The idea that the economy and the financial markets are closely connected, and that each offers clues for projecting the other, is no spring chicken. Nearly a century ago, for instance, William Hamilton outlined the case
Book Bits | 3.9.13
● The Locust and the Bee: Predators and Creators in Capitalism’s Future
By Geoff Mulgan
Review via New Statesman
“Capitalism,” writes Geoff Mulgan, “is not so much an aberration as a step on an evolutionary path, and one that contains within it some of the answers to its own contradictions.” In thinking of capitalism in this way, Mulgan voices a contemporary consensus. As advances in biology and genetics have promoted the belief that economic and political development can be understood in evolutionary terms, hundreds if not thousands of books have appeared in recent years claiming to explain the rise and development of capitalism as part of an ongoing process of social evolution.
February Private Payolls: The Best Month For Growth Since November
Private-sector payrolls grew by 246,000 in February on a seasonally adjusted basis—the most since November and at a substantially faster pace compared with January’s relatively tepid rise of 140,000, the Labor Department reports. Meanwhile, the year-over-year percentage change in private payrolls continued to advance at just under 1.9% through last month, or roughly in the range we’ve seen in recent history. In addition, the unemployment rate ticked down to 7.7%, a post-recession low. Is this a sign that growth is set to ramp up in the labor market? Maybe, but that’s a speculative interpretation of today’s data. What we can say with a high degree of confidence is that the moderate growth train of late rolls on.
4-Week Average Of Jobless Claims Drops To 5-Year Low
Jobless claims declined last week by 7,000 to a seasonally adjusted 340,000, which is near a post-recession low. Meanwhile, the four-week moving average for claims broke through the previous floor and touched a new cyclical low last week. The four-week average slipped to 348,750 on a seasonally adjusted basis—the lowest in five years. That’s a fairly potent clue for expecting that the labor market will continue to grow in the near term.
US Nonfarm Private Payrolls: Feb 2013 Preview
Private nonfarm payrolls are expected to increase by 214,000 in tomorrow’s update from the Labor Department, based on The Capital Spectator’s average econometric forecast. The projection is moderately above January’s gain, and higher than a pair of consensus forecasts.
ADP: Payrolls Increased 198,000 In February
Private-sector payrolls expanded by 198,000 in February, according to today’s ADP Employment Report. That’s down a bit from January’s 215,000 advance. Nonetheless, February’s increase is strong enough to inspire confidence for expecting that Friday’s Labor Department report on payrolls will also profile February as another month of modest growth for jobs creation.
Stocks & Inflation: The End Of An (Abnormal) Affair?
The Dow Jones Industrial Average reached an all-time high yesterday, and the S&P 500 is within shouting distance of a new peak too. But a soaring equity market is no reason to assume that the new abnormal has ended, at least not yet. The positive correlation between the market’s inflation forecast and the stock prices appears a bit looser these days, but it’s premature to declare that the link has been broken.
Asset Allocation & Higher Interest Rates
One of the major concerns for investors for the near-term future is the expected rise in interest rates. With the price of money at or near all-time lows in the modern era, the obvious question arises: what to do now? The short answer: more of the same. Assuming, of course, that your strategy is one of remaining broadly diversified across the major asset classes and maintaining a robust rebalancing strategy. That doesn’t satisfy some analysts, who argue that more radical measures are necessary. It’s different this time, the reasoning goes, and so strategy must be different. Well, it’s always different, but a prudent strategy of broad asset allocation and rebalancing tends to deliver average to above-average results vs. a broad array of portfolios that try to do better.
US Economic Profile | 3.04.13
The automatic budget cuts that commenced on Friday, March 1, may threaten economic growth, but recession risk remains low, based on the latest set of economic and financial numbers. Asked about the potential macro fallout from the sequester, House Speaker John Boehner yesterday responded: “I don’t know whether it’s going to hurt the economy or not. I don’t think anyone quite understands how the sequester is really going to work.” Whether you agree or not, what we do know is that the economy’s forward momentum remains intact–according to a broad survey of the current data set.
Book Bits | 3.2.13
● The Affluent Investor: Financial Advice to Grow and Protect Your Wealth
By Phil DeMuth
Excerpt
People are always bragging about their portfolio returns, but they never mention the risks they took because they don’t know what the risks are. Returns are visible; risks are the icebergs you don’t see until you’re Leonardo DiCaprio holding on to the plank….
Imagine that the risk/return visibility was reversed: that it was possible to find out every minute precisely how risky your investments were just by turning on CNBC, but you only learned their returns once a year. This would immediately promote a lot of sensible and productive investing behavior. People would manage their risks diligently and then settle for the returns they could get. This is exactly correct. Unfortunately, the world works otherwise. We watch performance—the bouncing ball in front of our eyes—because of an availability bias. The sadder-but-wiser investor always keeps an eye on risk, especially when he cannot see it.
