FYI for my newsletter subscribers…
Starting in September, The Beta Investment Report is published in multiple editions throughout each month. Previously, the newsletter was published in single monthly editions. Issues sent to subscribers so far this month:
9 September 2010 (Vol. 2 No. 9.5) “ETF, ETN & Index Fund News”
8 September 2010 (Vol. 2 No. 9.4) “Fund Focus: Foreign Gov’t Bonds
In Developed Markets”
3 September 2010 (Vol. 2 No. 9.3) “Rebalancing & Bonds”
2 September 2010 (Vol. 2 No. 9.2) “Economic Review”
1 September 2010 (Vol. 2 No. 9.1) “Risky Assets Take A Hit In August”
HOUSING & THE GREAT RECESSION
Steven Gjerstad (presidential fellow at Chapman University) and economics professor Vernon Smith (also at Chapman) connect the dots between the housing market and the business cycle in a recent study. Unfortunately, they don’t like what they see in the current climate. As they explain in an op-ed in The Wall Street Journal that summarizes their research, “If there is no recovery in housing expenditures, confirmed by a recovery in consumer durable goods expenditures, then there is no economic recovery.” And in case you were wondering, there’s no housing recovery to speak of at the moment.
JOBLESS CLAIMS DROP SHARPLY. CAN WE BELIEVE IT?
Seasonally adjusted jobless claims fell last week by 27,000—the biggest weekly drop in nearly two months and quite a bit more than the 2,000 retreat that economists generally were expecting. The news is a breath of fresh air for the business cycle, although it comes with some caveats. Nonetheless, the headline trend for the moment looks quite a bit better today: new filings for unemployment benefits dropped to 451,000 for the week through September 4, the lowest since early July.
EMERGING MARKETS POISED TO GRAB MORE GLOBAL GDP & MARKET CAP
It’s old news that emerging markets are expected to grow at rates in the years ahead that will make the developed world look stagnant. But the details still impress whenever new estimates are published.
IS OBAMA’S BUSINESS INVESTMENT TAX CREDIT TOO LITTLE, TOO LATE?
President Obama is scheduled to announce a round of new tax breaks today for corporate America in a bid to stimulate the economy. The timing is no surprise. Worries persist that the already weak economic rebound is still faltering.
BOOKS NOTED ON THE CAPITAL SPECTATOR
Please note the new “Book Store” link at the top of the page. Any and all books discussed on these pages are listed here.
HOW TO THINK ABOUT ECONOMICS
Has economics failed?
Yes, judging by the criticism heaped upon the dismal science in recent years. Macroeconomists in particular, we’re told, were blind to the rising risks that eventually killed the economic expansion and unleashed the Great Recession—the deepest contraction since the Great Depression in the 1930s. In fact, economics is at once the problem and the solution, as Roger Backhouse argues in an intriguing new book: The Puzzle of Modern Economics: Science or Ideology?
READING ROUNDUP FOR TUESDAY: 9.07.2010
►Dangerous Defeatism is taking hold among America’s economic elites
Ambrose Evans-Pritchard/Telegraph (U.K.)
“Blitz the market with bond purchases, but do so outside the banking system by buying from insurers, pension funds, and the public. This would gain traction on the broad M3 money instead of letting it collapse (yes, the “monetary base” has exploded, but that is a red herring), working through the classic Fisher/Friedman mechanisms of the quantity of money theory.
This is quite different from the Fed’s QE which buys bonds from the banks and works by trying to drive down borrowing costs. While Bernanke’s ‘creditism’ is certainly better than nothing, it is not gaining full traction.”
►The Monetary Base and Bank Lending: You Can Lead a Horse to Water…
David C. Wheelock/St. Louis Fed
“Why was the increase in the money stock so small when the increase in the monetary base was so large? The answer centers on the willingness of depository institutions (banks) to lend and the perceived creditworthiness of potential borrowers. A deposit is created when a bank makes a loan. Ordinarily, bank loans—and hence deposits—increase when the Fed adds reserves to the banking system. How ever, despite an increase in reserves of over $1 trillion, total commercial bank loans were some $200 billion lower in May 2010 than in September 2008. Banks added to their holdings of securities, which resulted in a modest increase in deposits and the money stock, but many banks were reluctant to make new loans. Partly this reflected weak loan demand, but it also indicated a diminished appetite for risk on the part of bankers.”
THE LABOR TREND IN AUGUST: STILL STRUGGLING
Nonfarm payrolls retreated by a net 54,000 last month (seasonally adjusted) and the unemployment rate ticked up to 9.6% from 9.5% in July, the Bureau of Labor Statistics reported this morning. The payroll loss for August isn’t as steep as the 100,000-plus decline that economists expected, but that’s cold comfort for a labor market that’s still struggling to grow. But there’s better news once we focus on the net change for private-sector payrolls, which posted a 67,000 rise—comfortably above the consensus forecast of a 44,000 gain. Better, but unimpressive.
READING ROUNDUP FOR FRIDAY: 9.03.2010
►Bond Bubble: A Sterile Debate
James Montier/The Big Picture
“…unless you believe that Japan is the correct template for the US (i.e. inflation will be zero for the next decade), government bonds don’t offer an attractive return as a buy-and-hold proposition.”
►Tyson’s Keynesian Confusion
Mark A. Calabria/Cato@Liberty blog
“Unlike consumption, which has largely rebounded, investment today is about 20% below its peak. Of course we should keep in mind, that peak was a bubble. The good news is that investment in such things a equipment and software, are slowly, but steadily, climbing back. The real drag on investments is from the construction industry, particularly residential, which is still down about 50% from its peak…
What most of this suggests to me is that unemployment is being driven mainly by a mismatch between skills of the unemployed and available job openings. You simply cannot, overnight, turn a construction worker into a nurse or computer programmer…
At the end of the day, what we need to get employment increasing is to create an environment where business feel confident to invest.”