Slip Back Economics

Posted on July 22, 2014 by MN Gordon

What’s this?  Has the U.S. consumer, the primary engine of economic growth, become ambivalent?  This is what the latest data says…

According to the Thomas Reuters/University of Michigan’s early July index reading, consumer sentiment is 81.3.  This is below the 83 level that the experts predicted and below the June mark of 82.5.  Yet while consumer sentiment is lower, it generally didn’t change.  What to make of it.

“The most remarkable aspect of recent trends in consumer confidence has been its resistance to change in either direction due to very negative GDP nor very positive employment gains,” survey director Richard Curtin said in a statement.  “This stability will provide the necessary strength for consumer spending to continue to expand, but does not support an acceleration in spending above 2.5 percent.”

Remember, consumer spending accounts for 70 percent of the economy.  If you take the numbers at face value, the more consumers spend the more the economy grows. Continue reading →

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Wealth Consumption

Posted on July 18, 2014 by MN Gordon

There aren’t many professions out there where there are no readily applied and real-time performance standards.  In fact, in the corporate world today, there’s a fanatic fixation on tying numerous metrics to performance.  You name it…

If it’s measurable, verifiable, and reportable…then performances are planned and benchmarked against it.  Gross margin, operating margin, net margin, profit after tax, net operating profit after tax, earnings before interest and tax, earned value, and on and on.  There are spreadsheets, charts, and graphs for all of them.

Where is the enterprise according to plan?  Where is it going?  Are profits going up?  What about costs?  What is the percent spent verses the percent complete?  Where are costs being disproportionally spent?

All of these metrics, in our opinion, have taken all the fun out of business.  There’s no energy left for creativity.  There are no allowances left for taking deliberated risks.  Not when days are spent tracking and charting performances. Continue reading →

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Dirty Investing

Posted on July 15, 2014 by MN Gordon

Temperatures in Brisbane, Australia, fell to their lowest level in 103 years.  On June 27, temperatures dropped all the way to 36o F.  The average for this time of year is 53o F.

Here in the United States summer’s in full swing.  However, for some areas this week it may not feel like it.  According to meteorologist Megan Glaros, a “polar vortex will be shooting a pocket of cold air…, possibly resulting in record low temperatures all across large portions of the Midwest and upper Great Plains, including Illinois, Indiana, Wisconsin, Iowa, Minnesota, Michigan, and Ohio.”

To long time Economic Prism readers this comes as no surprise.  For this lines up perfectly with our 2014 global cooling thesis.  We may not know what we’re talking about most of the time.  But occasionally we get something right.  Naturally, we always take our due credit whenever we possibly can.

Yet where the stock market’s concerned, it looks like our best guess missed the mark.  We said the stock market would hit a wall before summer. Continue reading →

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Refuse the Filthy Trash

Posted on July 11, 2014 by MN Gordon

What if the savings in your bank account lost 83 percent of its value over just 18 months?  We suppose you’d be a little disgruntled.  Unfortunately, that’s what has happened in Venezuela…

“Since February 2013,” reports El Universal, “the administration of Venezuela’s President Nicolás Maduro has kept the exchange rate at VEB 6.30 per US dollar, compared with a hike averaging 83 percent in the price of goods.  Whereas in Venezuela’s major trade partners – United States, China, Colombia, Mexico and Brazil – inflation is much lower, what can be bought with VEB 6.30 in Venezuela is much lower than what can be bought with a US dollar in those nations.”

Obviously, Maduro’s mandated exchange rate isn’t fooling anyone.  If 6.30 Venezuela bolivars were truly equal to 1 U.S. dollar, they’d be able to buy the same amount of goods and services.  That they can’t, demonstrates Maduro isn’t keeping with his end of the bargain…he isn’t stewarding his nation’s currency to honestly achieve the exchange rate he’s decreed. Continue reading →

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