Skeletons in the Closet

Posted on April 7, 2015 by MN Gordon

Just when the mainstream press thought they had a solid theme to report, something unexpected happened.  No one quite knows what’s going on for sure.  But the economy’s popular storyline appears to be drifting off plot.

The general consensus since late last year has been that the U.S. economy is moderately improving while the world’s other major economies – Japan, China, and Europe – are becoming weak like an over breaded meat loaf.  Until a few weeks ago things were rolling forward according to script.

The presumed strength of the economy was finally pushing the Fed to raise the federal funds rate after six plus years of being zero bound.  June of this year was broadly thought to be the magic time when Janet Yellen would finally pull the trigger.  But things rarely go as man – or woman – ordains them.

“Jove does not give all men their heart’s desire,” observed Homer, some 2,750 years ago.  Homer probably didn’t have central bank intervention into credit markets in mind when he made this remark.  If he had, he would have laughed with the gods at the vanity of it. Continue reading →

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The Best Time to Squirrel Away Some Nuts

Posted on April 3, 2015 by MN Gordon

“Sell in May and go away,” goes the old Wall Street adage.  The general rule is to sell stocks on May 1, hold cash through the summer and into the fall, and then re-enter the stock market on Halloween Day.  This certainly has a right ring to it…May and away even rhyme.  But what if it has a wrong outcome?

“Waiting until May Day runs the risk of selling at the same time that a large number of other investors are doing the same,” notes Mark Hulbert of Hulbert Financial Digest.  Perhaps the right time to sell isn’t May after all.  Maybe it’s better to front run the trend and sell in April.  But how can we be sure?

“Fortunately, we have real-world data on two attempts to get a jump start on the ‘sell in May and go away’ pattern.  The first is the ‘Almanac Investor Newsletter,’ edited by Jeffrey Hirsch, and the other is Sy Harding’s ‘Street Smart Report.’

“Both pursue surprisingly similar modifications to this basic seasonal pattern.  Each relies on a technical indicator known as MACD to pinpoint the precise day on which they enter and exit the market.  (MACD is a short-term momentum indicator, standing for moving average convergence divergence.) Continue reading →

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Prepare for a Harder World

Posted on March 31, 2015 by MN Gordon

Aside from death and taxes, the only guarantee in life is change.  Change, you see, is constant.  It’s always happening.

Sometimes change is an improvement.  Other times it’s an adversity.  But it’s always happening…you can count on it.  With this in mind, here’s one perspective of what’s coming down the turnpike…

“We should all be prepared for adjusting to a world that is harder,” were the gloomy words offered by Charles Munger last week in Los Angles.  Munger, if you don’t recall, is Warren Buffett’s billionaire sidekick who helped build Berkshire Hathaway.  His remark was made in response to a question about the Federal Reserve’s massive balance sheet expansion since the 2008 financial crisis.

“You can count on the purchasing power of money to go down over time,” added Munger. “And you can almost count that you’ll have more trouble in the next 50 years than the last.”  In fact, Munger believes the last 50 years have been an anomaly… Continue reading →

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