The Factor-Based Investing Channel

Household Incomes: The Decline of the "Middle Class"

The median household is the statistical center of the Middle Class. In terms of income, this class has not fared well in recent decades. Let's take a closer look at a troubling aspect of the Census Bureau's latest annual household income data, issued this month. In this update, we'll focus on the growing gap between the median (middle) and mean (average) household incomes across the complete time frame of the Census Bureau's annual reporting, which began in 1967, to the release last month of the annual data for 2016.

The Fear Factor in Today’s Interest Rates

Atlantic-hugging policymakers and pundits, buffered by a continent and a large ocean, may not fully appreciate the significant effect on global financial markets that the threat posed by North Korea has had in recent months. But competition for safe assets has clearly heated up.

Bubble Mindset

So the mindset, I think, goes something like this. Yes, market valuations are elevated, but, you know, low interest rates justify higher valuations. Besides, there’s really no alternative to stocks because you’ll get what, 1% annually in cash? Look at how the market has done in recent years. There’s no comparison.

Build Your Economic Storm Shelter Now

Today I want to continue with the hard-hitting analysis of our public pension problems and say more about personal storm preparation. We all have some very important choices to make.

S&P 500 Snapshot: Closes Higher Than Thursday, Daily Gain of 0.06%

The S&P opened Friday below its Thursday close and oscillated around the same point until about 2pm. The index closed the day with a gain of 0.06% and a week-over-week gain of 0.08%. The index is up 11.76% YTD.

Median Household Incomes by Age Bracket: 1967-2016

Earlier this week, we updated our commentary on household income distribution to include the Census Bureau's release of the 2016 annual data. Our focus was on arithmetic mean (average) household incomes by quintile (and the top 5%) over the 50-year history of this data series. The analysis offered some fascinating insights into U.S. household incomes. But the classification misses the implications of age for income. Households are by no means locked into the same quintile over time.

ECRI Weekly Leading Index: YoY Lowest in 12 Months

Today's release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 143.4, unchanged from the previous week. Year-over-year the four-week moving average of the indicator is now at 2.83%, down from 3.09% last week and its eleventh consecutive week of declines. The WLI Growth indicator is now at 0.0, also down from the previous week, its lowest since March of 2016.

Vehicle Miles Traveled: Another Look at Our Evolving Behavior

The Department of Transportation's Federal Highway Commission has released the latest report on Traffic Volume Trends, data through July. "Travel on all roads and streets changed by 0.8% (2.2 billion vehicle miles) for July 2017 as compared with July 2016." The less volatile 12-month moving average was up 0.13% month-over-month and 1.2% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) is up just 0.05% month-over-month and up only 0.6% year-over-year.

Health Care Reform – Right, Left, and Center

Three new health care reform initiatives - from the political right, left, and center - are developing in the Senate. Earlier this week I joined CNBC's Nightly Business Report to discuss the proposal up first for consideration: the Graham-Cassidy bill, which would turn the ACA into a system of state grants.

How to Trade in Today’s Placid Bond Markets

Today’s low bond market volatility won’t last forever. But knowing whether a correction will come next week or next year isn’t so important. Having an efficient trading strategy that can execute in both tranquil and turbulent markets is.

Five Surefire Ways to Lose a Prospect

It’s been challenging to limit this list to five surefire ways to fail to convert a prospect, but these will be a good start.

World Markets Update

All eight indexes on our world watch list have posted gains for 2017 through September 18. The top performer thus far is Hong Kong's Hang Seng with a gain of 28.0%, followed by India's BSE SENSEX at 21.77%. In third is our own S&P 500 with 11.84%.

Random Walk Part 1 – A Random Walk down a Dead-end Street

This is the first of a four-part empirical research study into the fallacy of the “random walk” view on investment reward and risk.

FANG Stocks Expose Blind Spots in Risk Models

The investing industry is constantly devising new acronyms and buzzwords. Sometimes these can be dangerous. The rise of the FANG stocks highlights how clusters of stocks may create investing hazards that standard risk models struggle to detect.

China’s Rising Presence in Emerging Debt Markets

Countless articles have been written in the past 10 years predicting (or warning) of China’s imminent financial demise, with the number of articles accelerating in recent years amid China’s debt build-up in the post Global Financial Crisis period. Investing on the basis of a “China collapse” view of the world would likely have resulted in more risk-averse portfolios in the emerging debt space and, hence, lower returns in recent years.