Author Archives: MN Gordon

     

 

 

Ridiculous Minutia

Jerome Powell, the new Chairman of the Federal Reserve, just completed his third week on the job.  He’s hardly had enough time to learn how to operate the office coffee maker, let alone the all-in-one printer.  He still doesn’t know what roach coach menu items induce a heinous gut bomb.

 


The perpetually slightly worried looking new Fed chairman Jerome Powell, here seen warily inspecting the Rose Garden at the White House. Everybody wants to know if he has a “better plan” – but there is no better plan, thus no-one has one. [PT]

Photo credit: A. Brandon / AP

 

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Mnuchin Gets It

United States Secretary of Treasury Steven Mnuchin has a sweet gig.  He writes rubber checks to pay the nation’s bills.  Yet, somehow, the rubber checks don’t bounce.  Instead, like magic, they clear. How this all works, considering the nation’s technically insolvent, we don’t quite understand.  But Mnuchin gets it.  He knows exactly how full faith and credit works – and he knows plenty more.

 

Master of the Mint and economy wizard Steven Mnuchin and his wife at the annual ritual greenback burning festival. [PT]

 

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Actions and Reactions

Down markets, like up markets, are both dazzling and delightful. The shock and awe of near back-to-back 1,000 point Dow Jones Industrial Average (DJIA) free-falls is indeed spectacular. There are many reasons to revel in it.  Today we shall share a few. To begin, losing money in a multi-day stock market dump is no fun at all.  We’d rather get our teeth drilled by a dentist.  Still, a rapid selloff has many positive qualities.

 

Memorable moments from the annals of dentistry [PT]

 

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When to Sell?

The common thread running through the collective minds of present U.S. stock market investors goes something like this: A great crash is coming.  But first there will be an epic run-up climaxing with a massive parabolic blow off top.  Hence, to capitalize on the final blow off, investors must let their stock market holdings ride until the precise moment the market peaks – and not a moment more.  That’s when investors should sell their stocks and go to cash.

 

The DJIA over the past two years – the recent blow-off move has catapulted the average way above its 200 day moving average. As we recently pointed out, the DJIA has posted unprecedented overbought readings in longer-term time frames and we suspect that the distance from the 200 dma it recently reached was quite a rare extreme as well. By itself, none of this would be overly concerning, but in conjunction with foaming-at-the-mouth bullish sentiment, stretched valuations and a sharp slowdown in money supply growth, it is hard to be anything but concerned. [PT]

 

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Something for Nothing

The world is full of bad ideas.  Just look around.  One can hardly blink without a multitude of bad ideas coming into view.  What’s more, the worse an idea is, the more popular it becomes. Take Mickey’s Fine Malt Liquor.  It’s nearly as destructive as prescription pain killers.  Yet people chug it down with reckless abandon.

 

Looking at the expression of this Mickey’s Malt Liquor tester one might initially get the impression that he is disappointed. We assure you that is not the case – this is actually his happy face, he is probably just about to enter Nirvana. Countless taste tests prove it, see this comparison of the “entire bottom shelf” of malt liquors, or these cost-conscious routiniers. Not to forget, it comes either in cans or in shatterproof plastic bottles. [PT]

 

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Trade Deficit with China Widens on Trump’s Watch 

Most things come easier said than done.  Take President Trump’s posture on trade with China. Trump doesn’t want a bigger trade deficit with China.  He wants a smaller trade deficit with China.  In fact, reducing the trade deficit with China is one of Trump’s promises to Make America Great Again.

 

We are often willing to give Donald Trump the benefit of the doubt, despite the fact that his delivery needs a lot of work. Considering his enemies and most vociferous detractors, we reckon he must be doing something right; but we vehemently disagree with his views on trade, some of which are unfortunately becoming policy now. As Murray Rothbard once noted: [P]rotectionist arguments, many plausible at first glance, are really a tissue of egregious fallacies. They betray a complete ignorance of the most basic economic analysis. Indeed, some of the arguments are almost embarrassing replicas of the most ridiculous claims of 17th-century mercantilism: for example, that it is somehow a calamitous problem that the United States has a balance-of-trade deficit, not overall, but merely with one specific country.” At the time Rothbard penned these words, Japan was in the position China finds itself in now; the Japanese stood widely accused of practically bankrupting the US by means of a nefarious scheme that consisted of providing US consumers with cheap high quality consumer goods and investing large amounts of money in the US. The hand-wringing over this was just as ridiculous then as that over China is now. Recently the POTUS imposed punitive tariffs on washing machines and solar panels. The winners: Whirlpool and two bankrupt solar panel manufacturers that aren’t even US-owned companies. The losers: every US consumer and the entire rest of the US solar industry! As noted in this Reuters article: “President Donald Trump on Tuesday signed into law a steep tariff on imported solar panels on Tuesday, a move billed as a way to protect American jobs but which the solar industry said would lead to tens of thousands of layoffs.”  Winning! [PT]

Photo credit: Jonathan Ernst / Reuters

 

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Controlled Inflation

American consumers are not only feeling good.  They are feeling great. They are borrowing money – and spending it – like tomorrow will never come.

 

After an extended period of indulging in excessive moderation (left), the US consumer makes his innermost wishes known (right). [PT]

 

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Onward Toward Default

People are hard to please these days.  Clients, customers, and cohorts – the whole lot.  They’re quick to point out your faults and flaws, even if they’re guilty of the same derelictions.

 

The age-old art of assigning blame – in this case complemented by firm knowledge of the proper way to prosperity (see lower right corner). Jack Lew not only sees the future with perfect clarity these days, he also seems to have spent his time as treasury secretary garnering plenty of “not guilty of anything/ had absolutely nothing to do with it/ innocent as the snow is white/ just a job title, doesn’t mean a thing” points. All the bad stuff related to public debt and deficits clearly happened before and/or after him, or in other words, he dindu nuffin’ . Similar to the discoverers of the way to prosperity of yore, he does however not only know these days what ought to be done, but also what is going to happen. His timing on the former issue may be a bit off, but then again, nobody’s perfect. With regard to the latter, he should definitely try his hand at stock market trading given his new-found powers of perfect foresight. [PT]

 

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A New Year of Symbiotic Disharmony

The New Year is nearly here. The slate’s been wiped clean. New hopes, new dreams, and new fantasies, are all within reach. Today is the day to make a double-fisted grab for them. Without question, 2018 will be the year in which everything happens exactly as it should. Some things you will be able to control, others will be well beyond your control.

 

How new years generally work… [PT]

 

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Remarkable and Extraordinary Growth

Good cheer has arrived at precisely the perfect moment. You can really see it. Record stock prices, stout economic growth, and a GOP tax reform bill to boot. Has there ever been a more flawless week leading up to Christmas?

 

Here’s what really happened: the government’s minions confiscated everything Santa had on him when he crossed the border and then added it to GDP. You know how it is… if something feels too good to be true… [PT]

 

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Bogus Jobs Pay Big Bucks

The political differences of today’s two leading parties are not over ultimate questions of principle.  Rather, they are over opposing answers to the question of how a goal can be achieved with the least sacrifice.  For lawmakers, the goal is to promise the populace something for nothing, while pretending to make good on it.

 

The short and sweet definition of democratic elections by eminent American wordsmith and political philosopher H.L. Mencken [PT]

 

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When Bakers Go Fishing

Government intervention into a nation’s economy is as foolish as attempting to control the sun’s rise and fall by law or force.  But that doesn’t mean governments don’t meddle each and every day with the best – and worst – of intentions.  The United States government is no exception.

 

From the “When the government helps the economy” collection: Breaking a few eggs while baking the bridge to nowhere omelet. [PT]

 

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