Yesterday I profiled the trend for a broad mix of economic and market indicators and reasoned that the case for expecting a new recession was still weak. Today’s weekly update on initial jobless claims supports that view: new claims dropped a hefty 26,000 last week to a seasonally adjusted 350,000—a new four-year low. Taken at face value, this looks like extraordinary news. The reality, however, may be far less encouraging. Last week’s decline is of questionable relevance because of a rather large seasonal adjustment that’s built into the calculation due to routine July shutdowns of auto plants for retooling.
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Recession Risk In Perspective
Lakshman Achuthan of the Economic Cycle Research Institute (ECRI) said that the U.S. is in a recession now. Speaking on Bloomberg TV yesterday, he argued that “I think we’re in recession already.” He may be right, but it’s impossible to know for sure at the moment. May is the latest full month of published economic data, and those numbers overall reflect growth. There are also a handful of June reports to review—payrolls and the ISM Manufacturing Index, in particular–and they aren’t particularly encouraging. But those two data points alone aren’t smoking guns either for arguing that a recession has started, as I discussed earlier via the links above. As for what the July data will tell us, we’ll have to wait until the reports begin to arrive in a few weeks.
GMI’s Ex Ante Risk Premium | June 2012 Update
The Global Market Index (a passive benchmark of all the major asset classes) has a history of delivering competitive returns against its actively managed competitors over the past decade. Surprising? Not really. It’s tough to beat the market generally, and the lesson applies to asset allocation too. A minority of skillful (lucky?) portfolio managers will, of course, outperform the averages when it comes to running multi-asset class portfolios. The mistake is thinking that the superior results will be widespread and easy to identify in advance. History suggests otherwise, which is one reason why a broadly defined strategy such as GMI is such a valuable benchmark. As an unbiased measure of return and risk for the global opportunity set, GMI tells us what’s available to every investor for minimal effort and at low cost via replicating this index via ETFs.
Strategic Briefing | 7.9.12 | Deflation Risk In China
Price Data Suggest Specter of Deflation in China
The New York Times | July 9
Prices are tumbling across the Chinese economy, according to government data released on Monday, as a flood of goods pouring out of the nation’s vast and ever-expanding factory cities exceeds anemic demand from Chinese households and businesses.
Book Bits | 7.7.2012
● Behavioral Finance and Investor Types: Managing Behavior to Make Better Investment Decisions
By Michael Pompian
Excerpt via publisher, Wiley
Why are somany people across the United States and other developed (and currently developing countries) in a position to accumulate wealth but have such a difficult time doing so? More often than not, the reason for this failure is that one’s own financial choices and behaviors sabotage otherwise well-intentioned efforts to achieve stated financial goals—assuming one’s goals are stated. For the purposes of this book, we will leave aside any discussion of the current outlook for the global economy, take no notice of the wealth distribution or wage levels, and stick primarily to the subject of personal financial management.
Another Disappointing Payrolls Report For June
Private-sector payrolls grew by a sluggish 84,000 on a net basis in June, the Labor Department reports. That’s down from the revised growth of 105,000 in May. It’s a disappointing report in absolute terms, and it doesn’t help that yesterday’s far-more encouraging ADP estimate inspired expectations that we’d see something better. But while no one can deny that the jobs growth is s-l-o-w, according to the government’s figures, it’s still premature to argue that it signals a new recession.
Jobless Claims Drop & The June ADP Employment Tally Perks Up
There’s still no sign of an imminent recession in the latest numbers for initial jobless claims. New filings for unemployment benefits last week dropped to a two-month low of 374,000 on a seasonally adjusted basis. Meanwhile, the year-over-year change in unadjusted terms posted a roughly 14% decline. There’s a lot of chatter about a slowing economy these days, based on certain indicators. Some pundits have already declared that another recession is fate. But fears that growth has hit a wall appear overblown based on today’s claims figures.
The Challenges Of Benchmarking Your Financial Adviser
Jason Zweig at The Wall Street Journal reminds us that analyzing an investment adviser’s performance record is still a complicated and convoluted affair. Performance alone shouldn’t be the only measure of an adviser’s value, but it’s not chopped liver either. So, how can we judge an adviser’s record? There are no short cuts, as Zweig points out. Although several consultancies have taken a stab at developing transparent and relevant adviser benchmarks—Brightscope and the Spaulding Group, for instance, according to Zweig—it’s debatable if the challenge has been solved.
Pondering The Rest Of The Summer
A month ago, it looked like the new abnormal was going to roll over the economy and the stock market and unleash a fresh round of general havoc. But the big squeeze never arrived. Is that the calm before the storm? Or is real mending unfolding in macro and markets?
Is The June Slowdown In Manufacturing Activity A Sign Of Things To Come?
Manufacturing activity contracted in June, according to the Institute for Supply Management’s manufacturing index. For the first time since July 2009, the ISM Index slipped under 50, dropping to 49.7 last month. A reading below 50 indicates a contracting manufacturing sector.