Friday's Employment Report

Graph by Haver Analytics (Click to enlarge). Friday's employment report is expected to show an increase of between 75,000 and 300,000 non-farm jobs (Bloomberg estimates). The upper end of this range would be good to see since job creation has been the bugaboo of this recovery. Some attention will be paid to the government sector where,on net,jobs have been lost despite hiring tens of thousands of census workers.
One concern do-it-yourself investors sometimes express to me is their weakness in understanding the macroeconomy. With that in mind I present an explanation of the unemployment rate calculation by Salman Khan. If you are not familar with his work you are in for a treat. You can practically get a college education viewing his youtube videos.

Tip for DIYers

In 2000, I left the world of pension fund investment management for semi-retirement, teaching part time and managing my own money. Life became more leisurely and more carefree. I even coached some athletic teams. But my heart was still in the markets. There was a problem however. I was slowly losing track of the markets. I was talking to someone about investing in bonds, and I was asked what the yield was on the 10-year U.S. Treasury note and how it compared to the yield on the 2-year issue. I didn't know what these yields were. I was dumbfounded. There was a time when you could wake me in the middle of the night and I could rattle off the yields all along the Treasury yield curve as well as the corporate bond yields along with their respective spreads.

I needed a way to formally stay in touch with the markets. I began keeping a weekly data piece (actually 4 pages) that tracks yields, a couple of currencies, economic data and a few other things that I like to look at. I also write a short summary on the market. I update it every day--which only takes a few minutes. Sometimes, in the summary, I write down where I think stocks and/or bonds are headed or I make some other prediction.

I have found this to be a useful exercise and recommend it. I find it interesting to go back and see what I once believed. I've become convinced that investors are biased in what they think they once believed. This exercise keeps me up with the market, and it even keeps me up with making tables/cutting and pasting in Word etc.

If you are interested in the data I collect, drop me a line and I will email you the most recent piece. This is not an ongoing offer; it is intended to show you concretely what I am talking about. The data you will want to collect will obviously be different from what I collect.

Keynes v. Hayek

Need a quick refresher on the debate between the Keynesians and the Austrian school of economics?

Truth in humor

From Jodi Begg's site (Economists Do It With Models) via the Washington Post.  Toles tells it like it is.

Global Bond Yields

Globally, bond yields tend to move together as traders arbitrage by trading the debt of various countries. This past week (as shown below), the yield on the 10-year U.S. Treasury rose sharply while yields on the same maturity in other countries were mixed. Given the poor results of the past week's auctions, and the data from the Treasury International Capital Report, this may be another indicator that the long-awaited rise in rates has started. Investors in bonds need to be cautious.

                                   3/5       3/12     3/19       3/26
10 yr.German             3.16      3.17     3.11       3.15
10 yr. Italy                 3.95      3.96     3.95       3.92
10 yr. UK                  4.06      4.1       3.95       4.04
10 yr. Japan               1.32      1.35     1.37       1.38
10 yr Australia            5.48     5.69     5.68       5.75
10 yr.U.S.                  3.68     3.7       3.69       3.85

I Wanna Be a Money Center Bank

“If I could come back as any corporate entity in my next life it would be as a money-center bank,” said Kiesel, who oversees $300 billion of credit investments from Newport Beach, California. “You can borrow money at virtually zero, you make prudent loans and you basically earn that spread.” (Mark Kiesel, global head of corporate bond portfolio management at Pimco).

Duh! Not only are you privy to a sizeable subsidized spread but also, if the risks don't play out, the American taxpayer bails you out and even pays your bonuses! Come on, what's not to like?

Two views on retirement planning and online calculators

This short video is worth watching because it gives differing views on doing the calculations for retirement planning. Kotlikoff's approach is a bit different from the typical planner in its application of economic theory - especially lifecycle consumption theory. Note the mention of potential conflict of interest in online calculators provided by the industry.