There are lots of reasons for using high-quality index funds, including low fees, high transparency and a clear mandate on the strategic goal. There’s also the remorse factor to consider.
WAITING FOR THE NEXT INFLATION REPORT
It’s all about inflation—or the lack thereof. Next week (Nov. 17) the Labor Department releases its October estimate for consumer price inflation. Economists are forecasting that core inflation rose 0.1% last month, slightly higher than September’s flat performance, according to Briefing.com.
CURRENCIES & THE BUSINESS CYCLE
Jim Rogers, one of the most respected investors of recent decades—and rightly so—thinks Fed Chairman Ben Bernanke is clueless on matters of macroeconomics. But enlightened macroeconomic analysis and succcessful investment evaluation don’t always reside at the same address. “Dr. Bernanke unfortunately does not understand economics, he does not understand currencies, he does not understand finance,” he charged last week in a speech, according to Bloomberg. That’s a powerful criticism and, if true, would be deeply disturbing. Is Rogers right? No, or at least the criticism doesn’t hold up given the framework Rogers set up to deliver his attack.
BOOK BITS FOR SATURDAY: 11.06.2010
● Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America
By Greg Farrell
Review via My Bank Tracker
Money, power and corruption — a killer combination. The new book CRASH OF THE TITANS: Greed, Hubris, the Fall of Merrill Lynch and the Near-Collapse of Bank of America, by Greg Farrell, includes all three…Farrell disproves the popular theory that the industry giant fell due to the unexpected downturn of the mortgage market. He reveals insider information on the names at the top of the headlines, including Stanley O’Neal, Osman Semerci, John Thain and Bank of America CEO Ken Lewis. Crash of the Titans gives a minute-by-minute recap of one of the most intense 48 hours in Wall Street history.
THE OCTOBER SURPRISE IN PAYROLL GROWTH
Any one economic report, like a single baseball game or the election du jour, is prone to deliver a surprise every once in a while, for good or ill. Today’s update on payrolls clearly falls into the category of positive surprise, and not a moment too soon.
THE CASE FOR HOLDING A CORE GLOBAL EQUITY ALLOCATION
The world is getting smaller, and that has implications for investing. Perhaps the leading change is the reduction in the potency of the country and industry factors as drivers of the equity risk premium. These sources of priced risk aren’t going away, nor are they irrelevant. But they just don’t pack as much punch as they once did.
HORNSWAGGLED AGAIN WITH INITIAL JOBLESS CLAIMS
Last week’s sharp drop in new filings for jobless benefits claims evaporated in today’s follow-up report.The trendless trend in initial claims rolls on.
READING ROOM FOR THURSDAY: 11.4.2010
►Fed to Spend $600 Billion to Speed Up Recovery
David Sanger and Sewell Chan/NY Times/Nov 3
The Federal Reserve, getting ahead of the battles that will dominate national politics over the next two years, moved Wednesday to jolt the economy into recovery with a bold but risky plan to pump $600 billion into the banking system.
►What the Fed did and why: supporting the recovery and sustaining price stability
Ben Bernanke/Washington Post/Nov 4
Today, most measures of underlying inflation are running somewhat below 2 percent, or a bit lower than the rate most Fed policymakers see as being most consistent with healthy economic growth in the long run. Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling. In the most extreme case, very low inflation can morph into deflation (falling prices and wages), which can contribute to long periods of economic stagnation…Critics have, for example, worried that it will lead to excessive increases in the money supply and ultimately to significant increases in inflation.Our earlier use of this policy approach had little effect on the amount of currency in circulation or on other broad measures of the money supply, such as bank deposits. Nor did it result in higher inflation.
ADP SAYS PRIVATE-SECTOR JOB CREATION WAS +43k IN OCTOBER
If today’s better-than-expected good news in the ADP Employment Report is a sign of things to come, the freshly minted Republican takeover of the U.S. House of Representatives is starting with a favorable tailwind. Actually, make that a modestly less troubling tailwind.
THE MORNING AFTER IN WASHINGTON: YOU WANT IT? YOU GOT IT
The Republicans took control of the House of Representatives in yesterday’s election and made progress but fell short of a majority in the Senate. The GOP, in other words, now has co-responsibility for the economy. Deciding if this is a political boon, or the equivalent of walking into a business cycle trap, will take time to assess. Meanwhile, this much is clear: the sluggish economy is no less sluggish now that the Republicans have a formal stake in the macro outcome. The only question is how the new party in power will influence policy in Washington and what that will mean, if anything, for the labor market, GDP, government debt levels, and all the rest.