They finally did it. The National Bureau of Economic Research today declared an official end to the Great Recession. The group announced that “a trough in business activity occurred in the U.S. economy in June 2009.” According to NBER, the recession lasted 18 months, the longest in the post-World War II period. The previous records–16 months–were set in 1973-75 and again in 1981-82.
Category Archives: Uncategorized
FUND CHOICES & STRATEGIC PERSPECTIVE
Two ETFs bit the dust last week—deservedly so. What was Geary Advisors LLC thinking when it launched state-focused ETFs? One targeted Texas stocks, the other held Oklahoma companies. Whatever the investment merits (and they were spare, at best, in my opinion), the marketplace has rendered its verdict. Apparently there are some products that are over the top, even in finance.
BOOK BITS FOR SUNDAY: 9.19.2010
● The Postcatastrophe Economy: Rebuilding America and Avoiding the Next Bubble
by Eric Janszen
Excerpt via Street.com
“The bright side of the crisis we’re currently facing is that it could serve as a political forcing function for the United States to develop its competitive muscle and eliminate its dependence on foreign borrowing and oil — the main source of our current problems. To execute a true restructuring plan requires strong and uncompromising leaders who are willing to level with the American people, to explain the seriousness of our problems, the sacrifices we all must make to solve them, the new and better nation for ourselves and our children that we will enjoy if we do, and the disaster that awaits us if we fail to meet this challenge.
That sounds good, but how? I argue that we can nurture the seeds of a new American industrial economy — a productive economy that generates profits from technological industries such as computers, biology, medicine, and high-technology materials — by cultivating next-generation transportation, energy, and communications infrastructure. ”
READING ROUNDUP FOR SUNDAY: 9.19.2010
►Can the Fed Offer a Reason to Cheer?
Tyler Cowen/NY Times
The economy needs help, but monetary policy, which is the Fed’s responsibility, has not been very expansionary. This is true even though the Fed has increased the monetary base enormously since the onset of the financial crisis…If the Fed promises to keep increasing the money supply until prices rise by, say, 3 percent a year, people should eventually start spending. Otherwise, if they just held the money, it would be worth 3 percent less each year…
In failing to push harder for monetary expansion, is Mr. Bernanke a wise and prudent guardian of the limited discretionary powers of the Fed? Or is he acting like a too-hesitant bureaucrat, afraid to fail and take the blame when he should be gunning for success?
We still don’t know which narrative is more accurate, but the Fed is not receiving enough signals of support from Congress.
►US Inflation: What is the “Trimmed Mean” CPI and What Does It Tell Us?
Ed Dolan’s Econ Blog
Monthly inflation figures can sometimes signal a turning point in inflation, but those turning points are just as often masked by random noise. At present, the core CPI and trimmed mean CPI show that US inflation is still on a downward trend. Expect the Fed to stick to its easy-money policy until the trend shows a clear upward turn.
BENCHMARKS & MODEL PORTFOLIOS
The SEC is “looking into” model ETF portfolios offered by financial advisors, Investment News reports. “The practice has come to the attention of the staff and they are looking at various aspects,” an SEC spokesman wrote in an email to the publication. The article suggests that the catalyst for the inquiry is the abuse of promoting model portfolios. As the story notes “some industry experts worry… that many of the advisers offering these model portfolios aren’t sophisticated enough to do the proper due diligence on the underlying exchange-traded funds. In the long run, they say, investors could get hurt.”
STRATEGIC THINKING & MEAN REVERSION IN MARKETS
Contrarianism has a long history in investing, and quite a bit of success as well. Graham and Dodd’s Security Analysis
HOW TO THINK ABOUT ECONOMICS, PART II
Last week I wrote about an intriguing new book—The Puzzle of Modern Economics
READING ROUNDUP FOR WEDNESDAY: 9.15.2010
►Richmond Fed’s Lacker Wants High Threshold For More Fed Action
Jon Hilsenrath/Wall Street Journal
“Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, sees modest growth in 2011, little change in inflation and little to spur the Fed to take new actions to support the economy.”
►IMF Meetings Should Target Double-Dip Risk
Mohamed A. El-Erian (Pimco)/Bloomberg
“Many topics are being teed up for next month’s annual meetings of the International Monetary Fund and World Bank in Washington, a gathering that will draw about 190 country representatives. There is a substantial risk of disappointment, one that would be detrimental to the welfare of billions around the world over time.”
RETAIL SALES RISE IN AUGUST
If you’re looking for fresh news that the risk of deflation/economic deterioration is gaining momentum, you won’t find it in today’s retail sales report for August. The advance estimates indicate a seasonally adjusted rise of 0.4% last month vs. July, the Census Bureau reported today. That’s the second monthly rise for U.S. retails sales and the highest percentage gain since March.
STOCKS UP, SO IS THE MONEY SUPPLY. A CONNECTION?
September has been a good month for equities, so far. The S&P 500 jumped nearly 7% for the month through Sep. 13. For the moment, the disinflationary/deflationary scare of the summer is over. Or is it merely taking a breather? There’s no assurance that the crowd won’t turn risk averse once more. It’s all about incoming economic data…still. But looking at the latest trend in money supply figures and the slight jump in the market’s inflation expectations suggest that there’s something more in the rise in equity prices than rank speculation.