The Treasury market’s inflation forecast has recently risen to the levels that prevailed before Lehman Brothers collapsed in September 2008, which triggered a financial crisis and fears of a deflationary spiral. Using the yield spread between the nominal and inflation-indexed 10-year Treasuries, the market’s outlook has come full circle since the dark days of late-2008.
Bound For Boston…
Blogging will be light to nonexistent for a day or so as I head up to Boston to chat about asset allocation at tomorrow’s World Series of ETFs and Indexing.
Consumer Spending & Income Rise In February As Inflation Bubbles
Personal income and spending rose again last month, the U.S. Bureau of Economic Analysis reports, although the numbers are tainted somewhat by the fact that inflation ticked up as well.
Housing Will Recover. But When?
What passes for optimism on the housing market these days is a pale reflection of the glory days of five years ago. “Housing is dead,” writes MarketWatch’s Rex Nutting. “There is no doubt about that. Housing is as dead as a door nail.” The good news, such as it is, is that “housing is just too small to do any real damage to the economy any more,” he adds. Perhaps, but housing’s not likely to help any time soon either.
Book Bits For Saturday: 3.26.2011
● Future Babble: Why Expert Predictions Are Next to Worthless, and You Can Do Better
By Dan Gardner
Review via New York Times Book Review
What does the future hold? To answer that question, human beings have looked to stars and to dreams; to cards, dice and the Delphic oracle; to animal entrails, Alan Greenspan, mathematical models, the palms of our hands. As the number and variety of these soothsaying techniques suggest, we have a deep, probably intrinsic desire to know the future. Unfortunately for us, the future is deeply, intrinsically unknowable. This is the problem Dan Gardner tackles in “Future Babble.”
Q4 GDP Growth Revised Up To 3.1% Pace
The U.S. economy grew at a 3.1% real annual rate in last year’s fourth-quarter, the government reports in its third and final estimate for Q4 GDP. That’s up from the previously reported 2.8% pace. For all of last year, the economy expanded by 2.9%.
Strategic Briefing | 3.25.2011 | Inflation & Oil Prices
Another year of living dangerously
The Economist | Mar 24
Even as higher oil prices and hobbled Japanese production reduce growth they add to mounting inflation risks (Britain is now fretting over inflation of 4.4%). But most rich-world economies have ample economic slack, and in several countries fiscal tightening will tug at recovery. Britain’s coalition government has reaffirmed its commitment to austerity with this week’s budget (see article), and America has begun to cut spending. Both the Bank of England and the Federal Reserve should resist the temptation to tighten soon. The European Central Bank seems intent on raising interest rates next month. That would be a mistake. In the euro zone underlying inflation and wage growth are both subdued and inflation expectations are under control. By raising rates the ECB would strengthen the euro and frustrate the efforts of countries like Greece, Ireland and—the next in line for bailing out—Portugal to grow their way out of their debts. There is only so much economic policymakers can do about crises that spring from war or nature. In this case, the priority should be not making matters worse.
Durable Goods Unexpectedly Fall In February
Orders for durable goods, a leading indicator of economic activity, fell 0.9% last month on a seasonally adjusted basis, the Census Bureau reports. The decrease follows a strong 3.6% gain in January. Economists were expecting a gain. Monthly data is volatile, however, and so it’s not clear if there’s something more ominous afoot.
Jobless Claims Fall Again. Will Rising Energy Prices Slow or Derail The Trend?
New jobless claims fell again last week, dropping by a seasonally adjusted 5,000 to 382,000, the Labor Department reports. The widely watched four-week moving average slipped as well, retreating to its lowest level in two-and-a-half years. It’s clear that new filings are trending lower once more, if slowly. But the ongoing strength in the oil market raises the question of whether higher energy prices are a threat?
Strategic Briefing | 3.24.2011 | Portugal: The Next Phase Of Euro Crisis
Portugal in crisis after prime minister resigns over austerity measures
Guardian | Mar 23
Portuguese prime minister José Sócrates has said he has submitted his resignation to the president after parliament rejected his minority Socialist government’s latest austerity measures. The loss of the vote “has taken away from the government all conditions to govern,” Sócrates said. It brings the country closer to needing a bailout.
Portugal bailout ‘could cost UK £3bn’
Guardian | Mar 23
“Portugal will inevitably ask for a bailout,” said Open Europe’s Raoul Ruparel. “But the cases of Ireland and Greece clearly illustrate that the EU’s strategy – to throw good money after bad – is failing. Rather than simply taking a bailout, it would be better in the long run for Portugal to restructure its debt now,” Ruparel added.
Merkel Says Socrates Was ‘Right’ to Push for More Portugal Cuts
Bloomberg | Mar 24
German Chancellor Angela Merkel said that Portuguese Prime Minister Jose Socrates did the right thing in putting a “far-reaching” program of austerity measures to parliament. Merkel, in a speech to lower-house lawmakers in Berlin today, said that Socrates had been “right and courageous” in presenting an additional round of budget cuts, and that she was “grateful” to him for taking responsibility for his country’s finances.