Sunday , January 17 2021
Home / James Picerno
James Picerno

James Picerno

James Picerno is a financial journalist who has been writing about finance and investment theory for more than twenty years. He writes for trade magazines read by financial professionals and financial advisers. Over the years, he’s written for the Wall Street Journal, Barron’s, Bloomberg Markets, Mutual Funds, Modern Maturity, Investment Advisor, Reuters, and his popular finance blog, The CapitalSpectator.

Articles by James Picerno

Book Bits: 16 January 2021

1 day ago

● The New Great Depression: Winners and Losers in a Post-Pandemic WorldJames RickardsQuote by author via Global Finance“I did not live through the Great Depression, but my parents did and they were affected for life,” says James Rickards, author of The New Great Depression: Winners and Losers in a Post Pandemic World. “This will be very similar.” A 2020 study published by the Federal Reserve of San Francisco looked at 650 years of pandemics and found that monetary policy, economic growth and other policies do not normalize for 30 to 40 years. “If 2019 is your base year to define normal,” Rickards says, “well, we’ll never see normal again. Ever.”

● Freedom From the Market: America’s Fight to Liberate Itself from the Grip of the Invisible HandMike KonczalReview via Publishers

Read More »

The ETF Portfolio Strategist: 15 Jan 2021

2 days ago

In this issue:

The small-cap equity rally continuesPortfolio-strategy benchmarks take a hitBroad-based market losses weigh on managed-risk strategiesSmall-cap stocks are pricing in a rosy 2021: There are still plenty of risks lurking, including uncertainty over what the incoming Biden administration will be able to accomplish. The President-elect on Thursday outlined an ambitious $1.9 trillion pandemic relief program that, if enacted, would go a long way in juicing the economy. Whether his policy prescription survives the tortured politics of the Beltway in the weeks ahead is an open question. For now, shares in the small-cap realm appear to be anticipating a rosy year ahead (or at least one that compares favorably vs. annus horribilis that just ended).

continue reading at The

Read More »

Research Review | 15 January 2021| Forecasting

2 days ago

Long-Term Stock ForecastingMagnus Pedersen (Hvass Laboratories)December 17, 2020When plotting the relation between valuation ratios and long-term returns on individual stocks or entire stock-indices, we often see a particular pattern in the plot, where higher valuation ratios are strongly correlated with lower long-term stock-returns, and vice versa. Moreover the plots often show a particular curvature for this relation between valuation ratio and long-term stock-returns. The explanation turns out to be quite simple and follows directly from the mathematical definition of the annualized return. Furthermore, we can decompose the change in share-price into the change in valuation ratio such as the P/E or P/Sales ratio, and the change in the Earnings or Sales Per Share. This is

Read More »

Macro Briefing: 15 January 2021

2 days ago

* Biden outlines $1.9 trillion Covid-19 relief plan* Today’s US retail sales data for December expected to post decline* Economists expect US growth at 4.3% in 2021 via new survey* Fed’s Powell says no rate hikes on the horizon for now* New wave of Covid-19 outbreak in China threatens economic recovery* UK double-dip recession lurks after GDP fell 2.6% in November* Are renewable energy stocks in a bubble?* Philly Fed’s ADS business cycle index falls sharply, signaling US recession risk* US import prices rose more than expected in December* US jobless claims surged last week to a 5-month high:

Read More »

Has The Recent Surge In US Equity Factor Correlations Peaked?

3 days ago

Looking for robust diversification opportunities in equity risk factors has turned up modest and sometimes disappointing results in recent years in broad-brush terms and it’s only gotten worse in the pandemic. The question is whether the worst has passed? Possibly, although the outlook remains cautious at best. Let’s dig into the numbers for some details.

Recall that the goal is to decompose broad stock market beta into several flavors of the risk premia that, in the aggregate, capture the overall footprint of the asset class while dispensing lower risk, higher return or some combination of both vs. holding, say, the S&P 500 Index. By rebalancing the mix, it’s possible to exploit the natural ebb and flow of factors so that 1+1=3. That, at least, is the theory. Not surprising,

Read More »

Macro Briefing: 14 January 2021

3 days ago

* Trump impeached for Second Time with support of 10 Republicans* Will Senate convict and remove Trump? Senate leader is undecided* Biden set to unveil plan for new Covid-19 relief package today* Federal officials warn of new attacks by extremists* China exports rose more than expected in December* China reports first Covid-19 death since May* ECB President Christine Lagarde calls for global regulation of bitcoin* US headline consumer inflation rose 1.4% 2020:

Read More »

Philly Fed’s ADS Business Cycle Index Near A Recession Signal

4 days ago

Is the US economy at risk of a double-dip recession? The threat is rising, according to the latest update of the ADS Index, a real-time tracker of business conditions published by the Philadelphia Fed. This benchmark is a valuable metric for monitoring recession risk, but its attempt to be timely also leaves it vulnerable to noisy volatility. Nonetheless, the latest ADS slide in the current climate bears watching as the pandemic continues to roil America in the new year.

Last week’s weak payrolls data and the ongoing surge in weekly jobless claims took a hefty bite out of the ADS Index, which is updated whenever new data is published for any of its six components. Last week’s labor market numbers were brutal overall and ADS fell to just slightly above a level that marks

Read More »

Macro Briefing: 13 January 2021

4 days ago

* Growing list of Republicans will support today’s vote on impeaching Trump* Pence rejects effort to oust Trump with 25th amendment* US to require proof of negative Covid-19 tests for international visitors* China’s Covid-19 cases rise the most in over five months* Brazil data shows China coronavirus vaccine is 50.4% effective* Global shortage of semiconductors squeezes auto production* US job openings fell less than expected in November but still trending down* US small business optimism index fell sharply in December:

Read More »

What Do Rising Interest Rates Imply For Stocks, REITs And Gold?

5 days ago

The world is still battling a pandemic, the US government is in turmoil and there’s no shortage of other events lurking on the global stage that could cause trouble for asset markets. Should we add in rising interest rates to the list of worries?

“Markets are now definitely pricing in rate hikes by the second half of 2023, but the time frame is a long way away and it will keep shifting, especially if the US continues to lose jobs as they did in December,” says Kenneth Broux, a strategist at Societe Generale in London.

The future is still uncertain, but rates are clearly rising, albeit from an unusually low base. It’s unclear if the rise is one more in a line of temporary upside runs in an otherwise secular decline. Analysts have been predicting the end of the slide in yields

Read More »

Macro Briefing: 12 January 2021

5 days ago

* House will vote today on removing Trump with 25th amendment* House plans Trump impeachment vote for Wednesday* Acting Homeland Security Secretary quits as FBI warns of armed protests* Secretary of State Pompeo puts Cuba on terrorism sponsor list* Atlanta Fed President sees possible rate hike coming sooner than expected* China’s rebounding economy is strengthening its currency* Double-dip recession risk is stalking Europe* Bitcoin’s dramatic correction is healthy, say analysts* Consumer year-ahead inflation expectations remain unchanged in December* 10-year Treasury yield continues to tick higher, rising to 1.15%:

Read More »

Foreign Stocks Led Mixed Run For Global Markets Last Week

6 days ago

Shares in emerging markets topped last week’s gains for the major asset classes, based on a set of exchange traded funds as of Friday’s close  (Jan. 8). Equities in developed markets ex-US were a close second-place weekly performer.

Leading the winners: Vanguard FTSE Emerging Markets Shares (VWO), which surged 4.7% last week. The rally lifted the fund to a record high. The latest gain marks the fund’s strongest weekly advance since the first week of November.

“There’s a lot of opportunity, a lot of risks, but I think emerging markets are really attractive right now,” says Ben Kirby, co-portfolio manager of Thornburg Investment Income Builder Fund. “Emerging market cycles tend to last several years,” he told CNBC on Friday. “Emerging markets have underperformed for quite a few years

Read More »

Macro Briefing: 11 January 2021

6 days ago

* House set for new impeachment vote on Trump* Authorities prepare for more protests and possible violence in Washington* Wall Street strategists anticipate reflation momentum picking up* Will 2021 be a record year for job growth in the US?* Philly Fed’s ADS Index moves close to signaling US economic contraction* US payrolls declined in December–first monthly slide in 8 months* US 10-year Treausury yield rises to 1.13%–highest since March:

Read More »

Book Bits: 9 January 2021

8 days ago

● Driven: The Race to Create the Autonomous CarAlex DaviesReview via BerkeleysideIt may be a stretch to call Davies’ new book The Right Stuff for the Age of the Autonomous Vehicle, but it shares some of Tom Wolfe’s narrative exuberance, pioneer spirit and eye for the telling detail. Davies chronicles the tech industry’s fascination with self-driving vehicles, from their origins in three “Grand Challenges” sponsored by the Defense Advanced Research Projects Agency (DARPA) to the attempts by Google, Uber and the city of Detroit to exploit the innovative technology for the auto-buying public.

● China and the WTO: Why Multilateralism Still MattersPetros C. Mavroidis and Andre SapirSummary via publisher (Princeton U. Press)China’s accession to the World Trade Organization (WTO) in 2001

Read More »

The ETF Portfolio Strategist: 8 Jan 2021

9 days ago

In this issue:

The stock market shrugs off Capitol chaosA bullish start for strategy benchmarks in the new yearDiverging paths for managed risk strategiesIs Insurrection Bullish? Let’s just say that judging by the week just ended, the stock market isn’t easily shaken by such distractions as riots in the US Capitol or political turmoil in Washington.

continue reading at The ETF Portfolio Strategist

Read More »

The Post-Trump Era Is About To Begin—Buckle Up

9 days ago

President Donald Trump will leave the White House on Jan. 20, perhaps sooner if growing efforts to unseat him in the remaining days of his presidency come to fruition. Whatever happens over the next two weeks, the economic and social forces that helped elect Trump aren’t going away. In fact, there’s a distinct possibility that those forces will strengthen and broaden in the months and years ahead. In turn, political and economic uncertainty may increase, in ways that have yet to be fully understood or recognized.

For the immediate future, the Trump presidency is ending in chaos. That’s saying something given the administration’s norm-breaking habits of the past four years. It appears that Trump’s actions on Jan. 6 crossed a line that many of his most arduous supporters in

Read More »

Macro Briefing: 8 January 2021

9 days ago

* Trump says he will prepare for Biden administration to take power* Democrats moving toward second Trump impeachment* Calls increase for Trump’s resignation after Capitol chaos* US foes eye opportunity to exploit US political chaos* US envoy to UN to visit Taiwan, a trip that will anger China* Sharp slowdown expected for today’s December US payrolls report* US trade deficit reached a 14-year high in November* Tesla’s Elon Musk becomes world’s richest person* Eurozone unemployment unexpectedly ticked down to 8.3% in November* US ISM Services PMI edged up in Dec, reflecting solid rate of expansion* US jobless claims remained unusually high last week

Read More »

US Firms Cut Jobs In December, Clouding Economic Outlook

10 days ago

The assault of the US Capitol on Wednesday failed, allowing Congress to certify Joe Biden’s election victory after a harrowing day in Washington. But the challenges for the US economy endure.

A new warning sign emerged in yesterday’s December report on private employment, according to the ADP Employment Report. For the first time since April, when the economy was crashing due to the pandemic, US companies cut payrolls. Total US nonfarm private employment fell 123,000 last month. The decline surprised economists: a 130,000 increase was expected, according to Econoday.com’s consensus point forecast.

The setback is hardly surprising in the wake of persistently high jobless claims. Although the number of new filings for unemployment benefits have pulled back from the extremes

Read More »

Macro Briefing: 7 January 2021

10 days ago

* Congress certifies Biden’s election win after assault of US Capitol* Trump pledges ‘orderly’ transition after riot on Capitol Hill* Democrats capture Georgia’s Senate seats and win control of US Senate* US unprepared for genetic variations of the coronavirus, experts warn* Global economic expansion remained ‘solid’ at 2020’s close, survey data shows* Eurozone economic confidence strengthened in December* 10-year Treasury yield rose 1% in November* US services sector growth slips to slowest pace in three months in December* US private payrolls declined in Dec — first monthly setback since April:

Read More »

Is A Weak US Dollar A Key Macro Theme For 2021?

11 days ago

The world’s reserve currency has been weakening since May and recent trending behavior suggests the slide has room to run and so it’s time for a short recap of the implications and the outlook for what could be a major driver of investment results in 2021.

Let’s start with the elephant in the room: the downside momentum. The US Dollar Index (USD) slipped to a new 2-1/2 year on Tues., Jan. 5. The 89.4 close (based on daily data) is lowest since April 2018. Using the index’s 50- and 200-day moving averages as an initial guide strongly suggests that a strong downside bias still prevails.

The dollar’s decline in recent months marks a dramatic reversal in a short period, but over the longer run forex volatility tends to be a wash. As a rule of thumb, the expected return for forex

Read More »

Macro Briefing: 6 January 2021

11 days ago

* Democrats appear to win Georgia runoff elections and take control of Senate* Congress expected to certify Biden’s win today* VP Pence isn’t expected to try to block Biden’s election certification today* Trump bars transactions with eight Chinese phone apps* Second US stimulus payments has reached 2/3 of households’ bank accounts* Hong Kong police arrest 53 pro-democracy lawmakers and activists* Bitcoin tops $35,000–another record high* GMO’s Jeremy Grantham warns of ‘epic bubble risk’* US Treasury 10-year yield reaches 1% in overnight trading–highest since March* China services sector expanded at slower pace in December via survey data* US manufacturing activity accelerated to 2-1/2-year high in December:

Read More »

Risk Premia Forecasts: Major Asset Classes | 5 January 2021

12 days ago

The expected risk premium for the Global Market Index (GMI) for the long run continued to tick higher in December. Today’s revised estimate rose to an annualized 5.5%, based on current data. That’s up from last month’s 5.3% projection. These forecasts represent long-run outlooks for the index’s performance over the “risk-free” rate via a risk-based model (details below).

Over short-to-medium-term periods, revisions to these forward-looking numbers can be volatile. For example, a year ago GMI’s ex ante risk premium was 5.0% — 50 basis points lower vs. today’s estimate.

GMI is an unmanaged, market-value-weighted portfolio that holds all the major asset classes (except cash) and represents a theoretical benchmark of the optimal portfolio, based on the so-called market portfolio.

Read More »

Macro Briefing: 5 January 2021

12 days ago

* US Senate control hangs in the balance in today’s Georgia runoff election* South Korea tanker diverted to Iran by Iranian Revolutionary Guard troops* Chicago Fed president: monetary policy will be accomodative ‘for a long time’* NYSE halts delisting of Chinese telecom companies* Retail, jobless data suggest German economy remains resilient during pandemic* UK recession threat deepens as new pandemic lockdown unfolds* Global mfg growth held near decade highs in Dec, according to PMI survey data* US construction spending rose to record high in November* US mfg recovery from pandemic endured in December via PMI survey data:

Read More »

Major Asset Classes | December 2020 | Performance Review

13 days ago

The year just passed left deep scars on humanity and the global economy, but there was few signs of trouble in the 2020 returns for the major asset classes. With the exception of broadly defined commodities and US and foreign property shares, global markets posted solid gains last year.The top 2020 performer: US stocks. The Russell 3000 Index surged 20.9% last year. A close second: equities in emerging markets. MSCI Emerging Markets Index added 18.3% for the 12 months through Dec. 31.
The deepest 2020 loss for the major asset classes: US real estate investment trusts (REITs). MSCI US REIT Index shed 7.6% last year, even after factoring in the sector’s relatively rich distributions.
For the monthly profile, December was kind to all corners, led by a sizzling 7.4% advance in emerging

Read More »

Macro Briefing: 4 January 2021

13 days ago

* Trump, in phone call, urges Georgia officials to overturn election results* US officials consider half doses of vaccine to accelerate rollout* Economists expect rough Q4 data for US followed by 2021 rebound* Pelosi re-elected as House Speaker* Survey: US political divide is biggest risk on world stage in 2021* Smaller cryptocurrencies are rising after Bitcoin’s surge* Eurozone manufacturing growth strengthened in December* UK Manufacturing PMI rose to 3-year high in December* US Treasury inflation forecasts start 2021 trading at two-year-plus highs:

Read More »

Best Of Books Bits 2020: Part II

15 days ago

Welcome to the New Year — and the sequel to last week’s first installment of notable titles that appeared in The Capital Spectator’s weekly Book Bits column in 2020. Happy reading!

● Boom and Bust: A Global History of Financial BubblesWilliam Quinn and John D. TurnerSummary via publisher (Cambridge U. Press)Why do stock and housing markets sometimes experience amazing booms followed by massive busts and why is this happening more and more frequently? In order to answer these questions, William Quinn and John D. Turner take us on a riveting ride through the history of financial bubbles, visiting, among other places, Paris and London in 1720, Latin America in the 1820s, Melbourne in the 1880s, New York in the 1920s, Tokyo in the 1980s, Silicon Valley in the 1990s and Shanghai in the

Read More »

The ETF Portfolio Strategist: 1 Jan 2021

16 days ago

In this issue:
Stock In Asia Ex-Japan Shine In 2020
Beta Risk Provided Strong Tailwinds For Portfolio Strategies In 2020
A Red-Hot Year For Our Managed Volatility Strategy But Minimum Vol Stumbled
Asia Ex-Japan Equities Led 2020 Returns: If you held a healthy share of equities across Asia excluding Japan in your investment strategy last year, congratulate yourself. This slice of global asset classes not only posted the strongest return this week; Asia ex-Japan also outperformed the rest of the field for our list of proxy ETFs representing the major asset classes on a global basis.
continue reading at The ETF Portfolio Strategist

Read More »

This Concludes Our Broadcasting Year…

19 days ago

The Capital Spectator has left the building. So long to 2020, and good riddance. We’ll be back in the new year, starting with Best of Book Bits 2020: Part II on Saturday, Jan 2, followed by the resumption of the usual routine on Monday, January 4. Meantime, best wishes to our readers for 2021! Our model-free forecast assumption: relief is coming.

Read More »

Correlations For Return Volatility Have Spiked

19 days ago

Designing and managing portfolios that maximize diversification is challenging in the best of circumstances. In the wake of this year’s coronavirus pandemic, the task has become even tougher.

The problem is particularly acute with conventional asset classes. In our periodic updates on return correlations for the major asset classes (see here, for example), the scope of the challenge is clear: most asset pairings tend to be closely correlated. There are exceptions, of course, starting with the workhorse of mixing stocks and bonds. But across the broad sweep of asset classes, low and negative return correlations are rare.

The standard approach to profiling correlations is with returns. For another perspective let’s examine how correlations for return volatility stack up. The

Read More »

Macro Briefing: 29 December 2020

19 days ago

* House passes bill to raise stimulus checks to $2,000* Debate over $2,000 Covid-19 aid checks shifts to Senate* House overrides Trump’s veto of a $740.5 billion defense policy bill* New York lawmakers pass bill that bans most evictions* Manufacturing activity expanded for 7th month in Texas in December* US stock market (S&P 500) jumped to record high on Monday:

Read More »

Commodities Rallied And Emerging Markets Tanked Last Week

20 days ago

The year’s penultimate trading week was short but it didn’t lack for drama. A broadly defined, equal-weighted measure of commodities led a mixed run for the major asset classes while stocks and bonds in emerging markets posted the deepest losses, based on a set of exchange traded funds at the close of last week’s trading (Dec. 24).WisdomTree Enhanced Commodity Strategy (GCC) rose 0.8%, posting its second straight weekly gain. The fund, which holds an equally weighted mix of commodities, surged earlier in the week before pulling back on Dec. 24 and posting a moderate advance vs. the previous Friday’s close. The gain left the ETF near its highest close since mid-2018.

Overall, last week delivered mixed results for the major asset classes, with about half of markets rising and the rest

Read More »