Where the Stock Market Must Go

Posted on March 11, 2014 by MN Gordon

“May you live in interesting times,” goes the ancient Chinese proverb.  While this sounds like a blessing at first…it’s really not.  Rather, it’s a curse.

Without a doubt, we live in interesting times.  Events unfold in sequences so rapid no one can truly keep up with them.  For example, while everyone was gawping at Russia’s incursion into Ukraine last week, President Obama unveiled a $3.9 trillion budget proposal for fiscal year 2015.

The plan includes $56 billion in increased spending.  Tax hikes for the rich and tax cuts for the poor are proposed to cover the additional costs.  There’s also $50 million for preservation of bee habitat, among other things, if you’re into that sort of thing.

Still, we won’t hash out the budget proposal today.  Nor will we offer the latest on Ukraine…or the Malaysia Airlines plane that mysteriously vanished on Saturday.  We merely highlight these matters to juxtapose the stimulating news stories that appear on a daily basis. Continue reading →

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A Buy Low Sell High Opportunity?

Posted on March 7, 2014 by MN Gordon

Russian stocks, as measured by the Market Vectors Russia ETF (NYSE: RSX), are down 15 percent year-to-date.  On Monday alone, when it looked like President Vladimir Putin had lost his marbles, the RSX dropped 10 percent.  On Tuesday, however, following Putin’s decision to not use force in Ukraine – for now – Russian stocks jumped 4 percent.

On Wednesday the RSX was flat and yesterday it was down about 1 percent.  Could this be a turning point for beaten down Muscovy stocks?  Naturally, we don’t know.  But we think it merits pause for consideration.

According to Jacob Nell of Morgan Stanley, “[Monday’s] sell-off has taken the market to technically extreme oversold levels.  Valuation multiples have only been cheaper in the depths of the 2008 crisis (when earnings fell about 60 percent).  And oil markets are stable in contrast to sell-offs in Russia historically.  Despite the obvious hit to growth expectations implied by the crisis, any sign that tensions are beginning to de-escalate would constitute a buying opportunity.” Continue reading →

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How the Fed Works to Spoil Your Retirement

Posted on March 4, 2014 by MN Gordon

Chicago Fed President Charles Evans wants inflation above 2 percent.  Somehow he thinks this will strengthen the economy and bring about full employment.  To Evans, more inflation will result in greater demand…and greater demand means more jobs.

Fed policy, according to Evans, should promote higher inflation.  Later this month, when new Fed Chair Janet Yellen leads her first Fed policy meeting, we’ll find out if she does too.  Based on her track record, she most likely does believe Fed policy should encourage inflation.  For example, in 1995, at a Federal Open Market Committee meeting, Yellen argued in favor of allowing inflation to exceed inflation targets for moral reasons…

“Ms. Yellen told the committee that ‘the moral’ of all this is ‘that the Fed should pursue multiple goals,’” recounts the Economic Policy Journal.  “She said that ‘when the goals conflict and it comes to calling for tough trade-offs, to me, a wise and humane policy is occasionally to let inflation rise even when inflation is running above target.’” Continue reading →

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The Mark Zuckerberg Indicator

Posted on February 28, 2014 by MN Gordon

Spotting absurdities is both enjoyable and entertaining.  Can you imagine a more agreeable vocation?  For what could be more flattering than pointing and laughing at a mob of your peers as they stomp and pant in unison like boobs on parade?

Markets, of course, offer ample opportunities for otherwise intelligent individuals to behave like utter blockheads.  Visions of easy riches and luxury accommodations are nearly more powerful than love.  They soften the brains and warm the hearts of the most unlikely suspects.

Soon even the most intolerant curmudgeon’s willing to beat the drum for a load of bull if he thinks it’ll make him rich.  Take bitcoin, for instance.  Several short months ago the crypto-currency was flying high…trading for over $1,000.

Early buyers were becoming overnight millionaires.  A new era had come into existence faster than a New York minute.  That’s when true believers and suckers alike went all in.  They wanted to get their share too.  The sky was the limit. Continue reading →

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