Just Another American Story

Posted on November 24, 2023 by MN Gordon

Wish that I was on ol’ Rocky Top
Down in the Tennessee hills
Ain’t no smoggy smoke on Rocky Top
Ain’t no telephone bills

Once I had a girl on Rocky Top
Half bear, other half cat
Wild as a mink, but sweet as soda pop
I still dream about that

– Rocky Top, As performed by the Osborne Brothers

Rise and Fall

This is a story that dates back over a billion years.  To the Proterozoic Era.  If you can stretch your mind to consider how long ago that was you can understand how sedimentary rock is formed and how it bonds you over eons to the natural world.

Over hundreds of millions of years, clay, silt, sand, and gravel, with some calcium carbonate, collected in deposits on the ocean bottom along the ancient margin of the North American continent.  Over time, these sediments cemented together and formed into layers of sedimentary rock over nine miles thick. Continue reading →

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The Swamp Walker Delight

Posted on November 17, 2023 by MN Gordon

If you can understand how the modern swamp walker thinks, you are better positioned to see how credit rating agencies and stopgap bills are both moving America towards a similar end.

Last week Moody’s Investor Service lowered its U.S. credit outlook from ‘stable’ to ‘negative.’  At the same time, Moody’s kept the U.S. at AAA, its highest rating.  What’s the holdup?

Several months ago, Fitch downgraded its U.S. credit rating from AAA to AA+.  S&P Global Ratings downgraded U.S. credit all the way back in 2011.  Does Moody’s really believe U.S. credit is ultra-safe?

By all honest accounts, the U.S. government’s financial condition has changed dramatically for the worst over the last 50 years.  Somehow Moody’s rates its credit as if the nation’s debt profile is still sound and sober.

By lowering its credit outlook Moody’s is likely setting the stage for an actual downgrade. Yet at this point a credit downgrade would come much too late for anyone to really care about.  Certainly, it won’t compel Washington to get a handle on its spending problem. Continue reading →

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The War and Peace of Secular Market Cycles

Posted on November 10, 2023 by MN Gordon

Projections from the Congressional Budget Office show Washington racking up an additional $20.2 trillion in debt over the next decade.  That would put the national debt somewhere around $54 trillion.

The national debt, which is the accumulation of annual budget deficits, is growing at a rate of roughly $2 trillion per year.  Much of this debt is needed to make good on mandatory outlays like social security, medicare, and health spending.  Some of the debt covers discretionary spending such as defense and transportation.

There’s also net interest on debt.  This recently topped $1 trillion a year for the first time ever.  Washington is essentially borrowing money to pay the interest on the debt.  This is no way to run a country.

These projections – the $2 trillion per year deficits – generally assume everything remains status quo.  That real gross domestic product increases at an annual rate of 2.4 percent.  And that there are no new wars, pandemics, or other freedom inhibiting crisis events – whether intentional or not – that would blow these budget projections out of the water. Continue reading →

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Once Upon a Time in Flagstaff

Posted on November 3, 2023 by MN Gordon

During the great bond bull market from September 1981 to July 2020 the yield on the 10-Year Treasury note fell from 15.32 percent to 0.62 percent.  Since then, the yield has spiked up to where it currently sits at about 4.66 percent.

The rapid interest rate flux has been unpleasant for bankers, borrowers, and businesses.  By our estimation the unpleasantness has only just begun.

After nearly 40 years of ever forgiving credit markets, where debts could be refinanced at lower and lower rates, there’s an abundance of rottenness to be purged from the system.  The great asset price liquidation is still forthcoming.  That’s our expectation, should central planner’s stay out of it.

But what if the pain has already come and gone?

Could the worst bond bear market in the 247-year history of the United States be coming to an end?  Is now a good time for stock market investors to buy shares of their favorite businesses? Continue reading →

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