Inflation, or measured inflation for those who take a more skeptical view of the accuracy of the government’s inflation estimates, has been subdued. Core inflation which strips out food and energy is running at 2.20%--slightly ahead of the Fed’s inflation target. The subdued level of core inflation seems to have led to some complacency in the market. Bond yields and the risk premium for inflation remain near record lows. But an alternative measure of inflation that takes into account the true cost of home prices instead of the fictional owners-equivalent rent measure used by the … [Read more...]
Who took all of America’s Manufacturing Jobs?
The decline in manufacturing employment in the U.S. has many causes. Some of them policy related, but others are due to technological innovation. Here Quartz reports on a study that tries to measure the impact of the proliferation of industrial robots on the U.S. labor market. The authors find that each additional robot reduced employment by 3-6 workers. In a recent study (pdf), economists Daren Acemoglu of MIT and Pascual Restrepo of Boston University try to quantify how worried we should be about robots. They examine the impact of industrial automation on the US labor market from 1990 to … [Read more...]
Is the Indexing Bubble about to Pop?
The move toward index-based investing has been relentless in recent years. Investors have pulled billions from actively managed funds and put them into index funds and index-based ETFs. Ned Davis of Ned Davis Research thinks the trend toward passive investing is a bubble that may be ready to pop. Barron's summarizes his views. Meanwhile, Ned Davis of Ned Davis Research thinks we’re in the late stages of a bubble in passive investing. “Not only have index funds outperformed, but the crowd has noticed,” he writes. Over the past year, investors have yanked billions from actively managed funds … [Read more...]
Fake News now as Popular as “Real” News
The FT reports on a study by the Oxford Internet Institute that found a quarter of web content shared on Twitter by users in Michigan in the final days of the presidential election was fake news. Professional news stories received the same percentage of shares on Twitter. Fake news of course doesn’t serve the public good, but then neither does biased professional news passed off as objective. Is there even a difference between the two? The FT writes: Nearly a quarter of web content shared on Twitter by users in the battleground state of Michigan during the final days of last year’s US … [Read more...]
Should you Buy Solar Panels?
The cost of photovoltaic solar has dropped by over 80% since 2008. Is solar now cost effective for you? Google’s Project Sunroof can help you decide. Project Sunroof has built 3-D models of rooftops in all 50 states, looked at the trees around people’s homes, considered local weather, and figured out how much energy each house or building can generate if its owners buy solar panels. Google has found that nearly 80% of all buildings it has modeled are viable for solar panels. You can see what google has to say about solar for you by entering your address on its Project Sunroof … [Read more...]
Are Investors Sick and Tired of Buybacks?
Over the last few years of bull market excess, companies have been spending less on capital, and more on buying back stock. But Justin Lahart reports that non-financial companies are slowing down their stock buybacks and doing more capital spending compared to their cash flows. But the data also suggest a shift is underway. In the fourth quarter, nonfinancial companies bought back a net $323 billion in equities, at a seasonally adjusted annual rate, half as much as in the previous quarter and the lowest amount since the second quarter of 2014. And unlike the third quarter, companies’ … [Read more...]
America’s Looming Debt Problem Could Derail it All
Over the last eight years, the federal government has been on an unprecedented spending spree. Since year-end 2007, federal debt outstanding has increased by more than $10 trillion—a number so large it is hard to even wrap your mind around. But let’s try. According to the Census Bureau there are almost 125.8 million households in the United States. The $10 trillion increase in federal debt equates to almost $80,000 per household. Do you and your family feel like you’ve gotten $80,000 worth of value from the government over the last eight years? For $10 Trillion, the U.S. government … [Read more...]
This Is Why Analysts Are Insincere on Quarterly Earnings Calls
Anybody who has wasted an hour of his life listening to a quarterly earnings conference call will appreciate the piece below from Jason Zweig. Quarterly earnings conference calls are obnoxious. First the management teams regurgitate the press release they just issued to analysts as if the analysts couldn’t read. Then, the analysts get a turn to ask questions. But before each question is asked analysts suck up to management with praise on their astute stewardship for beating quarterly earnings guidance. Guidance that in most cases have been lowered over the course of the prior three … [Read more...]
This is How a Startup is Changing the Fashion World with Tech
Over coming decades, artificial intelligence is going to profoundly change the way business is done on a large and small scale. Here the WSJ explains how Stitch Fix, an e-commerce apparel company is using AI to optimize design and sales. Apparel seller Stitch Fix recently introduced a coral, sleeveless blouse with a split neckline—and an unusual creative provenance. It was one of three new tops designed with the help of artificial intelligence. The San Francisco-based e-commerce company, which sends customers boxes of preselected outfits, is leveraging computers to analyze purchasing … [Read more...]
A New Hope for Truck and SUV Enthusiasts
Here is some good news for truck and SUV enthusiasts. The Trump administration has reopened a review of vehicle emissions standards requiring auto makers to sell vehicles averaging 54.5 miles per gallon (40 mpg in real world conditions) by 2025. If you’ve purchased a truck or SUV lately, you may have been disappointed with the underwhelming power or the gimmicky features intended to add power without increasing fuel consumption to meet those standards. You wouldn't be alone in that view. The Trump review offers new hope for those of us who would gladly sacrifice fuel efficiency for more … [Read more...]
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