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Disasters Can Happen

Prepare for the Unthinkable

by MN Gordon

Economic Prism

Red Ink

Growth and profits mask a variety of problems.  They hide business inefficiencies and the money suck of corporate administrivia.  They also conceal unproductive staff.

But most of all growth and profits obscure the extreme value subtracting forces of bloated management teams.  During good times it is unclear what these smug fellows do.  During bad times it is lucidly clear that most of them ain’t worth a darn.

When the profits inevitably recede, the senior executives, with their silly 24 point project reviews and cumbersome project execution requirements, appear lost.  They’re left exposed, with their pants down, and without a clue in the world as to what business it is they’re actually in.  What the heck have they been doing all this time?

Where does the money come from?  How is it spent?  Over (Read More....)

. . . → Read More: Prepare for the Unthinkable

The Number One Factor Influencing Fed Monetary Policy

by MN Gordon

Economic Prism

Things Ain’t Right

A brief scan of the financial and economic landscape – both in the U.S. and abroad – offers ample confirmation that we are in the midst of a great reset.  From a feint tickle at the turn of the new millennium to a persistent itch a decade ago, the preponderance of evidence in this regard is now much too painful to ignore.  There’s no denying that things ain’t right.

Debt is increasing while GDP’s stagnating.  Stocks are rising while earnings are declining.  Incomes are flat-lining for the majority of workers while growing by leaps and bounds for the 1 percent.  Plus there’s over $13 trillion of negative-yielding debt.

With all this going on, what’s become lucidly clear is the frank understanding that there’s nothing that can really be done to reverse it.  No executive order.  No monetary (Read More....)

. . . → Read More: The Number One Factor Influencing Fed Monetary Policy

Down Goes the Hopes and Dreams of Three Generations

Economic Collapse Picture Credit Pixabayby MN Gordon

Economic Prism

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

The Exhilarating Romp to DOW 30,000

Moneyby MN Gordon

Economic Prism

The stock market appears to have resumed its upward trajectory.  The S&P 500’s back above its 200 day moving average.  In fact, the S&P 500’s less than 50 points from its all-time high of about 2,131.

Soon the brief panic in August and September will be nothing more than a mere blip on the price chart.  A convenient toehold where stocks dug in, coiled up, and then sprang to a new record level from.  Buy the dip aficionados will point to it for validation and self-satisfaction.

By all accounts, stocks are nearly as expensive as they’ve ever been.  No matter how you slice and dice it – be it the Shiller’s Cyclically Adjusted Price (Read More....)

. . . → Read More: The Exhilarating Romp to DOW 30,000

The Prelude to QE4

Jobs, Employment, Work, Picture Credit Pixabayby MN Gordon

Economic Prism

The U.S. economy officially exited the Great Recession in June 2009.  But the recovery hasn’t done much to lift the broad population’s lot in life.  Six years into it, and the economy trudges along like a jack donkey up a muddy mountain road.

Progress is slow.  There’s an occasional backslide.  Moreover, with each slippery step there’s the danger it’ll stagger off the trail side and freefall onto the rocks 3,000 feet below.

The U.S. consumer, the primary engine of economic growth, is backsliding at the moment.  Recently the University of Michigan, Survey of Consumers, noted its consumer sentiment index fell to 85.7 in early September.  That’s down from 91.9 last month and to its lowest level in a year.

Producer prices are also in a lurch.  According to the Labor Department, the producer price index has declined on a 12-month basis for seven straight (Read More....)

. . . → Read More: The Prelude to QE4

Amplified Losses

Ben Bernanke,Fed’s balance sheet,economic implosion,Bernanke, Obama, Congress, recession,Marxism-LeninismAmplified Losses

by MN Gordon

Economic Prism

Federal Open Market Committee meetings are always a spectacle.  The forthcoming FOMC meeting, scheduled for September 16 and 17, should be particularly endearing.  For despite the Fed’s claim to provide transparency the upcoming policy announcement is cloudier than pollywog stew.

All year the Fed has hinted they’d finally lift the federal funds rate from near zero.  Yet with each FOMC meeting the Fed has pushed back the decision.  Until three weeks ago, the September FOMC meeting was to be the historic date of a small, incremental rate increase.

But that was before the stock market shuttered and rapidly dropped 12 percent.  In late August, at the moment of maximum (Read More....)

. . . → Read More: Amplified Losses

Good Riddance

Money Stock Market CrashBy MN Gordon

Economic Prism

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

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