Martin Fridson of Fridson Investment Advisors reviews my new book, Dynamic Asset Allocation: Modern Portfolio Theory Updated for the Smart Investor, via the CFA Institute.

Always a bridesmaid, never a bride. That about sums up the struggle in nonfarm payrolls to reach the tipping point of growth (or at least zero).

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Mercer, the consultancy, has some thoughts. Ten, to be exact…
1. Superannuation legislation will force change in the way we look at retirement and how retirement savings are invested
2. A weaker global banking system will create opportunities for private credit
3. Emerging market growth will outstrip developed markets, but equity markets may have priced this in
4. Environmental, Social and Governance (ESG) factors will continue to rise on investors’ radar
5. Investors will critically examine their investment strategies in the context of evolving deflation/inflation risks
6. Dynamic Asset Allocation (medium-term asset allocation tilts) will be de rigueur to capture market mispricing in the medium-term
7. Investors will undertake more due-diligence on hedge fund strategies
8. The big “macro” moves may be behind us – time to become “micro”?
9. Super funds will question the role of illiquid assets in their portfolios
10. Diversification will remain key.

Yields on short-term government securities vary from just above zero (10 basis points for 3-month T-bills) to around 1% (88 basis points for a 2-year Treasury). Those are extraordinarily low rates by the standards of recent decades. But don’t confuse that with borrowing costs, or the demand or ability to borrow.

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Last week we pondered the possibility that an ill wind was blowing in what had been a fairly consistent decline in initial jobless claims. Today’s update on new filings for jobless benefits doesn’t offering a soothing follow-up. If anything, we’re more anxious.

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Economist Scott Sumner makes the case that if we need more stimulus, it should be of the monetary variety rather than fiscal. That sounds about right, based on my analysis at 2009’s close that if there’s any evidence in favor of economically stimulating stimulus over the past year or so, the clues suggest that the monetary toolkit was the productive catalyst for averting a deeper contraction/crisis.

I’ll be discussing the finer points of portfolio strategy, strategic-minded investing and my new book (Dynamic Asset Allocation: Modern Portfolio Theory Updated for the Smart Investor) this coming Monday evening, February 8, on the Gabriel Wisdom Radio Show. The 60-minute show airs at 7 p.m. on the East Coast (4 p.m in the West). I’m scheduled for 7:30 eastern time. You can listen live via the link above or by way of the conventional channels with terrestrial radio (find your local station here.) In addition, the show will be archived here.

Is it really necessary to remind folks not to spend the rent (or college) money on the slot machines? And if someone is actually engaging in such obsessive and self-destructive behavior, is a casual comment to do otherwise from a stranger on TV likely to make a difference? Apparently the President of the United States thinks so. Maybe he’s right. In that case, let me remind everyone to be sensible and avoid the following: driving with your eyes closed, investing every last dime of your life savings in out-of-the-money options and expecting that politicians will focus (and speak) on the priorities du jour.

ADP’s estimate of nonfarm payrolls for January shows a 22,000 decline. That’s in contrast with the consensus view of economists, who collectively expect a small rise of 13,000 in the official jobs report from the U.S. Labor Department, which is scheduled for release on Friday.

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Microcap stocks soared last year, even by the inflated standards of the broad market. The CRSP Decile 10 Index (the smallest of the small in micro-cap land) surged more than 80% last year vs. a bit more than 26% for the S&P 500.
Why didn’t investors in funds targeting this slice of equities reap the lion’s share of the rewards? Rick Ferri of Portfolio Solutions explains the gap (hat tip to Mebane Faber’s World Beta blog). Ferri argues that microcap index funds “don’t exist, because micro-caps are too small for index funds and ETFs to invest in.”
We’ll have more to say on the subject in the near future in terms of what it means for multi-asset class investing. Meanwhile, you can read Ferri’s article at Forbes.com.