Why You Should Prepare Now for the Fed’s Next Money Pumping Scheme

Posted on November 4, 2014 by MN Gordon

Late last week something remarkable happened.  The Fed announced it would close out its quantitative easing program…and stocks went up.  This occurrence is what a psychologist would call cognitive dissonance.

We’ll have more to say on this in a moment, but first a review of some of last week’s other key happenings.  First off, the dollar rallied and commodities were obliterated.  Given the inverse relationship between commodities and the dollar this price action makes sense.

This relationship was clearly at work on oil and gold prices.  Oil dropped below $80 per barrel and gold fell to $1,172 per ounce.  Obviously, the Fed putting a stop to its mad money creation scheme should be positive for the dollar.

With fewer digital monetary units being credited to the financial system each existing dollar should retain its value or become more valuable.  Accordingly, items priced in dollars, such as oil and gold, should become cheaper.  However, this is only part of the story…and last week’s feat is just one moment in time. Continue reading →

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Hollow Words from a Hollow Man

Posted on October 31, 2014 by MN Gordon

One of the more endearing things about politics is election season.  Although hardly a soul in this day and age still takes them serious, they are not without merit.  In fact, they are not all bad.

For what better opportunity is there to point and laugh at the buffoons as they parade across the walk?  The show we’re greeted with is more amusing than anything a Hollywood screen writer could conjure up.  Clowns, cads, and cons…tripping over each other for your vote.

With mid-term elections just around the corner there’s been no shortage of scoundrels and drivel dribblers to entertain us.  Take former Secretary of State Hillary Clinton, for instance.  Last week she emitted a real whopper.

“Don’t let anyone tell you it’s corporations and businesses that create jobs,” said Clinton while campaigning for Martha Coakley for governor of Massachusetts.  “You know that old theory, trickledown economics.  That has been tried, that has failed.  It has failed rather spectacularly.” Continue reading →

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One Hundred Years of Failure and Counting

Posted on October 28, 2014 by MN Gordon

Quantitative easing is set to expire this month.  That’s the plan at least.  The $10 billion monthly tapers will finally bring the Fed’s QE3 bond buying program down from $85 billion per month to zero.

That’s not to say the Fed will no longer be operating with extreme monetary policies of market intervention.  Remember, the federal funds rate is still at practically zero.  This is something that had never happened until the fall of 2008.

Now, six year later, the federal funds rate is still pressed firmly down to the ground.  According to Federal Reserve utterances, they won’t begin raising the federal funds rate for another six months.  Of course, that could always change depending on what way the wind blows.

The Fed has shown that they are making things up as they go.  They are just winging it.  Should they raise interest rates?  Should they stop expanding the money supply? Continue reading →

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What a Correction Feels Like

Posted on October 24, 2014 by MN Gordon

What a Correction Feels LikeWhat a Correction Feels Like
By Jared Dillian, Editor, Bull’s Eye Investor

Back in the summer of 2007, when I was working for Lehman Brothers, I had a vacation to the Bahamas planned.  This was unusual for me.  Up until that point, in six years of working for Lehman, I had taken about five vacation days—total.  But my wife and I were going to a semi-primitive resort on Cat Island, the most desolate island in the Bahamas.  Interesting place for a vacation.  Suffice to say that it’s plenty hot in the Bahamas in August.

The market had been acting funny for a while, and I had a hunch that there was going to be trouble while I was gone, so I bought the 30 strike calls in the CBOE Market Volatility Index (VIX).  I was betting that volatility was going to go up a lot in a short period of time.  In fact, these options—which I spent a little over $100,000 on—would be worthless unless there was outright panic.  I gave instructions to my colleagues to sell the call options if the VIX went over 35. Continue reading →

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