December 9, 2013
Q4:2013 US GDP Nowcast: +2.0% | 12.09.2013
This year's fourth-quarter US GDP is expected to increase 2.0% (real seasonally adjusted annual rate), according to The Capital Spectator’s revised average econometric nowcast. The projected growth rate is slightly higher than the previous 1.9% estimate, which was published on November 18. The government's initial estimate of this year's Q4 GDP is scheduled for release on January 30.
December 7, 2013
Technical Issues As The Capital Spectator Migrates To WordPress
In the coming days (weeks?) I'll be attempting to transition The Capital Spectator to Wordpress from the existing MovableType platform. As a result, the site may go dark at times as I wrestle with the tech gods and work through the inevitable bugs that will pop up.
Book Bits | 12.7.13
● Going Viral
By Karine Nahon and Jeff Hemsley
Summary via publisher, Polity
We live in a world where a tweet can be instantly retweeted and read by millions around the world in minutes, where a video forwarded to friends can destroy a political career in hours, and where an unknown man or woman can become an international celebrity overnight. Virality: individuals create it, governments fear it, companies would die for it. So what is virality and how does it work? Why does one particular video get millions of views while hundreds of thousands of others get only a handful? In Going Viral, Nahon and Hemsley uncover the factors that make things go viral online. They analyze the characteristics of networks that shape virality, including the crucial role of gatekeepers who control the flow of information and connect networks to one another. They also explore the role of human attention, showing how phenomena like word of mouth, bandwagon effects, homophily and interest networks help to explain the patterns of individual behavior that make viral events.
December 6, 2013
Payrolls & Personal Spending Rise As Income Dips
The labor market expanded again last month: private payrolls increased 196,000 in November, moderately more than expected, based on The Capital Spectator’s average econometric projection. Even so, last month’s gain fell short of October’s revised 214,000 rise, although the pace of growth in November still suggests that the economy is creating jobs at a slightly faster rate these days compared with the lesser gains in recent history. Meanwhile, today’s update on personal income and spending brings mixed news. Personal consumption expenditures advanced 0.3% in October—in line with expectations. Disposable personal income, however, retreated 0.2%--the first monthly instance of red ink since January.
December 5, 2013
Today's Upbeat Macro Reports Probably Overstate Growth Prospects
This morning’s economic updates for the US paint an encouraging profile, but it may be a bit misleading. The Bureau of Economic Analysis revised second-quarter GDP up by a hefty degree, estimating that the nation’s output of goods and services increased 3.6% for the three months through September (seasonally adjusted annualized real rate). That’s substantially higher than the 2.8% gain in the advance estimate for Q3.
Personal Consumption Expenditures: October 2013 Preview
US personal consumption spending for October is projected to rise 0.3% vs. the previous month in tomorrow’s update from the Bureau of Economic Analysis, based on The Capital Spectator's average econometric forecast. Today’s average projection is slightly above the previously reported 0.2% increase for September. Meanwhile, the Capital Spectator’s average 0.3% forecast for October matches the projections in three surveys of economists.
US Nonfarm Private Payrolls: November 2013 Preview
Private nonfarm payrolls in the US are projected to increase by 180,000 (seasonally adjusted) in tomorrow's November update from the Labor Department, according to The Capital Spectator's average econometric point forecast. The projected gain is substantially below the previously reported increase of 212,000 for October. Meanwhile, The Capital Spectator’s average November projection falls between a pair of relatively wide-ranging consensus forecasts, based on surveys of economists.
December 4, 2013
ADP: Job Growth "Appears To Be Picking Up"
The US economy added a net 215,000 private-sector jobs last month, according to this morning’s ADP Employment Report—the biggest monthly gain in a year. The upbeat news suggests that the better-than-expected October payrolls report from the Labor Department isn’t a fluke after all.
Wrong Models, Good Forecasts, And The Search For Useful Guidance
The Economist asks the question that never goes out of style: Who’s good at forecasts? "That question is both obvious and critical. And yet, in most instances, we really don’t know the answer." I prefer the view that no one and everyone is good at this guessing game. No one in the sense that the future is unknowable. Everyone because even a broken forecasting model can be right at times, albeit for the wrong reason: luck. It’s the gray area between those extremes that’s dangerously seductive and occasionally useful.
December 3, 2013
Research Review |12.03.13 | Forecasting: Markets & Macro
Do Asset Price Drops Foreshadow Recessions?
John C. Bluedorn (IMF), et al. | Oct 2013
This paper examines the usefulness of asset prices in predicting recessions in the G-7 countries. It finds that asset price drops are significantly associated with the beginning of a recession in these countries. In particular, the marginal effect of an equity/house price drop on the likelihood of a new recession can be substantial. Equity price drops are, however, larger and are more frequent than house price drops, making them on average more helpful as recession predictors. These findings are robust to the inclusion of the term-spread, uncertainty, and oil prices. Lastly, there is no evidence of significant bias resulting from the rarity of recession starts.
December 2, 2013
Major Asset Classes | November 2013 | Performance Review
Red ink is splattered across November’s performance profile, presenting a contrast with the easy money gains in September and October. The leading exception: the US stock market, which advanced 2.9% in November on a total return basis. Meanwhile, last month's big loser among the major asset classes: US REITs, which shed a hefty 5.2% for the month just passed.
November 29, 2013
ISM Manufacturing Index: November 2013 Preview
The ISM Manufacturing Index is expected to post a marginal decline to 56.2 in Monday’s November update (scheduled for release on Dec. 2), based on The Capital Spectator's average econometric forecast. The estimate compares with the previously reported 56.4 for October. Meanwhile, the Capital Spectator's average projection is moderately higher than a pair of consensus forecasts for November via surveys of economists.
November 28, 2013
The Capital Spectator will go dark for the next few days to indulge in a bit of Puritan feasting, followed by a radical agenda of nothing in particular. The usual fun with macro and finance returns anew on Monday, December 2. Meanwhile, it's time to roast the bird, cut up the squash, and count our blessings. Have a great holiday!
November 27, 2013
A Pair Of Positive Macro Reports On Thanksgiving Eve
Today’s updates on initial jobless claims and the Chicago Fed National Activity Index bring encouraging news for the US economy as the nation prepares to celebrate the Thanksgiving holiday. New filings for jobless benefits dropped again last week, falling to the lowest level since late-September. Meanwhile, the three-month average of the Chicago Fed National Activity Index (CFNAI-MA3) inched ahead in October, reaching the highest level in eight months. Taken together, these two numbers bring a slightly stronger positive aura to the US economic outlook. It’s still premature to argue that growth overall is set to accelerate, but the data du jour suggest that it’s not getting any easier to be a pessimist when it comes to big-picture macro analysis.
Is The Latest Rise In Housing Permits A Sign Of Things To Come?
Yesterday’s surprisingly strong update on newly issued housing permits is a convincing signal for expecting that the residential real estate market will continue to grow in the near term. The double-shot releases of September and October data for permits beat expectations by a healthy margin. Last month’s number was especially strong, with permits rising to a 5-year high. The release of the hard data on housing starts, which usually accompanies the permit numbers, has been postponed until Dec. 16. But since permits and starts tend to track one another through time, yesterday’s upbeat news suggests that it’s likely that the triple play of September, October and November starts data that we’ll see next month will tell an encouraging tale.
November 26, 2013
Chicago Fed Nat'l Activity Index: October 2013 Preview
The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to increase slightly to 0.04 in tomorrow’s update for October (scheduled for release on November 27), according to The Capital Spectator's average econometric forecast. In the previous release for September, the three-month average was estimated at -0.03. Values below -0.70 indicate an "increasing likelihood" that a recession has started, according to guidelines from the Chicago Fed. Based on today's estimate, CFNAI's three-month average is projected to remain at a level that's historically associated with economic expansion and at a marginally higher-than-average trend rate.
Mr. Market's Asset Allocation Is Still Tough To Beat
The last five years have been anything but typical for financial markets, primarily because macroeconomic conditions around the world have been conspicuously abnormal. From heightened uncertainty about economic growth to extraordinary monetary policies, there’s no shortage of reasons to argue that much has changed since the world flirted with meltdown in late-2008. Five years after looking into the abyss, and living to tell the tale, it’s reasonable to ask: Has recent history helped or hindered our efforts to design and manage multi-asset class portfolios?
November 25, 2013
US Economic Profile | 11.25.13
The US economy has weathered some turbulence in recent months, including a government shutdown, higher interest rates, and a downturn in the mood among consumers. A subjective interpretation of these and other events suggests trouble for the business cycle, but for the moment that’s still assuming facts not in evidence. Macro risk remains low overall, based on measuring the broad trend via 14 economic and financial indicators. The Economic Trend (ETI) and Momentum indexes (EMI) continue to hover at levels that are well above their respective danger zones—levels that imply that the risk of a new recession was low through October.