Several analysts are warning (again) that we’re in a recession now, today, this minute. They may be right, or not. It’s hard to say for sure, of course, because we have minimal economic data about what’s happening now, today, this minute. Septermber’s economic profile, in other words, remains a mystery for the most part for a few weeks longer. But we do have most of the data through August, and it’s always worthwhile to review a broad measure of the numbers as a benchmark for thinking about where we’ve been in the business cycle, and where we seem to be headed.
Q3:2012 U.S. GDP Nowcast Update | 9.17.12
Friday’s update on industrial production and retail sales for August, along with the ongoing changes in the market indicators, provides an opportunity to run fresh numbers on the Capital Spectator’s 10-factor GDP nowcast (see this post for an overview of the methodology).1 The current nowcast anticipates Q3:2012 GDP rising at nearly 2.0% in real annualized terms—down from the previous +2.3% nowcast. (The government’s first estimate of Q3 GDP is scheduled for release on October 26.)
Book Bits | 9.15.2012
● The Value Investors: Lessons from the World’s Top Fund Managers
By Ronald Chan
Summary via publisher, Wiley
Investing legend Warren Buffett once said that “success in investing doesn’t correlate with I.Q. once you’re above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.” In an attempt to understand exactly what kind of temperament Buffett was talking about, Ronald W. Chan interviewed 12 value-investing legends from around the world, learning how their personal background, culture, and life experiences have shaped their investment mindset and strategy. The Value Investors: Lessons from the World’s Top Fund Managers is the result. From 106-year-old Irving Kahn, who worked closely with “father of value investing” Benjamin Graham and remains active today, and 95-year-old Walter Schloss (described by Warren Buffett as the “super-investor from Graham-and-Dodsville”), to the co-founders of Hong Kong-based Value Partners, Cheah Cheng Hye and V-Nee Yeh, and Francisco García Paramés of Spain’s Bestinver Asset Management, Chan chose investment luminaries to help him understand the international appeal – and success – of value investing. All of these men became strong advocates of the approach despite considerable age and cultural differences. Chan finds out why.
Retail Sales Strengthen In August As Industrial Production Slumps
Retail sales continued to rebound in August, the Census Bureau reports. Industrial production, however, tumbled sharply last month—the most, in fact, since 2009. But Hurricane Isaac may be to blame for most of the weakness in industrial production, according to today’s update from the Federal Reserve. If so, the strong report for consumer spending in August offers a clearer profile of the general trend last month.
A New Round Of Fed Stimulus & The New Abnormal
Yesterday’s announcement by the Federal Reserve that it will embark on a new and open-ended bond-buying program until job growth is stronger has many implications for the markets and the economy. One is deciding what the latest chapter in monetary stimulus means for the new abnormal.
Jobless Claims Rose Last Week, But The Annual Trend Is Still Encouraging
Initial jobless claims rose 15,000 last week to a seasonally adjusted 382,000–the highest since July. But the Labor Department advises “that several states have reported increases in initial claims (approximately 9,000 in total) for the week ending September 8, 2012 , as a result of Tropical Storm Issac.” Does that mean that last week’s rise is temporarily skewed with storm-related noise? Possibly, although only time will tell. Meantime, one reason for thinking positively: the unadjusted claims data on a year-over-year basis is still falling by 10% as of last week, a rate that’s in line with recent history. That’s a sign that it’s premature to read too much into last week’s seasonally adjusted jump.
Is The Decline In Positive Payrolls Revisions A Warning Sign?
Most economic reports should come with a warning: the data is subject to revision. Today’s glowing number that’s the toast of the punditocracy is tomorrow’s statistical detritus. But if the world is always eager to move on to the next number du jour, and forget yesterday’s news, informed analysts recognize that monitoring the initial estimates of a data series, and tracking its path through time, offers another layer of intelligence. For example, a recent study by the Philadelphia Fed found a “small positive (but statistically significant) association between the revision to job gains and the level of job gains.”
It’s The Government’s Shrinking Payrolls, Stupid
Mark Perry, an economics professor at the University of Michigan, writes that the weak labor market “can be traced to the biggest loss of government jobs since WWII.” The evidence is certainly damning if we compare government payrolls with private payrolls, which have been rising at nearly 2% a year over the past two years.
A Model For GDP Forecasting
The government’s first estimate of the nation’s economic growth for the third quarter doesn’t hit the streets until October 26. Meantime, the burning question: Does the sluggish 1.7% annualized pace in Q2 for GDP imply more of the same during for Q3? Or will see a stronger reading in the next quarterly report? The world is awash in guesses, and now there’s one more. Today marks the start of a new feature on The Capital Spectator: a regularly updated “nowcast” of the next quarter’s GDP using standard econometric techniques.
Book Bits | 9.8.2012
● The Price of Politics
By Bob Woodword
Review via the Associated Press/Newsday
A combination of miscalculations, ideological rigidity and discord within the leadership of both political parties brought the U.S. government to the brink of a catastrophic default during the 2011 showdown over the federal debt ceiling, according to a new book by journalist Bob Woodward. “The Price of Politics,” Woodward’s 17th book, chronicles President Obama’s contentious and still unresolved fiscal policy battle with congressional Republicans that dominated the White House agenda for nearly all of 2011. The book is scheduled for release on Tuesday. Woodward is a Washington Post associate editor. As the nation’s leaders raced to avert a default that could have shattered the financial markets’ confidence and imperiled the world’s economy, Obama convened an urgent meeting with top congressional leaders in the White House. According to Woodward, House Speaker John Boehner pointedly told the president that the lawmakers were working on a plan and wouldn’t negotiate with him.
