The ISM Manufacturing Index is expected to tick fractionally lower to 52.7 in tomorrow’s update for June vs. the previous month, based on The Capital Spectator’s average point forecast for several econometric estimates. The prediction is still above the neutral 50.0 mark and so the current outlook still calls for moderate growth for this benchmark of economic activity in the US manufacturing sector.
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Private nonfarm payrolls in the US are projected to increase by 200,000 (seasonally adjusted) in tomorrow’s June update of the ADP Employment Report, based on The Capital Spectator’s average point forecast for several econometric estimates. The average projection is fractionally below May’s increase.
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The escalating Greek crisis has raised new questions about the timing of the Federal Reserve’s plans for the first US rate hike since 2006. But by some accounts, it’s still mostly noise on this side the Atlantic. “This isn’t a ‘watch Greece’ situation,” says Roberto Perli, a former Fed staffer who’s now at Cornerstone Macro. “While we have chaos in Greece, there are no signs of dramatic contagion yet, and that’s why it doesn’t change the Fed’s tone.”
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● Greece is set to default at the end of today…
● But the Greek crisis isn’t expected to delay the Fed’s first rate hike…
● Meanwhile, US pending home sales rose to a 9-year high in May…
● As Puerto Rico faces bankruptcy…
● Eurozone inflation ticked lower this month while the jobless rate remains stable but elevated at 11.1%…
● And Germany’s unemployment remains close to an historic low in June as retail sales increased for a second month in Europe’s largest economy.

We’re all backtesters in some degree, but not all backtested strategies are created equal. One of the more common (and dangerous) mistakes is 1) backtesting a strategy based on the historical record; 2) documenting an encouraging performance record; and 3) assuming that you’re done. Rigorous testing, however, requires more. Why? Because relying on one sample—even if it’s a real-world record—doesn’t usually pass the smell test. What’s the problem? Your upbeat test results could be a random outcome.
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● Greece is on the brink… again still, but this time it’s far more acute as the government closes banks and imposes capital controls, pushing the beleaguered nation closer to default and a hasty exit from the euro…
● Meanwhile, back in the US, the University of Michigan’s Consumer Sentiment Index increased to its highest reading since January in this month’s preliminary reading. “An improving economy was the most important component,” said the chief economist for the survey…
● Eurozone economic confidence in June retreated, according to the European Commission’s revised survey data…
● And China cut interest rates to a record low after a sharp decline in the stock market.

● The Misfit Economy: Lessons in Creativity from Pirates, Hackers, Gangsters and Other Informal Entrepreneurs
By Alexa Clay and Kyra Maya Phillips
Review via Financial Times
Hackers, pirates and swindlers, rather than visionary chief executives, should be the inspiration for business leaders. That is the view set out in “The Misfit Economy,” by Alexa Clay and Kyra Maya Phillips.
The book’s principal contention is that “the free market economy does not possess a monopoly on innovation.”
They suggest five key principles to help discover your “inner misfit.”
They are hustling (“spotting an idea and going for it”); copying (which they describe as “collective innovation”); and hacking (taking on the establishment and getting “to know a system intimately in order to more effectively take it apart”).
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The US economic trend remains modestly positive as the second quarter comes to a close, based on a markets-based estimate of macro conditions. The Macro-Markets Risk Index (MMRI) closed at +4.8% yesterday (June 25). Although that’s close to the lowest level for the past year and reflects slower growth, the current reading is still comfortably above zero, which implies that business-cycle risk remains relatively low. A decline below 0% in MMRI would indicate that recession risk is elevated while readings above 0% imply that the economy will expand in the near-term future. Analyzing price data in the financial and commodities markets with a probit model also suggests that macro risk is low.
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● US consumer spending in May posted its biggest increase in six years while personal income perked up to its strongest advance in 14 months…
● Meanwhile, US initial jobless claims remained below the 300,000 mark for a 16th week…
● The revival in consumer spending “portends well for second-quarter growth and the broader momentum of economic activity in the second half of the year, and keeps the prospect of a September rate hike squarely on the table,” said Anthony Karydakis, chief economic strategist at Miller Tabak…
● Even the recently slumping Bloomberg Consumer Comfort Index made a positive U-turn, delivering its biggest gain for last week’s reading since April.
● On a relatively weak note among yesterday’s updates, Markit’s US Services PMI posted a slower growth rate at the end of Q2…
● Nonetheless, the Q2 GDP outlook improved a bit: the Atlanta Fed’s GDPNow estimate ticked up to 2.1% in yesterday’s update–the model’s highest Q2 forecast to date.
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History shows rather clearly that the stock market is prone to extreme events, aka crashes. The challenge is deciding when the risk for a repeat performance is unusually high. The literature offers endless possibilities, which is a reminder that the market can crumble for any number of reasons. The leading factor, of course, is the business cycle. But internal market issues can’t be ignored either, including abnormally high valuation. All of which inspires a relatively broad-minded system for monitoring the key risk factors.
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