Inflation and Chaos

Posted on November 1, 2024 by MN Gordon

The presidential election is less than one week away. Will Trump be the victor or will Harris?

The mainstream media is calling it a tossup. But from what we can tell, Trump appears to have the edge. At least, that’s what Wall Street is signaling.

Of course, apart from death and taxes, there are no guarantees in life. This is especially true when it comes to presidential elections. Anything can happen on election night. Ballot stuffing, fraud, hanging chads. You name it.

What will it be this time that throws the election results into question? Moreover, will voters accept the determined outcome? Or will discontented supporters of the losing side take to the streets and inflict total chaos?

What about stocks? Has Wall Street already priced in a Trump win? If so, and if Trump wins, will share prices run up further in celebration or will they drop in a “buy the rumor, sell the news” shakeout?

What will happen if Harris pulls out the victory? Will stocks crash? If so, is this a strategic buying opportunity? Continue reading →

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Dumb Reasons Why More QE Is Coming

Posted on October 25, 2024 by MN Gordon

Debt, deficits, and debt interest payments have crippled America’s finances in a way that only a government of corrupt clowns could have made possible. Decades of overspending are coming home to roost. We all get to live with the consequences.

The Treasury Department recently published its monthly treasury statement showing receipts and outlays through September 2024.This monthly statement is of particular interest because it provides the final tally for fiscal year 2024. So, with another wastrel year in the books, where did things end up?

For FY2024, the U.S. Treasury collected $4.92 trillion. However, it paid out $6.75 trillion. The difference, the deficit, was $1.83 trillion. And this difference was covered with debt.

The top outlay, of no surprise, was social security, which totaled $1.4 trillion. This was followed by health at $912 billion. The third highest outlay was net interest on the debt, which came in at $882 billion. Of note, net interest on the debt exceeded both Medicare ($874 billion) and national defense ($874 billion).

Net interest on the debt increased dramatically in FY2024 because of relatively higher interest rates. As comparison, in FY2023 net interest on the debt was $659 billion and in FY2022 it was just $475 billion. In other words, net interest on the debt was roughly 85 percent higher in FY2024 than it was just two years ago. Continue reading →

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Whip Inflation Never

Posted on October 18, 2024 by MN Gordon

The storyline all year from the Federal Reserve and the Treasury was that consumer price inflation was coming down. That it would soon be within the Fed’s arbitrary 2 percent target. That the runaway inflation over the last few years was a mere pothole in the road to greater prosperity.

On September 18, the Fed was so sure it had expelled inflation that it cut the federal funds rate for the first time since March 16, 2020. What’s more, the Fed went big. It cut 50 basis points.

The stock market has made hay in the weeks that have followed. Since September 18, the S&P 500 is up over 220 points, and has hit new all-time highs along the way.

This has pushed stocks to extreme valuations. The Buffett indicator, the ratio of total market capitalization over gross domestic product, is now over 200 percent. A fair market valuation is a ratio between 107 and 131 percent. Anything above 155 percent is considered significantly overvalued.

While the Fed’s rate cuts are thrilling for stock market investors – for now – they’re terrible for working Americans who are struggling to make ends meet. In fact, last week’s CPI report showed the Fed may have jumped the gun. Continue reading →

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Mistakes from the Past

Posted on October 11, 2024 by MN Gordon

Sometimes things don’t work out as planned…

On September 18, the Federal Reserve cut the federal funds rate by 50 basis points. This was the first time the Fed cut rates since March 16, 2020. The aggressive rate cut was goaded on by people like Elizabeth Warren, who said Fed Chair Jerome Powell was “behind the curve.”

Over the last three weeks something unexpected by the Fed has happened. The yield on the 10-Year Treasury didn’t follow the Fed’s rate cut down. Rather, it did the opposite. It went up.

This week the yield on the 10-Year Treasury spiked above 4 percent for the first time since July 31. The yield on the 2-Year Treasury note also topped 4 percent. Thus, the Treasury market is not cooperating with the Fed’s desire for cheaper credit.

Could it be that Warren was wrong, and the Fed wasn’t behind the curve after all? Was September’s 0.50 percent rate cut a policy mistake? Will the Fed add to its mistake with an additional rate cut in November? Continue reading →

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