The Capital Spectator will be traveling for the rest of the week, returning with a new Book Bits on Saturday, followed by the normal routine on Monday. Cheers!
Modeling US Stock Market Expected Returns, Part II
Earlier this month I outlined a model for estimating the US stock market’s return in the decade ahead. The post is part of a larger goal is to develop several models and use the average as more reliable forecast, based on the empirical evidence that combining models tends to generate superior results vs. any one model. In addition, the focus on equities is the counterpart to a previous series on estimating “fair value” for the 10-year Treasury yield.
Macro Briefing: 21 July 2021
* World in ‘early stages’ of another Covid-19 wave, says WHO chief
* US life expectancy fell 1.5 years in 2020, biggest drop since WWII
* US economy facing stronger headwinds, including “whiff of stagflation”
* US set to drop opposition to Germany-Russia Nord Stream 2 pipeline
* Monthslong slide in bond yields challenges focus on inflation worries
* Senate leader struggles to keep infrastructure spending bill alive
* Covid slowing recovery for many Southeast Asian economies, says analyst
* US housing starts rose more than expected in June but permits fell again:
Are Markets Done With Inflation Worries?
In case you took a day off yesterday, there’s a new narrative circulating that inflation anxiety is history and worries about slowing economic growth have moved to the fore. Maybe, but there’s no law that says you can’t have both macro risks bubbling, or neither.
Macro Briefing: 20 July 2021
* Biden pushes for more government spending to support the economy
* 90%-plus of people hospitalized with Covid-19 are unvaccinated
* US stock market decline leaves S&P 500 near one-month low at Monday’s close
* Markets appear to be moving beyond inflation worries to concerns about growth
* Spread of Delta variant raises possibility of US 10-year yield falling to 1%
* Can Ireland block global effort to overhaul global tax rules?
* Rising dollar makes emerging markets investors nervous
* NBER declares US covid recession lasted only two months, ended in April 2020
* US 10-year yield continues to sink, falling to 1.19% on Monday:
TIPS and Commodities Led Returns For Asset Classes Last Week
Inflation-indexed Treasuries and commodities were the top performers last week for the major asset classes, based on set of exchange traded funds.
Macro Briefing: 19 July 2021
* Economists expect US economy will slow as stimulus spending fades
* Oil eases after Opec+ agrees to lift production
* Zoom buys Five9 for $15 billion to boost appeal with business clients
* US retail spending was surprisingly strong in June
* Inflation worries weigh on US consumer sentiment in early July
* 10yr-2yr Treasury yield curve narrowed to five-month low on Friday:
The ETF Portfolio Strategist: 18 July 2021
There’s good news and bad news for our trio of proprietary strategies in last week’s performance round-up. Relative to the benchmark (Global Beta 16 (G.B16)), all three outperformed for the trading week through Friday, July 16. Alas, the outperformance was in the form of lesser declines, ranging 0.5% to 1.0% losses. The benchmark shed 1.1%.
Book Bits: 17 July 2021
David Kauders
Summary via publisher (Sparkling Books)
Why were economies sluggish before the pandemic arrived? Why have interest rates paid by businesses and households been rising even though deposit rates are nil? Does the policy of bailing out economies, now followed by most governments and central banks, bring any dangers? In The Financial System Limit, British investment manager David Kauders FRSA puts forward three radical theories which together provide the answers to these questions. These theories show that Keynesian economics has gradually turned from a benefit to society, into a damaging scheme. Other economic policies are also not addressing the fundamental problem, which is the world’s inability to afford private sector debts already created.
Adrian Wooldridge
Review via The Wall Street Journal
In 1958, the British sociologist Michael Young published “The Rise of the Meritocracy,” a fictional narrative that imagined a world where leaders in business and government would be chosen on the basis of talent and effort rather than social status, wealth or power. But the book, which brought the word “meritocracy” into the English language, wasn’t written to celebrate such a world. To the contrary, it was intended as a warning that those who fell behind in the competition to get ahead were likely to resent the new elite and would eventually rebel.
As Adrian Wooldridge notes in “The Aristocracy of Talent: How Meritocracy Made the Modern World,” Young predicted that the rebellion would occur in 2034. But in the U.S. and Britain, it seems to have already begun.
Sheera Frenkel and Cecilia Kang
Interview with authors via NPR
A new book investigates Facebook’s failure to protect against spreading hate speech, disinformation, conspiracy theories and calls to violence. The book also shows how Facebook became an advertising company, monetizing its users and their data. The book is called “An Ugly Truth: Inside Facebook’s Battle For Domination.” My guests are the authors, Sheera Frenkel and Cecilia Kang, who are reporters for The New York Times. Frenkel covers cybersecurity and is based in San Francisco and covers technology and regulatory policy and is based in Washington, D.C.
● The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion
Eliot Brown and Maureen Farrell
Review via Publishers Weekly
Wall Street Journal reporters Brown and Farrell trace the rise and fall of WeWork in this drama-filled debut, a cautionary tale of startup excess. Brown and Farrell follow charming, ambitious, and reckless founder and CEO Adam Neumann from his start as a baby clothes salesman in 2006 to the head of a unicorn startup that carried a market value of tens of billions of dollars. WeWork’s early success stoked unheard-of investments, but increasing ambitions and a lack of focus (including the goal to overhaul the world’s education system) drove such erratic corporate behavior as acquiring a wave pool maker in hopes of enhancing WeWork communities.
● American Marxism
Mark R. Levin
Summary via publisher (Threshold Editions/Simon & Schuster)
In American Marxism, Levin explains how the core elements of Marxist ideology are now pervasive in American society and culture—from our schools, the press, and corporations, to Hollywood, the Democratic Party, and the Biden presidency—and how it is often cloaked in deceptive labels like “progressivism,” “democratic socialism,” “social activism,” and more.
● Four Internets: Data, Geopolitics, and the Governance of Cyberspace
Kieron O’Hara, et al.
Summary via publisher (Oxford U. Press)
The Internet has become a staple of modern civilized life, now as vital a utility as electricity. But despite its growing influence, the Internet isn’t as stable as it might seem; rather, it can be best thought of as a network of networks reliant on developing technical and social measures to function, including hardware, software, standards, and protocols. As millions of new internet users sign on each year, governing bodies need to balance evolving social ideas surrounding internet use against shifting political pressures on internet governance–or risk disconnection.
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The ETF Portfolio Strategist: 16 July 2021
- US stocks break a 3-week winning streak
- Bonds continue to rally
- Across-the-board losses for our strategy benchmark this week