Does the government that governs least also govern best? The famous quote will be put to the test if Congress and the White house don’t resolve the “Taxmageddon” train wreck coming our way. What’s at stake? Perhaps economic growth, according to a new report from the Congressional Budget Office: “Economic Effects of Reducing the Fiscal Restraint That Is Scheduled to Occur in 2013.”
Monthly Archives: May 2012
Bubbles, Rebalancing and Asset Allocation
Remember the bond bubble? This is the prediction that bonds are subject to irrational exuberance and so they’re vulnerable to a crash any day now. Analysts have been warning that the end is near for several years. Meantime, the rally rolls on.
Chicago Fed National Activity Index Rose In April
A broad reading on economic activity turned higher last month. “Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.11 in April from –0.44 in March,” the Chicago Fed reports. Meanwhile, the index’s three-month moving average slipped a bit to -0.06 from March’s +0.02. But that’s still far above the -0.70 value that the Chicago Fed advises is an early warning sign of a new recession. By that standard, we’ll need to see a dramatic deterioration in economic reports in the weeks ahead to argue convincingly that a new recession is fate. Some analysts already say the jig is up. Perhaps, but for the moment a dismal outlook from dismal scientists is still more of a forecast that a recognition of current conditions.
Strategic Briefing | 5.21.12 | Taxmageddon & The Economy
How ‘Taxmageddon’ would affect the U.S. economy
The Washington Post | May 17
What will the economy look like in 2013? A great deal depends on what Congress decides to do at the end of this year. Remember, the Bush tax cuts are expiring, the payroll tax holiday will sunset, and a bunch of new spending cuts under the debt-deal “sequester” are scheduled to kick in. Coming all at once, that’s a potentially big drag on growth.
Book Bits | 5.19.2012
● The 7 Most Important Equations for Your Retirement: The Fascinating People and Ideas Behind Planning Your Retirement Income
By Moshe Milevsky
Summary via publisher, Wiley
Physics, Chemistry, Astronomy, Biology; every field has its intellectual giants who made breakthrough discoveries that changed the course of history. What about the topic of retirement planning? Is it a science? Or is retirement income planning just a collection of rules-of-thumb, financial products and sales pitches? In The 7 Most Important Equations for Your Retirement…And the Stories Behind Them Moshe Milevsky argues that twenty first century retirement income planning is indeed a science and has its foundations in the work of great sages who made conceptual and controversial breakthroughs over the last eight centuries. In the book Milevsky highlights the work of seven scholars—summarized by seven equations—who shaped all modern retirement calculations. He tells the stories of Leonardo Fibonnaci the Italian businessman; Benjamin Gompertz the gentleman actuary; Edmund Halley the astronomer; Irving Fisher the stock jock; Paul Samuelson the economic guru; Solomon Heubner the insurance and marketing visionary, and Andrey Kolmogorov the Russian mathematical genius—all giants in their respective fields who collectively laid the foundations for modern retirement income planning.
Passive Asset Allocation Strategies Are Still Tough To Beat
Brett Arends of SmartMoney skewers the simple stock/bond balanced fund strategy, and rightly so. There’s no reason to rely on a basic equity/fixed income mix in a world where a wider array of asset classes are available through low-cost ETFs.
Jobless Claims Were Unchanged Last Week
No news is still good news for jobless claims. The risk that the labor market’s revival has stalled is still on everyone’s mind, but there’s nothing ominous in today’s update on new filings for unemployment benefits. Claims were flat last week, holding steady at a revised 370,000 on a seasonally adjusted basis. The number du jour is a yawn, and for the time being that’s ok. Treading water has a short shelf life for inspiring confidence, but for the moment a broader review of the numbers continue to suggest that job growth will roll on.
The Economic Implications Of Quantifying Policy Uncertainty
Is policy uncertainty holding back the economic recovery? Stanford economics professor John Taylor says it is and writes that “recent research by Ellen McGrattan and Ed Prescott (on increased regulations) and by Scott Baker, Nick Bloom, and Steve Davis (on policy uncertainty) supports this view.” The U.S. Chamber of Commerce also advises via its recent small business survey that “concerns about over-regulation are the highest we’ve seen in the past year, with 42% of small businesses citing it as a major concern and 52% citing regulations as the top threat to their business.”
Industrial Production Rebounds Sharply In April
If you’re looking for evidence that recession risk is rising, you won’t find it in today’s update on industrial production, which surged 1.1% in April—the biggest monthly rise since December 2010. The cycle may be drag us down in the months ahead, but industrial production is putting up a pretty good imitation of swimming against the tide.
Retail Sales Growth Turns Sluggish In April
Retail sales rose a meager 0.1% last month on a seasonally adjusted basis, the smallest monthly gain since December, the Census Bureau reports. The retreat in the growth rate isn’t terribly surprising, given the relatively strong pace in each month during the first quarter. Nonetheless, today’s sales news won’t inspire confidence amid all the renewed worries about the potential blowback for the global ecoomy if Greece leaves the euro and the possibility of rising recession risk in the U.S.