What Fed Chair Powell Forgot to Mention

What are the chances of Federal Reserve Chairman Jerome Powell being wrong?  The chances he’ll be wrong on the economy’s growth prospects, the direction of the federal funds rate, and inflation itself?  Our guess is his chances of being wrong are quite high.

What you see, unfolding before your very eyes, is a great exercise in futility.  To this endeavor, the Federal Reserve has claimed central authority of the command center.  The federal funds rate, the Fed’s balance sheet, economic stagnation, massive asset bubbles, and the limits of central planners are the topics of focus.  Where to begin?

Powell got into the central banking business through uncommon means.  To his credit, he’s not an economist.  This is a great improvement over former Fed Chair, and intellectual ditherer, Janet Yellen.  Like President Trump, we didn’t have the patience for her egghead PhD economist act.

Powell, on the other hand, is a lawyer turned investment banker. Continue reading

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Good Riddance Lloyd Blankfein!

“God gave me my money.” – John D. Rockefeller

One and the Same

Today we step away from the economy and markets and endeavor down the path less traveled.  For fun and for free, we wade out into a smelly peat bog.  There we scratch away the surface muck in search of what lies below.

Our unwitting inspiration is none other than long time Goldman Sachs CEO Lloyd Blankfein.  The journey that follows was prompted by word he’s preparing to step down as CEO.  One account said this could happen by year’s end.  Indeed, times like these are times for honest reflection and celebration.

If you recall, in the fall of 2009, not long after warm rays of sunshine began smiling down upon this bull market, Goldman Sachs’ top man, Lloyd Blankfein had an epiphany.  The way he put it to The Times of London was that he’s just a banker doing “God’s work.”  At the time we weren’t sure what Blankfein was getting at.  Were you?

Perhaps he was elevating himself, and his firm’s business, to the noble and thankless cause of efficiently allocating capital to its highest and best use. Continue reading

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How to Blow $12.2 Billion in No Time Flat

One month ago we asked: What kind of stock market purge is this?  Over the last 30 days the stock market’s offered plenty of fake responses.  Yet we’re still waiting for a clear answer.

The stock market, like the President, knows the art of ballyhoo.  Day after day, stocks behave in shocking and unpredictable ways.  They bluster and then recoil with the inconsistent elegance of a President Trump twitter tirade.

Wild multi-hundred-point swings on the Dow Jones Industrial Average (DJIA) have become the norm.  Up 300 points one day.  Down 300 points the next.  Do you hear anything?

All we hear from the stock market is a giant racket.  There’s much noise being made.  But there’s nothing of substance behind it.

Certainly, after a nine year bull market there’s risk of a massive sell off.  That much is abundantly clear.  Perhaps it could be another 50 percent bloodbath like what happened in 2008-09.  But when will the next great panic hit? Continue reading

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Broken Promises

Consumer debt, corporate debt, and government debt are all going up.  But that’s not all.  Margin debt – debt that investors borrow against their portfolio to buy more stocks – has hit a record of $642.8 billion.  What in the world are people thinking?

Clearly, they’re not thinking.  Because thinking takes work.  Most people don’t like to work.  They like to pretend to work.

Similarly, people may say they care about debt.  But, based on their actions, they really don’t.  When it comes to the national debt, the overarching philosophy is that it doesn’t matter.

Government debt certainly doesn’t matter to Congress.  Nor does it matter to the President.  In fact, their actions demonstrate they want more of it.

Big corporations with big government contracts want more government debt too.  Their businesses demand it.  They’ve staked their success on the expectation that the debt slop will continue flowing down the trough where they consume it like rapacious pigs.

The higher education bubble is also based on a faulty foundation of debt.  The business model generally requires signing credulous 18-year-olds up for massive amounts of government backed student loans. Continue reading

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