Independent Ideas on the Economy, Financial Markets, and Investing

Get Ready for a Massive Stock Market Selloff

Posted on July 20, 2012 by MN Gordon

On Tuesday, Federal Reserve Chairman Ben Bernanke’s made his semiannual monetary policy testimony before the Senate Banking Committee. Washington and Wall Street wanted QE3. Bernanke demurred.

Following the testimony, Senator Chuck Schumer told Federal Reserve Chairman Ben Bernanke to “get to work.” Schumer, like most Senators, is under the illusion that Bernanke can actually do something to improve the economy. Those days are gone.

“The question in my mind is, is he [Bernanke] not stepping up with another program in any quick fashion because they’re [The Fed] starting to wonder if it’s going to have any impact? Alternatively, are they not stepping up because when they look at the data they think, ‘It’s not that bad,’?” said Jim Paulsen, chief market strategist at Wells Capital Management in Minneapolis, following Bernanke’s testimony. “Maybe it’s some of both. But does anyone need any more excess bank reserves?”

Obviously, Paulson’s last question was intended to make the point that there’s already too much credit available to banks. The problem is, there’s nowhere for the banks to put the credit to use. Continue reading →

Posted in MN Gordon, Stock Market | Tagged ben bernanke, congress, crash, federal reserve, gold, labor department, S&P500 | 1 Comment

Why Chimpanzees Throw Poop at Zoo Gawkers

Posted on July 17, 2012 by MN Gordon

Can you believe it? The 2012 fiscal year budget deficit is on track to eclipse $1 trillion a year for the fourth year in a row…

According to the Treasury Department, “through the first nine months of the budget year, the federal deficit totaled $904.2 billion.” By the end of the fiscal year, which ends September 30, the Congressional Budget Office projects the deficit will total about $1.17 trillion. This is madness.

Please recall, before 2009, the federal government never ran a deficit above $500 billion. Most years it was far less. In fact, just 12 years ago the government managed to pull in a surplus…though they didn’t use their excess proceeds to pay down the national debt.

But since 2009, $1 trillion deficits have been recurrent. Apparently, that’s what it takes to sustain the nation; to keep the government running and to dole out all the goodies promised to the populace. Any reduction in spending and increase in taxes, we’re told, will wreck the economy… Continue reading →

Posted in Inflation, MN Gordon | Tagged congress, currency, debt, gold, john maynard keynes | 3 Comments

The Wrath of Ray Kroc

Posted on July 13, 2012 by MN Gordon

If you’re concerned the economy may be slipping back into a recession…guess what? We’re already in one.

At least that’s what Lakshman Achuthan, Co-Founder & Chief Operations Officer of Economic Cycle Research Institute (ECRI), told Bloomberg TV on Tuesday.

“What we said back in December was that the most likely start date for the recession would be in Q1 and if not then, by the middle of 2012. I’m here to reaffirm that,” said Achuthan. “I think we’re in a recession. I think we’re in a recession already. As I said back there, it is very rare that you know you’re going into recession when you’re going into recession.”

ECRI, if you didn’t know, is the leading authority on business cycles. According to The Economist Magazine in 2005, “ECRI is perhaps the only organization to give advance warning of each of the past three recessions; just as impressive, it has never issued a false alarm.” Through the years leading up to the Great Recession and to the present, ECRI claims to have furthered this track record of prescient forecasts. Continue reading →

Posted in Economy, MN Gordon | Tagged bankruptcy, default, ray kroc, recession, san bernardino | 2 Comments

How to Invest in a Declining Economy

Posted on July 10, 2012 by MN Gordon

Despite enormous monetary and fiscal stimulus efforts, the world economy continues to trudge along like a weary pack mule. Most European countries are in recession, the United States is growing at just 1.9 percent, and, from what we gather, China’s epic twenty-year boom is stalling out. Where are things headed next?

Today we’ll check in with Dr. Copper for a trustworthy answer…

Dr. Copper – the metal with a PhD in economics – is always the first to know which way the economy will go. Copper’s broad use in industry and many different sectors of the economy, ranging from infrastructure to housing and consumer electronics, makes it a good early indicator of economic activity.

When copper prices rise, economic activity soon often increases. When copper prices fall the economy often then stagnates. Over the last year, copper prices have fallen 20 percent.

Obviously, the price of copper is in a downtrend…and it appears the world economy is following… Continue reading →