US companies added 208,000 workers in November, according to this morning’s ADP Employment Report. The gain was a bit softer than the consensus forecast, but overall the labor market continues to show a solid rate of growth. “At this pace the unemployment rate will drop by half a percentage point per annum,” Mark Zandi, chief economist of Moody’s Analytics, said in the accompanying press release. “The tightening in the job market will soon prompt acceleration in wage growth.”
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● Solid construction, auto sales data boost U.S. growth picture | Reuters
● PMI: Eurozone economic growth at 16-month low in Nov | Markit
● PMI: UK service sector growth strengthens in Nov | Markit
● Uncertainty in Washington Poses Long List of Economic Perils | NY Times
● Top CEOs less optimistic about US economy but plan more hiring | LA Times
● Fed’s Dudley says oil price drop a net benefit for US | Reuters
● Russia warns of recession in 2015 | BBC

Private nonfarm payrolls in the US are projected to increase 227,000 (seasonally adjusted) in tomorrow’s November update of the ADP Employment Report, based on The Capital Spectator’s median point forecast for several econometric estimates. The median projection is marginally below October’s increase.
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The expected risk premium for the Global Market Index (GMI) continued to fall in November. GMI, an unmanaged, market-value weighted mix of the major asset classes, is currently expected to earn an annualized 3.9% over the “risk-free” rate for the long term (for details on the methodology, see summary below). Today’s forecast is slightly below last month’s 4.0% estimate and moderately under the recent peak of 4.7% in August
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● Factories Humming in U.S. Even Amid Global Slowing | Bloomberg
● Euro zone producer prices fall at sharpest rate in a year | Reuters
● UK construction PMI falls to 13-month low in November | Investing.com
● Spain Jobless Claims Log Biggest Decline For November | RTT
● RBI leaves rates on hold, says could ease early 2015 | Reuters
● Australia holds rates as speculation mounts for cuts | CNBC
● MNI Japan Survey: Q3 Revised GDP -0.5% Annual Vs -1.6% | MNI

The Federal Reserve is reportedly on track to start raising interest rates next year, but the tightening is already underway if only in relative terms. Indeed, there’s a conspicuous directional change in the year-over-year comparison in the real (inflation-adjusted) monetary base. The substantial deceleration of the growth rate that’s been unfolding this year isn’t surprising at this point, but it serves as a reminder that the central bank’s plan to normalize policy is a process rather than a single date in the future when the Fed funds rate increases.
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US equities (Russell 3000) took the lead with performance among the major asset classes in November, posting a solid 2.4% total return. US real estate investment trusts (REITs) were in close pursuit with a 2.0% advance, which builds on October’s spectacular 10.0% surge, based on the MSCI REIT Index. In third place: foreign stock markets in the developed world (MSCI EAFE), which dispensed a respectable 1.4% total return. Whatever macro troubles weigh on Europe and Japan (and there are many), the burden appeared to be in remission in November in terms of equity performance overall.
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● German manufacturing PMI revised down to 49.5 in November | Investing.com
● Eurozone manufacturing hits near-stagnation as Big 3 nations contract | Guardian
● Italy Manufacturing Contracts Again | RTT
● Fed rattled by elusive inflation, but loath to sound alarm yet | Reuters
● Black Friday Spending Drops 11% | Time
● Oil suffers fresh heavy losses, with outlook unclear | Marketwatch

● Brandes on Value: The Independent Investor
By Charles Brandes
Review via Reading The Markets
Brandes on Value: The Independent Investor (McGraw-Hill) is a paean to the “practicality and universal application of Graham-and-Dodd principles.” Charles H. Brandes became a convert to value investing through a most unlikely encounter. In 1971, three years out of college and a broker/analyst in San Diego, he was taking his turn keeping an eye out for the admittedly rare walk-in brokerage customer “when an elderly, unassuming man walked through the door.” That man was Benjamin Graham—yes, the Benjamin Graham. Graham was spending his winters in La Jolla and wanted to open an account so he could buy a stock he had been tracking for months. Well, one thing led to another, and soon enough Brandes was hooked. In 1974, a year that most investors would have considered inauspicious but Graham called “an excellent time to launch a venture of this sort,” Brandes opened his own firm. Forty years later he remains convinced that “the fundamentals of value investing [make] total practical sense for long-term investors.” (p. xiv)
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The Federal Reserve may start raising interest rates next year for the first time in nearly a decade, but the focus at the moment is on deflation risk, or so it seems by way of the market’s softer inflation forecast via a closely followed yield spread in Treasuries. The implied outlook for inflation slumped to a three-year low of 1.82% on Nov. 26, based on the difference for the nominal 10-year yield less its inflation-indexed counterpart. This market-based estimate is down sharply from the recent peak of 2.29% as of this past July 30. It’s unclear how much of the market’s focus on deflation risk is tied to worries about the macro outlook in Europe and Asia vs. the US. This much is clear: if Mr. Market continues to lower his inflation estimate, it’s going to be tougher to argue that the US economy is immune to the macro troubles that are bubbling elsewhere in the world.
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