Are You Willing to Starve for the Greater Good?

Posted on July 14, 2023 by MN Gordon

Central planners are pulling double shifts.  Contriving plans and proposals to control what you consume, how you travel and cook, where your money is spent, and much, much more.

You know who we’re talking about.  The Davos WEF crowd.  The UN, IMF, World Bank, and central bankers.  Washington lobbyists, NGOs, public/private partnerships, technical advisory committees, nonprofits, and everything in between.  We’re also talking about your meddling neighbor, and many others.

What’s their deal?  Do they think they’re making the world a better place?  And, if so, a better place for who – them or you?

Could something more devious be guiding their advancements?

In Das Kapital, for example, Karl Marx bemoans capitalism for exploiting labor to produce surplus value.  His main gripe was that 19th century laborers worked for mere wages while some factory owners got incredibly rich.

To eradicate this class struggle, as he perceived it, Marx proposed a socialist mode of production coordinated through conscious economic planning.  He believed that distributing products “from each according to his ability, to each according to his needs” would bring about his vision of a workers’ paradise. Continue reading →

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Welcome to the Era of Targeted Bailouts

Posted on July 7, 2023 by MN Gordon

One of the consequences of a speculative mania is that it distorts the relationship between financial markets and the underlying economy.  As the broad stock market index inflates it disconnects from the underlying economy.  S&P 500 index funds become speculative instruments.

Over nearly four decades, certain choices and preferences were penalized by the Federal Reserve’s financial engineering games.  Namely, hard work, diligent saving, and paying one’s way.  These virtues were repeatedly punished with exacting deception.

For example, the 10-Year Treasury rate peaked at over 15 percent in September 1981.  Over the next 39 years, the crafty wizards at the Fed contrived a world of declining interest rates.  The Fed put, which involves slashing interest rates whenever there’s a 20 percent decline in the S&P 500, could be counted on to bailout stock and bond market investors.

This centrally coordinated intervention had a twofold effect of observable market distortions.  First, the burst of liquidity puts an elevated floor under how far the stock market falls – the put option effect.  Second, the interest rate cuts inflate bond prices, as bond prices move inverse to interest rates. Continue reading →

Posted in Inflation, MN Gordon | Tagged , , , , , | 1 Comment

Are You Gambling with Your Retirement Account?

Posted on June 30, 2023 by MN Gordon

And just like that.  The year is half over.  Can you believe it?

Hardly the blink of an eye ago we were putting the final touches on our one great big nasty prediction for 2023 – that China will invade Taiwan.

Of course, this hasn’t come true – yet.  And, quite frankly, we hope it doggone never does.  But with fools like Anthony Blinken in charge, the unthinkable could become a reality.

Certainly, the stock market, as measured by the S&P 500, has performed well.  As of market close on Thursday (June 29), the S&P 500 is up 14.51 percent year-to-date.  Not bad.

But the real action is over in the technology sector.  Year-to-date, the NASDAQ is up 29.86 percent.  Did you capitalize on it?

If not, you may still have a good shot at easy stock market returns over the next six months.  That’s what research by Thomas Lee, founder of Fundstrat Global Advisors, says. Continue reading →

Posted in MN Gordon, Stock Market | Tagged , , , , | 18 Comments

Washington’s Bias for Continuous Inflationism

Posted on June 23, 2023 by MN Gordon

This week Federal Reserve Chair Jerome Powell delivered his semiannual testimony to Congress.  A main feature of the discussion was the status of rate hikes and the fight against inflation.

In short, Powell’s inflation fight isn’t over.

Core CPI, which excludes food and fuel prices, is increasing at an annual rate of 5.3 percent.  Similarly, core personal consumption expenditure (PCE) prices are up 4.7 percent from a year ago.

Thus, a federal funds rate of 5.25 percent isn’t enough to contain rising prices.  Ideally, a rate on the order of 7 to 7.25 percent is needed to do the trick.

After its recent FOMC meeting, the Fed signaled two additional rate hikes this year.  As part of this week’s testimony, Powell validated this… remarking it was a “pretty good guess”.

So, why pause in the first place?

The Silicon Valley Bank and First Republic Bank fiascos in March are a very small part of a much larger issue.  Rapid interest rate hikes have left poorly prepared banks unable to adequately compensate depositors. Continue reading →

Posted in Inflation, MN Gordon | Tagged , , , , | 13 Comments