Archive for February, 2010
« Previous EntriesNY Fed Treasury Spread Model: Probability of Recession Falls to Lowest Level Since 1983
Submitted by CARPE DIEM
Today the New York Federal Reserve updated its “Probability of U.S. Recession Predicted by Treasury Spread” with data through January 2010, and the Fed’s recession probability forecast through January 2011 (see top chart above). The NY Fed’s model uses the spread between 10-year and 3-month Treasury rates (3.67% spread in January, the [...]
Quote of the Day: “My Heart, My Choice”
Submitted by CARPE DIEM
“I did not sign away my right to get the best possible health care for myself when I entered politics.”
~Canadian Premier of Newfoundland and Labrador Danny Williams
HT: John Goodman
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Case-Shiller Home Index Improves for 12th Month
Submitted by CARPE DIEM
“In December, the 10-City and 20-City S&P/Case-Shiller Home Price Indices recorded annual declines of 2.4% and 3.1%, respectively. These two indices, which are reported at a monthly frequency, have seen improvements in their annual rates of return every month since the beginning of the year (see chart above).”
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Women Earn Almost 50% of College Math Degrees
Submitted by CARPE DIEM
We hear a lot about how women are underrepresented in STEM (science, technology, engineering and mathematics) fields and careers, and “Nationwide, there is a push for more women to choose STEM fields.” There is a special National Science Foundation program called ADVANCE, whose goal is to:
“Increase the representation and advancement of [...]
The Value of an Economic Consultant: The Lagging Division
Submitted by Businomics Blog
Coming out of a recession (not the most recent, but another recession), a company had one line of business with flat sales. The company’s other divisions were hitting double-digit growth rates, but this one division had no growth at all.
In the meeting to report my results, I could tell that the CEO [...]
WHAT’S THE CRITICAL FACTOR IN PORTFOLIO RETURN?
Submitted by The Capital Spectator
If you could only make one decision in your investment strategy, what would it be? Would you concentrate on picking the best securities? The best ETFs or mutual funds? Would you focus exclusively on trying to time your asset allocation/rebalancing choices? Or maybe you’d spend a lot of time deciding if [...]
Treasury Supplementary Financing Program (SFP)
Submitted by Econbrowser
The SFP, the U.S. Treasury’s program for assisting with the balance sheet of the Federal Reserve, is making a sudden and dramatic comeback.
First a little background. Whenever the Federal Reserve buys an asset or makes a loan, it simply credits new reserve deposits to the account that the receiving bank maintains with the [...]
Real Wage Decline Ended the 1981-82 Recession?
Submitted by Econbrowser
David Henderson writes in his “Reply to DeLong”:
In the 1981-82 recession, the fall in real wages helped end the recession.
I don’t see it in BLS series Nonfarm Business Sector: Real Compensation Per Hour.
Figure 1: Log nonfarm business sector compensation, deflated using nonfarm business sector deflated. NBER defined recession shaded gray; assumes last recession [...]
3X Inc. in Charge-Off Rate for Credit Cards Since ‘06 to Record High; Don’t Issuers Deserve Protection?
Submitted by CARPE DIEM
The Credit Card Act of 2009 provides a lot of protection for cardholders:
Cardholders Deserve Protections against Arbitrary Interest Rate Increases
Cardholders Should Be Protected from Due Date Gimmicks
Cardholders Who Pay on Time Should Not Be Penalized
Cardholders Should Be Protected from Misleading Terms
Cardholders Deserve the Right to Set Limits on Their Credit
Card Companies Should [...]
In Search of…Crowding Out
Submitted by Econbrowser
There are various definitions of crowding out. There’s crowding out in the financial markets, and crowding out of actual economic activity. In order for crowding out in the financial markets to translate into a reduction of the interest sensitive components of aggregate demand, one needs to see an impact on interest rates. So, [...]
CAN INVESTMENT MISTAKES BE RATIONAL DECISIONS?
Submitted by The Capital Spectator
There’s a furious debate these days over the efficient market hypothesis and whether recent events support or spurn its implications. Among the criticisms: investors are irrational, meaning that they’re prone to chase trends mindlessly. In turn, this leads to speculative manias and crushing selloffs.
It all sounds reasonable on the surface, but [...]
GDP VS. MARKET CAP FOR EQUITY MARKET ASSET ALLOCATION
Submitted by The Capital Spectator
In the hierarchy of investment decisions, asset allocation is at or near the top of the list of variables that are strategically relevant for diversified portfolios. There are a number of studies telling us so, starting with the influential Brinson study from 1986—“Determinants of Portfolio Performance”—and its 1991 update. The basic [...]
Distortionary Effects of Regulations and the Law of Unintended Consequences: Annual Fees Are Back
Submitted by CARPE DIEM
WASH POST — “A law hailed as the most sweeping piece of consumer legislation in decades has helped make it more difficult for millions of Americans to get credit, and made that credit more expensive.
It wasn’t supposed to be this way. The law that President Barack Obama signed last May shields card [...]
Another V-Sign of Economic Recovery: Chicago Fed National Activity Index Reaches 30-Month High
Submitted by CARPE DIEM
“Led by improvements in production- and employment-related indicators, the Chicago Fed National Activity Index in January was slightly positive for the second time in the past three months. From June 2007 through October 2009, the index had been consistently negative. The index increased to +0.02 in January from –0.58 in December, with [...]
The new normal
Submitted by Econbrowser
Also included in Federal Reserve Chair Ben Bernanke’s statement to Congress last week were some guidelines for what we might expect Federal Reserve decisions and communications to look like as we make the gradual adjustment to more normal conditions.
In recent years, the Fed had gotten very good at communicating its intentions to the [...]
HOUSING & INDUSTRIAL PRODUCTION CONTINUE TO RECOVER
Submitted by The Capital Spectator
The staying power of the current rebound remains an open question, but the data du jour at least confirm that a recovery is underway. It’s a precarious rebound, but the economy must walk before it can run.
Both housing starts and industrial production posted higher levels last month. The annualized pace of [...]
V-Shaped Rebound in Industrial Production Marks The End of Every Recession
Submitted by CARPE DIEM
For the last ten recessions, notice a similar V-shaped pattern for the year-to-year growth in industrial production rebounding at the end of each recession, and signalling the start of the next economic expansion.
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ANOTHER JUMP IN JOBLESS CLAIMS
Submitted by The Capital Spectator
It’s still touch and go with weekly jobless claims, and it probably will be for some time. We’re in a transition phase, or so it seems. The question is what will be the outcome? As we write, we’re inclined to think the odds are evenly split between a resumption in the [...]
WHERE ARE THE CUSTOMER’S RETURNS?
Submitted by The Capital Spectator
Fred Schwed’s classic Where Are the Customers’ Yachts: or A Good Hard Look at Wall Street (Wiley Investment Classics) asks the perennially relevant question when it comes to investment advice. A 21st century corollary might inquire: Where are the customer’s returns? More precisely, why do the customer’s returns so often trail [...]
THE FIRST OF MANY RATE HIKES BY THE FED
Submitted by The Capital Spectator
We knew it was coming, but we didn’t know when. Now we know. After the stock market closed today in New York, the Federal Reserve announced it was raising its discount rate to 0.75% from 0.50%. This is the rate that the Fed charges on short-term loans to banks. Think of [...]
Recovery Strengthens: Leading Economic Index Rises in January for the 10th Straight Month
Submitted by CARPE DIEM
The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.3% in January, following a 1.2% gain in December, and a 1.1% rise in November. Says Ataman Ozyildirim, Economist at The Conference Board: “The U.S. LEI has risen steadily for nearly a year, led by an improvement in financial markets and [...]
Another Sign Manufacturing Sector’s Leading Recovery: Philly Fed Index Positive for 6th Month
Submitted by CARPE DIEM
PHILADELPHIA FED — “Manufacturing conditions continue to improve in the region, according to firms polled for this month’s Business Outlook Survey. Indexes for general activity, new orders, shipments, and employment all remained positive this month and increased from their readings in January. Firms reported a notable pickup in new orders this month. [...]
Markets In Everything: Homemade Wood “Shovels”
Submitted by CARPE DIEM
Picture taken at a Home Depot in the DC area during the recent Snowpocalpyse when regular shovels were scarce, and these wood “shovels” were selling at the “low, low price of $4.01.”
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Top 400 Taxpayers Paid 2% of All Income Taxes
Submitted by CARPE DIEM
According to new data from the IRS, the top 400 individual income taxpayers in 2007 (out of 143 million taxpayers) earned 1.59% of all Adjusted Gross Income in that year, and paid 2.05% of all individual income taxes collected (see chart).
Isn’t it amazing that only 400 taxpayers out of 143 [...]
Getting Value from a Consultant: A Story About Misdirection
Submitted by Businomics Blog
Good advice in engaging consultants, from a recent LinkedIn discussion, is to be specific about what you want. However, sometimes good results occur with some misdirection.
A client asked me to help them with an operational organization issue (a touch outside my specialty, but they had been happy with earlier work I had [...]
