I’ll be moderating the 2pm panel at IMN’s 3rd Annual World Series of ETFs & Investment Management conference on May 7 at the Seaport World Trade Center in Boston. The topic under discussion: using ETFs for managing downside risk.
Author Archives: James Picerno
Presidential Politics & The Business Cycle
War and the business cycle are the two primary factors influencing presidential elections. There are other forces, of course, but it’s hard to win if one or both of these big-picture variables are working against you.
Book Bits | 4.21.2012
● Land of Promise: An Economic History of the United States
By Michael Lind
Review via History Book Club
This election year offers Americans an unusually clear choice between competing visions of the republic: On the one hand a minimalist government presiding over a lightly-taxed populace left free to succeed (or not) on their own devices; or a more actively engaged government intervening in economic development and social policy to pursue what it perceives as the general welfare. Michal Lind’s splendid new economic history of the United States shows that these two competing visions are almost as old as the republic itself. This is a book that would be welcome anytime, but that is especially timely in the run-up to the 2012 elections. Anyone even slightly acquainted with American history will recognize these as the Jeffersonian and Hamiltonian strains of American public policy. Yet history is full of ironies: Jefferson remains one of the great heroes of the Democratic Party, but the real Jeffersonians of our time are the Tea Party Republicans, while Democrats tend to be Hamiltonian in outlook. The strands of history make a tangled skein. Michael Lind untangles those strands for us in this lucid, fascinating, highly readable book. He presents American economic history as a succession of “republics,” each characterized by its own economic forces and policies, each destabilized by the forces that would create its successor.
Strategic Briefing | 4.20.12 | Conference Board’s Leading Indicator Rises In March
US Leading Economic Indicator Increases
Conference Board | Apr 19
The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.3 percent in March to 95.7 (2004 = 100), following a 0.7 percent increase in February, and a 0.2 percent increase in January. Says Ataman Ozyildirim, economist at The Conference Board: “The LEI increased for the sixth consecutive month, pointing to a more positive outlook despite subdued consumer expectations and weakness in manufacturing new orders. Moreover, the six-month growth rate of the LEI continues to improve. The CEI, a measure of current economic conditions, has also increased in five of the last six months, with broad based gains in all components.”
Is The Recent Rise In Jobless Claims Warning Of Another Spring Slowdown?
A week ago I wondered if the rise in jobless claims in the first week of the month was due to a seasonal factors, and the inquiry still stands. But as you’ll see, today’s update raises more questions than it answers, although the short list of potential culprits starts with the seasonal influence of Easter. As for the straight numbers, new filings for unemployment benefits last week fell slightly by 2,000 to a seasonally adjusted 386,000. Historical context is always crucial for evaluating the number du jour, and more so than usual with today’s news.
Expecting Good News
When we last checked in on the “new abnormal”—an unusually tight connection between the market’s expectations for inflation and growth—the relationship was alive and kicking. A month later, nothing has changed, or so it appears. Taken at face value, that’s encouraging. Implied inflation (defined as the yield spread on the 10-year Treasury less its inflation-indexed counterpart) and the S&P 500 stock market index (a proxy for growth expectations) are still joined at the hip. In recent years, a fall in the inflation outlook has preceded macro weakness. But there’s no sign of that anxiety. For what it’s worth, the crowd isn’t in pricing new troubles, at least nothing that’s radically different from the usual afflictions of recent months.
Strategic Briefing | 4.18.12 | Is Euro Risk On The Rise Again?
Debate Grows as Europe Fears Return of a Crisis
New York Times | April 17
The European financial crisis has shown signs of reigniting in recent days, sharpening the debate between the champions of austerity and a growing chorus urging more expansionary policies to promote growth. Even the traditionally hard-line International Monetary Fund called on Tuesday for stronger European nations to ease the fiscal brakes by stretching out budget cuts over a longer period. But if that message was intended foremost for Germany, it seemed destined to fall on deaf ears: with two state elections coming up next month, Chancellor Angela Merkel is unlikely to shift her position, popular with voters, against additional help for the economies of struggling European partners.
Industrial Production In March Is Flat… Again
The view that the economy’s recent strength was boosted by a warm winter looks a bit more convincing after reviewing this morning’s March report on industrial production. After strong gains in December and January, March delivered the second straight month of no change in the Fed’s industrial production index.
Housing Starts Retreat As New Housing Permits Rise Sharply
New construction on residential housing slowed sharply last month, the Census Bureau reports, while newly issued permits in March rose to the highest level since September 2008. In other words, there’s mixed news on the housing front, although the ongoing climb in new permits suggests that construction activity will soon be turning higher.
Research Review | 4.17.2012 | Asset Allocation
Tactical Asset Allocation Using Relative Strength
John Lewis (Dorsey Wright Money Management) | March 2012
Relative strength strategies have a long history of delivering market-beating returns. A great deal of research in this area has been devoted to models using common stocks. While some studies show that RS works well using asset class data, the body of research is not as large. Our research shows that relative strength is a very valuable factor for selecting asset classes. When looking at the relative performance of various asset classes over an intermediate-term time horizon it is certainly possible to achieve returns better than standard, broad-based benchmarks. Achieving these returns often requires patience because relative strength strategies can get out of synch with the market. However, the adaptive nature of relative strength allows the process to adapt to the changing leadership over time.