Thursday, July 2, 2015

Fully Adjusted Return Forecast Early Yet Again...

On April 2, 2015, we issued an unemployment rate forecast that stated, in part:

"Our Fully Adjusted Return® Model, combining social and financial data, predicts a 5.4% rate for March. Unemployment has been trending down since the beginning of 2009. The long term trend is declining, as the chart below shows. We see no reason for this to change. The only risk is that we may be a little early."

As one outlet noted, "US employers added jobs at a solid pace in June, and the unemployment rate fell to 5.3 percent, a seven-year low." Today's rate release confirms our 4/2/15 forecast.

The chart above shows the overall Unemployment Rate (Blue), the rate for African Americans (Brown) and the difference between the two. (Gray line, scale at right.) We think the level and the volatility of this difference is a key indicator of the overall social and economic health of the country.



GDP

On May 28th, we issued a Fully Adjusted Return® forecast for GDP that, similarly, was a little early. At the time, we stated that: "Our 2015 Fully Adjusted Return® forecast for GDP suggests there will be no change, in other words, we will have a first quarter 2015 GDP estimate that reflects virtually no change, or negative 0.5%." The decline was reported at -0.7% at the time, and most economists expected a rise of +0.2%.

On June 24th, The Wall Street Journal reported "Gross domestic product, the broadest sum of goods and services produced across the economy, contracted at a 0.2% seasonally adjusted annual rate in the first quarter, the Commerce Department said Wednesday. The latest figure matched economists’ forecasts." Contrary to the Journal's implication, most economists missed the turn on May 28th. By June 24th, they caught up.

We were, again, early.

Thursday, June 4, 2015

Talking to 7th Graders in DC at Career Day...

I recently spoke at a Career Day event held at a local junior high school. I talked about what it takes to write (a lot of reading.....a lot).

I also encouraged the students to write. Unfortunately, the school does not have a newspaper or other outlet, so opportunities for learning through doing are limited.

(Online at: https://youtu.be/8piUOjuH98w)

Thursday, May 28, 2015

US GDP Forecast

The Bureau of Economic Analysis at the U.S. Department of Commerce will release the second estimate of First Quarter 2015 US GDP on Friday at 8:30 am. Gross Domestic Product (GDP) is the the broadest measure of economic activity. Most forecasters are predicting GDP will decline by 1.0% from the earlier quarter (4th Quarter, 2014.)

Our 2015 Fully Adjusted Return® forecast for GDP suggests there will be no change, in other words, we will have a first quarter 2015 GDP estimate that reflects virtually no change, or negative 0.5%." 

The US economy is strong and getting stronger. The only thing that can damage it are policy mistakes (like raising interest rates too soon) by officials at the Federal Reserve, and this is reason to be concerned. 

Fed economic policymakers, especially the group at left: MODERATOR: BETTY LIU ANCHOR, “IN THE LOOP WITH BETTY LIU,” BLOOMBERG TELEVISION, ALAN GREENSPAN PRESIDENT, GREENSPAN ASSOCIATES; FORMER CHAIRMAN, FEDERAL RESERVE BOARD, RICHARD W. FISHER FORMER PRESIDENT AND CEO, FEDERAL RESERVE BANK OF DALLAS, LAWRENCE B. LINDSEY PRESIDENT AND CEO, THE LINDSEY GROUP; FORMER DIRECTOR, NATIONAL ECONOMIC COUNCIL UNDER PRESIDENT GEORGE W. BUSH; FORMER GOVERNOR, FEDERAL RESERVE BOARD. (At the 2015 Fiscal Summit sponsored by the Peter G. Peterson Foundation.)

These guys collectively have, as one analyst noted, made some of the worst economic forecasts EVER.  

For example, in a speech titled The Great Moderation given on February 20, 2004, Ben Bernanke, not shown above, but another former Chairman of the Federal Reserve, failed to note the risk of the then soon to be felt Great Recession that started in 2006.

We note that Bernanke now says "China's economic slowdown should not worry markets as there was no risk of a hard landing, and emphasized that a move to raise U.S. rates should be viewed as a positive sign for the world's largest economy."

As I said, reason to be concerned.

Monday, April 20, 2015

What Poor People Want

Fiscal Forum: “The Political Economy of High Debt” IMF, April
19, 2015. L to R: David Wessel, Maria Luís Albuquerque,
Christine Lagarde, Helen Clark, Joaquim Levy.
I was at the IMF yesterday with a bunch of rich white people (@Lagarde @HelenClarkUNDP  ) when the subject of poor people came up.

Of course, as they do with Black people, rich white people claim to know everything there is to know about the poor. I think their main fear is that poor people will want the same deal that Goldman Sachs got, or the deal JP Morgan got, or the deal the "London Whale" or the LIBOR manipulators got. This fear is borne of a certain selfishness and greed.

It is, also, completely wrong, so I took the time to tell them what I think.

Here is what we want:

1. Water. Not privatized water systems. Access to clean water.
2. Food. Not GMO degraded, just clean food.
3. Shelter. Not subprime loans, but shelter.
4. Peace. Not the opportunity to be shot in the back by a racist cop, or a racist Israeli soldier or a Muslim extremist.

If you think about it, these are the same things that rich white people want.

Sunday, April 12, 2015

Effective Investing: How to minimize fees and maximize potential return

We coined the term "Effective Investing" to reflect a style of investing that does several things. First, it minimizes fees and costs. Your money should go toward your future, not to a broker or mutual fund company. There are only two ways to accomplish this, one in stock investing and the other in bond investing. Your money should be safe and effective investing means being able to sleep at night.











This means managing and minimizing risk. There are a limited number of ways to accomplish this, too. Risk is a feature of investing. It is how you get to return. Still, you can rationally minimize risk by taking a few constructive steps. 
In the bond or fixed income world, investing in US Government securities is the only way to accomplish this. 
In the stock market, the strategy is the polar opposite and can be summarized as "don't put all of your eggs in one basket," in fact, put them in the biggest basket you can find. This means investing in an Index Fund comprised of shares of stock in 500 or more companies. The S&P 500 Index is the tool we suggest (although we have had issues with S&P, their Index is solid.)
Finally, effective investing means being at peace with your conscience. This means not investing in companies that are, or may do bad things with your money. (Now, we understand that this may be difficult for some investing in US Government securities or investing in an Index, but we show you a way around this, in fact the ONLY way around this...) This means looking for and investing in responsible companies. In summary, Effective Investing:
  1. Minimizes fees.
  2. Minimizes risk.
  3. Maximizes potential financial AND social return.


We tell you how to do this online in: Stock, Bond and Mutual Fund Investing We cover the following topics:
  • What is Investing?
  • Why Invest?
  • How to minimize fees and maximize potential returns.
  • Risk and Reward
  • What Is a Stock?
  • What Is a Bond?
  • What Is a Mutual Fund?
  • What is a return?
  • What is Ethical/Socially Responsible/Environmental Social and Governance and Corporate Social Responsibility Investing?
  • What is screening? exclusion? shareholder activism? positive investing?
  • How can you invest effectively, meaning with minimum fees and maximum potential for return?
  • For a preview, see: https://youtu.be/ImgORmdCCkg