Sen. Dodd’s new financial regulation package is out and about. What does it mean? What does it do? What will it change? Will it work? The analysis has only just begun. We can start by recognizing that the Dodd legislation aims to add “layers of oversight.” It’s already delivered layers of paper (the actual bill is 1,336 pages).
IS A TRADE WAR BREWING?
Chinese Premier Wen Jiabao yesterday firmly rejected calls for a stronger yuan, which is widely credited for boosting the country’s exports and maintaining its enormous trade surplus. “The Chinese currency is not undervalued,” he said on Sunday in Beijing. “We oppose all countries engaging in mutual finger-pointing or taking strong measures to force other nations to appreciate their currencies.”
The Chinese have been asserting for some time that revaluing the currency was a non-starter. Earlier this month, China’s central bank chief said as much, as we discussed here. Wen’s comments yesterday only strengthen his country’s resolve.
A TAXING EXPERIMENT
Supply side economics guru Arthur Laffer co-authored a book recently whose title is anything but subtle: The End of Prosperity: How Higher Taxes Will Doom the Economy–If We Let It Happen
A BIT MORE CONSUMPTION IN FEBRUARY
Retails sales last month rose 0.3%, the Census Bureau reported this morning. That’s an upside surprise compared to the consensus outlook, which predicted a 0.3% fall. So much for the idea that snow can keep consumers away from the malls, even if the weather was blamed for pinching the labor market last month.
OBAMA WILL NOMINATE JANET YELLEN AS FED VICE CHAIRMAN
The Wall Street Journal this morning is reporting that Janet Yellen is on the fast track to become the central bank’s second-in-command replacement for the retiring Don Kohn.
NO, WE’RE NOT MAKING THIS UP…
Greece has economic troubles, and the extent and breadth of those troubles only seems to worsen the more the outside world learns of what makes this country tick.
WAITING (HOPING) FOR THE FLOOR TO GIVE WAY
The jury’s still out on the path of least resistance in the trend for initial jobless claims. Today’s weekly update is certainly a step in the right direction, although last week’s meager drop in new filings for jobless benefits falls far short of stellar, or convincing. The sluggish behavior of late in this series has kept us anxious for more than a month, and the number du jour doesn’t change much.
A BROADER ARRAY OF RISKS & OPPORTUNITIES IN GLOBAL EQUITIES
The global equity market has cast a long influence on regional stock markets in recent years. Whether it was a bull market on steroids or the opposite effect, the gravitational pull of a broad-minded definition of the world’s equity market has been a major force in moving narrower slices of stocks. Is the long shadow of equity beta now in the process of transition? It’s a little easier to answer “yes” if we consider year-to-date total returns for the primary equity regions around the world.
A FED HEAD’S SOBERING ANALYSIS OF THE LABOR MARKET
We’ve heard this before but we need to hear it again. Today the message comes from Charles Evans, president of the Chicago Federal Reserve Bank. “A number of labor market issues… lead me to think this accommodation will likely be appropriate for some time,” he said in prepared remarks delivered at a speech in Washington. In other words, the central bank will keep interest rates low for the foreseeable future. The lack of job growth is the main catalyst. How long will the easy money last? “I think six months is a good time period to say I think we’ll have accommodative policy like we have today.”
COMBINATION FORECASTS
There is a long history in financial economics of documenting some degree of predictability in asset returns. So why aren’t investors doing a better job of earning a risk premium? Is it because the prediction variables aren’t so useful after all? Or maybe the evidence showing support of earning higher risk premiums requires looking at longer periods than is the norm. Another possibility is that investors overall are incapable of mustering the emotional discipline required for exploiting forecasting opportunities.