Author Archives: MN Gordon

     

 

 

No CPI Change

Several ill-defined economic data points were unveiled this week.  Namely, the Labor Department’s July consumer price index report.  According to the government data, on whole, consumer prices for the month didn’t change one iota.

 

1-CPI percent changeCPI change rate –  clearly, there’s not enough money printing just yet… – click to enlarge.

 

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Short Circuited Feedback Loops

Finding and filling gaps in the market is one avenue for entrepreneurial success.  Obviously, the first to tap into an unmet consumer demand can unlock massive profits.  But unless there’s some comparative advantage, competition will quickly commoditize the market and profit margins will decline to just above breakeven.

 

cost-per-gigabyte-large-1Example of a “commoditized” market – hard-drive storage costs per GB. This is actually the essence of economic progress; this price decline has benefited consumers immensely and vastly enriched their lives. This makes it all the more baffling that central bankers insist we absolutely need price inflation in order to have economic growth (in fact, it actually demonstrates what dangerous lunatics they are). – click to enlarge.

 

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The Next President’s Debt Burden

According to the Department of Commerce, U.S. gross domestic product increased at an annual rate of 1.2 percent in the second quarter of 2016.  This, unfortunately, isn’t indicative of the sort of robust economic activity that will grow the economy out of debt.  In fact, as growth is stagnating, deficits are increasing.

 

GTY_donald_trump_hillary_clinton_sk_150619_16x9_992Potential future debt administrators Donald Trump and Hillary Clinton (this may be the real Hillary Clinton; unfortunately no-one knows where she is at the moment, as she has  evidently been replaced by a  malfunctioning android).

Photo credit: Getty Images

 

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Mad as a Hatter

Somewhere, someone first said “bull markets don’t die of old age.”  We suppose this throwaway phrase was first uttered in a time and place much like today.  That is, in the midst of a protracted bull market where stock prices had detached from the assets and earnings of companies their shares represent claim to.

 

Cow skeleton in the desert in Baroon village - aka the middle of nowhere, Rajasthan, IndiaThey may not die of old age… but they do occasionally die.

Photo credit: Brett Cole

 

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Hyperventilating Minds

“What has been will be again, what has been done will be done again; there is nothing new under the sun,” explained Solomon in Ecclesiastes, nearly 3,000 years ago.

 

1760 Tiepolo-Schule, Koenig Salomo Tiepolo, Giambattista 1696-1770. Schule. 'Die Koenigin von Saba vor Koenig Salomon' (Ausschnitt: Salomon). Gemaelde. Venedig, Dogenpalast, Sala della Milizia del Mar. E: King Solomon & Queen of Sheba / Tiepolo Tiepolo, Giambattista 1696-1770. School. - 'The Queen of Sheba before King Solom- on'. - (Detail: Solomon). Painting. Venice, Doge's Palace, Sala della Milizia del Mar. F: Ecole Tiepolo, Roi Salomon Tiepolo, Giambattista 1696-1770. Ecole. 'La Reine de Saba devant le roi Salomon' (Detail : Salomon). Peinture. Venise, Palais des Doges, Sala della Milizia del Mar.King Solomon, who reportedly was the go-to guy in his time when good advice was urgently needed. He also was a nigh inexhaustible fount of highly quotable statements. What would he have made of negative yields to maturity?

Painting by Giambattista Tiepolo

 

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Asset Price Levitation

One of the more preposterous deeds of modern central banking involves creating digital monetary credits from nothing and then using the faux money to purchase stocks.  If you’re unfamiliar with this erudite form of monetary policy this may sound rather fantastical.  But, in certain economies, this is now standard operating procedure.

 

tokyo whaleThe “Tokyo Whale” Haruhiko Kuroda explains his asset purchase madness with a few neat little slides.

Photo credit: Stringer / Xinhua Press / Corbis

 

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Consequences of Central Bank Policies

The existing capital stock continues to be frittered away at the expense of savers and retirees.  Nonetheless, central bankers don’t give a doggone about it.  This, after all, is one consequence of roughly eight years of near zero interest rate policy.

 

devastationCentral planning superheros, leaving a wasteland behind…

Image credit: Steve Epting

 

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Myths and Legends

“Myths and legends die hard in America,” remarked Hunter S. Thompson in The Great Shark Hunt, nearly 40-years ago.  Thompson didn’t likely have U.S. Treasury bonds in mind when he made this observation.  Though, if he were still alive, he may find the present state of the great Treasury bond bubble to be an amusing anecdote.

 

huntersthompson2Gonzo! Hunter S. Thompson, who had the theory that the truth is never told during the nine-to-five hours…

 

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Winners and Quitters

Vince Lombardi, the famous American football coach, once said, “Winners never quit and quitters never win.”  Maybe he meant that winners overcome obstacles to reach their goals while quitters give up and fall short… or something to that effect.

 

lombardiLegendary coach Vince Lombardi, prolific provider of bumper sticker material.

Photo credit: USATSI

 

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A Sucker’s Deal

The yield on the 10-Year Treasury note’s accelerating its descent toward zero.  The last we checked the yield was at about 1.56 percent.  But in every practical sense, for income investors, a yield of 1.56 percent may as well be zero.

 

1 - 10 year treasury note yieldEven though the US treasury note is like the one-eyed man in the land of the blind these days, it still is a guarantee to lose money in real terms if held to maturity – click to enlarge.

 

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Beyond Human Capacity

Distilling down and projecting out the economy’s limitless spectrum of interrelationships is near impossible to do with any regular accuracy.  The inputs are too vast.  The relationships are too erratic.

 

blue ball machineThe economy – complex and ever-changing interrelations.

Image credit: Andrea Dionne

 

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Seven Year Achievement

 

“Read the directions and directly you will be directed in the right direction.” — Lewis Carroll

 

directionsSee? It’s easy Janet! Just read the directions!

Illustration credit: Walt Disney

 

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