Independent Ideas on the Economy, Financial Markets, and Investing

One Great Big Nasty Prediction for 2023

Posted on December 30, 2022 by MN Gordon

Welcome to 2023!

The New Year’s edition of the Economic Prism is a place of wild conjecture and rough suppositions. A place where abstract thinking is celebrated. Imaginative cycle theories, deep metaphysics, fractal wave patterns, happy accidents, and amateur fortune tellers of all stripes are invited too.

Today, with perfect 20/20 vision, we set our sights on the year ahead. After all, the New Year’s here. What better time than now to peer out 12 months through our proprietary prism and report back what we see?

On the periphery, we find new dreams, new directions, and new delusions, swirling about like storm clouds interspersed with warm radiant light. We see opportunities and contretemps. We see doom and despair. And we also see hope and redemption.

But what else? What are the essential insights you should take along as you set out to make another pass around the sun?

What does the New Year have slated for stocks, the 10-Year Treasury note, gold, oil, bitcoin, and everything else? Will junk bonds be roiled by massive corporate defaults? Continue reading →

Posted in MN Gordon, Politics | Tagged 2023 predictions, petrodollar, taiwan invasion, vladimir putin, xi jinping | 18 Comments

Your Government Hates You

Posted on December 23, 2022 by MN Gordon

“Fate is nothing but the deeds committed in a prior state of existence.” – Ralph Waldo Emerson

Capital Consuming Gluttony

Did you know that in fiscal year 2022, federal tax receipts as a share of gross domestic product (GDP) hit a near record high of 19.6 percent?

According to the U.S. Treasury, in FY 2022, total federal tax receipts and additional federal government revenue topped $4.90 trillion. Yet, over this time, Congress spent $6.27 trillion. The difference, the 2022 deficit, was $1.37 trillion.

The difference, of course, was made up with debt. And year after year, decade after decade, these deficits have stacked up into a mega pile of debt. Presently, the U.S. national debt is over $31.4 trillion. As a reference point, in December 2000, the national debt was $5.6 trillion.

In other words, over the last 22 years the U.S. national debt has increased 460 percent. U.S. GDP over this same time, however, has increased just 157 percent, from about $10 trillion to 25.7 trillion. Continue reading →

Posted in Government Debt, MN Gordon | Tagged $1.7 trillion omnibus, debt, default, saving, treasuries | 34 Comments

The Do-Re-Mi of Treasury Notes

Posted on December 16, 2022 by MN Gordon

This week brought forth new data points for two of the world’s greatest economic contrivances.

These data points are important not so much because they provide a truthful depiction of reality. But rather, because in today’s centrally planned economy they can be big movers and shakers for the stock and bond market.

On Tuesday, the Bureau of Labor Statistics released the latest inflation data. According to the government’s aggregate data fabricators, consumer prices, as measured by the consumer price index (CPI), increased at an annual rate in November of 7.1 percent.

After peaking in June at 9.1 percent, the CPI has steadily declined. Wall Street was initially delighted on the news. The S&P 500 quickly jumped 155 points to an interim high of 4,145. From there it slid over 122 points to close the day at 4,022.

Investors, for their part, thought they’d spotted a clue in the CPI report. The whole herd of them knew just what the Federal Reserve would do on Wednesday at the conclusion of the December Federal Open Market Committee (FOMC) meeting. That is, the Fed would increase the federal funds rate by 50-basis points (i.e., 0.5 percent). Continue reading →

Posted in Government Debt, MN Gordon | Tagged do-re-mi, interest rate, recession, S&P500, treasuries, yield curve inversion | 1 Comment

Have You Ever Raided Your Retirement Account?

Posted on December 9, 2022 by MN Gordon

Did Santa Claus come early this year?

After hitting lows for the year in early October the stock market had a very pleasing bear market rally. For the months of October and November, the S&P 500 bounced up over 13 percent.

So far, December has been much less satisfying. The S&P 500 is down over 3 percent.

Still, the month is young. Santa Claus could make an appearance like he usually does. In fact, according to MarketWatch, in December, the DJIA is up 71 percent of the time, the S&P 500 is up 73 percent of the time, and the NASDAQ is up 61 percent of the time.

But it’s not all hot cocoa and candy canes in December. If you recall, in December 2018 the S&P 500 dropped 9.2 percent to close out the year. In this respect, we see an important tailwind for stocks in December.

Specifically, year-to-date, the DJIA, S&P 500, and NASDAQ are down 7.04 percent, 16.84 percent, and 29.17 percent, respectively. By this, 2022 provides fertile soils for tax loss harvesting. For example, if you have more capital losses than gains, you may be able to use up to $3,000 a year to offset ordinary income on federal income taxes and carry over the rest to future years. Continue reading →