● The Little Book of Sideways Markets: How to Make Money in Markets that Go Nowhere
By Vitaliy N. Katsenelson
Excerpt via publisher, John Wiley & Sons
Get ready for a great roller-coaster rise in the markets. For the next decade or so the Dow Jones Industrial Average and the S&P 500 index will likely do what they did over the preceding decade: go up and down, setting all-time highs and multiyear lows along the way. But at the end of the rise, index and buy-and-hold stock investors, having experienced ups and downs and swings akin to those on an amusement park rise, will find themselves pretty much back where they started.

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The U.S. Bureau of Economic Analysis published several economic reports today that collectively offer a mixed bag of macroeconomic news. The updates on new orders for durable goods, personal income and spending, and weekly jobless claims are usually dispatched on separate days. Because of the Thanksgiving holiday tomorrow, all three were released this morning, leaving an unusually hefty dose of statistics to review. Here’s a brief tour of some of the noteworthy data points:

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Keynes was no fan of the gold standard. In fact, he railed against it. In the mid-1920s, for instance, he pressed Winston Churchill to take England off the gold standard. Curiously, Robert Skidelsky, who’s written a best-selling biography that’s favorable to the economist—Keynes: The Return of the Master—seems to favor the gold standard.

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The U.S. economy expanded at a stronger pace in the third quarter than initially estimated, the Bureau of Economic Analysis (BEA) reports. The inflation-adjusted output of the nation’s goods and services rose at an annual rate of 2.5% for the three months through October, up from the 2.0% pace originally estimated for Q3. That puts a bit more distance over the second quarter’s lesser 1.7% gain.

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It’s human nature to search for a concise explanation of cause and effect. A reasonable pursuit with satisfactory results, most of the time. But untangling financial crises is different.
The new book All the Devils Are Here: The Hidden History of the Financial Crisis is a reminder that the near-implosion of the global financial system in late-2008 was the byproduct of multiple events over a period of years. Although some pundits are keen on pointing fingers at specific decisions by Congress or the Fed or certain financial institutions, there is no short list of catalysts that triggered the worst financial crisis since the Great Depression.

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Sometimes the risk is a bit more than investors bargained for, as reported by Bloomberg:
FBI raids seeking documents from three investment firms are related to hedge fund insider trading investigations directed by the office of Manhattan U.S. Attorney Preet Bharara, according to a person familiar with the probes. The offices of Level Global Investors LP and Diamondback Capital Management LLC, firms founded by alumni of SAC Capital Advisors LLC, were searched by Federal Bureau of Investigation agents, the government said today. Agents also executed a search warrant at the offices of Loch Capital Management, according to another person familiar with the matter. Both declined to be identified because the probes are ongoing. “The government has decided it needs to use force to obtain all the information,” said Jacob Frenkel, a former federal prosecutor and lawyer with the Securities and Exchange Commission. “It has opted not to issue grand jury subpoenas but instead use the search warrant process.”

As 2010 winds down, it’s time for a refresher on performance perspective for the global equity markets. The general theme: year-to-date returns are strong. Equity indices around the world have posted respectable if not stellar returns in 2010 through November 19, depending on the benchmark. Unsurprisingly, there’s also a bull market among active equity managers claiming unusual degrees of skill in the dark art of stock picking. Some of the congratulatory chatter is legitimate, but the primary explanation is the bullish tailwind that’s been blowing this year.

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● The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation
By Gary Shilling
Video interview with author via Daily Finance
Economist Gary Shilling, who correctly predicted the financial collapse, just released a new book, The Age of Deleveraging. In it Shilling explains why inflation isn’t what investors should be fearing, but rather deflation. He also explains why he thinks the U.S. economy is in for a period of slow growth, talks about his outlook for stocks–and provides recommendations on 10 investments investors should now make.

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Yesterday’s update on consumer price inflation for October offers few reasons to think that disinflation has been banished. That means it’s too soon to dismiss the risk that deflation may turn into outright deflation down the road. That’s probably a low risk, thanks to the Federal Reserve’s monetary stimulus efforts. But it’s a risk that’s not yet low enough to send this potential pitfall to the museum of irrelevant economic hazards. In a world struggling with unusually high levels of debt and weak growth, deflation still can’t be ruled out.

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The Journal of Financial Planning has just published a review of my book, Dynamic Asset Allocation: Modern Portfolio Theory Updated for the Smart Investor.