News Cycle – In Case You Missed It

Dear friends,

These past two weeks rank among some of the most tumultuous in U.S. postwar history, not just for investors, but every group imaginable save young children who’ve the freedom to not pay attention, much less care. ‘Uncertainty’ has taken on new meaning as the news cycle contracts to a nano-range in which sentiment can turn in the space of a 140-charcater transmittal of an unexpected message.

 

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News Cycle

Into this breach stepped the Federal Reserve on Wednesday. Rather than capitalize on the uncertainty of the moment, policymakers retained their relatively cautious stance, wasting the chance to prepare markets for 2017 being the most aggressive year of tightening in over a decade. Recall that there are but four FOMC meetings followed by a press conference. If FedSpeak can’t jawbone a March rate hike back onto the table, policymakers will have precious little room for error to make good on their promised three rate increases for the remainder of the year.

Of course, ‘data dependent’ remains the mantra. Following Wednesday’s ADP report, and despite the data’s unreliable predictive power, confidence in today’s January labor report skyrocketed. This echoed household’s healthiest prospects for the job market since Reagan was in office. That makes it a good thing headline job growth did not disappoint. Private job creation exceeded estimates by a healthy margin, coming in at 237,000, 62,000 more than expected. Meanwhile the unemployment rate ticked up for the right reason, as more able-bodied workers rejoined the labor force.

The one black eye in the report was wage growth. At 2.5 percent in the 12 months through January, average hourly earnings ticked down from December’s 2.6-percent rate. That’s something of a surprise given the minimum wage rose in 19 states at the start of the year. Add to this what Peter Boockvar pointed out – that 305,000 jobs were lost by those in the 25-54-year cohort. Those ‘prime earning years’ have just not delivered for far too many in the current recovery. Strong wage gains remain the missing link, a subject I will write about in the coming week.

As for the trading week we’re about to log into the history books, it was a very busy one for yours truly in chilly New York. I’ve pasted links to what you might have missed below. As always, your feedback is most appreciated.

With that, wishing you the best for a relaxing weekend. To capture that peace, you might want to pretend we’re back in medieval times and not being endlessly pinged. In other words, unplug, lest you’re constantly jolted back to the new news cycle and our collective newfound restlessness.

All best,

Danielle

Click through:

Debt and Deficits Are About to Matter Again for Investors — Bloomberg  

The Federal Reserve Has Squandered an Opportunity – CNBC 

Live Reaction to Release of Fed Statement — CNBC 

Article by Danielle DiMartino Booth, author of Fed Up: An Insider’s Take on the Why the Federal Reserve is Bad for America

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Called "The Dallas Fed's Resident Soothsayer" by D Magazine, Danielle DiMartino Booth is sought after for her depth of knowledge on the economy and financial markets. She is a well-known speaker who can tailor her message to a myriad of audiences, once spending a week crossing the ocean to present to groups as diverse as the Portfolio Management Institute in Newport Beach, the Global Interdependence Center in London and the Four States Forestry Association in Texarkana. Danielle spent nine years as a Senior Financial Analyst with the Federal Reserve of Dallas and served as an Advisor on monetary policy to Dallas Federal Reserve President Richard W. Fisher until his retirement in March 2015. She researches, writes and speaks on the financial markets, focusing recently on the ramifications of credit issuance and how it has driven equity and real estate market valuations. Sounding an early warning about the housing bubble in the 2000s, Danielle makes bold predictions based on meticulous research and her unique perspective honed from years in central banking and on Wall Street. Danielle began her career in New York at Credit Suisse and Donaldson, Lufkin & Jenrette where she worked in the fixed income, public equity and private equity markets. Danielle earned her BBA as a College of Business Scholar at the University of Texas at San Antonio. She holds an MBA in Finance and International Business from the University of Texas at Austin and an MS in Journalism from Columbia University. Danielle resides in University Park, Texas, with her husband John and their four children. In addition to many volunteer hours spent at her children's schools, she serves on the Board of Management of the Park Cities YMCA.