealth of the American public and subjects the federal government to perpetually expanding debt. The Constitution states that Congress has the responsibility to conduct the nation’s monetary policy, but the Federal Reserve has usurped that authority. Any honest review of the past 30 years would conclude that the Fed has failed in its mission. The Fed’s monetary manipulations led to the worst unemployment since the Great Depression, price volatility, excessive swings in interest rates, extremely low rates for member banks, and usurious …

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February, Thursday 16, 2012

DOW + 123 = 12,904SPX + 14 = 1358NAS + 44 = 295910 YR YLD +.06 = 1.99%OIL +.55 = 102.35GOLD +.70 = 1729.80SILV +.02 = 33.62PLAT – 10.00 = 1629.00 The number of people seeking unemployment benefits fell to the lowest point in almost four years last week, the latest signal that the job market is steadily improving. Weekly applications for unemployment benefits dropped 13,000 to a seasonally adjusted 348,000. It was the fourth drop in five weeks and the fewest number of claims since March 2008. The US economy is showing signs of strength. New construction of houses rose 1.5% in January. Part of the increase can be attributed to unseasonably warm weather, however part of it is that the economy is showing signs of strength. The Philly Fed Index of manufacturing hit a  four month high in February. US manufacturers just had their best month of growth in five years. As manufacturing has increased it has rippled through the economy, increasing demand in other industries, such as shipping and transportation. Part of the increase may be attributed to pent-up demand; individuals and businesses postponed purchases over the past three years. Now companies are investing in machinery and computers. Individuals are once again starting to make purchases of certain discretionary items, and even cars. Two years after emerging from bankruptcy GM unveiled record profits of $7.6 billion for 2011. It’s been a great year for GM. Although its European business is still in reverse and it is unlikely …

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