The sharp rise in gasoline prices over the past year has all but eaten up the payroll tax cut enacted late last year, advises Goldman Sachs via Fortune.com. The risk is that the ascent of fuel costs cuts sharply into consumer spending, which has been buoyant lately. “A key reason for concern is the sharp rise in gasoline prices so far in 2011 — nearly 70 cents per gallon — which is siphoning off household income at a run rate equivalent to $100 billion per year,” notes Goldman economist Andrew Tilton.
Author Archives: James Picerno
Strategic Briefing | 4.18.2011 | Small Cap Equities
Are Small Caps Too Pricey?
The Wall Street Journal | Apr 18
The market’s smallest stocks are commanding the largest premiums—and some of their biggest fans are becoming alarmed. The Russell 2000 Index, which comprises about 2,000 stocks with small market capitalizations, is within about 2% of a record closing high. It is a milestone that it looks destined to reach well before larger peers such as the Dow Jones Industrial Average and the Standard & Poor’s 500-stock index, which are off their record highs by 13% and 16%, respectively. Small companies now command the widest premium over large-cap stocks in at least a generation, based on the ratio of price to earnings.
Book Bits For Friday: 4.15.2011
● Boombustology: Spotting Financial Bubbles Before They Burst
By Vikram Mansharamani
Interview with author via The Leonard Lopate Show
Vikram Mansharamani, lecturer at Yale University and a global equity investor, explains how to identify unsustainable booms and forthcoming busts. Boombustology: Spotting Financial Bubbles Before They Burst gives an in-depth look at several major booms and busts and shows how to identify upcoming financial bubbles and the tell-tale signs of a forthcoming bust.
Are We At The Upper Range For “Safe” Inflation?
For the second consecutive month, consumer price inflation rose by 0.5% last month on a seasonally adjusted basis, the Labor Department reports. That’s the highest monthly rate in nearly two years. Higher energy and food costs are the key drivers for the higher inflation. In a world where inflation is bubbling around the globe—in China and India, for example—today’s news on U.S. inflation can’t be dismissed. But neither should today’s U.S. numbers be overstated.
New Jobless Claims Unexpectedly Rise Above 400k
New filings for jobless benefits rose by 27,000 on a seasonally adjusted basis last week—the biggest weekly increase in nearly two months. New claims, as a result, moved above the 400,000 mark for the first time in five weeks. It all adds up to a disappointment, but it’s too soon to wave the white flag. This is a volatile series and so no one should read too much into any one number. Meanwhile, the four-week moving average is still well below 400k, and so it’s not obvious that the recent downtrend has been broken.
3,768 Estimates Of The US Equity Risk Premium
What’s the outlook for the excess return on US stocks over the “risk free” rate? The answer varies with the forecaster, of course. For some insight into how much the estimates of the equity risk premium vary, two finance professors and an assistant recently polled thousands of professors, economists and assorted analysts and companies via email, receiving 3,768 responses with specific forecasts for 2011. Among the findings, detailed in a new working paper: the average risk premium “used by professors and companies is higher than the one used by analysts.”
Another Pitch For Nominal GDP Targeting
The idea that the Fed’s monetary policy should focus on stabilizing the growth rate of nominal GDP has been discussed at length by several economists since the Great Recession delivered an attitude adjustment in the land of macro. In fact, it’s an idea that’s been around in formal terms at least since the 1980s. But it’s not obvious that there’s any progress at the central bank, or in policy circles generally, for moving toward this worthy strategy, and so supporters of the concept keep on talking (and writing). The latest comes from David Beckworth, who lays out the reasoning in a concise essay in National Review.
Retail Sales Rise Again In March
Retail sales for March continued to climb, the U.S. Census Bureau reports. In fact, last month’s seasonally adjusted 0.4% rise in U.S. retail and food services sales was the ninth consecutive monthly increase.
Commodity Prices & Inflation. How Stong Is The Link?
Do big increases in commodity prices always lead to sharp increases in inflation? And while we’re pondering the topic, does a large drop in commodity prices invariably trim inflationary pressures? On both counts the answer is… no. Or so a new research essay from the Chicago Fed argues.
Will The Growth Momentum Last?
Small business confidence slipped last month, based on a report released today by National Federation of Independent Business. “It looks like everyone became more pessimistic in March,” said NFIB chief economist Bill Dunkelberg in a statement. “Or, perhaps, this is a ‘new normal’ and we are unlikely to see the surges usually experienced at the start of a recovery… Today’s recession-level reading is, all in all, a real disappointment.”