Pushing Past the Breaking Point

Posted on November 2, 2018 by MN Gordon

Mankind’s willful determinations to resist the natural order are in vain.  Still, he pushes onward, always grasping for the big breakthrough.  The allure of something for nothing is too enticing to pass up.

Systems of elaborate folly have been erected with the most impossible of promises.  That prosperity can be attained without labor.  That benefits can be paid without taxes.  That cheap credit can make everyone rich.

Central to these promises are the central government and central planning authorities.  They take your money and, in return, they make you a dependent.  They promise you a secure retirement, and free drugs, while running a scheme that’s well beyond anything Charles Ponzi ever dreamed of.

According to the government’s statistics, the economy has never been better.  By the official numbers, we’re living in a magical world of full employment, 2.3 percent price inflation, and the second-longest growth period in the post-World War II era.  Agreeable reports like these are broadcast each month without question. Continue reading →

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Three Cheers for James Riley!

Posted on October 26, 2018 by MN Gordon

All people, of both good and questionable character, share a singular talent.  They excel at taking something that’s tolerable in moderation, and then pushing it to the outer limits of absurdity.  Why live with restraint when you can get radical?

Public and private debt levels, NASDAQ stock valuations, the federal register, face tattoos, canned energy drinks.  You name it.  Overpowered by fear.  Blinded by greed.  People across the spectrum lace up their boots each day and go all in.

Take Greater Los Angeles, for instance.  Sometime in the early 20th century the fever to rapidly develop it caught on with supreme enthusiasm.  A new race towards disfigurement was on.

According to the prevailing logic, if a little concrete was a good thing, splattering every square inch of the basin’s surface was even better.  The U.S. Army Corps of Engineers signed on to the cause in earnest.  In search of a mission and purpose, and with little foresight, they extended the compulsive application of concrete to include LA’s rivers and creeks. Continue reading →

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Why You Should Expect the Unexpected

Posted on October 19, 2018 by MN Gordon

The confluence of factors that influence market prices are vast and variable.  One moment patterns and relationships are so pronounced you can set a cornerstone by them.  The next moment they vanish like smoke in the wind.

One thing that makes trading stocks so confounding is that the buy and sell points appear so obvious in hindsight.  When examining a stock’s price chart over a multi-year duration the wave movements appear to be almost predictable.  Trend lines matching interim highs and lows, and bounded price movements within this range, display what, in retrospect, are the precise moments to buy and sell.

In practice, the stock market dishes out hefty doses of humility with impartial judgement.  What’s more, being right does not always translate to success.  Sometimes it’s more costly to be right at the wrong time than wrong at the right time.

One fallacy that has gained popularity over the last decade is the zealot belief that the Fed disappears risk from markets. Continue reading →

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Choking On the Salt of Debt

Posted on October 12, 2018 by MN Gordon

Roughly three years ago, after traversing between Los Angeles and San Francisco via the expansive San Joaquin Valley, we penned the article, Salting the Economy to Death.  At the time, the monetary order was approach peak ZIRP.  We found the absurdity of zero bound interest rates to have similar parallels to the absurdity of hundreds upon hundreds of miles of blooming crop fields within the setting of an arid desert wasteland.

Given today’s changing financial conditions, namely the prospect of a sustained period of rising interest rates, we’ve taken the opportunity to refine our analysis.  What follows is an attempt to bring clarity to disorder.

The natural starting point for the topic at hand is from a place of delusion.  That is, the popular delusion that central planners can stimulate robust economic growth by setting interest rates artificially low.  The general theory is that cheap credit compels individuals and businesses to borrow loads of cash – and consume it.

Over a sample size of five to ten year, say the growth half of the business cycle, central bankers can falsely take credit for engineering a productive economy. Continue reading →

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