What is the Strike Price of the Powell Put?

Posted on March 18, 2022 by MN Gordon

The Federal Reserve, through a multi-decade series of shady practices, finds itself in a very disagreeable place.  Policies of extreme market intervention have positioned the economy and financial markets for an epic bust.

Price inflation.  Unemployment.  Interest rates.  Stock market valuations.

These metrics are presently situated in such a way that the “Powell put” will be impossible to successfully execute for the foreseeable future.

Price inflation is at a 40 year high.  The unemployment rate is 3.8 percent, which is near its low.  The 10-Year Treasury note is yielding 2.15 percent.  While this key interest rate is certainly trending higher, it’s still near a historical low.

And for all the wild price swings and gnashing of teeth over the last two months, the S&P 500 has hardly slipped.  In fact, as of market close on Thursday March 17 of 4,411, the S&P 500 is down only 7.83 percent from its all-time record close of 4,786 reached on January 3.  It still has another 12.17 percent to fall before reaching official bear market territory. Continue reading →

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Is Your Wealth Durable?

Posted on March 11, 2022 by MN Gordon

“Money is not the definition of wealth.”

– Unknown

America’s Oldest Family Farm

John Tuttle arrived in the New World from England in 1632.  He was not empty handed.

He had a land grant from King Charles II.  It was for a small, 20 acre plot of land located between the tidal waters of the Bellamy and Piscataqua rivers, in what became Dover, New Hampshire.  There, the Tuttle family farm expanded and prospered for over three centuries.

Along the way, the Tuttle’s withstood many tests.  Revolutionary and civil wars, the industrial revolution, economic depressions, financial panics, relentless competition, plagues, droughts, government encroachment, and countless other assaults to prosperity.

For a business to survive nearly 380 years in the same industry, with the same family owners, is a remarkable achievement.

Started in 1632, Tuttle Farm became America’s oldest continuously operated family farm, passed down across 11 generations of Tuttles from father to son.  What was their secret? Continue reading →

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Powell’s Pivot to Nowhere

Posted on March 4, 2022 by MN Gordon

Slow growth.  High prices.  The U.S. economy – and the global economy – was already facing these disagreeable prospects before Putin invaded Ukraine.

But now, with Russian tanks rolling through the “borderland,” negative supply shocks to the global economy will take things to a whole new level.  The dial on nastiness has been cranked up to maximum.  How all the madness is reconciled will be equally nasty.

The major stock market indexes, for example, had already been slipping and sliding since early January.  But now they’re beset with panic and fear…and sudden moments of greed.  These emotions play out in erratic wave patterns that can be characterized as massive freefalls punctuated by episodic relief rallies.

The initial delight that the potential world war would slow forthcoming Fed rate hikes quickly faded to a sucker’s rally.  The reality of it all is much greater than the variance between a 25 or 50 basis point rate hike.  The fact is, even with the stock market’s decline over the last two months, there’s still much, much further to fall. Continue reading →

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Would Putin Have Attacked if Oil was $50 per Barrel?

Posted on February 25, 2022 by MN Gordon

The ruling elite loves spending money.  But only when it’s your money; not theirs.

Of all modern economic dogmas, the one held dearest by the ruling elite is the belief government can spend the economy to growth using debt.  Certainly, government spending redirects economic growth to government preferred industries.

But government stimulus doesn’t grow the economy.  How could it?  Aside from stacks of legislation, levies, and fees, government doesn’t produce a doggone thing.

To the contrary, government usurps capital and uses it in ways businesses and individuals otherwise wouldn’t.  Specifically, the government uses its heavy hand to distribute capital to places that, absent coercion, people wouldn’t pay for.  These generally equate to value subtracting endeavors – like bullet trains in California’s Central Valley at a price tag of $105 billion and growing.

The great government giveaway that was executed by the Federal Reserve and the U.S. Treasury to somehow counteract the economic consequences of mandatory lockdown orders has come with its own consequences.  Namely, the printing press financed stimulus has propelled consumer price inflation to a 40 year high. Continue reading →

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