Here’s a brief (very brief) sampling that caught your editor’s eye, for one reason or another…
HEALTH CARE REFORM & MARKET (IN)EFFICIENCY
One pundit notes that the lack of heavy selling today in equities (the S&P 500 was up about 0.5%) implies that the market “doesn’t fear healthcare reform,” via Andrew Leonard at Salon.com. Paul Krugman echoes the point on his blog: “if Obamacare is such a disaster for the economy, where’s the market reaction?”
Does this mean the market’s efficient after all? Or, to take the opposite view: Is the market inefficient and therefore its muted reaction is a sign that healthcare reform is really bad news for the economy–bad news that the market doesn’t perceive?
WILL HEALTH CARE “REFORM” REALLY LOWER THE DEFICIT?
The health care reform bill has passed the House and the only thing standing in its way from becoming law is the Senate. Although Republicans are expected to put up a fight, it’s unlikely that they’ll succeed in keeping the bill from the President’s desk, where Obama will sign it and proclaim victory.
Among the many questions that surround the health care legislation is cost. At a time when the U.S. budget is already saddled with hefty doses of red ink, there’s a growing debate about how the new health care bill will help, or hinder, the cause of fiscal probity.
IT’S ALL ABOUT HEALTH CARE LEGISLATION NOW
Here’s something you don’t see every day, via Bloomberg News:
“The bond market is saying that it’s safer to lend to Warren Buffett than Barack Obama.”
GREENSPAN’S BUBBLE REVIEW DU JOUR
“All bubbles burst when risk aversion reaches its irreducible minimum,” former Fed chairman Alan Greenspan writes in a new paper—“The Crisis”—for the Brookings Institution. That minimum, he advises, arrives with “credit spreads approaching zero, though analysts’ ability to time the onset of deflation has proved illusive.”
IS UPSIDE ECONOMIC MOMENTUM SET TO BUBBLE?
The economy is struggling to regain positive economic momentum, according to recent readings of the Philly Fed’s ADS Business Conditions Index. Is it making any progress?
IS IT GETTING BETTER? OR JUST NOT GETTING WORSE?
Sometimes the waiting game is the only game in town when it comes to evaluating the economic numbers du jour. That seems to apply to this morning’s updates in consumer inflation and weekly jobless claims. The news tends to be encouraging, but we’re still a long way from declaring victory.
REVIEWING THE EQUITY RISK PREMIUM
Estimating the equity risk premium is the holy grail of investing. That’s because the allocation to the stock market is, for most investors, the primary driver of risk in the portfolio. As a general proposition, one can say that the allocation to equities will (for good or ill) go a long way in determining the portfolio’s return in the long run, and perhaps over the short- and medium-term horizons as well.
No wonder, then, that here’s a lot riding on the outlook for equity returns above and beyond the risk-free rate, which we can define as short-term Treasury bills or, if you prefer, the 10-year Treasury Note. With that in mind, it’s always timely to take a fresh look at what financial economics tells us about projecting the equity risk premium. As a preview, there’s still precious little that’s new under the sun in strategic terms. Yet researchers keep chipping away at the nuances of asset pricing, and every now and then they turn up intriguing and perhaps useful clues for peeling away another layer of uncertainty in projecting risk premiums.
NO EASY ANSWERS IN THE AGE OF EASY MONEY
The key phrases in today’s FOMC statement from the Fed in reference to the outlook for interest rates: “exceptionally low” and “extended period.” Almost no one expected a change from the current zero-to-0.25% Fed funds target, although there was speculation that the wording might change. Not so. Bernanke and his crew want it understood that they’re going to keep rates low for quite a while, and they really do mean it.
ANOTHER FOMC DAY
Will they hike ’em today? Probably not. But the sight of a central bank raising interest rates is no longer unusual. Australia has been hiking the price of money recently and South Korea is reportedly set to begin its exit strategy. The Fed isn’t likely to join them today. The formal yeah or nay arrives this afternoon, when the FOMC releases a statement. But the aura of tightening hangs in the air.