Financial Review

Fans of Gridlock

http://media.blubrry.com/eatthebankers/p/content.blubrry.com/eatthebankers/SINCLAIR_NOE-SEG_1-11-21-2014.mp3Podcast: Play in new window | Download (Duration: 13:17 — 6.1MB)Subscribe: Apple Podcasts | Android | RSSFinancial Review by Sinclair Noe DOW + 91 = 17,810 SPX + 10 = 2063 NAS + 11 = 4712 10 YR YLD – .02 = 2.32% OIL + .77 = 76.62 GOLD + 5.80 = 1201.30 SILV + .15 = 16.50 Record highs for the Dow and the S&P. China has cut interest rates for the first time in more than 2 years. The first thought is that China is trying to stimulate growth for a slowing economy. However, in making the announcement, the People’s Bank of China tried to emphasize that the economy is growing within a reasonable range, and the rate cut was not about spurring growth. Instead, they emphasized the need to reduce corporate financing costs to help struggling companies. So, you might think that lower rates would only encourage more borrowing in a country that already has too much debt. What the Chinese central bank appears to be doing is making it feasible to refinance the existing debt at lower rates, which would allow Chinese companies to lessen their debt burdens. So, in this way, lower rates is a way to deleverage. And this is not the first attempt at reducing borrowing costs. Since September the People’s Bank of China has provided more than $130 billion in medium term loans to banks on the condition they lower borrowing rates for small businesses; trying to channel to certain industries, including …

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Financial Review

Financial Engineers at the Gate

http://media.blubrry.com/eatthebankers/p/content.blubrry.com/eatthebankers/SINCLAIR_NOE-SEG_1-10-21-2014.mp3Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB)Subscribe: Apple Podcasts | Android | RSSFinancial Review DOW + 215 = 16,614 SPX + 37 = 1941 NAS + 103 = 4419 10 YR YLD + .03 = 2.21% OIL + .64 = 82.55 GOLD + 2.50 = 1250.40 SILV + .09 = 17.62 In economic news, the National Association of Realtors reports sales of existing homes rose 2.4% in September to a seasonally adjusted annual rate of 5.17 million, hitting the fastest pace in one year and rebounding from an unexpected drop in August. However, September’s pace of sales was down 1.7% from a year earlier. So, the housing market isn’t roaring, but lower interest rates managed to pull some buyers off the sidelines last month. Low interest rates are just part of the equation in the housing market; buyers also need to be employed. The Labor Department today released state unemployment numbers, and in 15 states, the unemployment rate is now under 5%; that list includes: North Dakota at 2.8%, South Dakota at 3.4%, Utah 3.5%, and Nebraska, Minnesota, Hawaii, New Hampshire, Vermont, Idaho, Iowa, Montana, Dolorado, Oklahoma, Wyoming, and Kansas. Georgia has the highest unemployment rate at 7.9%. Arizona made the bottom 10 with a 6.9% unemployment rate, a full percentage point higher than the national average. Reuters reported the European Central Bank was looking at buying corporate bonds as soon as December in its efforts to revive the Eurozone economy. The move to buy corporate …

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Financial Review

A Tale of Three Stocks

http://media.blubrry.com/eatthebankers/p/content.blubrry.com/eatthebankers/SINCLAIR_NOE-SEG_1-10-20-2014.mp3Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB)Subscribe: Apple Podcasts | Android | RSSFinancial Review DOW + 19 = 16,339 SPX + 17 = 1904 NAS + 57 = 4316 10 YR YLD – .02 = 2.18% OIL – .21 = 81.85 GOLD + 8.70 = 1247.90 SILV + .16 = 17.53 A nice bounce in the S&P 500 index and the Nasdaq Composite. For most of the session, the Dow was in negative territory, clawing its way to positive, barely. There are 3 stocks that had a compelling story today. We start with IBM, which reported its third-quarter results; a 10th consecutive period of falling sales, marked by weaker performance in growth markets. IBM said its long-standing forecast of earnings per share of $20 for 2015 is no longer achievable. IBM lowered its forecast for free cash flow. The company said it was selling its money-losing chip-making business to GlobalFoundries, a move to further cut costs and focus on its more profitable, faster-growing businesses. Once upon a time, IBM was a pioneer in advancing semiconductor technology, its manufacturing capability fell behind others that produced chips in large volume, but now they will have to pay GlobalFoundries $1.5 billion to take the chip division, while taking a $4.7 billion charge. IBM has been divesting slower-growing and unprofitable businesses, but like many older tech companies, it is caught in the middle; sloughing off the old and expensive without yet having a foothold in the new. Some customers are …

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Financial Review

Thursday, May 22, 2014 – A Heckuva Business Model

A Heckuva Business Model by Sinclair Noe   DOW + 10 = 16,543 SPX + 4 = 1892 NAS + 22 = 4154 10 YR YLD + .02 = 2.55% OIL – .31 = 103.76 GOLD + 1.80 = 1294.70 SILV + .10 = 19.59   Yesterday we told you Russia and China had signed a 30 year, $400 billion dollar deal for Russia to deliver natural gas to China. Today, both countries vetoed a United Nations Security Council Resolution seeking to refer Syria to the International Criminal Court for possible war crimes. In the short-term, the Russia-China gas deal won’t have a big impact. The deal will not be in place until 2018 and even then will only see Russia selling a fraction of its gas exports to China every year, exports to the EU could still well be two to four times the size.   The economic links between Russia and Europe will continue to be significant and they will continue to be reliant on each other when it comes to energy; the former to sell the latter to buy, but this link gives an advantage to Russia, especially when the weather turns cold. At least symbolically the deal highlights Russia’s desire to move away from links with Europe. Combine this with Europe’s desire to increase energy security and the relations between the two sides could become increasingly cold and distant. Although, some countries due to geographical proximity, such as Bulgaria or Hungary; or due to long standing …

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Financial Review

Monday, May 20, 2014 – Protected Species

Protected Species by Sinclair Noe DOW – 137 = 16,374 SPX -12 = 1872 NAS – 28 = 4096 10 YR YLD – .02 = 2.51% OIL + .87 = 102.98 GOLD + 1.70 = 1295.30 SILV + .05 = 19.49 Today is Tuesday and that means that General Motors has announced another recall; this time 2.6 million more cars. Last week, GM recalled 3 million vehicles. So far this year, GM has announced 29 recalls affecting more than 15 million cars globally. The list of recalled vehicles is long. It’s easier to list the vehicles that haven’t been recalled; they have recalled 58 versions of Chevrolet and GMC pickups.   Last week the Dow hit a record high; since then it has been floundering. For the fourth straight session, the Nasdaq Composite has posted more 52-week lows than 52-week highs; 55 lows versus 38 highs. The Russell 2000 Index of small and mid-cap stocks hit a high on March 4th and since then it has dropped almost 10%.   Meanwhile, interest rates have been moving steadily lower despite winding down of large scale asset purchases under the Fed’s quantitative easing, and the talk about raising interest rates at some point down the road. With yields on the 10-yr Treasury note dipping down around 2.5%, that means somebody is buying Treasuries, but if not the Fed, then who?   Well, it’s certainly not Russia. Putin sold off more than $100 billion in Treasuries in March; he was probably expecting Treasury …

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Monday, January 06, 2014 – A Cold Forecast

A Cold Forecast by Sinclair Noe DOW – 44 = 16,425SPX – 4 = 1826NAS – 18 = 411310 YR YLD – .03 = 2.96%OIL – .31 = 93.65GOLD – .20 = 1238.80SILV + .02 = 20.27 A few big things this week. Friday we’ll see the monthly jobs report. Today we had the confirmation of Janet Yellen, no surprise there; on Wednesday we’ll see the minutes of the most recent FOMC meeting which will give us the justification for the taper. The minutes will likely include strong differentiation between taper and tightening, and the Fed is likely to stress the importance of accommodative monetary policy and ultra-low interest rates for the next 18 months or so. Any bond gains have been curbed as we start the new year; a combination of the Fed slowing its bond purchases, plus corporate supply, plus there is still the safe haven aspect of bonds in the face of a few days of weakness in the equity markets. This Friday’s jobs report will prove important as a barometer for yields. More than 2.2 million jobs were probably created in 2013, the most since about 2.5 million eight years earlier. The estimates call for 195,000 net new jobs in December and the unemployment rate to hold at 7.0%. If the economy added more than 200,000 jobs we might expect a more aggressive taper; fewer than 200,000 jobs and the taper might be more sanguine. Healthcare spending in the US rose 3.7% in 2012 to $2.8 …

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Monday, November 11, 2013 – Fed Stuck As Other Central Banks Race to Bottom

Fed Stuck As Other Central Banks Race to Bottom by Sinclair Noe DOW + 21 = 15,783SPX + 1 = 1771NAS + 0.56 = 3919OIL + .54 = 95.14GOLD – 7.60 = 1282.90SILV – .16 = 21.45 A fairly boring day on Wall Street ended with the major averages in positive territory and that was good enough for record highs on the Dow Industrial. The bond market was closed because of the Veterans Day holiday. Volume on the S&P 500 was down by about 23%. Of the 447 S&P 500 companies that have released third-quarter profits so far, 75% have beaten analysts’ forecasts. Earnings per share for the companies that have reported, increased 4.7% in the third quarter. All fairly good news. This will be a relatively light news week. Key economic reports include Thursday’s Sep trade deficit (expected to widen to -$39.0 from -$38.8 in Aug) and Friday’s Oct industrial production report (expected -0.1%). The Treasury this week will conduct its $70 billion quarterly refunding operation. There are speaking engagements by Minneapolis Fed President Kocherlakota and Atlanta Fed President Lockhart on Tuesday and by Philadelphia Fed President Plosser on Thursday. Fed Chairman Bernanke will hold a town hall meeting with educators on Wednesday in Washington D.C. One quick point that I didn’t get to last week, last Thursday, during a speech, New York Fed president William Dudley said that some of America’s largest financial institutions appear to lack respect for the law. Dudley suggested that regulators may be stymied by …

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Tuesday, May 21, 2013 – Apple Gimmicks

Apple Gimmicks by Sinclair Noe DOW + 52 = 15,387SPX + 2 = 1669NAS + 5 = 350210 YR YLD – .02 = 1.94%OIL – .98 = 95.95GOLD – 18.10 = 1377.00SILV – .49 = 22.53 It’s Tuesday. The markets moved higher. It’s almost inevitable. The Dow Industrials have closed higher every Tuesday this year, with the exception of January 8th; 19 consecutive Tuesdays. No, I don’t know why. Well, today, part of the reason could be traced to the Federal Reserve. A couple of Fed heads were talking up easy money. New York Fed President William Dudley said he cannot be sure whether policymakers will next reduce or increase the amount of purchases, due to the “uncertain” economic outlook. The QE taper may end up being a QE expansion. Dudley worries about investor over-reaction to a “normalization” of policy and suggests the FOMC may need to update what it needs to see to move in that direction. Earlier, James Bullard, president of the Federal Reserve Bank of St. Louis, urged the European Central Bank to consider employing a US style quantitative easing program to counter slowing inflation and recession in the euro zone. Tomorrow, Fed Chairman Ben Bernanke will speak before a congressional panel, the Joint Economic Committee. The minutes of the Fed’s latest policy-setting meeting will be released on Wednesday afternoon. When the Fed showers liquidity, the money flows to the markets, but I can’t give a good reason for the Tuesday winning streak. There is a certain …

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Thursday, October 18, 2012 – The Only Day Like it Ever

The Only Day Like it Ever by Sinclair Noe DOW – 8 = 13,548 SPX – 3 = 1457NAS – 31 = 307210 YR YLD +.01 = 1.83%OIL un = 92.09GOLD – 8.30 = 1742.60SILV – .38 = 32.92PLAT – 19.00 = 1651.00 Do you remember where you were 25 years ago? It was a Sunday; 1987. The news of the day was that Nancy Reagan had been hospitalized with cancer; there was a threat of war with Iran and within 24 hours the US was shelling Iranian oil platforms; there were concerns about Germany’s currency; the United States, wanting to prop up the dollar and restrict inflation, tightened policy faster than the Europeans. US pressure on Germany to change its monetary policy was one of the factors that unnerved investors.The stock market had a wave of steady selling on Friday and the Dow dropped 108 points. Most people really weren’t aware; this was before we all had computers and smart phones and tablets. Maybe you read about the Friday sell-off in the Sunday newspaper. Maybe you thought about selling a little bit of your portfolio, but the truth is that it was already too late. Halfway around the world, the dollar-backed Hong Kong markets were chopped down 10%. And then the crash spread. European bond markets collapsed, which caused interest-sensitive savings and loans and money center banks to plunge. Monday morning, October 19, 1987 the crash washed across lower Manhattan. In a flash, the Dow crumbled and by the …

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Friday, May 25, 2012 – It’s Better Than It Looks, Striving For Happiness Amidst the Cow Pies – by Sinclair Noe

DOW – 74 = 12,454SPX – 2= 1317NAS – 1 = 283710 YR YLD – .01 = 1.75%OIL -.06 = 90.60GOLD + 15.90 = 1574.70SILV +.21 = 28.63PLAT + 14.00 = 1436.00 For the week, the S&P 500 rose 1.7 percent.  I’m of the opinion that life is better than it appears. We look around sometimes and the world can seem scary. Sometimes we have to look a little deeper to find the good, the decent, the delightful and the potentially pluperfect. And that brings us to today’s topic on the possibility of the Federal Reserve pumping money into the banking system through asset purchases, in other words, Quantitative Easing Part 3. Inflation expectations are falling, if you consider Treasury bonds as a gauge of inflation. The lower outlook for inflation gives the Fed wiggle room to stimulate the economy. Although, right now the Dow looks like a better QE indicator, and it is not indicating QE. The banks can always make a case for QE, but what about the Fed officials who make the actual decisions? St. Louis Federal Reserve President James Bullard says he expects the U.S. economy to perform better than many forecasters anticipate and that the Fed will therefore need to raise interest rates in late 2013, not late 2014 as its policy committee is currently indicating. Minneapolis Federal Reserve President Narayana Kocherlakota thinks the current labor market performance is much closer to maximum employment than the data alone would suggest. A few weeks back, Kocherlakota …

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