No Guarantees of Success

Posted on April 8, 2016 by MN Gordon

Stock picking is an exercise in humility.  Ask anyone who has tried it.  Chances are their best ideas have gone against them more frequently than they’d care to admit.

One thing that makes stock picking so confounding, is that it seems so simple in hindsight.  Gazing at a stock’s price chart, the wave movements over time appear to be almost predictable.  The precise moments to buy and sell look clear and obvious.

Of course, knowing these inflection points in advance is the real trick.  Timing the inhales and exhales of the market with consistency is generally a transitory endeavor.  Nonetheless, there’s no shortage of theories on how to go about it.

One popular theory, for example, is to gaze at stock price waves without blinking.  After several minutes, you’re supposed to zoom in and back out and then back in again.  According to the theory, if you peer in deep enough you can see the mass psychology of the market manifesting in golden ratio fractal patterns.  If you’re doing it right, they even jump out like the spiral arrays of a snail shell…or the Milky Way galaxy. Continue reading →

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The Other Problem with Debt No One is Talking About

Posted on April 1, 2016 by MN Gordon

Nearly 7 years have elapsed since the official end of the Great Recession.  By now it’s painfully obvious the rising tide of economic recovery has failed to lift all boats.  In fact, many boats bottomed out on the rocks in early 2009 and have been taking on water ever since.

Last week, for instance, it was reported that U.S. credit card debt topped $714 billion in the third quarter of 2015.  That’s up $34 billion from the year before.  Shouldn’t the economic recovery allow consumers to pay down their debts?

Indeed, it should, if only the economic recovery was the result of real, economic growth.  To the contrary, the recovery has been faux growth driven by cheap Fed credit and financial engineering.  Mutual increases in prosperity haven’t occurred.

In particular, those outside the financial services business, and other bubble industries, like government lobbyists, have largely missed out on any increase in income or living standard.  Good paying professional jobs that vaporized during the downturn have been replaced with low paying service jobs.  Consumers have used credit card debt to pick up the slack. Continue reading →

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Deficit Spending is Not the Answer

Posted on March 25, 2016 by MN Gordon

Central bankers and monetary adherents the world over are united in the common grouse that fiscal policy is lacking.  Grander programs of direct stimulation are needed, they grumble.  Monetary policy alone won’t cut the mustard, they gripe.

Hardly a week goes by where the monetary side of the house isn’t heaving grievances at the fiscal side of the house.  The government spenders aren’t doing their part to boost the GDP, proclaim the money printers.  Greater outlays and ‘structural reforms’ are needed to spur aggregate demand, they moan.

For example, last month, just prior to the G20 gala, the Organization for Economic Cooperation and Development (OECD) asserted that “Getting back to healthy and inclusive growth calls for urgent policy response, drawing on monetary, fiscal, and structural policies working together.”  The OECD report also stated that “The case for structural reforms, combined with supporting demand policies, remains strong to sustainably lift productivity and the job creation.” Continue reading →

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Why Janet Yellen is Toast

Posted on March 18, 2016 by MN Gordon

“The Phillips Curve is alive,” said Fed Chair Janet Yellen at Wednesday’s post FOMC meeting press conference.

We’ll offer some remarks on this in just a moment, including why Yellen is toast.  But first we must put her utterances into proper context.

This week, at a business meeting, we experienced the full veracity of Brandolini’s Law.  If you happen to be ignorant of Brandolini’s Law, we must apologize.  For we must forever end your bliss.

Brandolini’s Law, or the BS Asymmetry Principle, as formulated by Italian programmer Alberto Brandolini, says: “The amount of energy needed to refute BS is an order of magnitude bigger than to produce it.”

In other words, it takes 10-times the energy to debunk a falsehood than it takes to spew it.  Certainly, Brandolini is on to something.  In fact, as far as we can tell, there are countless applications of this law. Continue reading →

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