Is the Great Post-Pandemic Boom a Great Big Dud?

Posted on July 9, 2021 by MN Gordon

“I want to talk about happy things, man.” – President Joe Biden, July 2, 2021

Lasting Disaster

The prices of certain commodities are down.  But not down enough to proclaim price inflation dead.

Lumber futures, for example, declined more than 40 percent in June.  This marked the largest price decline for lumber since the 1970s.  But after spiking from about $495 per thousand board feet in October 2020 to over $1,423 in April 2021, lumber’s current price of $718 is still almost double its 30 year average.

Futures for lean hogs have also pulled back of late.  After reaching an interim high of 121.95 cents per pound on June 9, they’re currently priced at 110.10.  Still, even with this recent decline, lean hogs have increased over 57 percent since the beginning of 2021.

Just one year ago, raw sugar futures were priced at 11.76 cents per pound.  In February, they hit a four year high of 18.49.  At the time of this writing, raw sugar futures are priced at 17.45.  Apparently, some of this price increase is attributed to concerns about dry weather impacting Brazilian sugarcane output.  Should you sweeten your portfolio? Continue reading →

Posted in Economy, MN Gordon | Tagged , , , , | 24 Comments

Independence Day in America Circa 2021

Posted on July 2, 2021 by MN Gordon

[Editor’s Note: This edition of the Economic Prism has been published in years past to coincide with the Independence Day holiday.  The themes explored within grow more relevant with each passing year.  Thus we are republishing it with several light updates.  Enjoy!]

Merry Mobs

The days are long and hot in the Northern Hemisphere when real American patriots spit upon their hands and hoist the stars and stripes.  On July 4th, the free and brave, with duty and self-sacrifice, begrudgingly accept federal holiday pay to stand tall upon their own two feet.  Rugged individualism and uncompromising independence are essential to their character.

With purpose and intent, they assemble as merry mobs along the shoreline to celebrate American Independence.  Freedom lovers – descendants of Andrew Jackson – gather to eat hotdogs and pitch horseshoes while downing tipples of corn syrup and fermented grain.  When the sun slips beyond the western horizon and the stars twinkle bright, they hoot and holler at the brilliance of fireworks and sparkling pyrotechnics. Continue reading →

Posted in MN Gordon, Politics | Tagged , , , , | 1 Comment

Do You Hear the Bells Ringing?

Posted on June 25, 2021 by MN Gordon

There’s an old Wall Street adage, you’ve likely heard it, “No one rings a bell at the top (or bottom) of the market.”

The bell, of course, is the signal to sell at the market top.  Here we pause to take exception with this adage.  As far as we can tell, bells do ring at market tops.  Yet few hear them.  Most people’s ears are plugged with the prospects of easy riches.

Bull markets often give way to manias…where an asset’s intrinsic value becomes less important than the hope that an overpriced asset can be later offloaded at a higher price to a greater fool.  Certainly, irrational pricing based on greater fool dynamics is the sound of a ringing bell.  Though this can go on for years.

The current ratio of total market capitalization to GDP (now over 200 percent) is most definitely the sound of a ringing bell.  Another ringing bell is the $500 million batch in junk bonds recently sold by MicroStrategy for the sole purpose of buying bitcoin.  These bitcoin junk bonds pay a generous 6.125 percent coupon rate.

How will MicroStrategy pay the coupon if bitcoin goes down?  Will they sell more junk bonds?  Will anyone buy them? Continue reading →

Posted in MN Gordon, Stock Market | Tagged , , , , , | 24 Comments

How to Buffer the Fallout from America’s Third World Death Spiral

Posted on June 18, 2021 by MN Gordon

“What the hell?!” – President Joe Biden, June 16, 2021

Out of Control

American workers are trying to make their way in an economy that’s rigged against them.  We made this claim many years ago.  Today, for fun and for free, we revisit this assertion…starting with the latest from those doing the rigging.

This week, after a two day meeting, the Federal Open Market Committee (FOMC) released their statement.  Nothing material changed.  The Fed will continue to hold the federal funds rate near zero.  The Fed will also continue to create at least $120 billion per month from thin air to buy Treasuries and mortgage-backed securities.

Bond yields spiked and the price of gold dropped because 13 Fed officials now plot dots that project two hikes to the federal funds rate in 2023.  Fed Chair Jay Powell also mentioned the Fed is “talking about talking about” bond tapering.  These technocrats likely know – though they won’t admit – they’ve already lost control.

Consumer price inflation is ‘officially’ rising at a 5 percent annualized rate.  However, the ‘unofficial’ rate of consumer price inflation, as calculated using methodologies in place in 1980, is about 13 percent. Continue reading →

Posted in Economy, MN Gordon | Tagged , , , , , | 35 Comments