The risk of a new recession is higher, but it’s not obvious that it’s at the tipping point. A number of traditional indicators that have an encouraging history of dispensing early warning signs are still in the growth column, if only slightly. But there’s also a set of deteriorating numbers that counteract the positives, as today’s update on new jobless claims reminds. No wonder that some analysts say there’s a 50/50 chance of a downturn.
The Power Of Two Simple Investing Ideas
In theory, the recent increase in market volatility opens the door for superior results from active management. In practice, it’s still hard to beat relevant benchmarks. You wouldn’t know it from the promises from the usual suspects, but the numbers suggest another reality.
Another Look At Volatility Hedging
Can market volatility be tamed? Sure, but it comes at a price, usually in the form of reduced return. The real question is whether you can tame volatility without materially lowering expected return. Analysts have been dissecting this problem for years, although interest in the topic has exploded lately for obvious reasons. One of the more intriguing strategies is available through a new breed of hedging strategies designed by several large investment banks. A number of financial planners are using the products, which have been stress-tested during the recent market turmoil. How do these strategies hold up upon closer inspection? For some perspective, take a look at my article in the September issue of Financial Advisor.
Strategic Briefing | 9.7.2011 | The Crisis In Europe
In Euro Zone, Banking Fear Feeds on Itself
The New York Times | Sep 7
“This crisis has the potential to be a lot worse than Lehman Brothers,” said George Soros, the hedge fund investor, citing the lack of an authoritative pan-European body to handle a banking crisis of this severity. “That is why the problem is so serious. You need a crisis to create the political will for Europe to create such an authority, but there is still no understanding as to what the authority will do.”
German court gives MPs bigger say in euro bailouts
Reuters | Sep 7
Germany’s highest court said parliament must have a bigger say in euro zone rescue packages, a landmark ruling that may make it more difficult for Europe to respond swiftly in delivering aid to crisis-hit member states.
A Bit Of Good News For The Services Sector
The U.S. services sector grew at a moderately faster pace in August, but the crowd’s not paying attention. The better-than-expected rise in the ISM’s non-manufacturing index is taking a back seat to Friday’s news of flat job growth and renewed fears of mounting economic challenges in Europe and the Continent’s ongoing push for fiscal and monetary austerity. Focusing on the negative isn’t surprising, but today’s ISM report keeps hope alive, if only slightly, that the problems in the U.S. will bring a mixed bag of macro results rather than an outright recession.
The Trouble With Tax Cuts
Job growth stalled in August, manufacturing activity isn’t faring much better, the demand for liquidity and safety is on the march again, and the trend for U.S. exports may face new headwinds if economic growth in emerging markets suffers, as some analysts predict. What’s a politician to do these days? Lean on the tried-and-true policy response, of course.
Book Bits For Saturday: 9.3.2011
● The Arrogance Cycle: Think You Can’t Lose, Think Again
By Michael K. Farr and Edward Claflin
Summary via publisher, Lyons Press
What is the arrogance cycle? We’ve just lived through it. As market bubbles build, our confidence level rises (dis)proportionately. Everyone wants in on the action. We want to believe Wall Street, and once we do, the inevitable happens. The only problem was that it was all artificial. In The Arrogance Cycle, Farr examines the forces at work on individuals and markets and explains in clear, concise layman terms how we got to where we are.
Job Growth Takes A Dive In August
Today’s employment report is dismal. It may not be fatal, but it’s the most discouraging update for jobs from the Labor Department since the Great Recession was formally declared dead and buried as of June 2009.
Manufacturing Growth Weakens In August
The first major economic report for August offers no comfort for thinking that we’ll break free of the economy’s sluggish growth phase any time soon. Today’s update on the ISM Manufacturing Index reflects an expansion in the sector, but only slightly. The index slipped to 50.6 last month, down from 50.9 in July. A reading above 50 indicates expansion, but with the index declining to its lowest level in more than two years there’s nothing dazzling here.
Jobless Claims Fell Last Week, But So What?
New jobless claims fell by a seasonally adjusted 12,000 last week to settle at 409,000, but no one’s going to see that as much more than another round of statistical noise. This leading indicator of economic activity has been stuck in a rut for months and it’s going to take more than one sizable downshift to convince the crowd that something’s changed. It doesn’t help that there’s another one-time event in the mix. Some of the drop is reportedly due to the end of the Verizon strike, which pushed new claims higher in early August. But the same factor in reverse had the opposite effect a few weeks back. Round and round we go.