Rational Insanity

Posted on April 22, 2016 by MN Gordon

Dark storm clouds gather along the economic horizon.  They multiply ominously with each passing day.  The recovery, weak as it has been, has run for nearly seven years.  Now it appears to be sputtering and stalling out.

On Tuesday, for example, iconic computer chip manufacturer Intel announced they’d be laying off 12,000 employees.  Alas, with the decline of the personal computer, this has been a long time coming.  But it was the full 10 percent decline of PC sales during the first quarter of the year that finally triggered Intel’s reduction in force (RIF).

Intel’s new plan is to reinvent itself.  From what we gather the new strategy is to refocus its efforts on cloud computing and connected – internet of things – devices.  “I am confident that we’ll emerge as a more productive company with broader reach and sharper execution,” said CEO Brian Krzanich.

Indeed, this will likely be true over time.  Intel isn’t Kodak.  Computer chips will eventually be in just about everything – not just personal computers. Continue reading →

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Double Whammy Economics

Posted on April 15, 2016 by MN Gordon

What’s up with the U.S. consumer?  They seem to have come to their senses at the worst possible time.  They can no longer be counted on to push economic growth up and to the right.  Specifically, they’re not spending money on stuff.

According to Wednesday’s Commerce Department report, U.S. retail and food services sales for March declined 0.3 percent from February.  Apparently, U.S. consumers are tapering back on auto purchases and spending at restaurants, bars, and clothing and department stores.  What’s more, sales have fallen or been flat for each of the first three months of the year.

“We are seeing much less impulse buying and hearing more ‘I need to go home and think about it,’” said Randal Weeks, owner of Gray Living, a home décor store in McKinney Texas.  Similar anecdotes are being reported by retailers across the country.  What in the world is prompting this consumer ambivalence?

“Shoppers feel uncertain because of a stock market that fell more than 10 percent in six weeks and the recent terror attacks in Europe, said Bob Phibbs, CEO of The Retail Doctor, a consulting company based in Coxsackie, New York. Continue reading →

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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 →

Posted in Government Debt, MN Gordon | Tagged , , , , | 14 Comments