I’m always on the prowl for rebalancing opportunities–in particular, those moments when the odds look unusually high for success in one or more ETFs. Instances of screaming buys or sells are rare, of course, and when they do arrive the free low-cost lunch doesn’t last long. Accordingly, it’s essential to monitor the ebb and flow of markets on a regular basis so that you can grab a pearl before it turns back into a sow’s ear.
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● Risk Savvy: How to Make Good Decisions
By Gerd Gigerenzer
Summary via publisher, Viking
In the age of Big Data we often believe that our predictions about the future are better than ever before. But as risk expert Gerd Gigerenzer shows, the surprising truth is that in the real world, we often get better results by using simple rules and considering less information. In Risk Savvy, Gigerenzer reveals that most of us, including doctors, lawyers, financial advisers, and elected officials, misunderstand statistics much more often than we think, leaving us not only misinformed, but vulnerable to exploitation. Yet there is hope. Anyone can learn to make better decisions for their health, finances, family, and business without needing to consult an expert or a super computer, and Gigerenzer shows us how.
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The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to decline slightly to -0.26 in the March update that’s scheduled for release on Monday (April 21), according to The Capital Spectator’s median econometric forecast. In the previous release for February, the three-month average was -0.18, a reading that equates with relatively weak economic growth. 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 March, CFNAI’s three-month average is projected to remain at a level that’s historically associated with growth, but at a moderately below-trend pace.
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So much for pessimism. Most of the key economic reports for March are in and the general message looks encouraging… again. You can never say anything definitive about the business cycle in real time, but the data in hand today strongly suggest that the recent turbulence in some economic reports was only a temporary blip in an ongoing run of moderate growth.
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In the coming days I’ll be publishing passages from my new book–Nowcasting The Business Cycle: A Practical Guide For Spotting Business Cycle Peaks Ahead Of The Crowd. Let’s kick off the first of several excerpts with an obvious starting point… the beginning.
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There’s a growing list of economic clues that suggest that the moderate pace of expansion, although battered and bruised in January and February, revived last month. Consider yesterday’s update on industrial output, which increased 0.7% in March—a gain that translates into a respectable 3.8% annual rise. Housing starts still look shaky, but most of the other key indicators at the end of this year’s first quarter point to growth. Here’s one more piece of empirical support for thinking positively when it comes to the macro trend: stable inflation expectations and a rising stock market.
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The Federal Reserve is mulling a new set of tougher banking rules to boost the odds that the financial system will remain sufficiently liquid when the next crisis strikes. It’s a worthy goal, if only because one day another event will surely arrive. But all the usual caveats apply when it comes to engineering outcomes in economics, starting with the sober reality that any efforts to sidestep implosion due to banking turbulence are forever linked with the potential for blowback by way of moral hazard. In fact, there can be no permanent solution for managing bank risk if the goal is simultaneously keeping the threat of bank runs to a minimum while maximizing prudence in matters of investing and lending in the private sector. The ideal regulatory prescription that promotes each of these two competing interests is in constant flux due to the ebb and flow of the business cycle.
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Housing starts are expected to total 930,000 in tomorrow’s update for March, based on The Capital Spectator’s median econometric forecast (seasonally adjusted annual rate). The projection represents a modest rise vs. the previously reported 907,000 for February.
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US industrial production in March is projected to increase by 0.2% vs. the previous month in tomorrow’s release from the Federal Reserve, according to The Capital Spectator’s median econometric forecast. The projected gain represents a deceleration in growth from the previously reported 0.6% rise for February.
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The US stock market is nothing if not resilient. There’s no shortage of risks lurking around the world, but the American equity market shows minimal signs of relinquishing its role as the leading performer among the major asset classes. Sure, the bears mount a challenge every so often (including last week’s selloff), but any setbacks have been temporary affairs… so far. Indeed, the bulls took control again yesterday and stocks mounted a modest recovery.
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