What You Are Up Against

Posted on September 18, 2012 by MN Gordon

The Bureau of Labor Statistics reported last Friday that consumer prices increased 0.6 percent in August.  Over the last 12 months, according to the BLS, consumer prices increased 1.7 percent.  Nonetheless, if you’ve paid bills or bought anything lately you know the government’s inflation numbers are merely propaganda.

When inflation is calculated the way it was measured in the 1980s, before government statisticians began fudging the numbers through hedonic pricing adjustments and other nonsense for political reasons, the consumer price index is rising by 9.3 percent annually.  Obviously, an inflation rate of 9.3 percent is much greater than an inflation rate of 1.7 percent.

This vast difference is problematic…particularly for low income earners living pay check to pay check.  They may now be finding that there pay check runs out long before payday.  But, in addition to low income earners, an inflation rate of 9.3 percent is problematic for savers and fixed income earning retirees. Continue reading →

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Helping the World Ruin Itself

Posted on September 14, 2012 by MN Gordon

“Iacta alea est.” – Suetonius to Julius Caesar, upon crossing the Rubicon, January 10, 49 BC

Yielding to Political Will

Yesterday brought forth new evidence that man, despite his better judgment, will nearly always yield to political will.  Several months ago Senator Chuck Schumer told Federal Reserve Chairman Ben Bernanke to “get to work.”  Yesterday’s FOMC statement offered Bernanke’s acquiescence…

“….The Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.”

And here’s the kicker…

“If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability.”

Following the FOMC statement stock prices soared.  The DOW jumped over 200 points closing at 13,539.  Gold also jumped $50 per ounce. Continue reading →

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Within the Vice-like Grip of the Secular Bear

Posted on September 11, 2012 by MN Gordon

The Labor Department released the August jobs report last Friday.  The median estimate of economists surveyed by Bloomberg was for a gain of 130,000 jobs.  The actual number of new jobs created was just 96,000.

This means several things.  First it means the estimates of expert economists were off by 35 percent.  Naturally, it must be nice to work in a profession where it’s perfectly acceptable to miss the mark by 35 percent.  No doubt, in most professions, missing the mark by 35 percent will severely impact one’s performance review.

The other thing the dismal jobs report means is that Wall Street’s expectation for more quantitative easing will now reach a fever pitch.  Don’t you know?  In this upside down world of monetary folderol, bad news for the economy is good news for stocks.  For this may just be the dreary data Fed Chairman Ben Bernanke needs to initiate a program of open ended Treasury purchases.

Here at the Economic Prism we believe Bernanke’s hands are tied for the moment.  What we mean is, although he may be a madman, he’s not a complete idiot. Continue reading →

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Providence Is With Us

Posted on September 7, 2012 by MN Gordon

Yesterday European Central Bank President Mario Draghi announced what could be an unlimited bond buying program to save the euro.  Later in the day, after running up 28 points, the S&P 500 closed at its highest level since before Lehman Brothers vanished from the face of the earth.  You can make of it what you want.  But from our perch, we see another disaster in the making.

A broken clock is right twice per day.  What we mean is, any day now, the stock market could crash.  That’s our story, at least…and we’re sticking to it.

On July 20th we published an article titled, Get Ready for a Massive Stock Market Selloff.  In summary, the article warned that the lack of monetary easing, an economy on the verge of recession, and a Congressional stalemate as the country drives full speed ahead toward the fiscal cliff would result in a massive stock market selloff.

Quite frankly, we thought the stock market would reverse course by now.  That it would no longer continue going up…it would go down.  Yet since July 20th the stock market has not gone down; it has gone up.  In fact, as measured by the S&P 500, it has gone up over 5 percent. Continue reading →

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