Will The Weak Housing Market Pinch The Economy?

The latest batch of housing numbers offer a mixed view at best for this key sector. The March data for new housing starts and residential building permits are above their recent lows, but the gains are sluggish compared to the rates of increase from 2011 through early 2013. And that’s the good news vs. home sales, which have been sliding recently. Purchases of existing houses last month slumped to the lowest level in nearly two years while sales of new homes in March dropped to a nine-month low.
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Manufacturing Employment Signals Economic Growth

It’s widely recognized that the manufacturing sector is highly sensitive to the business cycle. Employment trends in this corner tend to react earlier to macro distress compared with payrolls generally. As a result, monitoring this slice of the labor market offers a valuable benchmark for evaluating the macro trend. The good news is that these numbers point to economic growth for the foreseeable future.
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Is US Inflation Headed Higher?

Has the slow decline in the pace of consumer price inflation in the US hit bottom? If so, is that good news for the economy? A cautious “yes” applies in both cases, albeit with the usual caveats. Looking at the core reading of consumer price inflation through last month suggests that the price trend has a floor around the 1.6% rate. We won’t know for sue until future reports arrive, but it’s getting easier to think that we’ve seen the trough. If so, that’s an encouraging transition for the economic outlook.
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Ranking ETFs On Momentum

I’m always on the prowl for rebalancing opportunities–in particular, those moments when the odds look unusually high for success in one or more ETFs. Instances of screaming buys or sells are rare, of course, and when they do arrive the free low-cost lunch doesn’t last long. Accordingly, it’s essential to monitor the ebb and flow of markets on a regular basis so that you can grab a pearl before it turns back into a sow’s ear.
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Book Bits | 4.19.14

Risk Savvy: How to Make Good Decisions
By Gerd Gigerenzer
Summary via publisher, Viking
In the age of Big Data we often believe that our predictions about the future are better than ever before. But as risk expert Gerd Gigerenzer shows, the surprising truth is that in the real world, we often get better results by using simple rules and considering less information. In Risk Savvy, Gigerenzer reveals that most of us, including doctors, lawyers, financial advisers, and elected officials, misunderstand statistics much more often than we think, leaving us not only misinformed, but vulnerable to exploitation. Yet there is hope. Anyone can learn to make better decisions for their health, finances, family, and business without needing to consult an expert or a super computer, and Gigerenzer shows us how.
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Chicago Fed Nat’l Activity Index: Mar 2014 Preview

The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to decline slightly to -0.26 in the March update that’s scheduled for release on Monday (April 21), according to The Capital Spectator’s median econometric forecast. In the previous release for February, the three-month average was -0.18, a reading that equates with relatively weak economic growth. Only 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 for March, CFNAI’s three-month average is projected to remain at a level that’s historically associated with growth, but at a moderately below-trend pace.
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US Economic Profile | 4.18.14

So much for pessimism. Most of the key economic reports for March are in and the general message looks encouraging… again. You can never say anything definitive about the business cycle in real time, but the data in hand today strongly suggest that the recent turbulence in some economic reports was only a temporary blip in an ongoing run of moderate growth.
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A Bullish Disconnect Between Stocks & Inflation

There’s a growing list of economic clues that suggest that the moderate pace of expansion, although battered and bruised in January and February, revived last month. Consider yesterday’s update on industrial output, which increased 0.7% in March—a gain that translates into a respectable 3.8% annual rise. Housing starts still look shaky, but most of the other key indicators at the end of this year’s first quarter point to growth. Here’s one more piece of empirical support for thinking positively when it comes to the macro trend: stable inflation expectations and a rising stock market.
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Searching For Banking Regulation’s Godiva

The Federal Reserve is mulling a new set of tougher banking rules to boost the odds that the financial system will remain sufficiently liquid when the next crisis strikes. It’s a worthy goal, if only because one day another event will surely arrive. But all the usual caveats apply when it comes to engineering outcomes in economics, starting with the sober reality that any efforts to sidestep implosion due to banking turbulence are forever linked with the potential for blowback by way of moral hazard. In fact, there can be no permanent solution for managing bank risk if the goal is simultaneously keeping the threat of bank runs to a minimum while maximizing prudence in matters of investing and lending in the private sector. The ideal regulatory prescription that promotes each of these two competing interests is in constant flux due to the ebb and flow of the business cycle.
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