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“What executive isn’t challenged by the daily barrage of conflicting economic reports attempting to clarify the question of the hour: will the global recovery build or lapse into another recession? Indeed, executives around the world are evenly split on the topic. And while the savviest executives and investors know better than to get caught up in the short-term fluctuations of the economy, many others, looking for evidence of longer-term trends, still fixate on movements in the equity markets.
They shouldn’t. The fact is that those markets, well analyzed as they are, don’t predict downturns effectively. Credit markets are a better place to look for signs of impending trouble, in no small part because they have been at the core of most financial crises and recessions for hundreds of years. Parsing the credit markets isn’t easy—there’s no single number remotely like a share price to monitor, and there are many moving parts. But for executives willing to take the time to understand the relationship between the financial and real economies, the credit markets can provide clearer indicators that a recession is on the horizon.
Subscribers to the theory that markets process all information efficiently would argue that equity investors should be in very good shape to recognize early indications of a looming downturn. If that were indeed the case, current market valuations might inspire confidence. Our model of the equity markets suggests that their current levels in Europe and the United States are reasonably consistent with the intrinsic value of equities, given long-term profit trends and current rates of interest and inflation. And since equity markets do a reasonably good job of tracking long-term economic fundamentals,1 investors can expect longer-term returns—dividends and share price appreciation—that are in line with historical real returns, in the range of 6 to 7 percent.”
JJ Editor's Daily Picks
"Political leaders from all French parties, including former presidents Francois Hollande and Nicolas Sarkozy, joined Jews and non-Jews in Paris’s Place de la Republique to condemn antisemitic acts."
"Eighty years ago tonight, thousands of Americans gathered in New York to rally behind the Nazi Party and its ideals. An Oscar-nominated short documentary retrieves footage of the event, but leaves out the context that gives it meaning."
"The PM has persuaded the religious-Zionist Jewish Home to partner with the Kahanists of Otzma Yehudit. It makes cynical political sense for his interests, but what of Israel’s?"
"IFC’s series Documentary Now! began as an affectionately parodic tribute to the classics of nonfiction cinema. Its first episode, “Sandy Passage,” was a note-perfect evocation of the Maysles brothers’ Grey Gardens..."
"Making our choices count is, however, far from straightforward, and this is the subject of Martin Hägglund’s book This Life: Secular Faith and Spiritual Freedom."
"Teens in the United States are coming of age at a time when digital technology is truly ubiquitous, where smartphones are all of our “constant companions.”"
"...the Smollett story, if the “trajectory” leads to evidence of fakery, would actually reveal something else modern America is about: victimhood chic."
"Cool in the humanities isn’t that different from cool in other areas of cultural life, like planking, hotdog-legs photography, mason jar rehabilitation, and novels whose main character is a city."
"It’s true that high-octane, hardworking child-rearing has some pointless excesses, and it doesn’t spark joy for parents. But done right, it works for kids..."
"Cape Town in South Africa is a foodie destination. Some people in its renowned restaurant industry are trying to spread the food wealth citywide."
"...for many “space expansionists,” escaping Earth is about much more than dodging the bullet of extinction: it’s about realizing astronomical amounts of value by exploiting the universe’s vast resources to create something resembling utopia. "
"After facing persecution in the former Soviet Union and a new wave of antisemitism in the United States, Marya Zilberberg decides to put her Jewishness on display."