Earning a respectable investment is hard. Holding it on to it is even harder, according to a variety of studies over the years that have analyzed the portfolios that investor build and own. The news is at once disturbing and baffling. Disturbing because a large population of individuals have earned painfully low returns over long stretches of time; baffling because the solution to climbing out of the performance hole is ridiculously easy… in theory.
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● ECB unveils massive QE boost for eurozone | BBC
● US Jobless claims off 7-month high, but oil layoffs a concern | CSN
● Oil jumps as Saudi king’s death feeds market uncertainty | Reuters
● U.S. Fears Chaos as Government of Yemen Falls | NY Times
● PMI: Eurozone Private Sector Growth Accelerates In January | RTT
● PMI: German private sector expands faster in January | Reuters

The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to decelerate to a +0.23 reading in the December update that’s scheduled for release tomorrow (Jan. 23), based on The Capital Spectator’s median point forecast for several econometric estimates. The projection is moderately below the +0.48 reading for November, which reflected a strong above-average pace of economic growth for the US relative to the historical trend. Only negative values below -0.70 indicate an “increasing likelihood” that a recession has started, according to guidelines from the Chicago Fed. Using today’s estimate for December as a guide, CFNAI’s three-month average is expected to remain at a level that’s historically associated with growth at an above-trend pace.
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Global economic growth continued to decelerate through December, according to business survey data, but there are few signs at the moment that the offshore slowdown is threatening the US macro trend. A diversified set of indicators shows that macro momentum remained solidly positive through the end of 2014. It’s naïve to think that the US can remain insulated from foreign turbulence if conditions deteriorate further in Europe and elsewhere. But analyzing the latest figures suggests that the potential for trouble in the US is minimal for the immediate future thanks to an acceleration in the pace of the expansion in recent months.
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● Suspense builds as ECB prepares to unveil QE | Reuters
● Why Mario Draghi and the ECB could disappoint | Marketwatch
● What to Expect From the ECB’s Stimulus Efforts | NY Times
● One-Family Home Gain Brightens U.S. Housing Outlook | Bloomberg
● Can U.S. Stocks Stay Hot As Global Markets Lag? | Barron’s
● Bank of Canada Shocks With Rate Cut “Insurance” Against Oil Slump | WSJ

Housing starts in December rose a bit more than expected, the US Census Bureau reports, but the modestly upbeat news was marred by the decline in new building permits in last year’s final month. As a result, the overall profile for these leading indicators remains muddled at best. On a year-over-year basis the trend certainly looks sluggish, in contrast with the generally brighter news from other key economic reports in recent months.
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Once upon a time there was only one factor—the market, a la the capital asset pricing model. But after a half century of crunching the numbers since CAPM was born, “now we have a zoo of new factors,” as Professor John Cochrane observed a few years ago. In theory, identifying more factors opens the door for building superior risk-adjusted portfolios. But some practitioners worry that “the proliferation of factors is deeply troubling,” as Research Affiliates explained recently. Why? Because not all factors are created equal and securitizing what looks like a productive risk premium on paper is tricky when it comes to real-world results.
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● US Homebuilder confidence declines slightly in January | Housingwire
● UK Sep-Nov Jobless Rate Falls More Than Expected | RTT
● Bonds, shares, gold supported ahead of expected ECB action | Reuters
● Brent crude oil rises above $48.50, but outlook remains weak | Reuters
● Gold Prices Top $1,300 an Ounce for First Time in Five Months | Bloomberg
● Behind Drop in Oil Prices, Washington’s Hand | NY Times

Housing starts are expected to increase to an annual pace of 1.036 million in tomorrow’s update for December, according to The Capital Spectator’s median point forecast for several econometric estimates. The projection represents a marginally higher level of residential construction vs. November’s 1.028 million units.
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The global economy was growing moderately at the end of last year, but the pace of the expansion slowed to a 14-month low, according to the December update of the JPMorgan Global All-Industry Output Index. “The underlying dynamics of the survey are weaker across the board, with indices for output, new orders, backlogs and employment all tracking lower,” the press release noted. But if this is a prelude to a global recession in the year ahead, it’s not obvious to a number of widely followed forecasting groups.
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