Forecasts of Gloom

Just like the clockwork of a rooster’s call at dawn.  On the first day of June each year, coastal Southern California becomes encapsulated by dense gloom.  You can guarantee it.

Out of state visitors mistake the gloom for smog.  But it’s something very different.  For the legendary Los Angeles smog disappeared in the early 1990s when the state enacted mandatory vehicle smog testing.

What a hassle and annoying expense.  But at least the San Gabriel Mountains are now visible from Long Beach most days of the year.  Plus school kids rarely now have recess called off for elevated ozone levels…unlike the good old days.

June gloom is a natural occurrence quite different than smog.  Warming temperatures in the inland region draw the dense grey marine layer several miles in each morning where it sits over the vast coastal plain.  Blue skies don’t appear until the sun burns the miasma off around 1 PM only to be covered up again by the following morning.

Some can’t stand it.  Others enjoy the brief – about 3 week – reprieve from the upcoming summer heat while it lasts. Continue reading

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Why Residential Rental Prices are off their Rocker

Why Residential Rental Prices are off their Rocker“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years,” go the sage words of Warren Buffett.  At present, this advice is especially important.  For asset prices are expensive.

Stocks are near record valuations.  Buying even the best companies today could result in holding stocks that are underwater for a decade – or more.  These are the risks when prices have been pushed to their limits.

We’ve gone over the absurdity of current valuations so many times we’ve lost count.  No matter how you slice and dice it – be it the Shiller’s Cyclically Adjusted Price Earnings (CAPE) ratio or the Buffett indicator – overall stock prices are a complete and total rip off.  This simple fact is being largely ignored at the moment.

On top of that, treasury yields – which move inverse to price – are skidding along the bottom of a 30-plus year credit cycle.  When yields finally turn, they could rise for the next 20 years.  Conversely, asset prices will deflate as borrowing costs increase. Continue reading

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This Market’s Bound to Bust

Sporting events are overrated.  Think of the latest Mayweather vs Pacquiao fight.  What a dud that turned out to be…twelve rounds of pat-a-cake.  We’ve seen harder hits watching the squirrels go at it along the back fence.

For any real action these days, you must turn elsewhere than professional sports.  Some prefer reality television for kicks and titters.  Others like to keep up with the gossip on Facebook.  Here at the Economic Prism we have other hankerings.

For the greatest show on earth, we set our sights to the stock market with eager anticipation.  We don’t know what will happen next.  But we do know something big – like a massive meltdown – is coming.

On Tuesday, for instance, the stock market took a nose dive.  The S&P 500 lost a full percent.  From what we gather, good news for the economy was perceived as bad news for stocks.

New home sales data exceeded forecasts.  Orders for capital equipment rose in the U.S. for a second month. Continue reading

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Cynics and the Big Fat Greek Default

Cynics and the Big Fat Greek Default“Crito, we owe a rooster to Asclepius.  Please don’t forget to pay the debt,” were the final words of Socrates.  He uttered them shortly after downing poison hemlock in 399 BC, in fulfillment of his death sentence for corrupting the youth.

Asclepius was the Greek god for curing illness.  One interpretation of Socrates’ last words is that death is the cure – or freedom – of the soul from the body.  Another is that Socrates viewed his death as a cure for Athens’ ailments…including its decline from the height of hegemony and defeat by Sparta in the Peloponnesian War.

By all accounts, Socrates’ followers were left searching for direction following the death of this profound gadfly.  Plato, for example, went on to explore, broaden, and clarify Socrates ideas, making them lasting contributions to the world.  However, many of Socrates’ other followers dissolved into various factions, and became nothing more than historical footnotes.

The Cynics, for instance, took Socrates’ teachings of the virtues of a simple life and extended them into loony land.  Before long Diogenes of Sinope was begging for a living and stumbling around the marketplace with a lamp in full daylight, claiming to be looking for an honest man. Continue reading

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