Book Bits |23 July 2016

Overcomplicated: Technology at the Limits of Comprehension
By Samuel Arbesman
Review via Publishers Weekly
Arbesman (The Half-Life of Facts), a self-described “complexity scientist,” presents a new framework for understanding and working with complex technological systems in this thought-provoking treatise. Arbesman argues that technological systems have become so complicated that not even those who design them fully understand how they work, nor do they always know what to do when their systems fail or return unexpected, possibly catastrophic results. He illustrates this through numerous examples of flaws or breaks in increasingly sophisticated systems such as traffic control, the stock market, machine translation, and medical devices.
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Is Recession-Risk Monitoring Useful For Investing?

There’s a myth going around that tracking the business cycle is a waste of time for investors. On the surface, the reasoning sounds logical. By the time it’s clear that the US has slipped into a recession, it’s too late to tone down equity positions because Mr. Market has already incorporated this information into prices. But the historical record offers a different story–and a different lesson, namely: carefully monitoring recession risk can be helpful for sidestepping the worst of a stock market correction that unfolds because of economic contraction. Skeptical? Of course you are, and rightly so. In the tortured realm of the macro-markets nexus, we’re up to our eyeballs in conflicting and misleading commentary and analysis. But let’s cut through the noise and allow the numbers to tell the story.
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Utility Stocks Power On

Upside momentum continues to favor utility stocks, which retain top billing among US sectors in the one-year total return column via a set of proxy ETFs. These companies have been strong all year, which is starting to worry some analysts. Brian Krawez at Scharf Investments, for instance, told Forbes this week that he’s recommending that investors steer clear of utilities because “they’re trading well above their historical averages in terms of multiples.” Maybe so, but the technical profile in this corner still looks strong. The positive momentum will fade eventually, although it’s not obvious from the rear-view mirror that the turning point is imminent.
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Chicago Fed Nat’l Activity Index: June 2016 Preview

The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to tick higher in tomorrow’s Thursday’s June report, based on The Capital Spectator’s average point forecast for several econometric estimates. The average projection for -0.17 reflects a moderate improvement over the previous month. The forecast for June continues to anticipate that US economic growth is running below the historical trend rate for expansion. But the projection also points to a 3-month CFNAI reading that’s well above the level that marks a new NBER-defined recession.
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Is Inflation Headed Higher? Recent History Leaves Room For Doubt

In some quarters, forecasts of sharply higher inflation in the US have become a perennial warning since the Great Recession ended in mid-2009. The Federal Reserve’s extraordinary efforts with monetary stimulus, the reasoning goes, is destined to unleash runaway inflation any day now. Those expectations have yet to align with the hard numbers. But in the wake of last month’s surprisingly strong payrolls report, the inflation hawks have a fresh set of talking points to discuss. Is it really different this time? For some insight, let’s review the historical relationship between inflation and wage growth.
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