The Economic Motherboard is Now Fried

Posted on April 14, 2015 by MN Gordon

Economics is a boring and tedious trade to the casual observer.  All the monthly report outs on GDP, employment, manufacturing, inflation, among other indexes, are a dull waste of time.  What decisions could one possibly make to improve their lot in life from these reported data?

Should you buy more toothpaste because the CPI went up 0.2 percent last month?  Should you stay at your current job because GDP growth is slowing?  Obviously, this information is useless for making a reasoned decision.

Plus, in addition to the government’s nonsense economics reports, the blathers of the leading economic policy makers are near incoherent.  “Just because we removed the word ‘patient’ from the statement doesn’t mean we are going to be impatient,” said Fed Chair Janet Yellen last month when asked about the Fed’s strategy for raising the federal funds rate.  Certainly, this is the type of utterance that, upon hearing it, reduces an individual’s mind and sucks from their soul. Continue reading →

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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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