A broadly defined index of commodities rose for a third straight week, posting the strongest gain among the major asset classes over the five trading days through July 28, based on a set of exchange-traded products. Supported by higher prices for crude oil and gold, commodities overall increased to a two-month high at Friday’s close.
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● The Chickenshit Club: Why the Justice Department Fails to Prosecute Executives
By Jesse Eisinger
Interview with author via Bloomberg.com
Like many of us, Eisinger was perplexed and even infuriated by the utter lack of prosecution following the great financial crisis and recession. Fraud was rampant, with an obvious paper trail leading to senior management at various banks and brokers. It should have made for winning prosecutions and help top heal society following the crash and recovery. The issue of why white collar criminals are treated with such respect, and afforded rights not available to blue collar criminals gets a thorough review.
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Economic activity revived in the second quarter, according to this morning’s “advance” GDP report published by the Bureau of Economic Analysis. Output increased 2.6%, which matched Econoday.com’s consensus forecast. The growth rate also marks an encouraging improvement over Q1’s pace, which was revised down slightly to a sluggish 1.2% rise.
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In a final round of predictions, forecasters raised expectations for today’s preliminary estimate of second quarter GDP growth. The projections still anticipate that output will remain modest, but the 11th-hour predictions suggest that an upside surprise is possible in today’s release from the Bureau of Economic Analysis that’s due at 8:30 am Eastern.
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The trend remains your friend if financials have been overweighted in your portfolio. Measured by one-year performance, this sector is red hot in absolute and relative terms, based on a set of proxy ETFs.
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Designing and managing asset allocation strategies based on factors is promoted in some corners as a better way to build portfolios. Not surprisingly, there’s no shortage of studies that support this view. But the jury’s still out on whether it’s prudent to throw out the standard asset-class buckets. Factor-based investing can play a productive role in enhancing a conventionally designed asset allocation, but it’s debatable if a pure factor-only strategy is a true solution.
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A new study offers encouraging results for a strategy of monitoring the business cycle as a tool for enhancing investment returns (or at least limiting losses). “Over the period 1970-2015, investment returns were enhanced by merely knowing concurrently whether the economy was in a state of expansion or contraction, and making the most basic asset allocation decision of whether to be in stocks or bonds,” write a trio of professors in a recent paper (“Does it Pay to Forecast the Business Cycle? A U.S. Update and an International Perspective”).
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For a second week in a row, all the broad categories of global markets posted gains. Led by a sharp advance in foreign government bonds in developed markets, the major asset classes dispensed a clean sweep of price increases, based on a set of exchange-traded products.
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● Rethinking the Economics of Land and Housing
By Josh Ryan-Collins, et al.
Summary via publisher (Zed Books)
Why are house prices in many advanced economies rising faster than incomes? Why isn’t land and location taught or seen as important in modern economics? What is the relationship between the financial system and land? In this accessible but provocative guide to the economics of land and housing, the authors reveal how many of the key challenges facing modern economies – including housing crises, financial instability and growing inequalities – are intimately tied to the land economy. Looking at the ways in which discussions of land have been routinely excluded from both housing policy and economic theory, the authors show that in order to tackle these increasingly pressing issues a major rethink by both politicians and economists is required.
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The Capital Spectator is traveling for the rest of the week. The usual routine may resume with Saturday’s Book Bits, definitely on Monday with the weekly wrap on the major asset classes. Meantime, stay cool.