China’s Concrete Problem

Posted on February 10, 2015 by MN Gordon

There’s always something fascinating going on when it comes to the economy.  Take China, for instance.  According to the International Monetary Fund, and the notion of purchasing power parity, they’re the world’s largest economy.

Nonetheless, they’ve started the year off in a rut.  For example, China’s exports fell 3.3 percent in January from a year ago.  But that was nothing.  Imports dropped 19.9 percent.

“The slide in imports is the sharpest since May 2009,” explained Reuters, “when Chinese factories were still slashing inventories in reaction to the global financial crisis.  The dismal trade performance will increase concerns that an economic slowdown in china – originally considered a desirable adjustment away from an investment-intensive export model toward one based on domestic consumption – is at risk of derailing.”

Here at the Economic Prism we didn’t know China’s economy was still at risk of derailing.  Didn’t their economy derail some time ago?  Any economy that used 6.6 gigatons of cement between 2011 and 2014 is effectively FUBAR. Continue reading →

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What Groundhog Day Means for Stocks

Posted on February 6, 2015 by MN Gordon

Something remarkable happened this week.  The price of oil didn’t go down.  It did the opposite…it went up.

For one reason or another, no one really knows, this was construed as bullish for stocks.  Perhaps rising oil prices mean there’s robust demand.  Maybe, despite a 5th straight month of declining U.S. factory orders, the economy is still grinding upwards.  Who really knows?

What we do know is that on Tuesday, the DOW jumped over 300 points.  There was plenty of good cheer to go around indeed.  All 30 of the DOW stocks closed higher than they opened.  Then, yesterday, the DOW jumped another 211 points.  Has there ever been a more glorious time to be alive?

Here at the Economic Prism we recommend you enjoy the upswing while it lasts.  The lightheaded and dizzy feeling it provokes is fun for sure.  But, alas, it will be followed by a stumble and crash.  That’s how these things always go.

Certainly there are plenty of moving parts in an economy.  Some may strengthen while others may weaken. Continue reading →

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Socialism is Like a Nude Beach – Sounds Like a Great Idea Until You Get There

Posted on February 3, 2015 by MN Gordon

Socialism is Like a Nude Beach – Sound Like a Great Idea Until You Get There
By Jared Dillian, Editor, Bull’s Eye Investor

I’ve been following the activities of Syriza for a long time.  They started putting up big numbers in the polls in Greece three or four years ago.

Syriza has a message that’s very popular with Greeks: Screw Germany.  The word they use to describe what’s happened to Greece during the period of time since the debt crisis is “humiliation.”

To be fair, if you owe a lot of money to someone, it can be tempting to give them the finger. When Greece’s debt was restructured, it was done in such a fashion that none of the debt was really forgiven, but the maturities were extended far out in the future.  Since Greece doesn’t grow (for structural, demographic, and cultural reasons), this is known as extend and pretend.  Everyone knew, even back then, that the only hope Greece would have to avoid default would be whatever ability they had to refinance. Continue reading →

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Leading the Next Economic Downturn

Posted on January 30, 2015 by MN Gordon

Markets went haywire again this week.  The DOW flipped and flopped like a fish out of water.  Something spectacular is heading this way…you can just feel it.

U.S. government debt has now eclipsed $18.1 trillion.  Tack on the debts of households, businesses, and state and local governments, and the total U.S. debt jumps to $59.2 trillion.  Personal debt alone, which includes mortgage, student loan, and credit card debt, now stands at over $16.7 trillion.

These numbers are significant.  They’re astounding too.  Not only for how ginormous they are.  But, more so, for what they imagine to life.

In particular, these massive debts produce a mirage of prosperity.  They also produce an abundance of false demand.  This, in turn, conjures an abundance of productivity that otherwise wouldn’t exist.

Millions of people wake up each morning to do jobs that are made possible only by cheap money or inflated prices. Continue reading →

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