Some random thoughts on romance, finance and other things ending in “ance”….
1) This morning’s payroll report was okay. The average monthly job gains have come in at 153K since 2010 so this month’s report is pretty strong at 175K. Private payrolls have softened a bit, but it’s still not worth getting too worried about. More importantly, we have yet to see major moves in leading indicators for employment. Both temp help and jobless claims have remained pretty steady. So today’s consensus figure really isn’t all that surprising.
Given the weakness in revenues I’d be stunned if the employment picture picked up any momentum here. We’re sort of in a holding pattern where the economy appears to be waiting for a decisive move such as a huge surge in consumer borrowing (housing bubble again, maybe?) or a bigger shock from government spending. I don’t know, but given the pace of private investment improvement it’s hard to think we’re going to breakout to the upside. My base case is still muddle through for now….It’s not sexy, but it’s not unsexy, if that makes any sense.
2) Looks like Bernanke will signal some tapering at the June meeting. That’s the latest from John Hilsenrath at least. He says the Fed will signal some tightening later in the year. I don’t know if I’d call it real tightening because I don’t think QE is actually all that easing, but the market will probably disagree with that idea. Remember, the market is a beauty contest where we vote for the winners and I think QE is the ugliest girl in the room. But everyone else is enticed by her mystical gaze so we have to wander around like zombies chasing her like she’s beautiful also….You don’t vote with your conviction in this game when you know that the winners get crowned by being on the side that garners the most votes.
3) I’ll throw in an oldie, but a goodie here from James Montier. The Seven Sins of Fund Management which was sent via Macquarie Private Wealth. My approach to economics is a strange hybrid of behavioral economics with a heavy dose of post-keynesian with bits of other stuff thrown in there. And Montier’s work on behavioral finance is a must read if you’re going to connect the dots. This one is one of my favorites….
PS – I’ll get to the romance next time. Maybe some sexy Z.1 Flow of Funds analysis will do the trick….If you’re into integrated macroeconomic accounts you’ll barely be able to contain yourself.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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