Welcome to the Death Zone

Posted on March 25, 2022 by MN Gordon

Do you own a house?  Do you rent?

How you answer these questions likely influences your perception of inflation and the economy.

But what if the forces driving your perception are about to reverse…thus, standing your perception on its head?

We believe big, earth-shattering changes are under foot in the credit market.  A seemingly firm foundation may soon give way like liquified soil following an earthquake.

Where to begin…

Many investment gurus in the early 1980s were predicting the future while projecting the past.  After a decade of raging price inflation, the popular dogma was to pack one’s portfolio with gold coins, fine art, and antiques.  This was the proven, surefire way to preserve one’s hard earned wealth.

The United States, it seemed, was about to go full Weimar.  Howard Ruff, in his investment newsletter The Ruff Times,  was predicting the dollar would soon turn to hyperinflationary ash, like conifer trees in a California wildfire.  It was inevitable.  And imminent! Continue reading →

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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 →

Posted in Inflation, MN Gordon | Tagged , , , , | 21 Comments