Blaine Rollins: "So many roads ahead"

…the key economic question is the impact of more stimulative fiscal policy at a time when the economy is moving beyond full employment. If most of the added growth takes the form of stronger aggregate demand without an offsetting increase in aggregate supply, as we expect, then it is only a matter of when, not if, financial conditions and monetary policy need to turn more restrictive to reverse the demand expansion. In a full employment economy, what Congress giveth, the Fed ultimately taketh away. The prospect of fiscal stimulus thus reinforces our forecast that the funds rate will rise well beyond current market pricing, with four hikes in 2018 and a terminal rate of 3¼%-3½%.

(Goldman Sachs)

The Federal Reserve is set to raise interest rates for the third time this year Wednesday, just as other central banks in the developed world have recently started to tighten monetary policy. But investors in developing countries aren’t flinching, reflecting confidence in the growing global economy and a changing investment landscape in those countries, fund managers say.

“Everybody used to think if the Fed tightens, all emerging markets die,” said Helen Qiao, managing director at Bank of America Merrill Lynch in Hong Kong. “I don’t think that is the picture anymore.”

The reversal in fortunes comes as emerging markets are enjoying what some analysts call a “Goldilocks” moment—a combination of strong global growth, stabilizing commodity prices and improving domestic fundamentals. This has fueled a rally dwarfing gains made by U.S. stocks.

(WSJ)

Exhibit 1 compares our estimates of potential growth in 2017Q3 for several countries, with bar widths denoting the comparative economic size of each country. Notwithstanding the caveat that these are inevitably uncertain—in part because we cannot observe “potential” growth, and also due to the choice of model itself—the main conclusion is that potential growth in the largest EM economies far outstrips that of the leading DMs.

(Goldman Sachs)

Simons has placed a big bet on his hunch that basic science will yield to the same approach that made him rich. He has hired ninety-one fellows in the past two years, and expects to employ more than two hundred, making the Flatiron almost as big as the Institute for Advanced Study, in Princeton, New Jersey. He is not worried about the cost. “I originally thought seventy-five million a year, but now I’m thinking it’s probably going to be about eighty,” he said. Given that Forbes estimates Simons’s net worth to be $18.5 billion, supporting the Flatiron Institute is, in financial terms, a lark. “Renaissance was a lot of fun,” he told me. “And this is fun, too.”…

Flatiron Institute researchers don’t have to teach, and they don’t have to apply for grants, which can consume much of an academic’s time. Nearly all the institute’s senior hires come from universities, and most of these universities are nearby, leading to some resentment. “People feel we have so many resources that we’re going to take over the world,” Spergel said. In an e-mail, one competitor complained to Spergel that the Flatiron was “a 1000 pound gorilla,” adding that, of the people he had recently been trying to recruit, all of them had “an offer from you.” Another researcher pointed out that, as powerful as computational science has become, it still relies on the kind of experimental science that the institute does not fund. In an e-mail, the researcher noted, “The predictions from the computation can only ever be as good as the data that has been generated. (I think!)”

(New Yorker)

Stephanie Schriock, the president of Emily’s List, the largest national organization devoted to electing female candidates, said that in the 10 months before the election in 2016, about 1,000 women contacted her organization about running for office or getting involved in other ways. Since the election, she said, the number has exploded to more than 22,000…

The largest increase by far is in the number of female House candidates — 354 — which includes 291 Democrats and 63 Republicans, according to data from the Rutgers center. The number of women challenging incumbents is almost four times the number at the same period in 2015.

In the Senate, there are almost double the number of female candidates — 25 Democrats and 13 Republicans so far — than there were at this point in 2015, and about 10 times the number in the 2012 and 2014 elections.

(NY Times)

Recent research suggests one possible way of reducing perceived inequalities in the workplace: Hire CEOs with daughters.

A handful of studies that look at decision-making by chief executives, legislators, judges and venture capitalists suggest those who have daughters are more likely to make decisions that favor more equitable treatment of women.

A newly published study in the December issue of the Journal of Financial Economics shows that CEOs who have daughters scored higher in a measure of corporate social responsibility, says co-author Henrik Cronqvist, chairman of the department of finance at the University of Miami School of Business Administration. The study is an update of one that was initially released in 2015.

Merely having a daughter opens executives’ eyes to gender-related issues that they might not otherwise be aware of, says Dr. Cronqvist, who co-wrote the study with Frank Yu, associate professor of finance at China Europe International Business School in Shanghai.

The study found that when a CEO has a daughter, the company’s corporate-social-responsibility rating—a third-party measure of how companies stack up on community, diversity, employee relations and other metrics—is about 9.1% higher than that of a median firm. The study analyzed familial information of 416 CEOs from S&P 500 companies.

(WSJ)

Out of 125 FBS schools required to report financial data to the U.S. Department of Education, Louisville is the only one that derives more than half of its men’s sports revenue from basketball, says Jonathan Jensen, a sports marketing professor at the University of North Carolina at Chapel Hill. Much of that revenue comes from a $238 million taxpayer-funded arena, the KFC Yum Center, which opened downtown in 2010 and has become a heavy burden on taxpayers. The lease was negotiated by Jurich and the arena authority. Under the terms, taxpayer contributions make up 75 percent of the arena’s operating income while Louisville gets to keep most of the revenue — an arrangement that “blew our mind,” says state auditor Mike Harmon, whose office examined the arena’s finances. “It was like, ‘This is ridiculous.’ It’s like co-signing the loan for a friend’s home and then having to pay three-fourths of the mortgage.”

Denis Frankenberger, a local businessman who has dissected the lease in minute detail, calls it “the biggest taxpayer scandal in the history of Louisville.”

In the arena’s first year, men’s basketball revenue jumped 58 percent, from $25.9 million to $40.9 million, a trend that continued as the program became the richest in the country. Under the lease, Louisville keeps 88 percent of premium seat licensing, 97 percent of suite sales, all program revenue and half of concessions.

As Louisville was growing richer, the arena was failing — partly due to the lopsided lease, partly due to tax estimates based on “flawed data,” Harmon says. By early this year, the arena required a bailout to keep it from defaulting on more than $300 million in bond debt. Jurich’s athletic department agreed to pay an additional $2.4 million a year. The public, meanwhile, was saddled with another 25 years of arena-related taxes totaling hundreds of millions of dollars. In the end, the arena will cost more than $1 billion, with taxpayers funding most of it. Despite the bailout, some experts fear the FBI probe’s effect on the arena’s primary tenant could be catastrophic.

(ESPN)