The expected risk premium for the Global Market Index (GMI) dipped moderately in September vs. the previous month. GMI, an unmanaged, market-value weighted mix of the major asset classes, is currently projected to earn an annualized 4.3% over the “risk-free” rate for the long term (for details on the methodology, see summary below). Today’s forecast is below last month’s 4.7% estimate.
Continue reading →

● German Factories See Sharp Drop in Orders | Wall Street Journal
German factory orders tanked in August, signaling that the rest of the year will feature weak economic output or even stagnation, experts said.
● Eurozone Sentix investor confidence at 17-mo. low | Investing.com
Investor confidence in the euro zone for October deteriorated to the lowest level in 17 months, underlining concerns over the outlook for the region’s economy.
● Surging dollar may be triple whammy for U.S. earnings | Reuters
The suddenly unstoppable U.S. dollar is posing a triple threat to American companies’ profits: driving up the costs of doing business overseas, suppressing the value of non-U.S. sales and, perhaps most worryingly, signaling weak international demand.
● World on brink of an oil price war | New Zealand Herald
A sudden slump in the price of crude has exposed deep divisions within the Organisation of Petroleum Exporting Countries (Opec) ahead of its final scheduled meeting of the year next month to decide on how much oil to pump.
● The Collapse of the Russian Ruble | Econospeak
There has been little attention to this in the western media, but the Russian ruble has suffered a major decline in the last few months.

● The Euro Trap: On Bursting Bubbles, Budgets, and Beliefs
By Hans-Werner Sinn
Summary via publisher (Oxford University Press)
This book offers a critical assessment of the history of the euro, its crisis, and the rescue measures taken by the European Central Bank and the community of states. The euro induced huge capital flows from the northern to the southern countries of the Eurozone that triggered an inflationary credit bubble in the latter, deprived them of their competitiveness, and made them vulnerable to the financial crisis that spilled over from the US in 2007 and 2008. As private capital shied away from the southern countries, the ECB helped out by providing credit from the local money-printing presses. The ECB became heavily exposed to investment risks in the process, and subsequently had to be bailed out by intergovernmental rescue operations that provided replacement credit for the ECB credit, which itself had replaced the dwindling private credit. The interventions stretched the legal strictures stipulated by the Maastricht Treaty which, in the absence of a European federal state, had granted the ECB a very limited mandate. These interventions created a path dependency that effectively made parliaments vicarious agents of the ECB’s Governing Council.
Continue reading →

Growth in private-sector payrolls rebounded strongly in September, according to today’s update from the US Labor Department. The revival isn’t particularly surprising (the crowd was expecting a sizable improvement), although the sharply higher gain is reassuring after August’s weak advance. Indeed, the companies added 236,000 jobs last month, a sizable improvement over August’s revised increase of 175,000 (initially reported as a mere 134,000 gain). It’s unclear if today’s print is a sign of stronger growth to come vs. a one-time payback after an unusually soft month. Only time will tell. Meanwhile, the numbers du jour look quite good.
Continue reading →

The US stock market has taken a hit lately, presumably because various geopolitical and macro risks around the world are starting to resonate with formerly complacent investors who have been inclined to drive American equities higher in recent history no matter the headlines du jour. But to the extent that the worries are focused on the US economy, the worst fears still look overblown. Or so this week’s updates on the labor market suggest, including today’s encouraging numbers on initial jobless claims for the week through September 27.
Continue reading →

Private nonfarm payrolls in the US are projected to increase 208,000 (seasonally adjusted) in tomorrow’s September update from the Labor Department, according to The Capital Spectator’s median econometric point forecast. The prediction reflects a sharply higher gain vs. the previously reported increase of 134,000 for August.
Continue reading →

Private-sector employment continued to rise at a moderate pace in September, according to this morning’s ADP Employment Report. Last month’s 213,000 increase in jobs (seasonally adjusted) was slightly higher than the consensus forecast, but generally in line with the pace of growth in recent months. In fact, once you consider the year-over-year trend—payrolls advanced 2.2% last month vs. the year-earlier level—today’s release looks a lot like the August report. In other words, the economy continues to create jobs at a steady rate in the low-2% range.
Continue reading →

September was a complete rout. All the major asset classes suffered losses last month—the first calendar month of across-the-board red ink since June 2013.
Continue reading →