Book Bits | 8 July 2017

Will Robots Take Your Job?: A Plea for Consensus By Nigel M. de S. Cameron
Summary via publisher (Polity)
The trend that began with ATMs and do-it-yourself checkouts is moving at lightning speed. Everything from driving to teaching to the care of the elderly and, indeed, code-writing can now be done by smart machines. Conventional wisdom says there will be new jobs to replace those we lose – but is it so simple? And are we ready? Technology writer and think-tank director Nigel Cameron argues it’s naive to believe we face a smooth transition. Whether or not there are “new” jobs, we face massive disruption as the jobs millions of us are doing get outsourced to machines. A twenty-first-century “rust belt” will rapidly corrode the labor market and affect literally hundreds of different kinds of jobs simultaneously.
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US Job Growth Rebounds In June, But 1-Year Trend Eases

US companies added 187,000 workers to payrolls in June, a moderate improvement over the upwardly revised 159,000 increase in the previous month, the Labor Department reports. That’s a healthy gain that suggests the economy overall remains on a positive track for the near term. But the year-over-year trend continues to point to softer growth generally for the labor market – a sign that economic activity may be vulnerable to deceleration in the second half of the year.
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The Economic Trend Usually Looks Positive When Recessions Start

Recognizing when a recession starts in real time is, for all practical purposes, impossible. The one exception to that rule is if you’re willing to endure a high number of false signals in your model. In that case, you’ll see lots of new recessions starting, but only a handful will be the genuine article. But if reliability with a low error rate is required — as it should be – the usual routine won’t suffice. Instead, you’ll need a methodology that focuses on a broad set of key indicators. No less critical is how you define the analysis of the dataset. An optimal set of indicators won’t mean much if you’re running the analysis with a shaky modeling framework.
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Book Bits | 1 July 2017

Before Babylon, Beyond Bitcoin: From Money that We Understand to Money that Understands Us
Review via The Economist
People use money every day and yet struggle to understand it. The economic experiment known as monetarism—limiting the supply of money in order to control inflation—was abandoned when it became clear it was impossible to establish a precise definition of the money supply. The idea of negative interest rates, introduced by some modern central banks, puzzles those who think that savers should be rewarded for thrift.
“Before Babylon, Beyond Bitcoin” by David Birch, a consultant, offers a broad historical overview on the nature of this essential economic instrument. His underlying thesis is that money has evolved over the ages to suit the needs of society and the economy.
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Research Review | 30 June 2017 | Searching For Alpha

US Sector Rotation with Five-Factor Fama-French Alphas
G. Sarwar (University of Greenwich), et al.
June 16, 2017
In this paper we investigate the risk-adjusted performance of US sector portfolios and sector rotation strategy using the alphas from the Fama-French five factor model. We find that five-factor model fits better the returns of US sector portfolios than the three factor model, but that significant alphas are still present in all the sectors at some point in time. In the full sample period, 50% of sectors generate significant five-factor alpha. We test if such alpha signifies a true sector out/underperformance by applying simple long-only and long-short sector rotation strategies. Our long-only sector rotation strategy that buys a sector with a positive five-factor alpha generates four times higher Sharpe ratio than the S&P500 buy-and-hold. If the strategy is adjusted to switch to the risk-free asset in recessions, the Sharpe ratio achieved is ten-fold that of the buy-and-hold. The long-short strategy fares less well.
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