From Bad to Worse in a Big Way

Posted on February 27, 2015 by MN Gordon

Just when it appeared that a $50 per barrel floor had been put under the price of oil, something unexpected happened.  The price of oil dropped over 2 percent to about $48.74 a barrel.  What’s more, it could fall much, much further…

“A rally in crude-oil prices halted last week after U.S. data showed that domestic crude inventories are at their highest in about 80 years,” explained the Wall Street Journal.

In other words, not since 1935 – the middle year of the Great Depression – has there been such a glut in U.S. oil.  Moreover, a weekly report from Morgan Stanley remarked that forthcoming U.S. data on supply and drilling are “likely to appear ominous.”  From what we gather, this most likely means the supply glut will steepen.

Naturally, when there’s an oversupply of something, the price must drop to equilibrate demand.  How much further it must drop no one really knows.  But we surmise the price of oil must fall considerably further to close an 80 year inventory high.

Obviously, domestic oil producers wanted a quick price rebound in the first quarter of 2015. Continue reading →

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The End of the New Paradigm

Posted on February 24, 2015 by MN Gordon

There is a pleasant mist in the air which conceals the depths of the disorder with earnest efficiency.  Cavernous divergences exist between the financial economy and the real economy.  Yet only the crankiest will speak of them.

The union in Europe was temporarily saved last Friday.  Investors the world over cheered the relief.  The DOW and S&P 500 closed out the week at record highs.

The big news was that the Greek bailout will be extended four more months.  The fact that Greece will never pay back its creditors doesn’t matter for now.  The clever program of extend and pretend has been preserved.

This is how things work in 2015.  The world economy roles round and down with remarkable precision, borrowing massive amounts of digital monetary credits into existence and spending them.  Certainly, this can’t go on forever.

The more duct tape and safety pins that are used to hold things together…  The more money creation that occurs to temporarily paper things over…  The greater destruction the final financial blowout will ultimately be. Continue reading →

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The Sickness that Never Ends

Posted on February 20, 2015 by MN Gordon

It’s a wacky and wild world out there.  We don’t know what to make of it anymore.  The tried and true has disappeared from common circulation like pre-1965 quarter dollars.  What remains is a lot of claptrap.

For example, we’ve noticed numerous reports lately explaining why eating piles of bacon is good for us.  What’s more, just this week we came across an article telling us that putting a scoop of butter in our coffee each morning makes for a healthy breakfast.  Apparently the added oil slick fills you up so you don’t need to eat much for lunch.

Huh?  Perhaps these are healthy diet choices for those eager to have a myocardial infarction.  We’ll stick to black coffee and a granola bar.

Of course, nowhere is the prevalence of humbug greater than the world of money.  For only in the money realm do you hear things as idiotic as the popular notion that spending money – even borrowed money – makes you wealthy.  Similarly, only in the world of money would you hear highly respected individuals contend that a destructive hurricane is good for the economy. Continue reading →

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The Perfect Time to Save for a Rainy Day

Posted on February 17, 2015 by MN Gordon

Today we gaze back to the past so we can peer forward to the future.  What does yesterday tell us about today?  What does today tell us about tomorrow?

For example, eleven year ago the global economy was in the euphoric stage of what ended up being an epic property bubble.  It was a magical time in the United States.  The sun smiled brightly on its inhabitants even on the stormiest of days.

Money appeared from the heavens in the form of a fantastical new acronym – MEW.  Mortgage equity withdrawal, courtesy of inflated housing prices, showered the lowly homeowner with an abundance of cash.  Mortgage brokers and real estate agents alike were getting rich.  The zenith of humanity had arrived.

Naturally, a pocket full of free cash must be spent in any and all ways possible.  Some MEW recipients bought additional real estate not to live in, but on spec…with the sole intent of flipping for a profit to the greater fool.  Others covered their countertops with Italian granite.  Vacation cruises were also a popular way to put MEW to good use. Continue reading →

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