Treasury Bubble Redux

Posted on January 20, 2015 by MN Gordon

Last week, while everyone was busy gawping at the stock market’s wild swings and oil’s epic fall from grace, we set our sights on the 10 Year Treasury note.  On Thursday and Friday the yield touched down at 1.75 percent.  Yields haven’t been that low since May 2013.

What’s more, 10 Year Treasury Yields are approaching their all-time low of 1.53 percent that was briefly reached in July 2012.  If you recall, when Treasury yields go down, Treasury prices go up.  In other words, right now Treasuries are nearly as expensive as they’ve ever been.

With global financial markets being on edge, U.S. Treasuries appear to be a safe bet.  “They’re the safest investment in the world,” goes the popular wisdom.  Many investors reason they are guaranteed the return of their principle, plus 1.75 percent to boot.

Here at the Economic Prism we believe 1.75 percent is just enough rope for people to hang themselves with.  But don’t listen to us.  We’ve been predicting a debt market reversal for at least six years…possibly longer. Continue reading →

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Oil Demand Deduction

Posted on January 16, 2015 by MN Gordon

According to Saudi Prince Alwaleed bin Talal, we’ll never see $100 per barrel oil again.  That, in our book, is a pretty long time.  Nonetheless, Prince Alwaleed’s sure of it…

“If supply stays where it is, and demand remains weak, you better believe [the price of oil] is gonna go down more.  But if some supply is taken off the market, and there’s some growth in demand, prices may go up.  But I’m sure we’re never going to see $100 anymore,” said Prince Alwaleed bin Talal, the billionaire Saudi businessman.

This is quite a reversal indeed.  Who would have predicted back in June 2014, when oil was at $107 a barrel, that it would crash to the mid-$40s by January 2015?  We don’t know anyone who predicted this…do you know anyone who predicted this?

The pros certainly didn’t.  For example, Southwestern Energy definitely did not have a clue what was about to happen.  As recently as October, they spent $5.3 billion acquiring oil reserve properties from Chesapeake Energy.

Now, just three months later, the collapse in oil and gas prices has dragged the value of the properties with it. Continue reading →

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Tilting the Odds in Your Favor

Posted on January 13, 2015 by MN Gordon

Jim Rogers, renowned investor and author, is convinced agriculture will be a future economic boom area.  He believes there will be further food shortages.  He also thinks there will be opportunities for hard workers because no one wants to farm land.

“If you want to invest in agriculture, the best thing you should do is become a farmer,” said Rogers.  “Buy yourself some land and become a farmer if you’d be any good at it – or even if you’d just be mediocre at it – because there’s going to be some fortunes made in agriculture and when an industry breaks full faith even mediocre people make a lot of money because everything is going right.

“So if you really want to make a lot of money, that’s the best way to do it.  Alternatively, you can buy land and lease it out if you can find a good farmer.

“There are other ways to make money in agriculture, of course.  You can open a chain of restaurants in the agricultural areas of the world because the farmers are going to be much more successful in the next 30 years than in the last 30 years.  Or open shops. Continue reading →

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A Stock Market Spectacular

Posted on January 9, 2015 by MN Gordon

What a week.  Can you believe it?  Stock prices have gone bipolar.  What is going on?

According to “Bond King” Bill Gross, “The good times are over.”  He’s predicting “minus signs in front of the returns for many asset classes” by the end of 2015.  Gross also believes falling oil prices and a strong U.S. dollar will limit the Federal Reserve’s ability to raise interest rates.

Like Gross, we believe 2015 will be a rough year for stocks.  Where stock volatility was minimal in 2014, in 2015 price volatility will be the norm.  The first full trading week of the New Year confirms this insight.

For instance, during the first part of the week stocks were down…a lot.  On Monday the DOW fell 320 points, and on Tuesday it fell 133 points.  By mid-week stocks were up…the DOW jumped 212 points on Wednesday.  Then, yesterday, the DOW jumped another 323 points.

Your guess is as good as ours as to how the week closes. Continue reading →

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