Are You Unknowingly in the Impact Zone?

Posted on June 16, 2023 by MN Gordon

“When the wave breaks here.  Don’t be there.  Or you’re gonna get drilled!” – Turtle

A New Bull Market?

Have U.S. stocks really entered a new bull market?

That’s the claim of some experts following the S&P 500’s recent attainment of a 20 percent increase from its October 2022 interim low.  We have some reservations.

Of note, the S&P 500 is still down over 7 percent from its all-time closing high reached on December 29, 2021.  Certainly, the S&P 500 could hit a new high as part of this rally.  But it would be short-lived.

There are a number of factors at play that are bearish for the stock market.  Interest rates, Treasury sales, credit market stresses, and an imminent recession.

In fact, we believe the S&P 500 has become increasingly risky over the last six months as the top technology stocks have bubbled up.  Because of this, the portfolios of many investors are now unknowingly in the impact zone.  And they will get absolutely drilled when the market resumes its next bear market leg down.

We’ll get to the how and why of this in just a moment.  But first, some context is in order.

This week’s Bureau of Labor Statistics consumer price index (CPI) report is as good a place as any to look at first.  As you may have seen, the BLS reported that consumer price inflation, as measured by the CPI, increased at an annual rate of 4 percent in May.  That’s more than double the Fed’s arbitrary 2-percent inflation target. Continue reading →

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Time to Get Real About Artificial Intelligence

Posted on June 9, 2023 by MN Gordon

There’s never really a good time for a new bubble mania.  But usually, they have the decency to come at the tail end of an extended bull market, as a sort of blow-off top.

That’s when investors, blinded by greed and confident from a long period of success, throw caution to the wind.  They recklessly chase share prices higher with the expectation of bagging easy riches.

The dot com bubble mania blow-off in the run up to the new millennium was a true classic.  It was preceded by an 18-year bull market and triggered by a new, game-changing technology.  The subsequent downside – a 75 percent collapse of the NASDAQ – was timeless.

The current AI bubble mania is an odd duck.  With the roll out of ChatGPT, roughly 6 months ago, the AI bubble mania has inflated within an extended bear market rally.  Hopeful investors are getting suckered in at the worst possible time.

Year-to-date, the NASDAQ is up 26 percent.  Yet, it is still down over 17 percent from its November 19, 2021, all-time closing high. Continue reading →

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On the Importance of Deflation and Depressions

Posted on June 2, 2023 by MN Gordon

Much of legislative activity is grossly overcomplicated.  This is because honest governance is missing from the process.

The simple and honest way to put headspace between the debt and the debt ceiling is to run a budget surplus and use the excess to pay down the debt.  The politics of the moment make this impossible.

Unless something radical happens, the Senate will soon pass the debt ceiling bill.  Perhaps by the time you read this, it has already happened.  Are you happy?

You shouldn’t be.  Not if you believe in small, limited government, greater freedom and autonomy, and future prosperity for your kids and grandkids.  If you believe in these things, then raising the debt ceiling is a direct assault on your sensibilities and way of life.

Alas, most Americans don’t give a rip that the debt ceiling was raised.  They’re too busy running up their own consumer debt to care what Washington’s doing.  And like the federal government, when they run out of money, and max out their credit cards, they borrow more.  For tomorrow never comes. Continue reading →

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How to Face Risk in an Uncertain World

Posted on May 26, 2023 by MN Gordon

Managing risk.  Mitigating uncertainty.  Is attempting to crack this unsolvable puzzle all just a waste of time and energy?

The Popocatépetl volcano erupted last week.  It was an impressive sight.  Smoke and ash, in addition to 1,500-foot-high lava fountains, spewed from the volcano’s conical, crater top.

El Popo, as the locals call it, is about 45 miles southeast of Mexico City.  Roughly 25 million people live within a 60-mile radius.

The eruption prompted the Mexican government to raise the warning level to “yellow phase three.”  This means residents should be prepared to evacuate.

With a little luck, the volcanic activity will subside – for now.  In reality, there’s no good way to evacuate 25 million people from a single area.

For example, when panicked residents attempted to flee Los Angeles during the 1992 riots the highways quickly grinded to a halt.  Enterprising vendors traversed the immobile onramps on foot, selling bottled water and canned soda pop at a hefty premium.

Thirsty evacuees had little choice.  They were trapped.  They had to pay up.  There was no way out of the LA Basin. Continue reading →

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