The Treasury market’s 10-year estimate of future inflation rose above the Federal Reserve’s 2% target this week – the first time that level has been breached for this maturity since last March, based on daily yield-spread data via Treasury.gov. Official inflation numbers, which are published with a lag, continue to reflect pricing pressure that’s modestly below the Fed’s target. The Treasury market, however, is betting that inflation will accelerate this year.
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N. Korea agrees to hold talks with S. Korea next week: Reuters
Global debt reached a record $233 trillion in 2017’s third quarter: Bloomberg
Winter storm battered the US Northeast on Thursday: Reuters
Trump planning to allow oil drilling in most of US coastal waters: NY Times
US private employment growth accelerated to 250k in Dec: ADP
US jobless claims rose last week but remain historically low: Dow Jones
Global economic output strengthened to 2-1/2 year high in Dec: IHS Markit
SEC to investors: You’re on your own with cryptocurrencies: The Hill
Job cuts at US companies fell in 2017 to lowest level since 1990: CG&C
2017 losses from natural disasters is a record $135 billion for insurers: Munich Re
The bull market is the second-longest on record–when will it end? NY Times
PMI: US services sector growth slowed to 7-month low in Dec: IHS Markit 

Technology shares continue to post the strongest trend performance for US equity sectors, based on a set of ETFs ranked by one-year return. Although most sectors are posting year-over-year gains, the annual pace for tech remains notable for its outsized advance vs. the rest of the field.
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Critical flaws in world’s computers raise new security risks: c|net
Severe winter storm strikes US East Coast: Fox
Oil prices rise to highest level since 2015: Reuters
Countries look to launch virtual currencies to avoid sanctions: NY Times
Fed minutes show continued support for gradual rate hikes: Bloomberg
ISM: US factory activity increased in Dec to 2nd highest level in 6 years: Reuters
PMI: China’s services sector growth at fastest pace in over 3 years: Reuters
US auto sales fell 2% in 2017–first annual drop since ’09, but pace still healthy: AP
Broad US stock indices rise to record territory: RTT
CBOE VIX Volatility Index drops again, close to record lows: TradingGods.net

Weighting stocks based on market capitalization has long been the design standard for most index funds, but a recently launched ETF turns the strategy on its head. The Reverse Cap Weighted US Large Cap ETF (RVRS) holds the familiar S&P 500 names but in weights that are inversely proportional to their market cap. For example, the largest stock has the smallest weight and the smallest has the biggest footprint. What’s the rationale behind the strategy? Isn’t this just another twist on tapping into the small-cap factor? The Capital Spectator recently asked Herb Blank, a senior consultant at Global Finesse, to explain the motivation behind the strategy. In a recent study (“The Case for Reverse-Cap-Weighted Indexing”), Blank and co-author Qiao Duan report that reverse weighting outperformed the conventional S&P 500 for the ten-year period through 2016. The results offer “an intriguing alternative weighting scheme with the potential to realize superior rates of return,” they write.
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South Korea offers border talks with North Korea: NY Times
Will Mitch Romney, a possible Trump foe, run for Utah’s Senate seat? CNN
Is China’s rising economic influence in Latin America a threat to US? Bloomberg
Trump threatens to cut Palestinian aid: Haaretz
Unemployment rate in Germany fell to record low in Dec: Bloomberg
Global Mfg PMI ends 2017 at seven-year high: IHS Markit
US Mfg PMI rises to two-year high in Dec: IHS Markit
Gold rises to highest close since September: Reuters

The major asset classes enjoyed a flawless bull run in 2017, courtesy of across-the-board gains for all the broad measures of the global markets. Even cash managed to eke out a small gain.
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Kim Jong Un says “button for nuclear weapons is on my table”: CBS News
N. Korea extends olive branch to S. Korea: CNN
Iranian protests spread, triggers government crackdown: Reuters
N. Korean hackers are hijacking computers to mine cryptocurrencies: Bloomberg
PMI: China’s mfg growth ticks up to 4-month high in December: Reuters
Eurozone Mfg PMI ends 2017 at record high for time series: IHS Markit
Trump announces a big cut in military aid to Pakistan: Fox
What might Trump do in 2018? The Hill
Will deregulation in US spur business investment? NY Times
Consultancy predicts US store closings will accelerate in 2018: Business Insider

And so it begins. Best wishes for a prosperous new year! Cheers!

Last week we looked at the first installment of a short list of noteworthy titles that appeared in The Capital Spectator’s weekly Book Bits column during 2017. Here’s the second half of the year-end recap of books that deserve another look.
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