Five scattered points about oil, crises, Keystone and other stuff

Some thoughts, musings, and simply fun items we’ve recently come across:

1) As of the start of this week, global non-energy equities have held up fine: Read more

Econo-yakking (observations from the AEA conference)

The annual conference hosted by the American Economics Association offers so many panels and paper discussions, on such a wide variety of topics, that there is something for everyone during each two-hour slot of time.

Should one follow the crowd to Mankiw vs Piketty on the importance of r > g (which got colourful), or get funky and check out Experimental Finance and Neuroeconomics? Read more

US Markets Live, special FOMC presser edition

Live markets commentary from 

FOMC statement from 17 December 2014

Remember that we’ll be hosting a special edition of US Markets Live starting at 2:25pm EST. Join us here.

The highlights from the statement, which we’ll update as we make our way through it: Read more

Reminder: US Markets Live, special FOMC presser edition

Joseph and I will be kicking off at 2:25pm EST (7:25pm in London) at the usual place. We’ll have a few minutes to discuss the statement before the presser starts at 2:30pm.

Join us at the usual placeRead more

Will US household formation growth finally accelerate in 2015?

Have we been early or just wrong? Read more

The oddly subdued optimism about falling oil prices

Our pal Josh Brown has a hilarious post highlighting the pessimism bias in how the fall of oil prices has been discussed in the US:

This past June, crude oil prices were hitting highs above $110 a barrel and the narrative was that this was why stocks were selling off. The S&P 500 had a weekly correlation of .55 with oil, meanwhile, and had actually spent most of the year rising with it. So not only was the “story” of why stocks were dropping false, the data was as well. Read more

The Fed and oil: 2014 is not 2011 in reverse

Back in 2011, inflation climbed above the Fed’s 2 per cent target, but the FOMC resisted the impulse to tighten monetary conditions. Long-run inflation expectations hadn’t risen to worrying levels, and Ben Bernanke perceived that a price spike led by oil was likely to be “transitory”.

No surprise there: he wrote the paper on this very topic. And he was proved right. Read more

Oil and Fed officials, in their own words

A handy chart from BCA Research (click to embiggen):

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The economic effects of the Obama immigration order

The first thing to be said about the macroeconomic impact of Obama’s executive order on immigration is that it will be small but not trivial.

The second thing to be said is that although the impact will be small, it will also be positive. Read more

Inequality and the portfolio flux

Split in half the six years from the start of the US recession at the end of 2007 through the end of last year, and consider them as a pair of three-year periods.

In the first period — from 2007 through 2010, and which we’ll refer to as the crisis years — wealth inequality in the US spiked while income inequality actually contracted quite aggressively, the latter a reversal of the pre-recession trend. “Crisis years” isn’t a perfect label, as the recession actually ended in mid-2009, but it’s good enough for our purposes here. Read more

The decline in the share of uninsured Americans

Jason Furman chairs the president’s Council of Economic Advisors and therefore has an obvious incentive to present the Obama administration’s policy outcomes in the best light, but nonetheless this chart from his recent speech is striking:

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The October jobs report tells the story of two streaks

The first streak: October marks the 49th consecutive month of positive US jobs creation, the longest such period since the second world war.

Superficially this sounds impressive, and very much a good thing. But it isn’t, really. Read more

We are hosting a New York pub quiz and drinks!

FT Alphaville and the FT’s US markets team are hosting a night of drinks and trivia in New York on the evening of Wednesday, November 19th.

The last time we did this (in London), we grilled you on the eurozone sovereign debt crisis, the complexities of synthetic ETFs, seasonal adjustments in economic indicators, and other proudly nerdy topics. Read more

The Closer, final edition

To our readers, thanks so much for subscribing to The Closer. This is the final daily email from FT Alphaville, but you can continue receiving expertly curated missives from the Financial Times via First FT. We encourage you to have a look and subscribe. Thanks again!


US wage and salary growth inching up, still very slowly

The third quarter was the second straight three-month period showing a favourable trend for US nominal wage and salary growth, though a lot more acceleration is needed before it’s anything to celebrate:

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Affordable housing and the legit big-city whinge

When city-dwellers moan about their high cost of living, they often elicit the unsympathetic retort that they should shut up and praise the ghost of Jane Jacobs for the cultural vibrancy of their neighborhoods, the lucrative jobs, and the artisanal pizza.

Living in a great city is a consumption good, you whinging ninnies — you SHOULD have to pay for it! Why do you think you’re entitled to live wherever you want?
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Video: LSAPs RIP

We had a chat with the FT’s US markets editor Mike MacKenzie about Wednesday’s FOMC statement. There were masks:

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Highlights from the FOMC statement, 29 October 2014

Full text here. The highlights:

– Large scale asset purchases have ended, as expected (though remember that the Fed is still reinvesting the principal on MBS and rolling over maturing treasuries). Read more

Fed talk, inequality, and the lawless border town between fiscal and monetary responsibilities

It’s hard to say which was more surprising — the passages in Janet Yellen’s inequality speech last week that appealed to American values, or the topics she chose to omit entirely.

To start with the latter, the interdependent relationship between inequality and economic growth has become a mainstream topic of economic debate in recent years, and a very contentious one. Read more

The Closer


- Why New Yorkers can’t find a taxi when it rainsRead more

Spending versus consolidation, German political capital edition

Two sets of charts from BCA Research with unclear implications:

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Bullard: FOMC should consider “a pause on the taper”

From the transcript of St Louis Fed president James Bullard’s interview with Bloomberg Television:

I also think that inflation expectations are dropping in the U.S. And that is something that a central bank cannot abide. We have to make sure that inflation and inflation expectations remain near our target. And for that reason I think a reasonable response of the Fed in this situation would be to invoke the clause on the taper that said that the taper was data dependent. And we could go on pause on the taper at this juncture and wait until we see how the data shakes out into December. So… continue with QE at a very low level as we have it right now. And then assess our options going forward. …

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What does the case for calm look like?

The abundance of worrying news continues growing — the collapse of bond yields and equity markets, falling inflation and inflation expectations all across the developed world, the ongoing slump in commodity prices.

Whether such tumultuous activity in markets accurately reflects the updated prospects for the real economy is a difficult question. The doom-iest news has been coming out of Europe (ex-UK), where concerns of a triple-dip recession do appear warranted given the latest economic indicators from — not to mention the intransigence by policymakers in — Germany. But the prospects for Japan and emerging markets, many of whose fortunes are tied to commodity cycles, have also become more disquieting. Read more

Undershooting unemployment is the new overshooting inflation

(The chart frames the upper and lower forecasts of the central tendency, which removes the highest three and lowest three forecasts of the FOMC as a whole. The red line is the midpoint between the two.)

Starting in 2009, the midpoint of the central tendency projections for the long-run unemployment rate climbed from 4.9 per cent to 5.6 per cent during the next three years. Read more

The Closer


- Lovely reflection by Josh Gans about the influence of Jean Tirole on his life and career. Read more

Bill jumps the segue

It begins ominously:

Dancing, or better yet as the beginning of my Investment Outlook suggests, being asked to dance, seems to have become an important part of my life over the past month or so. Having first been asked by my wonderful wife, Sue, and now by Dick Weil and Janus from a business standpoint, I write to you today from my desk in a new Janus office in Newport Beach, California. Read more

Video: jobs report and the implications for markets and policy

The FT’s video producer demanded that we wear his outrageously over-sized jacket to appear presentable in this conversation with US markets editor Mike MacKenzie. The least you can do is have a look:

Have a great weekend! Read more

September payrolls: +248k, and jobless rate at 5.9%

The US employment situation report for September was better than expected but not quite as good as its headline numbers suggest.

First the good news. We can take comfort that the August numbers were very likely anomalous, a blip of the kind that should be expected now and again. Jobs growth had slowed for two straight months prior to September, but the upward revisions now show that July and August were better than first believed, with a respective 243,000 and 180,000 jobs created. Read more

Shadow banking defined, again and again

Via the latest report from the IMF, click to embiggen:

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