Salting the Earth with Money

Posted on June 11, 2013 by MN Gordon

Former Federal Reserve Chairman Alan Greenspan opened his mouth last Friday to caution on the perils of quantitative easing and artificially suppressed interest rates.  Greenspan also cogitated upon how to put the worms back into the already opened can.

What follows is a sampling of his utterances…

“The sooner we come to grips with this excessive level of assets on the balance sheet of the Federal Reserve – that everybody agrees is excessive – the better.  There is a general presumption that we can wait indefinitely and make judgments on when we’re going to move.  I’m not sure the market will allow us to do that.

“I think the issue is not only a question of when we taper down, but when do we turn.  The markets may not give us all the leeway we might like to do that.”

The difference between tapering and turning is similar to the difference between slowing down the rate new debt is added and actually paying debt back.  Currently, as you know, the Federal Reserve creates $85 billion a month – from nothing – to prop up the credit market. Continue reading →

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Jabberwocky Adhesive Tape

Posted on June 7, 2013 by MN Gordon

Beware the Jabberwock, my son!
The jaws that bite, the claws that catch!
Beware the Jubub bird, and shun
The frumious Bandersnatch!

— Lewis Carroll, Jabberwocky

One Scratch Below

More is revealed each and every day.  For instance, the St. Louis Federal Reserve recently revealed that American household wealth is down about 55 percent from where it was in late 2007.  This little fact offers a remarkable insight into what’s been going on and why the economy feels like such a tedious slog to the average working stiff.

“Household wealth plunged $16 trillion from the third quarter of 2007 through the first quarter of 2009,” reports The Dallas Morning News.  “By the final three months of 2012, American households as a group had regained $14.7 trillion.

“Yet once those figures are adjusted for inflation and averaged across the U.S. population, the picture doesn’t look so bright: The average household has recovered only 45 percent of its wealth, the St. Louis Fed concluded.” Continue reading →

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Is Real Estate Ever a Wise Investment for Retirees?

Posted on June 4, 2013 by MN Gordon

Is Real Estate Ever a Wise Investment for Retirees?
By Dennis Miller, Editor, Money Forever

At one point in my life you might have heard me say something like, “I’ve probably made more money in real estate by accident than I have in the market on purpose.”  For many years, you could buy good-quality property, as much as you could afford, and you were almost guaranteed to make money.  That ended in 2008.  Now folks are looking for bargains, hoping to profit from the crash.

So what has changed?  I don’t have to tell you that the commercial and residential real-estate markets took a huge hit in 2008 and have yet to fully recover.  Many folks saw the value of their homes drop by 40 percent or more, and their net worth drop right along with it.  In the meantime, bank short sales have skyrocketed.

Opportunities to buy may be returning, but something else has also changed.  Folks on either side of the retirement cusp are in a different place in life than when they bought their McMansions.  Children have fled the coop, so their needs have changed.  Also, retirees and folks approaching retirement cannot afford a do-over. Continue reading →

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Market Forces and Market Intervention

Posted on May 31, 2013 by MN Gordon

Stocks sprinted higher on Tuesday, releasing the pent up demand that developed over the long weekend.  The Dow rose 106 points.  According to several headlines we read, Dow stocks were boosted by strong housing and consumer confidence reports.

Then, on Wednesday, the market gave it all back…the Dow fell 106 points.  Easy come.  Easy go.

Yesterday the Dow picked up 26 points and the Japanese Nikkei 225 crashed 483 points.  But, despite the stock market’s erratic movements, something else caught our eye.  We watched in awe Tuesday as the yield on the 10-Year Treasury Note jumped to 2.13 percent.

No doubt, watching treasury yields move about is as dull as watching paint dry most of the time.  But occasionally, there’s some dramatic action.  What’s more, this may be one of those occasions.

For example, on May 2 – less than a month ago – the 10 Year Treasury yielded just 1.63 percent.  Since then yields have gone practically straight up…yields have jumped 30 percent just this month.  Could this be the beginning of the end of the great big Treasury bond bubble? Continue reading →

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