The Fed’s Hands are Tied, For Now

Posted on August 21, 2012 by MN Gordon

The stock market’s on a six week win streak.  What’s more, from June 4 through last Friday the DOW’s up 9.7-percent.  Can you believe it?

We thought the stock market would meltdown this summer like Charlie Sheen following a weekend bender.  Instead it has melted up like a Great Plains heat wave.  Home Depot, PepsiCo, Chevron, 3M Co, Google, plus 42 other S&P 500 stocks have recently hit 52-week highs.

If this keeps up just about anything could happen.  In fact, the S&P 500’s a horse’s hair away from taking out its April high of 1,419.04, and reaching a new four-year high.  The way things are going, before long, the S&P 500 will take out its October 2007 all-time high of 1,565.

Ryan Detrick at Schaeffer’s Investment Research thinks stocks will continue to go up for two reasons: “First, price action continues to be constructive; and second, overall expectations are still too low.”

We’re not sure what Detrick means by “price action continues to be constructive.” Continue reading →

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The Errant Miscalculation of a Generation

Posted on August 17, 2012 by MN Gordon

Man’s desires are unlimited, as far as we can tell.  There’s always an upgrade or deluxe version of the latest doodads to chase after.  Some go after them with the stubborn resolve of a donkey going after a dangling carrot.  Others come up with resourceful ways to outflank their competitors.

Where money’s concerned, it doesn’t matter where an individual falls on the income scale…a little more is always yearned for.  A middle income earner may think a $10,000 raise would satisfy all their longings.  But after attaining this, they’ll come to find that another $10,000 is what’s really needed.  Similarly, for a successful business owner, if $1 million in profits is good…$2 million is better.

When it comes down to it, money is just a means to satisfy one’s desires.  But these desires amount to more than just stuff.  They also include experiences.

That’s why, time, above all, is the commodity par excellence.  One can always earn more money.  Once time is spent, it can never be regained.

Just ask 16th century Spanish explorer Juan Ponce de León. Continue reading →

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Mandates and Morons: Twisting the World into a Madhouse

Posted on August 14, 2012 by MN Gordon

A win-win deal is a contract or transaction where both participants benefit.  Usually this means both parties receive profits.  Here’s a simple example how…

An entrepreneur pencils out a money making enterprise…say an automatic car wash station.  He makes some assumptions, runs the numbers, weighs overhead against projected revenue, and sees a worthwhile profit potential to exploit.  Then he borrows money from his local credit union to get the venture off the ground.

If he’s a good business man, the deal will work out for both he and the bank.  He’ll cover his costs and have a healthy profit to take home.  The credit union will have a performing loan on their books.  But if things don’t pan out, the credit union will take a loss and the would be entrepreneur will have to find a wage job until he comes up with a new – hopefully better – venture.

In private enterprise, win-win deals are commonplace.  What’s more, they bring wealth to the world.  In public dealings, or when an element of political engineering’s involved, win-win deals are humbug.  They don’t exist.  Moreover, they subtract wealth from the world. Continue reading →

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How to Sleep Well During the Great Dollar Panic Ahead

Posted on August 10, 2012 by MN Gordon

Periods of epic price deflation have occurred several times in American history.  The Great Depression, of course, is the only period still within living memory for some.  But peering back another 100 years, there’s an instance of price deflation that was far greater.

Without coincidence, the Panic of 1837 followed a grand experiment in central banking.  Over issuances of unbacked paper money by the Second Bank of the United States – the U.S. central bank from 1817 to 1836 – led to rampant speculation and price inflation.  Much like today, the combination of the central bank, legal tender law, fractional reserve banking, and government deficits, dramatically increased the supply of money and credit…compelling people to borrow money to buy things they couldn’t afford with money they couldn’t repay.

Murray N. Rothbard documented the massive monetary inflation in his historic tomb Continue reading →

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