What does last week’s market slide across most of the major asset classes imply for investing? A lot… or maybe nothing. The decision to adjust a portfolio, or not, depends on the risk-management strategy.

Every portfolio needs a clear-eyed plan for dealing with risk—it’s the financial brain that controls the investment body and provides the map for navigating rough financial seas. With that in mind, now’s a good time to review and reaffirm the first principles of enlightened risk management in the care and feeding of conventional investment portfolios.
Continue reading →

● The Power and Independence of the Federal Reserve
By Peter Conti-Brown
Summary via publisher (Princeton University Press)
The independence of the Federal Reserve is considered a cornerstone of its identity, crucial for keeping monetary policy decisions free of electoral politics. But do we really understand what is meant by “Federal Reserve independence”? Using scores of examples from the Fed’s rich history, The Power and Independence of the Federal Reserve shows that much common wisdom about the nation’s central bank is inaccurate. Legal scholar and financial historian Peter Conti-Brown provides an in-depth look at the Fed’s place in government, its internal governance structure, and its relationships to such individuals and groups as the president, Congress, economists, and bankers.
Continue reading →

Today’s December updates on retail sales and industrial production for the US delivered disappointing news. Negative comparisons weighed on both indicators for last month, raising more doubts about the strength of the US economy. There’s also a bit of good news on the margins in the year-over-year comparisons. Nonetheless, it’s hard to overlook the deterioration in these numbers as last year came to a close.
Continue reading →

Treasury yields have made a sharp U-turn lately. The 2-year yield—considered the most sensitive to rate expectations—has been sliding this month, falling to 0.90% yesterday (Jan. 14), based on daily data via Treasury.gov. That’s the lowest in about a month. The benchmark 10-year yield has lost even more ground, slipping to 2.10%–the lowest since late-October.
Continue reading →

● Monthly US jobless claims hit highest level since July | MarketWatch
● US Jobless claims rose 7,000 last week, but still near lows | USA Today
● Consumer Comfort Index for US Improved Last Week to 3mo High | Bloomberg
● Chinese stocks breach December 2014 | Reuters
● ECB Minutes Signal Scope For Further Easing | RTT
● UK Analysis: Nov Construction Falls; Could Weigh on GDP | MNI
● Dating financial stress episodes: A new model-based approach | Vox

US retail sales are expected to increase 0.2% in tomorrow’s December report vs. the previous month, according to The Capital Spectator’s average point forecast for several econometric estimates. The average prediction matches the growth rate in the previous month.
Continue reading →

US industrial production is expected to post no change in tomorrow’s December report vs. the previous month, according to The Capital Spectator’s average point forecast for several econometric estimates. The prediction reflects relative improvement in comparison with the previously reported 0.2% decline in November.
Continue reading →

The recent increase in junk bond yields is a warning sign that recession risk is rising, says Martin Fridson, a money manager at Lehmann Livian Fridson Advisors. “I am not an economic forecaster — this is what the market is saying,” he told Bloomberg on Tuesday. “There are lots and lots of caveats, but if you accept all of the assumptions, it’s a pretty startling comment,” says this respected veteran of all things high-yield-bond related.
Continue reading →

● US Economy Expands as Wages Stay Flat, Fed’s Beige Book Says | Bloomberg
● Mortgage applications in US rebound 21% | CNBC
● Year-ahead inflation outlook dips to 1.8% via US businesses | Atlanta Fed
● US Foreclosures at 9-Year Low in 2015 But Up in Some Oil Towns | MNI
● Survey finds that Americans see gov’t, economy as top US problems | Gallup
● China may slow Fed’s interest rate rises: Fed officials | Reuters
● German Economy Defied 2015 Global Slowdown via Stronger Growth| Bloomberg

Consumer discretionary stocks are holding on to their leadership position for the trailing 1-year period, but the edge is fading. Meantime, the worst-performing US equity sector—energy—has slipped deeper into negative territory, based on analysis of a set of sector ETFs.
Continue reading →