by MN Gordon
Borrowing money and spending it can be fun. Certainly more fun than saving and paying down debt. Not only that, borrowing money’s much easier too.
Saving takes prudence, discipline, and hard work. Running up the credit card takes none of these things. But that doesn’t mean there aren’t consequences.
Just like an individual, when an entire economy racks up a bill it can’t pay back, future economic growth becomes stunted. It becomes even more difficult to save and invest when more and more earnings must go to service debt. Asian economies are discovering this phenomenon. They are also discovering the relentless hold of a debt trap. What went wrong?
In short, when the financial crisis and Great Recession hit in 2008 nearly all governments ran up their federal debt. The U.S. government, for instance, ran fiscal deficits over $1 trillion dollars from 2009 thru 2012. Since then, they’ve cut budget deficits back to about half of that.
While many Asian governments also increased (Read More....)
. . . → Read More: The Fastest Way to Escape a Debt Trap
by MN Gordon
“Past performance is not indicative of future results,” goes the hackneyed investment disclaimer. No doubt, this warning’s been repeated so often no investor gives pause to consider it. Perhaps now, six years into a bull market, is a critical moment for honest contemplation.
The stock market has become as predictable as the sunrise. That it will go up for a seventh straight year is universally expected. Bullish on its recent successes, the bull market marches on with gusto.
This, indeed, is the sort of gusto Napoleon Bonaparte’s army set out with on its march to Moscow in the Russian Campaign of 1812. Like the Grande Armée, today’s investors believe they will never lose. Such is the sort of pretenses that lead to disaster.
World markets cracked last Friday. First it was the NIKKEI 225 out of Japan, giving up 232 points. Then, later in the day, the German DAX dropped 310 points. Lastly, closing out the day, the DOW fell 279 points. What to make of it?
Perhaps it is nothing. Maybe world markets will continue their (Read More....)
. . . → Read More: One Bear Market from Disaster
by MN Gordon
Change is constant. You can count on it. Earlier this week, for instance, it was revealed that China’s economy is growing at just 7 percent annually. The Middle Kingdom’s GDP hasn’t been this slow since 2009…during the midst of the global financial crisis. What’s going on?
For perspective, 7 percent GDP growth in the United States or Europe would be outstanding. In fact, the GDP for both economies are slipping and sliding around 1 percent. But in China 7 percent GDP growth is a signal that the sky is falling.
‘“We are facing a complicated international situation and increased downward pressure on the domestic economy,’ the National Bureau of Statistics said on Wednesday.
“The government has been using targeted easing measures to give the economy a boost and ensure the growth target is reached so that it can achieve another target: the creation of at least 10 million new jobs this year.”
Yikes! Ten million new (Read More....)
. . . → Read More: China’s Spectacular Reckoning
by MN Gordon
Economics is a boring and tedious trade to the casual observer. All the monthly report outs on GDP, employment, manufacturing, inflation, among other indexes, are a dull waste of time. What decisions could one possibly make to improve their lot in life from these reported data?
Should you buy more toothpaste because the CPI went up 0.2 percent last month? Should you stay at your current job because GDP growth is slowing? Obviously, this information is useless for making a reasoned decision.
Plus, in addition to the government’s nonsense economics reports, the blathers of the leading economic policy makers are near incoherent. “Just because we removed the word ‘patient’ from the statement doesn’t mean we are going to be impatient,” said Fed Chair Janet Yellen last month when asked about the Fed’s strategy for raising the federal funds rate. Certainly, this is the (Read More....)
. . . → Read More: The Economic Motherboard is Fried
by MN Gordon
Just when the mainstream press thought they had a solid theme to report, something unexpected happened. No one quite knows what’s going on for sure. But the economy’s popular storyline appears to be drifting off plot.
The general consensus since late last year has been that the U.S. economy is moderately improving while the world’s other major economies – Japan, China, and Europe – are becoming weak like an over breaded meat loaf. Until a few weeks ago things were rolling forward according to script.
The presumed strength of the economy was finally pushing the Fed to raise the federal funds rate after six plus years of being zero bound. June of this year was broadly thought to be the magic time when Janet Yellen would finally pull the trigger. But things rarely go as man – or woman – ordains them.
“Jove does not give all men their heart’s desire,” observed Homer, some 2,750 years ago. Homer probably didn’t have central bank intervention into credit markets in mind when he (Read More....)
. . . → Read More: Skeletons in the Closet
by MN Gordon
“Sell in May and go away,” goes the old Wall Street adage. The general rule is to sell stocks on May 1, hold cash through the summer and into the fall, and then re-enter the stock market on Halloween Day. This certainly has a right ring to it…May and away even rhyme. But what if it has a wrong outcome?
“Waiting until May Day runs the risk of selling at the same time that a large number of other investors are doing the same,” notes Mark Hulbert of Hulbert Financial Digest. Perhaps the right time to sell isn’t May after all. Maybe it’s better to front run the trend and sell in April. But how can we be sure?
“Fortunately, we have real-world data on two attempts to get a jump start on the ‘sell in May and go away’ pattern. The first is the ‘Almanac Investor Newsletter,’ edited by Jeffrey Hirsch, and the other is Sy Harding’s ‘Street Smart (Read More....)
. . . → Read More: The Best Time to Squirrel Away Some Nuts
by MN Gordon
Aside from death and taxes, the only guarantee in life is change. Change, you see, is constant. It’s always happening.
Sometimes change is an improvement. Other times it’s an adversity. But it’s always happening…you can count on it. With this in mind, here’s one perspective of what’s coming down the turnpike…
“We should all be prepared for adjusting to a world that is harder,” were the gloomy words offered by Charles Munger last week in Los Angles. Munger, if you don’t recall, is Warren Buffett’s billionaire sidekick who helped build Berkshire Hathaway. His remark was made in response to a question about the Federal Reserve’s massive balance sheet expansion since the 2008 financial crisis.
“You can count on the purchasing power of money to go down over time,” added Munger. “And you can almost count that you’ll have more trouble in (Read More....)
. . . → Read More: Prepare for a Harder World
Guest Post Peter Wood
I have written several articles on the coming global, systemic collapse of fiat currencies and so this will probably be my last article before what I write about becomes reality. The world stands on the brink of a catastrophe – an event that will trigger distress, misery, deprivation and hardship unseen before in the annals of human history.
The collapse of a globalized high-tech economic system cannot be compared to any previous economic crisis. In the 1920’s and 30’s the vast majority of Europeans and Americans already lived in poverty with many not even having access to basic amenities such as electricity, gas and piped water so when the economic crises hit they didn’t have far to fall, as they were already at the bottom of the living standard ladder.
This time for the majority of people it will be a truly horrendous (Read More....)
. . . → Read More: The Inmates Are Now In Charge Of the Lunatic Asylum And Madness Is The ‘New Normal’