Gold Shines Bright

The mighty U.S. dollar spent a good part of the year beating up on other currencies.  From January to mid-October, the dollar rose 13 percent against the euro, 22 percent against the Japanese yen, and 6 percent against emerging market currencies.

And while the dollar rose less against emerging market currencies than against Europe and Japan, the thrashing was particularly brutal.  Many emerging economies – like Sri Lanka, Zambia, Pakistan, Argentina, Turkey, and others – that borrow in dollars, are now on the hook to repay those loans using their local currencies of diminishing relative value.

Perhaps the worst of the dollar’s rapid rise is over.  We don’t know.  But over the last month the dollar has rolled over from the 20-year high attained on the dollar index.

Specifically, the dollar index is up over 10 percent year-to-date.  Over the last 30-days, however, it has fallen more than 3 percent.

After slipping below 96 cents in September, the euro has risen to nearly $1.04.  The British pound has also bounced from its September all-time low.  The Japanese yen has slightly rebounded from a brutal skid to a 32-year low against the dollar. Continue reading

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Opendoor: Buy the Ticket, Take the Ride

On February 11, 2021, the share price of Opendoor Technologies Inc. (NASDAQ: OPEN) hit an all-time closing high of $35.88.  As of market close on Thursday, the stock was trading at just $1.87.  That’s over a 94 percent loss.

Should you buy the dip?

Opendoor, if you’re unfamiliar with the business, is an online – iBuyer – company that buys and sells residential real estate.  Through its web-based platform, Opendoor provides instant cash offers to property owners.  For potential sellers, the process is very slick and very convenient.

Sellers that use Opendoor skip the tedium and all the phony interactions that come with real estate agents.  They also skip the ridiculous open houses, and the bummer of their nosy neighbors and other looky-loos trampling through their staged home.

In fact, with Opendoor, selling a house is as simple as selling an old pair of trousers on eBay.  For this service, Opendoor charges a fee that’s comparable to a real estate agent’s commission. Continue reading

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Death to Zombies

On Thursday, the Bureau of Labor Statistics reported that consumer prices, as measured by the consumer price index (CPI), inflated at an annual rate of 7.7 percent in October.  Investors went bananas on this apparent pullback in the headline CPI.

The stock market responded with one of its biggest single day rallies in history.  The S&P 500 jumped over 5.5 percent.  The NASDAQ jumped over 7.3 percent.  Of greater note, the yield on the 10-Year Treasury note dropped to just 3.81 percent – its lowest yield in over a month.

So, is raging consumer price inflation no longer a concern?  Has the ugly storm come and gone?  Can Powell now pivot?

Probably not.  More than likely, consumer price inflation will rage throughout the decade.  Regardless, now’s not the time to go all in on stocks.  We’ll explain why in just a moment.  But first several words on consumer price inflation.

Consumer price inflation, remember, is an effect of money supply inflation.  The Federal Reserve inflated its balance sheet with upwards of $5 trillion in digital monetary units – created out of thin air – between September 2019 and April 2022. Continue reading

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Are You Ready for the Coming U.S. Government Default?

The vast herd of investors are a deluded crowd.  Following the Federal Reserve’s much anticipated 75 basis point rate hike on Wednesday the major stock market indexes jumped upward.

Optimistic investors keyed in on the Federal Open Market Committee (FOMC) statement and, in particular, the remark that the Fed, “will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation and economic and financial developments.”

Somehow this was perceived as being the precursor to a policy pivot.  Yet during the post-FOMC statement press conference, Powell clarified that, “It’s very premature to be thinking about pausing.”

Stocks then fell off a cliff.  The Dow Jones Industrial Average (DJIA) closing out the day with a loss of 505 points.

Will there be a pivot, pause, or no pivot?  This is the wrong question to be asking.  The reality is the major stock market indexes have much farther to fall before the bear market is over, regardless of if the Fed pivots anytime soon. Continue reading

Posted in Government Debt, MN Gordon | Tagged , , , , | 32 Comments