Listening to the Canary

Posted on April 22, 2014 by MN Gordon

Listening to the Canary
By Terry Coxon, Senior Economist

During World War II, the British Royal Air Force (RAF) undertook a plan of misdirection to allow a squadron of bombers to approach an exceptionally valuable target in Europe undetected.  The target was so heavily guarded that destroying it would require more than the usual degree of surprise.

Although the RAF was equipped to jam the electronic detection of aircraft along the route to the target (a primitive forebear of radar was then in use), they feared that the jamming itself would alert the defending forces.  Their solution was to “train” the defending German personnel to believe something that wasn’t true.  The RAF had a great advantage in undertaking the training: The intended trainees were operating equipment that was novel and far from reliable; and those operators were trying to interpret signals without the help of direct observation, such as actually seeing what they were charged with detecting. Continue reading →

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The Next Big Crisis Moment You Can Bank On

Posted on April 18, 2014 by MN Gordon

Donald Rumsfeld has a way with words that is both simple and insightful.  Obviously, not everyone’s valued his intelligence over the years.  From what we gather, they called him Ronald Dumbsfeld when he worked for the Nixon administration.

This name calling never seemed to bother Rumsfeld one bit.  “If you try and please everybody,” he once remarked, “somebody’s not going to like it.”  Naturally, in a world full of frauds and cheats, this is the sort of keen acumen we appreciate.

We hadn’t heard much of Rumsfeld since he left public office.  So we were pleasantly delighted when we happened across his annual letter to the Internal Revenue Service, published earlier this week.  Inside were several well placed gems to marvel over…

“The tax code is so complex,” writes Rumsfeld, “and the forms are so complicated, that I know that I cannot have any confidence that I know what is being requested and therefore I cannot and do not know, and I suspect a great many Americans cannot know, whether or not their tax returns are accurate. Continue reading →

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This Market’s Ready to Implode

Posted on April 15, 2014 by MN Gordon

Until about this time last month, the world was practically flawless.  Stocks were on the march.  They were generally moving onward and upward as the Fed had ordained them.

New Fed Chair, Janet Yellon, was finding her way too…completing the tapering work that Bernanke began.  Despite a minor stumble of words it appeared she’d be able to hold the paper money charade together for at least a while longer.  But then something slipped.

At first no one noticed.  By the time people caught on to what was going on, the growth and technology stocks in the NASDAQ had cracked.  Then the broad S&P 500 faltered. What to make of it?

David Winters, manager of Wintergreen Advisors fund, believes the recent drop in stock prices is a buying opportunity.  “You can get filet mignon for chuck prices,” he said.  Should you listen to him?

If Winters is right, this is this just a brief correction.  Those who buy the dip will be rewarded. Continue reading →

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Give Trains a Chance

Posted on April 11, 2014 by MN Gordon

Chinese exports and imports slipped in March.  According to trade data from Beijing released Wednesday, exports declined 6.6 percent from this time last year.  Moreover, imports dropped 11.3 percent.

If you can believe it, China’s first quarter GDP rose just 7.3 percent.  That’s its slowest growth rate since 2009.  While this may be red hot growth in many countries, in China this is cause for alarm.

In China, 8 percent GDP is considered necessary to create enough jobs for the tens of millions of migrants flooding from the country to the city.  Likewise, this growth and creation of jobs are thought to be necessary to prevent massive social unrest.  Some, however, believe a slowdown for China will ultimately help the economy.

Last month, Mei Jianping, professor of finance at the Cheung Kong Graduate School of business, explained why a slowdown is inevitable.  “China’s GDP target of 7.5 percent for 2014 ‘may be possible’ but the rate ‘is not sustainable’, said Jianping. Continue reading →

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