Stimulus and Spasmodic Economics

Posted on June 5, 2012 by MN Gordon

Nerves are fried.  Hands are shaky.  Triggers fingers are happy.  “Market’s need stimulus now!” screams the crowd.

These days, it doesn’t take much selling to growl up a thunderous roar for help.  The DOW’s fallen 1,258 from its May 1 interim high of 13,359 and, judging by the headlines, the next great market panic’s upon us.  For whatever reason, not only is the Fed responsible for managing the nation’s money supply and supporting full employment, the Fed’s also responsible for ensuring the stock market always goes up…

“Federal Reserve Chairman Ben Bernanke will be back on Capitol Hill on Thursday to testify before a congressional committee about the state of the U.S. economy,” reports Reuters.  “He’s not going to get an easy ride.

“The blue-chip Dow average (.DJI) of stocks is now negative for the year.  Employment appears to be slowing to a snail’s pace and Europe remains mired in crisis.

‘“This puts the Fed firmly in play and they will likely feel compelled to respond,’ said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York, after data on Friday showed U.S. job growth in May was the weakest in a year. Continue reading →

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There’s A Great Storm Coming

Posted on June 1, 2012 by MN Gordon

Investors were in good spirits after the long Memorial Day weekend.  Rested and refreshed, they showed up Tuesday and bought stocks.  The DOW jumped 125 points for the day.

By Wednesday, however, they remembered there’s an imminent crisis emanating out of Europe.  Hence, they didn’t buy; they sold.  The DOW dropped 160 points…giving back Tuesday’s gains, and then some.  Then, yesterday, investors didn’t know what to make of things.  They sold.  They bought.  They sold…the DOW ultimately closed out the day with a 26 point loss.

These days the stock market still gets the most attention.  But the real market action is taking place in the boring old bond market.  On Thursday, if you hadn’t noticed, yields on the 10-Year Treasury Note fell to 1.53 percent…its lowest level in living memory, or perhaps ever.

Here at the Economic Prism we watched the mass exodus from stocks while in a state of awe.  In front of our unblinking eyes, fear was compelling collective man from one danger into a much greater one. Continue reading →

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The Greatest Show On Earth

Posted on May 29, 2012 by MN Gordon

Things are getting interesting.  Last week, for instance, markets offered up both a rich comedy and tragedy above any story a Hollywood screenwriter could imagine.  The comedy, of course, was the Facebook IPO flop.  The tragedy, fittingly, was courtesy of the Greeks.

Yet the plot for both episodes was the same…it centered on market exploration.  The comedy garnered plenty of laughs as markets’ explored the true value of Facebook shares.  The tragedy received an abundance of tears while markets’ explored a Greek exit from the Eurozone.

Here at the Economic Prism we watched the shows with the hypnotized gaze of a child at the circus.  We knew the juggling clown on the unicycle was headed for a crackup…yet we couldn’t stop watching.

Obviously, Facebook shares are not worth the $38 price tag they were initially offered to the public at.  In fact, Mark Hulbert, at MarketWatch, crunched some numbers, and determined Facebook’s stock should trade for $13.80.  That’s 63 percent less than the IPO price. Continue reading →

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Why the End of Uruguayan-Argentinian Bank Secrecy is Good News for Expats

Posted on May 25, 2012 by MN Gordon

Why the End of Uruguayan-Argentinian Bank Secrecy is Good News for Expats
By International Man

Uruguay Ends Bank Secrecy with Argentina and That’s Good News for Expats!

After months of negotiations, Uruguay capitulated to OECD and Argentine demands to end bank secrecy with respect to Argentine tax investigations.  Once the deal is ratified by both countries’ legislatures, Argentine tax inspectors will have access to Uruguayan bank account information for Argentine citizens suspected of tax evasion.

Oddly, this tax sharing agreement is just one of many questionable decisions by Uruguay’s government, all of which are bringing the local economy to a halt.

In order to understand the magnitude of this announcement, it is important to understand the significant degree to which Argentine investors dominate the Uruguayan economy and its banking system.

Over the last decade, the business environment in Argentina has been so bad, so business-unfriendly, that Argentine farmers, investors and businessmen were desperate to escape Argentina. Continue reading →

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