Every financial crisis brings cries of more regulation. True in centuries past, true today. But more regulation isn’t always better regulation. And sometimes the knee-jerk reaction to do something, anything (if only to look politically astute) is a step backward.
Author Archives: James Picerno
HOUSING STARTS RISE, BUT NEW BUILDING PERMITS FALL
The housing market has stabilized. In fact, it’s safe to say that it’s rebounding. After being hammered for three consecutive years through early 2009, the trend is again friendly in housing construction. But the number of new building permits issued fell sharply last month. Is the nascent recovery in housing starts destined to follow?
MID-MONTH PORTFOLIO REVIEW
May’s shaping up to be a rough month for most of the major asset classes. The primary catalyst: debt worries. As investors become increasingly anxious over the ramifications of mounting deficit spending in Europe and throughout the developed world, risk aversion is the new new thing…again.
SATURDAY LINK LIST: 5.15.2010
Red-ink roundup: Here, there and everywhere…
INDUSTRIAL PRODUCTION & RETAIL SALES RISE IN APRIL
Retail sales rose in April—the seventh consecutive monthly increase, the government reported. Meanwhile, industrial production also rose last month—the third straight rise and the strongest since January. On a year-over-year basis, both measures are up sharply, suggesting that the broad trend in the economic recovery rolls on.
“DYNAMIC ASSET ALLOCATION” ON THE RECOMMENDED LIST
Online MBA, a business education website, listed my book–Dynamic Asset Allocation
STILL NO SIGN OF DOWNWARD MOMENTUM IN JOBLESS CLAIMS
Jobless claims dipped last week by a meager 4,000 to a seasonally adjusted 444,000, the Labor Department reported this morning. But even that spare decline is less than it seems. The previous week’s claims were revised up by 4,000, making the last two weeks more or less a wash, depending on whether you’re feeling statistically generous or not.
THE DOLLAR’S UP, AND SO IS GOLD. A WARNING SIGN?
Gold is trading at a record high today—roughly $1240/oz as we write this morning. The standard interpretation is that the metal is pricing in higher inflation in the years ahead. That’s an accurate reading of gold’s message, but the analysis is more complicated than usual once you consider the metal’s trend of late in context with other markets and the global economic climate. In the short term, the rising demand for gold is also telling us that the risk is rising (again) for a new wave of deflation in the months ahead.
INFLATION WILL “SAVE” THE EURO
Fiat currencies ultimately succumb to the follies of government largess, but the denouement rarely comes quickly. So it goes that the rumors of the euro’s death have been premature.
RATIONAL ASSET PRICING COMPLICATIONS
Is momentum investing irrational? Momentum here is defined as the persistence of recent pricing trends to continue in the short-term future. It’s not a trick question, but it’s complicated. As financial economics continues to identify “factors” (or alternative betas, if you prefer), the new insight both helps and hinders the effort to clarify the truth about asset pricing. One the one hand, documenting the case that securities prices are driven by more than the “market” beta represents an attack against modern portfolio theory and the efficient market hypothesis. Yet the same smoking guns can also be used to defend EMH. The momentum factor offers an intriguing example.