Amplified Losses

Posted on September 11, 2015 by MN Gordon

Federal Open Market Committee meetings are always a spectacle.  The forthcoming FOMC meeting, scheduled for September 16 and 17, should be particularly endearing.  For despite the Fed’s claim to provide transparency the upcoming policy announcement is cloudier than pollywog stew.

All year the Fed has hinted they’d finally lift the federal funds rate from near zero.  Yet with each FOMC meeting the Fed has pushed back the decision.  Until three weeks ago, the September FOMC meeting was to be the historic date of a small, incremental rate increase.

But that was before the stock market shuttered and rapidly dropped 12 percent.  In late August, at the moment of maximum panic, New York Federal Reserve Bank President, William Dudley, backed off on the prospect of a September rate increase.  The markets greeted Dudley’s remarks as if they were manna from heaven.

However, after the stock market settled down, it wasn’t clear if the September rate increase was still on or not.  No one seems to know.  This includes the Fed too. Continue reading →

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This is War

Posted on September 8, 2015 by MN Gordon

Exactly 20-years ago this month we got our first email address.  We were entering freshman year of college.  Along with a student identification card we received an email account.

The World Wide Web was a Wild West frontier at the time.  No one quite knew where it would take us.  Perhaps no one still knows its ultimate destination.

But one thing is abundantly clear.  Email has become a ball and chain that makes professional life practically unbearable.  Along with the advent of the smart phone there’s no escaping round the clock demands these days.

Indeed, like the first generation to have their lives interrupted by the advent of the clock, we’ve come to disdain email.  We recall the freedom of life prior to its existence…when there was a clear separation from being on the clock and being off the clock.  This, of course, is the downside of progress.

In retrospect, instant communication and connection comes with a price.  Namely one’s time, freedom, and privacy. Continue reading →

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Good Riddance

Posted on September 4, 2015 by MN Gordon

High-risk investing is rewarded with higher returns when the financial tide is rising.  The vast sea of liquidity hides the hazards and perils of a rock bottom reef.  Madmen and lunatics get rich.  But when the tide turns…watch out…

“You only find out who is swimming naked when the tide goes out,” remarked Warren Buffett back in 2001.  Since mid-May the DOW is down nearly 2,000 points.  At this rate, the receding tide will soon expose a multitude of skinny-dippers.

What we mean is, a big hedge fund or pension fund will soon be caught with its pants down.  Perhaps it will be billionaire David Einhorn.  His Greenlight Capital hedge fund is already down nearly 15 percent in 2015.  While it’s still too early to tell if Einhorn’s swimming naked…the water line has dropped significantly.

But it’s not just the high risk hedge funds with something to hide.  Pension funds, seeking higher yields, have been swimming with hedge funds.  They didn’t have much choice.

The Fed’s artificially pinned Treasury yields down to an absurdly low rate for over 80 months. Continue reading →

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The Chinese Fiasco

Posted on September 1, 2015 by MN Gordon

The twilight receded into the vista of the glowing port lights.  Docked container ships melded into the profusion of overhead cranes.  Sporadic refinery flares overtook the final sparkles of dusk.

The sun slipped beyond the far side of the Palos Verdes cliffs.  We lit a giant bonfire and settled down to its tantalizing flames.  The kindling crackled and snapped.  Sparkling embers escaped in the light onshore breeze.

School’s back in session tomorrow.  But for the under 10-year old crowd we tent camped with last Saturday night at Cabrillo Beach Youth Center, sitting in a classroom was the furthest thing from their mind.  Whittling drift wood, tying bowline knots, and kayaking the breakwater were the tasks at hand.

Our vantage point from Cabrillo Beach in San Pedro, looking back at the Port of Los Angeles and over to the Port of Long Beach, was a sight for reflection.  At this outer peninsula tip the managed chaos of container ships, docks, cranes, semi-trucks and railcars intermingled in harmony.  Each shipping container, no doubt, was overloaded with low priced goods from the Far East for the American consumer. Continue reading →

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