Mebane Faber has some fun thinking about an idea for an ETF that tracks the investment results published by the Barron’s Roundtable, an annual feature dispenses an array of portfolio recommendations. As Pundit Tracker notes, “following the investment picks of the annual Barron’s Roundtable has been a lucrative approach over the years. Since 2002, the average Roundtable return has been 11.5% versus -0.2% for S&P 500, with all but one of the members outperforming the index.”
Q4:2012 U.S. GDP Nowcast Update | 12.17.2012
Gross domestic product for the U.S. in the fourth-quarter is on track to rise by 1.5%, according to the average of The Capital Spectator’s five econometric “nowcasts”. That’s up slightly from the 1.2% average in our previous update on November 23. The improvement isn’t surprising, considering the recent round of upbeat economic reports, including the revivals in industrial production and retail sales numbers for November. Today’s GDP nowcast for Q4 reflects the latest fourth-quarter indicators, and the prevailing wind at the moment is blowing positive, albeit modestly so.
Book Bits | 12.15.12
● Practical Risk-Adjusted Performance Measurement
By Carl Bacon
Summary via publisher, Wiley
Risk within asset management firms has an undeserved reputation for being an overly complex, mathematical subject. This book simplifies the subject and demonstrates with practical examples that risk is perfectly straightforward and not as complicated as it might seem. Unlike most books written on portfolio risk, which generally focus on ex-ante risk from an academic perspective using complicated language and no worked examples, this book focuses on ex-post risk from a buy side, asset management, risk practitioners perspective, including a number of practical worked examples for risk measures and their interpretation.
Industrial Production Rebounds Sharply In November
Industrial production mounted a surprisingly strong comeback last month. The 1.1% surge in the Fed’s industrial production index—the biggest monthly gain in nearly two years—surprised many analysts, including yours truly. Surprising or not, it’s clear that October’s dreadful decline in this indicator (a decline that was revised further into the red in today’s update) was a temporary setback rather than a sign that the trend was slipping over the edge. Indeed, the cyclically sensitive manufacturing component in today’s report also registered a strong 1.1% increase in November.
Industrial Production: November 2012 Preview
The November update on industrial production is scheduled for release today (9:15am eastern) and most analysts are expecting a rebound from October’s 0.4% slump. The Capital Spectator’s econometric forecasts are mixed, however, although the average of these predictions leans modestly into positive territory with a slight 0.1% increase. That’s a sign for thinking that industrial production will post a gain in today’s report, but probably not as much as the consensus outlook anticipates.
A Pair Of Winners: Jobless Claims Fall, Retail Sales Rise
Jobless claims dropped substantially last week, near the lowest level in almost five years. Meanwhile, retail sales rebounded in November. In short, we have two more economic updates that support the case for expecting modest economic growth in the near future.
More Of The Same… With “Thresholds”
Fed Chairman Ben Bernanke made it clear… again. Interest rates will remain low, even when the labor market shows stronger signs of growth. He said that if inflation doesn’t exceed an annual rate of 2.5%, and unemployment stays above 6.5%, the Fed would keep its target rate near zero percent. Laying out “thresholds” is something new, but the basic message remains the same: low rates and no plans to change the status quo any time soon.
Stress-Testing Forecasts For Tomorrow’s November Retail Sales Report
Will tomorrow’s retail sales update for November bring pain or pleasure for the increasingly delicate and high-stakes art/science of deciding where the business cycle’s headed? October’s report was somewhat sobering, thanks to a 0.3% drop in consumption—the first since June. Some of the weakness was blamed on Hurricane Sandy. If so, will November’s numbers bounce back after a month of relatively clear skies? Yes, according to the consensus forecast, which projects a handsome 0.4% rise, according to Briefing.com. Sounds good, but that’s a bit high relative to a pair of econometric models I routinely use for additional context when considering where the data’s headed.
Research Review | 12.11.2012 | Dividend Yield & Equity Returns
Dividend Yields, Dividend Growth, and Return Predictability in the Cross-Section of Stocks
Paulo Maio and Pedro Santa-Clara | Nov 2012
There is a generalized conviction that variation in dividend yields is exclusively related to expected returns and not to expected dividend growth — e.g. Cochrane’s presidential address (Cochrane, 2011). We show that this pattern, although valid for the stock market as a whole, is not true for small and value stocks portfolios where dividend yields are related mainly to future dividend changes. Thus, the variance decomposition associated with aggregate dividend yields (commonly used in the literature) has important heterogeneity in the cross-section of equities. Our results are robust for different forecasting horizons, econometric methodology used (direct long-horizon regressions or first-order VAR), and also confirmed by a Monte-Carlo simulation.
U.S. Economic Trend Update | 12.10.12
Thinking positively about the economy isn’t getting any easier these days. From worries about fiscal uncertainty in Washington to fears that America’s long-run growth prospects have been impaired, the case for pessimism is in full swing in the final days of the year. The rear view mirror for economic data, however, suggests that the game isn’t over yet, as today’s update of The Capital Spectator Economic Trend Index (CS-ETI) reminds.