There are countless investment strategies, but arguably there’s only one true benchmark: the market portfolio, defined as a passive allocation to all the major asset classes, initially weighted by the relative dollar values and thereafter left to the whim of market fluctuation.
This benchmark isn’t necessarily appropriate for everyone as an investment strategy, although it’s easy and inexpensive to build, thanks to the proliferation of index funds, ETFs and ETNs. Yes, it’s a mindless measure of the risk and return profile from a broad-minded definition of markets. And yet the results over time, although middling (as you’d expect), look pretty good these days.

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Fed Chairman Ben Bernanke will be chatting up the central bank’s exit strategy later this week when he testifies before the House Financial Services Committee on February 10. To say that there are political and economic risks hovering over the subject is to understate the potential hazards.
There are risks to tightening too early, which some worry would repeat the mistakes of 1936-1937, when reserve requirements were tightened and the economy slipped into recession. At the same time, it’d be foolish to discount the potential for higher inflation in the years ahead in the wake of the extraordinary monetary stimulus over the past year or so. Regardless of the economic reality, the political pressure to keep rates low is intense, given the weak labor market.

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Today’s employment report was, well, discouraging. Or was it? The range of opinion was unusually wide, or so it seems.
The reported facts, at least, are clear. Quoting from the Labor Department’s press release, “The unemployment rate fell from 10.0 to 9.7% in January, and nonfarm payroll employment was essentially unchanged (-20,000), the U.S. Bureau of Labor Statistics reported today. Employment fell in construction and in transportation and warehousing, while temporary help services and retail trade added jobs.”
But that’s just the beginning. Or is it the end? You decide. Here’s a sampling of the commentary on today’s numbers that, for one reason or another, caught our attention…

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Martin Fridson of Fridson Investment Advisors reviews my new book, Dynamic Asset Allocation: Modern Portfolio Theory Updated for the Smart Investor, via the CFA Institute.

Always a bridesmaid, never a bride. That about sums up the struggle in nonfarm payrolls to reach the tipping point of growth (or at least zero).

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Mercer, the consultancy, has some thoughts. Ten, to be exact…
1. Superannuation legislation will force change in the way we look at retirement and how retirement savings are invested
2. A weaker global banking system will create opportunities for private credit
3. Emerging market growth will outstrip developed markets, but equity markets may have priced this in
4. Environmental, Social and Governance (ESG) factors will continue to rise on investors’ radar
5. Investors will critically examine their investment strategies in the context of evolving deflation/inflation risks
6. Dynamic Asset Allocation (medium-term asset allocation tilts) will be de rigueur to capture market mispricing in the medium-term
7. Investors will undertake more due-diligence on hedge fund strategies
8. The big “macro” moves may be behind us – time to become “micro”?
9. Super funds will question the role of illiquid assets in their portfolios
10. Diversification will remain key.

Yields on short-term government securities vary from just above zero (10 basis points for 3-month T-bills) to around 1% (88 basis points for a 2-year Treasury). Those are extraordinarily low rates by the standards of recent decades. But don’t confuse that with borrowing costs, or the demand or ability to borrow.

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Last week we pondered the possibility that an ill wind was blowing in what had been a fairly consistent decline in initial jobless claims. Today’s update on new filings for jobless benefits doesn’t offering a soothing follow-up. If anything, we’re more anxious.

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Economist Scott Sumner makes the case that if we need more stimulus, it should be of the monetary variety rather than fiscal. That sounds about right, based on my analysis at 2009’s close that if there’s any evidence in favor of economically stimulating stimulus over the past year or so, the clues suggest that the monetary toolkit was the productive catalyst for averting a deeper contraction/crisis.

I’ll be discussing the finer points of portfolio strategy, strategic-minded investing and my new book (Dynamic Asset Allocation: Modern Portfolio Theory Updated for the Smart Investor) this coming Monday evening, February 8, on the Gabriel Wisdom Radio Show. The 60-minute show airs at 7 p.m. on the East Coast (4 p.m in the West). I’m scheduled for 7:30 eastern time. You can listen live via the link above or by way of the conventional channels with terrestrial radio (find your local station here.) In addition, the show will be archived here.