Entries by Milton Ezrati

    Equities: A "China Syndrome" Sequel? Not Quite

    August 24, 2015 10:12 AM by Milton Ezrati

    The sell-off in U.S. stocks in response to reports of a weakening Chinese economy shows that investor emotions have gotten ahead of reality.

    The U.S. equity market's recent selloff seems to have its roots in an exaggerated, indeed panicked, response to negative news out of China. A recent Economic Insights on the Lord Abbett website explains in detail why such interpretations are erroneous. The equity rout in China, though severe, is an entirely unsurprising response to the market's previous and unsustainable run-up during the previous year.

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    China's Devaluation Calculation

    August 11, 2015 4:38 PM by Milton Ezrati

    Beijing is betting that lowering the value of the yuan will help its faltering export sector. But the move may not immediately produce the desired economic boost.

    In a move to shore up its flagging export sector, China lowered the yuan’s value against the U.S. dollar by 1.9% on August 11, the biggest such move in nearly 20 years. This action, which essentially is a devaluation of the Chinese currency, sent the U.S. dollar and other currencies sharply higher in response.

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    Stocks: A Stark Reminder of Global Risk

    July 18, 2014 2:25 PM by Milton Ezrati

    Fresh news of geopolitical turmoil spurred selling on July 17. How might markets behave in the aftermath?

    U.S. equity investors appear to have disregarded a growing number of geopolitical threats as they bid major indexes higher in 2014. But the shock of a downed Malaysian airliner in Ukraine, coupled with news of an incursion by Israeli ground forces into Gaza, spurred widespread selling in U.S. stocks on July 17. 

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    U.S. Economy: The Muddle Gets Deeper

    June 25, 2014 2:31 PM by Milton Ezrati

    While a far larger-than-expected decline in revised first-quarter GDP does not signal recession, it does point to continued subpar growth.  

    Though a downward revision in first-quarter U.S. gross domestic product (GDP) was widely expected, the actual change reported by the Commerce Department on June 25 was more severe—and troubling for that reason alone. Instead of the previous estimate of a 1.0% annualized rate of decline in real GDP reported on May 29, the revised data revealed a 2.9% decrease. Economists surveyed by Bloomberg projected a 1.8% drop.

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    Oil Spillover: Could the Iraq Conflict Dampen U.S. Growth?

    June 16, 2014 4:05 PM by Milton Ezrati

    Expectations of stronger second-quarter growth may have to be trimmed if gasoline prices rise sharply.  

    Given the deepening conflict in Iraq, it is remarkable that oil prices have not risen higher than the $107 per barrel (Bloomberg data) reached on June 16.  Whichever side has the advantage-—the government of Prime Minister Nouri al-Maliki, or the insurgency led by the Islamic State of Iraq and Syria (ISIS)—or whether the United States or Iran, cooperatively or unilaterally, intervene in the conflict, the prospect of ongoing fighting and chaos threatens to keep some or all of Iraq's ample oil supplies off the market. 

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    U.S. Economy Will Weather a Weak First Quarter

    May 29, 2014 12:22 PM by Milton Ezrati

    Shocking as the first-quarter GDP release looks on the surface, it still is no big deal.

    The Commerce Department’s release of revised first quarter GDP figures on May 29 offered a negative surprise.  Though the pattern of monthly data since the preliminary GDP estimate of 0.1% annualized real growth have led many to suspect that the figure could be negative, the reported decline of 1.0% went further than most any forecaster expected.  Yet, the picture still is one of temporary weather-related problems that have little bearing on the future. 

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    Piketty: Misremembrance of Things Past

    May 21, 2014 2:04 PM by Milton Ezrati

    The French author cherry-picks certain periods of economic history to make his point—and totally ignores the prospective impact of current demographic trends.

    Professor Thomas Piketty’s new book, Capital in the Twenty-First Century, certainly has caused a stir—with a vivid description of income inequality over a long past and across several economies and with extreme recommendations on how to remedy the presumed injustice. There is, however, a serious problem with the picture he paints and, consequently, his policy prescriptions. Because his conclusions reflect only a particular historical period, they say nothing about the nature of capitalism, as he suggests they do, and little about a future in which aging demographics will create very different trends than he has found in the past.

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    An "Emerging" Menace to the U.S. Economy? Hardly

    May 9, 2014 4:25 PM by Milton Ezrati

    A recent article emphasizing America’s vulnerability to setbacks in emerging markets is unnecessarily alarmist.

    A recent Barron’s article (May 3, 2014) may have stirred some concern in an already wary investment community. The piece, drawing on work form a noted New York think tank, saw an increased danger in the rise of emerging economies to some 40% of the world’s gross domestic product (GDP). It argued that this increased prominence made the U.S. economy, and financial markets, much more vulnerable than previously to foreign economic fluctuations. The author speculated that a setback in emerging economies would force the U.S. Federal Reserve to keep short-term interest rates lower for longer than many now expect.

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    Two Cheers for the April Jobs Report

    May 2, 2014 10:40 AM by Milton Ezrati

    While job growth rebounded from weather-related weakness, labor market fundamentals remain soft.

    The April employment report released May 2 gave spirits a lift after the earlier, dreary GDP report on April 30. The government announced that the U.S. economy added 288,000 jobs on the month, with the unemployment rate dropping to 6.3%. But the April report requires two points of context. 

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    The Labor Market's March Muddle

    April 5, 2014 10:08 AM by Milton Ezrati

    Mixed data in the monthly jobs report, including below-forecast payroll growth, underscore the sluggish recovery.

    At best, the jobs report for March is a mixed bag. On April 4, the Labor Department reported that nonfarm payrolls expanded 192,000 for the month, but a bounce was expected as a kind of a catchup for the weather-depressed rates of hiring in the three prior months. Accordingly, the consensus view of economists had expected 200,000 new jobs.  On that basis, this figure is mildly disappointing.

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