The year and the decade are nearly over. This calendrical conclusion inspires looking back and considering what might have been vs. what actually happened. Some are already calling the last 10 years a lost decade. But that’s misleading. Only investors who made big, risky bets suffered a lost decade. Despite what you may read elsewhere, broad asset allocation across the major asset classes delivered a modest gain. It wasn’t stellar, even by broadly diversified investing’s standards. But a lost decade? Hardly.
BOOK BITS FOR SATURDAY: 12.4.2010
● The Power of Passive Investing: More Wealth with Less Work
By Richard A. Ferri
Video of author discussing book, and a summary via publisher, John Wiley & Sons.
Time and again, individual investors discover, all too late, that actively picking stocks is a loser’s game. The alternative lies with index funds. This passive form of investing allows you to participate in the markets relatively cheaply while prospering all the more because the money saved on investment expenses stays in your pocket.
In his latest book, investment expert Richard Ferri shows you how easy and accessible index investing is. Along the way, he highlights how successful you can be by using this passive approach to allocate funds to stocks, bonds, and other prudent asset classes.
ON THE ROAD AGAIN…
I’m speaking at the Superbowl of Indexing conference in Phoenix that starts on Sunday, which means that blogging will be light to nonexistent for a few days…
NOVEMBER PAYROLLS EDGE HIGHER, BUT SO DOES UNEMPLOYMENT
The labor market expanded last month, but the net gain in private nonfarm payrolls was disappointing, even by the deflated standards of late.
READING ROOM FOR FRIDAY: 12.3.2010
►Gauging the Odds of a Double-Dip Recession Amid Signals and Slowdowns
Harvey Rosenblum and Tyler Atkinson/Dallas Fed/December
The yield curve’s steep upward slope suggests a low probability of a recession in the coming year. Nonetheless, many economists are reluctant to rely on this indicator because the curve’s shape and slope have been distorted by the Federal Reserve’s unconventional monetary policy: a near-zero federal funds rate and a quantitative-easing program that damped intermediate- and longer-term Treasury rates. With near-zero short-term rates, it is almost impossible for a yield curve inversion, that is, short-term rates exceeding longer-term ones.
There is some reason to believe the unemployment rate could climb again. Claims for jobless benefits remain at a level usually associated with an increasing unemployment. Even if the rate does not increase, it remains elevated, straining the overall recovery.
While the current real price of oil does not fit the criterion of a shock, it sits at levels only seen in the early 1980s and 2006–08. An oil supply shock would be especially damaging to the already weak recovery.
Most forecasters project growth at 2 to 3 percent over the next year, but not gaining sufficient momentum to advance safely above stall speed. Until this situation is resolved, policymakers will continue facing pressure to pursue fiscal and monetary measures to guide the economy toward full employment and more robust growth.
JOBLESS CLAIMS RISE, BUT THE TREND STILL LOOKS ENCOURAGING
We were so close. Last week’s initial jobless claims report tempted optimistic expectations with a notable decline in new filings to the lowest level since July 2008. It looked like salvation had arrived at long last. But a large chunk of that drop evaporated in today’s update from the Labor Department. Claims rose 26,000 to a seasonally adjusted 436,000 last week. Were we hornswoggled again? Not necessarily, at least not yet.
A STRONG YEAR FOR CONSUMER STOCKS
Betting on consumption has been a winning investment strategy in 2010. The S&P 500’s top sector this year through December 1 is consumer discretionary, posting a 23.4% total return. That’s more than double the broad market’s year-to-date gain, as measured by the S&P 500’s 10.2% rise through yesterday.
QE2 AND CONSERVATIVE ECONOMICS
Mark Calabria, director of financial-regulation studies at the Cato Institute, responds to David Beckworth’s “conservative case for QE2” in National Review. Minds will differ on the topic, of course, since this is economics (and politics) and so what constitutes “evidence” one way or another is forever debatable. That risk aside, it looks like Calabria’s reasoning is less than airtight.
ADP SAYS PRIVATE PAYROLLS RISE AGAIN IN NOVEMBER
Private-sector payrolls rose by a net 93,000 last month, according to this morning’s release of the ADP National Employment Report. That’s the 10th straight month of increases and the largest monthly rise in three years for this series. The news comes just in time to temper the sour trend in yesterday’s update on housing prices for the third quarter.
IS HOUSING IN TROUBLE…AGAIN?
Is the housing recovery losing steam? It’s harder to dismiss the possibility after reading today’s update of the S&P/Case-Shiller Home Price Indices. Nationally, U.S. housing prices fell 2.0% in this year’s third quarter over the previous three months. That’s a sharp deceleration from the 4.7% rise in this year’s second quarter.