For our final act of 2023, here’s the second installment to Best of Books 2023. Last week we reviewed highlights from this column over the past year — here’s the follow-up installment of books that captured our attention over the preceding 12 months. Happy reading–and Happy New Year!

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The Capital Spectator is pulling the plug on the rest of the year and slipping out the door. Other than part II for Book Bits on Saturday (Dec. 30), it’s arrivederci unti we return on Tues., Jan. 2. Meanwhile, be safe, be smart, be well. Ciao!

The outlook for the US economy is on track to close 2023 with a relatively upbeat outlook for the fourth quarter, based on a set of nowcasts compiled by CapitalSpectator.com.

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* Escalating attacks on US troops and shipping threaten wider Middle East war
* How did so many economists mistakenly forecast a US recession?
* 76% of economists see US recession risk at 50% or less in next 12 months
* US home prices post biggest gain of 2023 in October
* Texas factory activity stabilized in December after November contraction
* US economic activity rebounds in November–Chicago Fed Nat’l Activity Index:

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The US bond market has had a rough ride for much of the past two years, but the powerful rally over the last two months suggests the worst is over. Cherry-picking analytics from the recent crop of 2024 outlooks that are seasonal standards this time of year provides inspiration for thinking that the new year could reverse more (all?) of the damage inflicted on fixed income since the Federal Reserve starting raising interest rates in March 2022.

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* US strikes Iran-backed militias in Iraq
* Geopolitical risk and 50 elections lurking for world economy in 2024
* Inflation around the world is slowing faster than expected, but…
* Residual high inflation has soured consumers’ views of economy
* 12 reasons to remain bullish in 2024: Yardeni Quicktakes
* Economists expect inflation will return to “normal” in 2024
* PCE inflation, Fed’s preferred price gauge, rises less than expected in Nov:

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It’s time once more to look back on CapitalSpectator.com’s weekly Book Bits column and pluck a few of the more memorable titles from the archives. Per the usual routine, as each year draws to a close, we revisit ten books from 2023’s travels — titles that, for one reason or another, caught your editor’s eye and deserve another look before New Year’s celebrations commence. We’ll start with five today, followed by the balance in a week. Happy reading!

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Visions of sugar plums aren’t yet dancing in my head, but I thought I heard the laugh of a right jolly old elf. Or was it the neighbor’s cat? No matter — the world headquarters of The Capital Spectator is now closed, reopening on Tuesday, Dec. 26. Meanwhile, excuse me as take my leave like the down of a thistle. Cheers!

Factor Zoo (.zip)
Alexander Swade (Lancaster University) et al.
October 2023
The number of factors allegedly driving the cross-section of stock returns has grown steadily over time. We explore how much this ‘factor zoo’ can be compressed, focusing on explaining the available alpha rather than the covariance matrix of factor returns. Our findings indicate that about 15 factors are enough to span the entire factor zoo. This evidence suggests that many factors are redundant but also that merely using a handful of factors, as in common asset pricing models, is insufficient. While the selected factor styles remain persistent, the specific style representatives vary over time, underscoring the importance of continuous factor innovation.

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* Small group of Wall Street economists still see US recession lurking, but…
* Fear of recession is starting to fade for Americans
* Warner Bros in merger talks with Paramount
* 5 portfolio lessons from 2023, including: Don’t Fight the Fed
* US existing home sales rise in November–first gain in 5 months
* US Consumer Confidence Index rebounds sharply in December:

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