by MN Gordon
Somewhere, someone first said “bull markets don’t die of old age.” We suppose this throwaway phrase was first uttered in a time and place much like today. That is, in the midst of a protracted bull market where stock prices had detached from the assets and earnings of companies their shares represent claim to.
Presumably, it was used as rationale for why stock prices should go higher. Quite frankly, we don’t know why anyone would ever say such baloney. But it likely makes the person who emits it feel content about their place in the (Read More....)
. . . → Read More: Visions of Tomorrow from the Permanently High Plateau
by MN Gordon
A Sucker’s Deal
The yield on the 10-Year Treasury note’s accelerating its descent toward zero. The last we checked the yield was at about 1.56 percent. But in every practical sense, for income investors, a yield of 1.56 percent may as well be zero.
For example, at that rate, if you gave the government $1,000, you’d earn $156 over the next 10 years. That comes out to just $15.60 per year. As far as we can tell, that’s a sucker’s deal.
What’s more, it’s likely inflation will significantly erode the buying power of the initial principle. Using the government’s own highly understated (Read More....)
. . . → Read More: Down Goes the Hopes and Dreams of Three Generations
By MN Gordon
High-risk investing is rewarded with higher returns when the financial tide is rising. The vast sea of liquidity hides the hazards and perils of a rock bottom reef. Madmen and lunatics get rich. But when the tide turns…watch out…
“You only find out who is swimming naked when the tide goes out,” remarked Warren Buffett back in 2001. Since mid-May the DOW is down nearly 2,000 points. At this rate, the receding tide will soon expose a multitude of skinny-dippers.
What we mean is, a big hedge fund or pension fund will soon be caught with its pants down. Perhaps it will be billionaire David Einhorn. His Greenlight Capital hedge fund is already down nearly 15 percent in 2015. While it’s still too early to tell if Einhorn’s swimming naked…the water line has dropped significantly.
But it’s not just the high risk hedge funds with something to hide. (Read More....)
. . . → Read More: Good Riddance
by MN Gordon
We wandered around the Coachella Valley for several days this week. If you’ve never been to the area you aren’t missing out. It’s a giant desert valley centered about 120 miles due east of Los Angeles.
Some people go there to golf. Others go to retire…and die. We, on the other hand, were there strictly for business and we couldn’t wait to leave the moment we arrived. It was hot, and dry.
So we (Read More....)
. . . → Read More: Foundation for Massive Wealth
by MN Gordon
Today we gaze back to the past so we can peer forward to the future. What does yesterday tell us about today? What does today tell us about tomorrow?
For example, eleven year ago the global economy was in the euphoric stage of what ended up being an epic property bubble. It was a magical time in the United States. The sun smiled brightly on its inhabitants even on the stormiest of days.
Money appeared from the heavens in the form of a fantastical new acronym – MEW. Mortgage equity withdrawal, courtesy of inflated housing prices, showered the lowly homeowner with an abundance of cash. Mortgage brokers and real estate agents alike were getting rich. The zenith of humanity had arrived.
Naturally, a pocket full of free cash must be spent in any and all ways possible. Some MEW recipients bought additional real estate not to live in, but on (Read More....)
. . . → Read More: The Perfect Time to Save for a Rainy Day
by MN Gordon
The stock market was clobbered on Tuesday. The DOW sold off 272 points. What did it mean? Was it an indicator the market is finally rolling over, as we’ve anticipated for some time? Or was it just another head fake on the way to new highs?
On Wednesday we thought we had our answer. The DOW ran back up 274 points…recovering all of the prior day’s losses, plus two points. It was the market’s best day of the year. Wall Street was euphoric.
Even gold stocks rose. Junior mining (Read More....)
. . . → Read More: Buyer’s Remorse
by MN Gordon Economic Prism
Several cracks in what was thought to be a granite foundation supporting the stock market were revealed last week. The S&P 500 fell 2.67 percent between weeks open and close. For the month of July, the S&P 500 finished down 1.63 percent…its first monthly loss since January.
Many reasons were given for the selloff. The Argentine debt saga, the joint US and EU sanctions on Russia, and the prospect the Fed will raise rates were some of the most popular. Here at the Economic Prism we have some reservations…these developments should have hardly been a surprise for investors.
Rather, we believe stocks fell for a much simpler reason. We believe they fell because that’s what they must do. Remember, the stock market goes up…and it also goes down.
After going up without interruption for the last five and a half years it is long overdue for the downside. How much downside? No one really knows.
But it will likely be much, much more than (Read More....)
. . . → Read More: The Bull Market is Cooked