Author Archives: MN Gordon

     

 

Not Adding Up

One of the more disagreeable discrepancies of American life in the 21st century is the world according to Washington’s economic bureaus and the world as it actually is.  In short, things don’t add up.  What’s more, the propaganda is so far off the mark, it is downright insulting.

 

Coming down from the mountain with the latest data tablet… [PT]

 

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Suspicious Phrases

There are certain phrases – like “trust me” or “I got this” – that should immediately provoke one’s suspicion.  When your slippery contractor tells you, “trust me, your kitchen renovation will be done before Christmas,” you should be wary.  There is no way it will be done before late spring.

 

USD-CNH (offshore yuan) exchange rate – the support/resistance level at 7 finally breaks amid escalating trade war rhetoric. [PT]

 

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Do You Hear a Bell Ringing?

The sun shines brightest across the North American continent as we enter summer’s dog days.  Cold sweet lemonade is the refreshment of choice at ballparks and swimming holes alike.  Many people drink it after cutting the grass, or whenever else a respite from the heat and some thirst quenching satisfaction is needed.

 

Regardless of whether companies were able to “beat estimates” (which as often happens, were revised lower just before the reporting season started), their actual Q2 results didn’t look very encouraging so far. The manufacturing sector in particular looks a bit frayed around the edges as the saying goes. [PT]

 

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Realizing the Full Implications of the Forthcoming Catastrophe

 

“Facilis descensus Averno.” – Virgil (Publius Vergilius Maro)

 

Delivering Tomorrow’s Curses

Roman poet Virgil penned these words in his epic, The Aeneid, roughly a generation before the birth of Jesus of Nazareth.  They can be loosely translated to, “the descent to hell is easy.”  Those who’ve traversed this passage can attest to the veracity of this axiom.

 

Virgil reading the Aeneid to Augustus, Octavia and Livia. Contrary to what one might think at first blush, Octavia didn’t fall asleep because she was bored by it – rather, when Virgil recited Book Six, she fainted (the veracity of this account is not undisputed, but it’s a good story anyway). A little side note: Virgil caught a fever while returning from to Rome from Greece and died in Brundisium in 19 BC. It was Virgil’s wish that the poem be burned, but Augustus ordered his literary executors to preserve it and publish it with as few editorial changes as possible. Thus Augustus rescued the Aeneid for posterity. [PT]

 

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Tending Towards Maximum Perversity

According to Finagle’s corollary to Murphy’s law, “Anything that can go wrong, will — at the worst possible moment.”  Taken a degree further, per O’Toole’s corollary of Finagle’s law, and the second law of thermodynamics, “The perversity of the Universe tends towards a maximum.”

 

Murphy’s law in action… not even Murphy himself was safe from it. [PT]

 

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A Good Story with Minor Imperfections

If you don’t know where you are going, any road will get you there,” is a quote that’s oft misattributed to Lewis Carrol. The fact that there is ambiguity about who is behind this quote on ambiguity seems fitting. For our purposes today, the spirit of the quote is what we are after. We think it may help elucidate the strange and confusing world of fake money in which we all travel.

 

Consumer price index, y/y rate of change – the Fed is not satisfied with the speed at which monetary debasement raises everybody’s cost of living lately. And no, they don’t think said speed should be lowered. [PT]

 

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Freedom and Apple Pie

The days are long and hot in the Northern Hemisphere when real American patriots raise the stars and stripes. Today the free and brave, with duty and self-sacrifice, begrudgingly accept federal holiday pay to stand tall upon their own two feet. Rugged individualism and uncompromising independence are essential to their character.

 

Independence day festivities…

 

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A Distorted Landscape

One of the more remarkable achievements of fake money creation is that it distorts and disfigures the world in odd and uncanny ways.  Dow (not quite) 27,000.  Million dollar shacks.  Over $13 trillion in subzero-yielding debt. You name it.  Any and every disfiguration is possible with enough fake money.

 

The global stock of outstanding government bonds with negative yields-to-maturity reaches a new record high of more than $13 trillion – this is insanity writ large. [PT]

 

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An Epic Folly for the Ages

Today we begin with a list.  A partial list.  And in no particular order…

Angela Merkel. Donald Tusk. Mario Draghi. Donald Trump. Jerome Powell.  Shinzo Abe.  Haruhiko Kuroda.  Theresa May. Boris Johnson. Mark Carney. Xi Jinping.  Emmanuel Macron.  Vladimir Putin. Justin Trudeau. Juan Trump.  And many, many more…

 

Politicians and bureaucrats of the modern age of statism and central planning… fighting a rearguard action doomed to fail. [PT]

 

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A Loose Relationship

The Dow Jones Industrial Average made another concerted run at the elusive 27,000 milestone over the last several weeks.  But, as of this writing, the index has stalled out short of this psychosomatic barrier.  By our estimation, this is for the best.

 

Since early 2018 the DJIA has gone nowhere, albeit in interesting ways… [PT]

 

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A Plan for Everything!

The run-up to the presidential primaries offers a funhouse reflection of American life.  Presidential hopefuls, hacks, and has-beens turn to focus groups to discover what they think the American electorate wants. Then they distill it down to hollow bumper stickers. After that, they pump their fists and reflect it back with mindless repetition.

 

A plea for clemency from Mr. 1/1024th crow. [PT]

 

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The Ugly End of Globalization

Sometime in the fall of 2018 a lowly gofer at the New York Stock Exchange was sweating  bullets.  He had made an honest mistake.  One that could forever tag him a buffoon.

 

Art Cashin the living hat-stand, going through a succession of DJIA milestone hats. He promised was going to crack a smile for the Dow 27,000 hat photo, alas, it was not to be. [PT]

 

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Most read in the last 20 days:

  • Sovereign Bonds – Stretched to the Limit
    Anti-Vigilantes We dimly remember when Japanese government debt traded at a negative yield to maturity for the very first time. This happened at some point in the late 1990s or early 2000ds in secondary market trading (it was probably a shorter maturity than the 10-year JGB) and was considered quite a curiosity. If memory serves, it happened on just one brief occasion and it was widely held at the time that the absurd situation of a bond buyer accepting a certain loss if the bonds were...
  • Writing on the Wall
    Not Adding Up One of the more disagreeable discrepancies of American life in the 21st century is the world according to Washington’s economic bureaus and the world as it actually is.  In short, things don’t add up.  What’s more, the propaganda is so far off the mark, it is downright insulting.   Coming down from the mountain with the latest data tablet... [PT]   The Bureau of Labor Statistics (BLS) reports an unemployment rate of just 3.7 percent.  The BLS also...
  • Global Stock Markets: Danger Lies Directly Ahead
      A Global Pattern You are no doubt aware of the saying “sell in May and go away”. It is one of the best-known and oldest stock market truisms.   Mark Twain's famous saying about stock market speculation (the other one was “There are two times in a man's life when he should not speculate – when he cannot afford it, and when he can”).  From a seasonal perspective he was definitely right about September and October. [PT]   The saying is in fact justified...
  • Bond Yields in the Netherworld - Precious Metals Supply and Demand
      A Record Amount of Bonds with Negative Yields to Maturity Last week the price of gold went up $22, while the price of silver dropped ¢17. The big news last week was that the yield on all German government bond maturities is now negative. They are also all negative in Switzerland. And in Denmark, all maturities out to 20 years are negative. Interest rates are dropping rapidly in the US as well.   More than $14 trillion in bonds now trade at negative yields to maturity –...
  • Rising Stock Market Volatility – Another Warning Sign
      Bad Hair Days Are Back We recently discussed the many divergences between major US indexes, which led us to expect that a downturn in the stock market was close (see The Calm Before the Storm for details). Here is an update of the comparison chart we showed at the time:   The divergences between various indexes seem to be resolving as expected.   The next chart shows analogous divergences between the S&P 500 Index and two major foreign stock markets:   US...
  • Retail Holders Sell Their Gold - Precious Metals Supply and Demand
      A Myriad of Reasons to Buy Gold – But Small Holders are Selling Big moves occurred in the prices of the metals last week, with that of gold up $57 and silver $0.77. We have now reached a price of gold (if not silver) not seen since 2013, when it was on the way down. What is causing this sudden spike in price and renewed interest in gold?   A well-known depiction of investor emotions over a complete market cycle. Interestingly, it appears as though many retail gold holders...
  • Bitcoin – From Greed to Fear
      A Noteworthy Sentiment Change Bitcoin and other cryptocurrencies have declined quite sharply in recent days. Here is an overnight snapshot of the daily chart:   Bitcoin corrects again...   It is difficult to gauge sentiment on BTC objectively, but there is a service that tries to do just that. According to its greed & fear barometer, the recent decline seems to have triggered quite a bit of apprehension:   The BTC sentiment measure of alternative.me has...
  • Getting to a Special State of Ugly
    Suspicious Phrases There are certain phrases – like “trust me” or “I got this” – that should immediately provoke one’s suspicion.  When your slippery contractor tells you, “trust me, your kitchen renovation will be done before Christmas,” you should be wary.  There is no way it will be done before late spring.   USD-CNH (offshore yuan) exchange rate – the support/resistance level at 7 finally breaks amid escalating trade war rhetoric. [PT]   Or...
  • Interest Rate Watch and Bond Market Curiosities
    Things To Keep An Eye On Below is an overview of important US interest rates and yield curve spreads. In view of the sharp increase in stock market volatility, yields on government debt have continued to decline in a hurry. However, the flat to inverted yield curve has not yet begun to steep – which usually happens shortly before recessions and the associated bear markets begin.   2-year note yield, 3-month t-bill yield, 10-year note yield, 10-year/2-year yield spread,...
  • Tumbling Interest Rates - Precious Metals Supply and Demand
      An Era of Low Time Preference Last week the price of gold moved up another $16, and the price of silver was up $0.14.   10-year treasury note yield since 1999 – it is almost back at the multi-decade low of 2016. The only other time in history when US treasury yields were this low was in 1944-1945, when the Fed was actively suppressing yields in order to provide cheap financing for the war effort. One year later (from mid 1946 to mid 1947) the CPI jumped to more than 17%...
  • A Bubble in Complacency - Incrementum Advisory Board Discussion
      Incrementum Advisory Board Meeting of 31 July 2019 At the end of July the Advisory Board of the Incrementum Fund held its quarterly meeting (a full transcript is available for download at the end of this post). The board was joined by special guest Simon Mikhailovich, a financial market veteran who inter alia co-founded the Toqueville Bullion Reserve. The title of the transcript and this post was inspired by his remarks.   Special guest Simon Mikhailovich   We...

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