The ISM Manufacturing Index is expected to remain unchanged at 53.2 in tomorrow’s update for March vs. the previous month, based on The Capital Spectator’s median econometric forecast. Meanwhile, this median projection is moderately below three consensus forecasts via surveys of economists.
Continue reading →

It’s all about supply and demand–the first, last, and everything for estimating the projected path of prices. Geopolitics can and does intrude, of course. This is oil, after all. But the raw numbers of economics have the last word eventually—even for the world’s most valuable commodity.
Continue reading →

● Capital in the Twenty-First Century
By Thomas Piketty
Review via The New Yorker
In the stately world of academic presses, it isn’t often that advance orders and publicity for a book prompt a publisher to push forward its publication date. But that’s what Belknap, an imprint of Harvard University Press, did for “Capital in the Twenty-first Century,” a sweeping account of rising inequality by the French economist Thomas Piketty. Reviewing the French edition of Piketty’s book, which came out last year, Branko Milanovic, a former senior economist at the World Bank, called it “one of the watershed books in economic thinking.” The Economist said that it could change the way we think about the past two centuries of economic history. Certainly, no economics book in recent years has received this sort of attention.
Continue reading →

Optimism got a break with today’s release for personal income and spending in February. As expected, modest growth prevailed last month as Americans spent a bit more vs. January. The gain marks the second monthly increase in a row. February’s 0.3% rise for both disposable personal income (DPI) and personal consumption expenditures (PCE) isn’t particularly impressive, but the fact that both indicators posted a decent rise in a month that suffered a heavy blow from Old Man Winter is an encouraging sign. More importantly, the year-over-year comparisons remain comfortably above zero, which implies that the recent fears of the worst for the business cycle have been excessive after all.
Continue reading →

Tomorrow’s report on US personal consumption spending for February is projected to show a gain of 0.3% vs. the previous month, based on The Capital Spectator’s median econometric forecast. That’s slightly below January’s 0.4% increase. Meanwhile, the Capital Spectator’s median forecast for February matches the consensus predictions in three surveys of economists.
Continue reading →

Selection bias is everywhere in financial journalism, and for obvious reasons (obvious if you’re in the publishing business). The average reader isn’t interested in a rigorous study of investment track records… yawn. No, the average reader wants sexy stories and profiles of a man (or woman) who beat the odds and delivered stellar returns. Or so it seems, based on a casual review of the usual suspects. I stumbled across another one recently, and it pushes all the obvious buttons. The basic message: the road to uncommonly high returns can be found with an extreme strategy. In this case, the short cut to the promised land runs through a “concentrated” value portfolio that keeps the number of holdings to a minimum and focuses on a select list of securities with the highest expected return. What else do you need to know? Goodbye indexing, so long multi-asset class diversification. They’re done. Now that you have the superior formula, sit back and drink in the success.
Continue reading →

It may get worse before it gets better for the US economy. GDP is expected to expand 2.0% (real seasonally adjusted annual rate) in the first three months of 2014, according to The Capital Spectator’s median nowcast. The revised estimate is below the previous 2.4% nowcast for Q1:2014 that was published on February 25.
Continue reading →

After asset allocation and rebalancing, choosing weights for each asset in the portfolio is next in line among the critical decisions that determine investment results. Once you make reasonable choices on the asset classes to hold, and how and when to rebalance those assets, your focus should turn to asset weights. But choosing weights is tricky, considerably more so compared with asset allocation or rebalancing. As a practical matter, you can use some intelligent rules of thumb for designing a portfolio that’s probably in the neighborhood of long-term optimal (the highest expected return for a given level of risk) with regards to asset allocation and rebalancing. Deciding how to weight the assets, by contrast, carries a much higher analytical burden for engineering a satisfying outcome.
Continue reading →

● Against Austerity: How We Can Fix the Crisis They Made
By Richard Seymour
Summary by publisher, Pluto Press
Five years into capitalism’s deepest crisis, which has led to cuts and economic pain across the world, Against Austerity addresses a puzzling aspect of the current conjuncture: why are the rich still getting away with it? Why is protest so ephemeral? Why does the left appear to be marginal to political life? In an analysis which challenges our understanding of capitalism, class and ideology, Richard Seymour shows how ‘austerity’ is just one part of a wider elite plan to radically re-engineer society and everyday life in the interests of profit, consumerism and speculative finance.
Continue reading →

The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to decline slightly to -0.04 in the February update that’s scheduled for release on Monday (Mar. 24), according to The Capital Spectator’s median econometric forecast. In the previous release for January, the three-month average was +0.10, a reading that equates with economic expansion. Only values below -0.70 indicate an “increasing likelihood” that a recession has started, according to guidelines from the Chicago Fed. Based on today’s estimate for February, CFNAI’s three-month average is projected to remain at a level that’s historically associated with growth, but at a marginally below-trend pace.
Continue reading →