It’s all about expectations. A nebulous concept, to be sure, but one that’s not beyond influencing macro outcomes with some control via monetary policy. To what extent? To what end? Ideally, it runs like this, as per Professor David Beckworth: “Here is why I think QE will pack an economic punch, if done correctly. The expectation of permanently higher prices will cause cash-flushed firms, households, and other entities to start spending more today. Right now there is an excess money demand problem that could be stemmed by meaningfully changing the inflation outlook.”
Monthly Archives: November 2010
ANOTHER LOOK AT REBALANCING…
Is rebalancing a tool for managing risk? Or maybe it’s a source for minting benchmark-beating returns. No, wait–it might be both. Really? In the new issue of Financial Advisor magazine, I take a fresh look at rebalancing in: Rethinking Rebalancing.
QE2’s SUCCESS SO FAR…
Critics of the anticipated launch of the Fed’s new round of quantitative easing (QE2) to lower medium and long-term interest rates have fallen into two broad camps. One says that the policy won’t work. The second argues that QE2 threatens to create new problems for the economy, ranging from higher inflation that spirals out of control to asset bubbles and other negative consequences. And, of course, some attacks incorporate both of these points.
PERSONAL INCOME SLIPS, SPENDING RISES FOR SEPTEMBER
Disposable personal income (DPI) slipped last month while personal consumption expenditures (PCE) rose, the U.S. Bureau of Economic Analysis reports. The mixed profile for September isn’t surprising these days, although it does offer one more piece of statistical evidence for keeping optimism in check about the near-term prospects for economic growth.
THE BRAVE NEW (AND EVOLVING) WORLD OF ALTERNATIVE BETAS
PowerShares is planning to launch five factor ETFs based on the S&P 500, according to an SEC filing. It’s one more sign that a new era is dawning for alternative betas and enhanced asset allocation opportunities.