Tomorrow’s report on US retail sales for March is projected to show a 0.2% gain for the month, according to The Capital Spectator’s average econometric forecast. That’s sharply lower than the 1.1% gain reported by the Census Bureau for February. Meanwhile, the Capital Spectator’s March projection is moderately above the range of consensus forecasts for several surveys of economists.
Asset Allocation & Rebalancing Review | 11 April 2013
The US stock market rose to an all-time high yesterday, based on the S&P 500. US equities also look strong in relative terms so far this year vs. all the major asset classes.
Diverging Paths: Stocks & The Market’s Inflation Forecast
Has the stock market finally broken free of inflation expectations? If so, is this a turning point for the market? For inflation expectations? For the economy? Lots of questions at this point, with no answers. At least no definitive answers. Meanwhile, there’s the striking image of diverging paths: the equity market running sharply higher while the market’s inflation forecast grinds lower.
A Smart Way To Look At A “Dumb” Investing Strategy
Expecting rebalancing to juice portfolio returns is a “dumb idea,” according to Forbes. “Rebalancing is fine if all you are trying to do is sleep better at night. But the idea that it increases your expected return is balderdash.” This can be reasonable advice… up to a point. But all-or-nothing blanket statements don’t usually fare well when it comes to evaluating investing strategies for the real world. That’s surely the case when reducing the pros and cons of rebalancing, and all the accompanying nuances, to a one liner.
The Data Will Set You Free (Or At Least Suggest A Few Interesting Regressions)
There’s been a lot of chatter over the last two years or so about recession predictions, and why some smart economists have been so wrong so far. There are no definitive answers, even if some explanations look potentially informative, if not exactly kind for the dismal scientists who stumbled. But we’ll leave that for another day… well, maybe not entirely. The ever-perceptive Noah Smith (who moonlights as an assistant finance professor at Stony Brook when he’s not blogging) weighs in, albeit inadvertently and through the thought experiment of pondering “A world without macroeconomists?” Along the way, he observes that taking the numbers at face value, with minimal if any theory, can still tell us something useful at times, but not without complaints — “Measurement Without Theory,” as Koopmans famously charged (pdf).
Q1:2013 US GDP Nowcast Update | 4.08.2013
First-quarter US GDP is expected to increase 3.2%, according to the latest update of The Capital Spectator’s average econometric nowcast. That’s virtually unchanged from the previous 3.1% nowcast, published on March 19. (GDP percentage changes are quoted as real seasonally adjusted annual rates.)
Book Bits | 4.6.13
● The Alchemists: Three Central Bankers and a World on Fire
By Neil Irwin
Q&A with author via The New York Times/Economix blog
Q: Americans generally view the financial crisis as a domestic event, and it’s already fading from memory. A central message of your book seems to be that it was primarily a European event, and it’s not over yet.
A: If history teaches one thing, it is that when a severe global financial panic sets in, it can easily bend and warp and metastasize. That’s how what we once quaintly called the subprime crisis came to have such varied effects as banking collapses in Iceland and Ireland and Cyprus, a lost decade for the British economy, and a series of events that nearly unraveled 60 years of progress toward a united and peaceful Europe. At its worst, those types of unpredictable domino effects can lead to some very bad places, of which the Great Depression and World War II are the prime examples. Fortunately nothing nearly that bad has happened this time. But as catastrophic as the 2008 experience was for the U.S. economy and millions of Americans, it was closer to the start of the crisis than the end.
How Should You Customize Your Asset Allocation?
Everyone (or nearly everyone) agrees that investment portfolios should be customized, based on an investor’s risk tolerance, objectives, time horizon, and so on. Where minds differ is deciding how to customize. There are two basic paths. The first, which is the overwhelmingly popular route, is building portfolios from the ground up, security by security, fund by fund. Peter Betenstein called this approach the “interior decorator fallacy” in Capital Ideas
Nonfarm Payrolls’ Growth Slows Sharply In March
Private payrolls increased by 95,000 in March, but the net gain is the smallest since last June, the Labor Department reports. Today’s update represents a sharp slowdown from February’s revised 254,000 advance. Even more troubling is the hefty deceleration in the year-over-year trend: private payrolls rose by just under 1.8% for the year through March—the slowest pace in nearly two years.
Macro-Markets Risk Index | 4.05.2013
A markets-based profile of economic conditions suggests that business cycle risk remains low. The Macro-Markets Risk Index (MMRI) closed yesterday (April 4) at 12.3%–well above the danger zone of 0% and within the 10%-to-15% range that’s prevailed so far in 2013. When MMRI falls under 0%, recession risk is elevated; readings above 0% equate with economic growth.