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Disasters Can Happen

How to Prepare for Another Market Face Pounding

by MN Gordon

Economic Prism

‘Better than Goldilocks’

“Markets make opinions,” goes the old Wall Street adage.  Indeed, this sounds like a nifty thing to say.  But what does it really mean?

Perhaps this means that after a long period of rising stocks prices otherwise intelligent people conceive of clever explanations for why the good times will carry on.  Moreover, if the market goes up for long enough, the opinions become so engrained they seek to explain why stock prices will go up forever.

After nine years of near uninterrupted stock market gains, new opinions are being offered to explain why the stock market will be bathed in sunshine indefinitely.  For example, the late-1990s term Goldilocks is again being used to describe why the slow growth, low unemployment, economy is good for stocks.  Apparently, if an economy is not-too-cold, but (Read More....)

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One Bear Market from Disaster

Crisisby MN Gordon

Economic Prism

“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. (Read More....)

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Leading the Next Economic Downturn

Economic Collapse, Credit Crunch, Markets, Stock Marketsby MN Gordon

Economic Prism

Markets went haywire again this week. The DOW flipped and flopped like a fish out of water. Something spectacular is heading this way…you can just feel it.

U.S. government debt has now eclipsed $18.1 trillion. Tack on the debts of households, businesses, and state and local governments, and the total U.S. debt jumps to $59.2 trillion. Personal debt alone, which includes mortgage, student loan, and credit card debt, now stands at over $16.7 trillion.

These numbers are significant. They’re astounding to. Not only for how ginormous they are. But, more so, for what they imagine to life.

In particular, these massive debts produce a mirage of prosperity. They also produce an abundance of false demand. This, in turn, conjures an abundance of productivity that otherwise wouldn’t exist.

Millions of people wake up each morning to do jobs that are made possible only by cheap money or inflated prices. Sometimes they require just one or the other. (Read More....)

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When the Stock Market Bubble will Burst

Pensionsby MN Gordon Economic Prism

U.S. markets were closed yesterday in observance of Memorial Day. But, nonetheless, we peered through our Economic Prism for hints and clues of what’s to come. There are no bones about it. We believe the bull market’s end is nigh. And if it isn’t, it should be.

We’ve detailed various rationales…like stock valuations and average bull market durations. We’ve made countless observations of the rough waters the economy is sailing into. Corporate earnings are doomed.

Still, day after day, stocks continue to rise. Higher, further, longer than we possibly could have imagined. We can hardly believe our eyes.

Could we live in a world with (Read More....)

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What’s Really Propelling the Stock Market Higher

By MN Gordon, Economic Prism

Consumers are back at it…doing what they do best.  They’re buying stuff and they’re consuming it.  Moreover, they’re doing so at an accelerating rate.

The Commerce Department reported
on Wednesday that retail sales increased 1.1 percent in February, the largest rise since September, and well above January’s 0.2 percent gain.  This is in spite of the 2 percent increase in payroll taxes and the tax increase on the rich.  Apparently, so far, smaller paychecks are not inhibiting people’s desires to spend money.

This increase in consumer spending should help the first quarter GDP number, since consumer spending makes up about 70 percent of the U.S. economy.  But is an increase in GDP, propelled by an increase in consumer spending, really a good thing?

If the increase in consumer (Read More....)

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