Author Archives: MN Gordon

     

 

 

A Walk on the Wild Side

 

“Never play cards with a man called Doc.  Never eat at a place called Mom’s.  Never sleep with a woman whose troubles are worse than your own.”

– Nelson Algren, A Walk on the Wild Side

 

Fresh Fruit or Rotting Vegetables?

A subtle gas seems to always be vented into the atmosphere at the sunset of an extended bull market.  As the light fades, an odor that’s indiscernible from that of fresh fruit or rotting vegetables wafts down Wall Street.  You can almost smell it.  But what it is you smell is too faint to accurately characterize.

 

DJIA, daily; quo vadis Industrial Average, and what’s that odd smell? At the peak in late January the  weekly chart of the average sported an RSI of 92 – an all-time record “overbought” condition. A few other indexes (particularly the Nasdaq and small cap indexes) have reached new highs in the meantime, but broad-based and large cap indexes have failed to confirm these moves. [PT]

 

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Futility with Purpose

Plebeians generally ignore the tact of their economic central planners.  They care more that their meatloaf is hot and their suds are cold, than about any plans being hatched in the capital city.  Nonetheless, the central planners know an angry mob, with torches and pitchforks, are only a few empty bellies away.  Hence, they must always stay on point.

 

Watch for those pitchfork bearers – they can get real nasty and then heads often roll quite literally. [PT]

 

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Credit has a wicked way

of magnifying a person’s defects.  Even the most cautious man, with unlimited credit, can make mistakes that in retrospect seem absurd.  But an average man, with unlimited credit, is preeminently disposed to going full imbecile.

 

Let us not forget about this important skill…  [PT]

 

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Friends and Enemies

Do citizens of the United States trust their government will do what’s right?  It depends who you ask. By and large, the esteem the American populace holds its government in is likely a small fraction of what it was roughly 65 years ago.  That was when Lieutenant General William Kelly Harrison Jr. signed the Korean Armistice Agreement.  Certainly, in days gone by representatives of other nations held the U.S. government in higher regard.

 

The most austere signing ceremony ever: Lieut. Gen. William K. Harrison, Jr. (seated left), and Korean People’s Army and Chinese People’s Volunteers delegate Gen. Nam Il (seated right) sign the Korean War armistice agreement at P’anmunjŏm, Korea, July 27, 1953. No-one seems really happy – presumably, no-one was. [PT]

 

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Rare Commodity

Modern economists are prone to shouting fire in a crowded theater.  The world is full of seeming incongruences. Economists puzzle over things like population growth and arable acres of farmland. They project out a linear scenario of increasing divergence, and see a catastrophe in the making.

 

Professional scaremonger Thomas Robert Malthus, one in a long line of scarcity prophets who failed to recognize the capacity of human ingenuity and free markets to solve the perceived problem of “finite resources”. The effects of demographics are the exact opposite of what the scarcity scaremongers claim: there is no overpopulation problem based on the allegedly “limited carrying capacity” of the planet (as an aside, note that most of the land area of the planet remains completely devoid of people). On the contrary, the more human beings there are, the more tacit and outright knowledge exists and the more ideas and innovation can be tapped for the benefit of all – provided a free market remains operative. Unfortunately, the free market and its “anarchy of production” as Marxists used to derisively refer to it, is precisely what the scarcity prophets ultimately attack – since their demands can only be fulfilled by applying the most vicious statist coercion. [PT]

 

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Tightening Credit Markets

Daylight extends a little further into the evening with each passing day.  Moods ease.  Contentment rises.  These are some of the many delights the northern hemisphere has to offer this time of year. As summer approaches, and dispositions loosen, something less amiable is happening.  Credit markets are tightening.  The yield on the 10-Year Treasury note has exceeded 3.12 percent.

 

A change in pace: yields are actually going somewhere. There is a fly in the ointment for treasury bears though: the net speculative short position in futures across the yield curve is seemingly establishing new record highs every week. While this is not bullish for treasuries per se, it definitely makes yields vulnerable to a sharp pullback. The question is what might cause such a pullback. Our guess would be that either “unexpected economic weakness” will enter the scene, or crisis conditions in emerging markets will worsen and eventually spark “flight to safety” behavior. [PT]

 

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“Literally On Fire”

This week brought forward more evidence that we are living in a fabricated world. The popular story-line presents a world of pure awesomeness. The common experience, however,  falls grossly short.

 

There are many degrees of awesomeness, up to total awesomeness – which is where we are these days, in the age of total awesomeness, just a short skip away from the Nirvana era. What is Nirvana, you may wonder? We only know for sure that Nirvana is what the stock market has priced in – other than that, we will have to wait and see. [PT]

 

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A Useful Public Service

There are nooks and corners in every city where talk is cheap and scandal is honorable.  The Alley, in Downtown Los Angeles, is a magical place where shrewd entrepreneurs, shameless salesmen, and downright hucksters coexist in symbiotic disharmony.  Fakes, fugazis, and knock-offs galore, pack the roll-up storefronts with sparkle and shimmer.

 


The Alley in LA – in places such as this, consumers are as a rule well served by applying a little bit of common sense when pondering purchases. In fact, common sense is a multi-purpose weapon that reportedly comes in handy in many situations and is widely considered a valuable addition to one’s personal armory.  [PT]

Photo credit: Navymailman

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Meandering Prices

Prices rise and prices fall.  So, too, they fall and rise.  This is how the supply and demand sweet spot is continually discovered – and rediscovered. When supply exceeds demand for a good or service, prices fall. Conversely, when demand exceeds supply, prices rise.

 

Supply and demand (the curves usually shown in such charts are unrealistic, as bids and offers in the market are arranged in discrete steps). [PT]

 

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Paradise in LA LA Land

More is revealed with each passing day.  You can count on it.  But what exactly the ‘more is of’ requires careful discrimination.  Is the ‘more’ merely more noise?  Or is it something of actual substance?  Today we endeavor to pass judgment, on your behalf.

 

Normally, judgment would be passed on a Thursday, but we are making an exception. [PT]

 

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Good Intentions

One of the unspoken delights in life is the rich satisfaction that comes with bearing witness to the spectacular failure of an offensive and unjust system. This week served up a lavish plate of delicious appetizers with both a style and refinement that’s ordinarily reserved for a competitive speed eating contest. What a remarkable time to be alive.

 

It seemed a good idea at first… [PT]

 

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Interesting Times Arrive

“Things sure are getting exciting again, ain’t they?”  The remark was made by a colleague on Tuesday morning, as we stepped off the elevator to grab a cup of coffee.

 

Ancient Chinese curse alert… [PT]

 

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Most read in the last 20 days:

  • America Goes Full Imbecile
      Credit has a wicked way of magnifying a person’s defects.  Even the most cautious man, with unlimited credit, can make mistakes that in retrospect seem absurd.  But an average man, with unlimited credit, is preeminently disposed to going full imbecile.   Let us not forget about this important skill...  [PT]   Several weeks ago we came across a woeful tale of Mike Meru.  Somehow, this special fellow, while of apparent sound mine and worthy intent, racked up...
  • Retail Capitulation – Precious Metals Supply and Demand
      Small Crowds, Shrinking Premiums The prices of gold and silver rose five bucks and 37 cents respectively last week. Is this the blast off to da moon for the silver rocket of halcyon days, in other words 2010-2011?   Various gold bars. Coin and bar premiums have been shrinking steadily (as have coin sales of the US Mint by the way), a sign that retail investors have lost interest in gold. There are even more signs of this actually, and this loss of interest stands in stark...
  • Credit Spreads: Polly is Twitching Again - in Europe
      Junk Bond Spread Breakout The famous dead parrot is coming back to life... in an unexpected place. With its QE operations, which included inter alia corporate bonds, the ECB has managed to suppress credit spreads in Europe to truly ludicrous levels. From there, the effect propagated through arbitrage to other developed markets. And yes, this does “support the economy” - mainly by triggering an avalanche of capital malinvestment and creating the associated boom conditions, while...
  • Gold Divergences Emerge
      Bad Hair Day Produces Positive Divergences On Friday the ongoing trade dispute between the US and China was apparently escalated by a notch to the next level, at least verbally. The Trump administration announced a list of tariffs that are supposed to come into force in three week's time and China clicked back by announcing retaliatory action. In effect, the US government said: take that China, we will now really hurt our own consumers!  - and China's mandarins replied: just you wait, we...
  • Industrial Commodities vs. Gold - Precious Metals Supply and Demand
      Oil is Different Last week, we showed a graph of rising open interest in crude oil futures. From this, we inferred — incorrectly as it turns out — that the basis must be rising. Why else, we asked, would market makers carry more and more oil?   Crude oil acts differently from gold – and so do all other industrial commodities. What makes them different is that the supply of industrial commodities held in storage as a rule suffices to satisfy industrial demand only for a...
  • Chasing the Wind
      Futility with Purpose Plebeians generally ignore the tact of their economic central planners.  They care more that their meatloaf is hot and their suds are cold, than about any plans being hatched in the capital city.  Nonetheless, the central planners know an angry mob, with torches and pitchforks, are only a few empty bellies away.  Hence, they must always stay on point.   Watch for those pitchfork bearers – they can get real nasty and then heads often roll quite literally....
  • Lift-Off Not (Yet) - Precious Metals Supply and Demand
      Wrong-Way Event Last week we said something that turned out to be prescient:   This is not an environment for a Lift Off Event.   An unfortunate technical mishap interrupted the latest moon-flight of the gold rocket. Fear not true believers, a few positive tracks were left behind. [PT]   The price of gold didn’t move much Mon-Thu last week, though the price of silver did seem to be blasting off. Then on Friday, it reversed hard. We will provide a forensic...
  • Merger Mania and the Kings of Debt
      Another Early Warning Siren Goes Off Our friend Jonathan Tepper of research house Variant Perception (check out their blog to see some of their excellent work) recently pointed out to us that the volume of mergers and acquisitions has increased rather noticeably lately. Some color on this was provided in an article published by Reuters in late May, “Global M&A hits record $2 trillion in the year to date”, which inter alia contained the following chart illustrating the...
  • Cryptocurrency Technicals – Navigating the Bear Market
      A Purely Technical Market Long time readers may recall that we regard Bitcoin and other liquid big cap cryptocurrencies as secondary media of exchange from a monetary theory perspective for the time being. The wave of speculative demand that has propelled them to astonishing heights was triggered by market participants realizing that they have the potential to become money. The process of achieving more widespread adoption of these currencies as a means of payment and establishing...
  • The Fed's “Inflation Target” is Impoverishing American Workers
      Redefined Terms and Absurd Targets At one time, the Federal Reserve's sole mandate was to maintain stable prices and to “fight inflation.”  To the Fed, the financial press, and most everyone else “inflation” means rising prices instead of its original and true definition as an increase in the money supply.  Rising prices are a consequence – a very painful consequence – of money printing.   Fed Chair Jerome Powell apparently does not see the pernicious effects...
  • A Walk on the Wild Side
      A Walk on the Wild Side   “Never play cards with a man called Doc.  Never eat at a place called Mom’s.  Never sleep with a woman whose troubles are worse than your own.” – Nelson Algren, A Walk on the Wild Side   Fresh Fruit or Rotting Vegetables? A subtle gas seems to always be vented into the atmosphere at the sunset of an extended bull market.  As the light fades, an odor that’s indiscernible from that of fresh fruit or rotting vegetables wafts down...

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