In the latest report from the Institute for Supply Management (ISM), the Non-Manufacturing (Services) Index for October echoes the positive findings from its manufacturing counterpart. These two indicators suggest that the economy is indeed on an upward trajectory. While growth is modest and not yet robust, it’s difficult to argue that there’s an imminent risk of economic contraction.
Could the rebuilding efforts in the Northeast following Hurricane Sandy’s devastation provide a boost to the ongoing modest economic growth? While it’s too early to determine, the potential should not be overlooked. Currently, we are setting a baseline for Q4:2012 GDP nowcasts. The Bureau of Economic Analysis will publish the official estimate in late February, which means there is a long way to go until we have the final figures. At this stage, the average of our five econometric-based nowcasts projects an annualized growth rate of 1.7% for Q4, a slight decrease from the official estimate of 2.0% for Q3.
While the eastern seaboard of the U.S. is facing severe weather challenges, economic indicators remain encouraging. Although there is no clear sign that the economy is poised for a breakout from its slow growth pattern, the latest data continues to support the notion that a new recession is not on the horizon.
● How They Got Away with It: White Collar Criminals and the Financial Meltdown
Edited by Susan Will, Stephen Handelman, and David C. Brotherton
Summary via the publisher, Columbia University Press
A team of international scholars, including experts in criminology, sociology, economics, and law, analyzes the multifaceted causes of the 2008 economic crisis. They consider the extensive damage inflicted on governments, businesses, and individuals while exploring the persistent systemic issues that allowed wrongdoers to escape accountability. This collection includes insightful essays examining the destructive practices inherent in the subprime loan market, the role of external auditors, the fallout from Wall Street deregulation, and the manipulative behaviors of hedge fund managers. They illuminate the complex landscape of modern finance, revealing its vulnerabilities to corruption and fraud, and scrutinize the failures of enablers such as accountants and credit rating agencies. While the U.S. was at the epicenter of the crisis, the financial misdeeds of other nations exacerbated the situation. Global-focused essays delve into problematic practices in China and European property markets, shedding light on the extensive impacts of international money laundering and tax evasion.
The Capital Spectator is currently experiencing power outages due to the aftermath of Hurricane Sandy, but thanks to the generosity of a local high school, we have a temporary solution that allows us to update the performance of major asset classes.
The aftermath of Hurricane Sandy has severely impacted the East Coast, particularly devastating areas in New Jersey—home to The Capital Spectator. The loss of electricity feels like a significant blow in today’s digital age, leaving your editor in a state of confusion. Internet access is sporadic, and our return to the online space is brief. It looks like power may not be restored until early next week at best. In short, things have been chaotic around here, and normal operations at CapitalSpectator.com are on hold. However, we aim to resume as swiftly as possible. To all our East Coast readers, especially those in New Jersey: please stay safe and take care.
In today’s landscape of historically low interest rates, many investors are actively seeking yield. On the upside, there are numerous avenues available to enhance your investment returns beyond conventional options. However, the downside is that higher yields typically come with greater risks. This principle is well known, emphasizing the importance of robust risk management in portfolio design, no matter the investment goals.
● Misunderstanding Financial Crises: Why We Don’t See Them Coming
By Gary Gorton
Summary via the publisher, Oxford University Press
Before 2007, many economists believed that financial crises were a thing of the past in the United States. Gary B. Gorton, a leading expert on financial crises, challenges this perspective, asserting that common misconceptions often obscure the true nature of these events and their recurrence. In “Misunderstanding Financial Crises,” Gorton provides a comprehensive overview, demonstrating that such crises are not isolated incidents caused by random events. Instead, they are intrinsic to our financial system. Gorton argues that the analytical lens applied by economists missed critical developments, including the evolution of capital markets and the banking sector, the emergence of new financial instruments, and the scale of certain monetary markets. By comparing the so-called “Quiet Period” (1934-2007) with the “Panic of 2007-2008,” he connects essential factors like bank debt, liquidity, and the moral hazard associated with “too big to fail.” Overall, he advocates for a more nuanced understanding of the causes behind financial collapses and highlights how regulation has failed to adapt to innovations within the financial sector.
The Bureau of Economic Analysis has reported that the U.S. economy grew at an annualized rate of 2.0% during the third quarter, according to its preliminary GDP estimate for July to September. This marks an improvement from Q2’s lackluster performance of 1.3%, indicating that concerns about an impending recession have been markedly overstated.
The recent update from the Chicago Fed National Activity Index (CFNAI) lends weight to the growing realization that economic conditions have experienced a modest improvement in September. Our analysis of the published data over the past week has been encouraging, as indicated by The Capital Spectator Economic Trend Index (CS-ETI). The September figures from the CFNAI support this positive outlook.
