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 →

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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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