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Hutchins Roundup: Zoning laws, Fed forecasts, and more 

What’s the latest thinking in fiscal and monetary policy? The Hutchins Roundup keeps you informed of the latest research, charts, and speeches. Want…



This article was originally published by Brookings

By Sophia Campbell, Lorena Hernandez Barcena, Nasiha Salwati, Louise Sheiner

What’s the latest thinking in fiscal and monetary policy? The Hutchins Roundup keeps you informed of the latest research, charts, and speeches. Want to receive the Hutchins Roundup as an email? Sign up here to get it in your inbox every Thursday. 

Relaxing zoning restrictions can increase housing supply and lower rents and house prices 

Relaxing land-use regulations can increase the supply of affordable housing—but which forms of regulation have the greatest impact? By comparing housing prices and supply on either side of zoning boundaries in the Greater Boston area, Nick Chiumenti of the Boston Fed, Amrita Kulka of the University of Warwick and Aradhya Sood of the University of Toronto find that increasing density by reducing the minimum lot size and allowing more dwelling units per lot has the greatest effect on supply and pricing (either alone or in combination with other policies), increasing the supply of multi-family units by up to two thirds and lowering rents and prices by up to 6% and 7%, respectively. Less effective changes include multi-family zoning (which allows for multi-family housing but does not address density restrictions), relaxed building height limits, and inclusionary zoning policies that allow affordable housing developers to override certain zoning bylaws or community opposition, none of which significantly increase housing supply or lower costs when implemented on their own. The authors also find that when density increases by 1%, single-family house prices fall by 0.16-0.21% — suggesting that policies intended to help first-time home buyers and low-income renters are likely to face strong political opposition from current homeowners. Consequently, the authors show, easing land-use restrictions has a smaller effect on density and pricing under local governance structures in which current residents have greater representation.   

Knowledge of monetary policy makes the Fed’s forecasts more accurate than the market’s  

The Federal Reserve tends to forecast the state of the economy more accurately than private forecasters. Amy Guisinger of Lafayette College and Michael McCracken and Michael Owyang of the Federal Reserve Bank of St. Louis find that 20-30% of the Fed’s forecasting advantage is derived from its greater ability to predict future monetary policy. Comparing Fed and market projected and realized inflation, the authors find that when the market matches the Fed’s expectations of future monetary policy, it predicts inflation over that period as accurately as the Fed. The results suggest that the Fed’s forecasting tools or resources do not significantly outperform those of private forecasters. Increased forward guidance has reduced the knowledge gap about monetary policy, causing the Fed to lose much of its forecasting advantage over private forecasters, they find.  

Steep community college enrollment declines reflect, in part, concentration of hands-on classes  

Economic downturns decrease the opportunity cost of going to school, usually leading to an increase in higher education enrollment. The COVID-19 pandemic was an exception. Community college enrollment fell 9.5% between the fall of 2019 and fall of 2020; it fell 15% among men, about twice as much as women. Diane Whitmore Schanzenbach of Northwestern and Sarah Turner of the University of Virginia use data on community college enrollment by course in seven states (representing about half of all community college students) and find that 20% of the overall decline in community college enrollment was attributable to courses requiring hands-on training, such as welding, HVAC and auto repair, that could not easily be shifted online. These subjects are typically male-dominated and explain 90% of the difference between the enrollment decline for men and women. The authors speculate that the proven effectiveness and cost-savings of shifting other programs to a hybrid model may induce community colleges to adopt simulation technologies for hands-on programs.   

Chart of the week: State and local employment remains significantly below pre-pandemic levels 


Quote of the week:  

“[W]hen we make that first rate move — whenever it is — that’s not really policy tightening. Accommodation is still going to be really high at that point. So, I think that the case is really strong to begin to wind back some of that accommodation… I can tell you in that December SEP [Summary of Economic Projections] submission I had three penciled in for this year…I also want to point out that we’re going have to see how the economy does overtime before we can say for sure how many rate increases are needed,” says Loretta Mester, President of the Federal Reserve Bank of Cleveland. 

“There’s still a lot of uncertainty regarding the outlook. There’s uncertainty about how the pandemic plays out. As we’ve seen each variant, the economy has really navigated it in terms of the economic outlook but right now we have to say that we probably need to recalibrate our policy stance because inflation is well above where we need it to be. The labor markets are tight from the standpoint of a policy-relevant framework. Do I think we’ll see labor force participation move up somewhat after we get beyond the pandemicOf course, but I don’t think we can ignore the shorter run or medium run tightness in that labor market. So, I think we’re in a good place to move policy and we’ll have to see how that affects the economy going forward and the other factors affecting economic growth and employment going forward.” 

The Brookings Institution is financed through the support of a diverse array of foundations, corporations, governments, individuals, as well as an endowment. A list of donors can be found in our annual reports published online here. The findings, interpretations, and conclusions in this report are solely those of its author(s) and are not influenced by any donation. 


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Author: mmaydani


Fear and Greed: An Investors Two Worst Enemies

Over the past two years, investors have had to balance fear and greed amidst market, economic, and political unpredictability. Since 2020, the divergence…

Over the past two years, investors have had to balance fear and greed amidst market, economic, and political unpredictability. Since 2020, the divergence between asset price performance and fundamentals has never been starker. As a reminder, stock prices were surging higher in the spring and summer of 2020 despite double-digit unemployment and closures of large economic segments. It was not easy to be bullish with news like the New York Times front-page below.

new york times fear

The stock market bottomed the week the headline above was published. Since then, the S&P 500 has more than doubled. Those investors who could silence their fear and focus on technical signals and fiscal and monetary stimulus prospered.

Simultaneous feelings of fear and greed were overwhelming and detrimental to many investors over the past two years.

As we look ahead, we believe those same emotional biases will hinder investors. In this piece, we examine two biases that often handcuff investors and push them to make the wrong decisions at the wrong time. Our intention to make you aware of these subconscious forces is to help you manage both fear and greed and, ultimately, your wealth.

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Availability Bias – Fear

Proposals for new nuclear power plants often come under resounding negative pressure from local communities. According to Britannica, the phrase NIMBY (not in my backyard) was coined because of the “threat” of new nuclear power plants.

Ask your friends or neighbors, and they would likely be distraught at the prospect of a nuclear power plant in their neighborhood. The reason is Three Mile Island, Fukushima, and Chernobyl in most cases.

Nuclear power plant disasters, while very rare, are extremely powerful in terms of the public’s perception of nuclear power. No one wants nukes in their backyard, despite the fact they are low cost, reliable, and produce no carbon emissions. As the graph below shows, nuclear energy is not only one of the greenest forms of energy production, but it is also the safest. 

nuclear energy availability bias

Availability bias occurs when people base their sense of risk on examples that quickly come to mind when a topic arises. When most people think of nuclear energy, Chernobyl, Three Mile Island, and Fukushima are top of mind.

Our collective availability bias against nuclear energy arguably results in more environmentally unfriendly, costlier, and deadlier energy options. Simply it causes us to make poor risk/reward decisions.

Availability Bias – Market Crashes

Investors can face the same crippling fear that nuclear energy protestors harbor.

The years 1929, 1987, 2000, and 2008 elicit anxiety from investors. Those four stock market crashes erased massive wealth in relatively short periods. Many people believe the crashes appeared out of the blue with no ability to detect them in advance.

The reality is all four were predictable. Timing a crash is difficult but quantifying the risk of a crash and the conditions leading to a crash are manageable. For example, we wrote 1987 to highlight plenty of fundamental and technical warnings in advance of the most significant single-day market crash.

The combination of high valuations and the fear of a market crash inevitably left many investors over the last year on the sidelines. While such a stance may prove correct in the longer run, those investors are sorely missing the ability to compound wealth in the shorter run. In the case of availability bias, investors are putting too much emphasis on risk and not enough time properly managing the risk.

Herd Mentality – Greed

It is often at market peaks that investors fail to appreciate risk and instead follow the bullish herd. Jim Cramer, for example, and many others make a living promoting bullish views. They thrive in bull markets. When markets roar ahead, extreme optimism and promises of much higher prices make the promoter’s siren songs hard to ignore.

Famed investors, Wall Street analysts, and the media prey on ill-equipped investors by justifying high valuations and forecasting ever-higher prices.  Their narratives rationalizing steep valuation premiums and bold return forecasts become widespread. To some, they appear to be facts. Despite evidence to the contrary and historical precedence, investors buy the hype. “This time is different,” say the promoters.

As bull markets run at full steam, the call of the promoters elicits a fear of missing out (FOMO) or behavioral herding. Most investors blindly mimic the behavior of other investors without seeking the rationality behind it.

“There is nothing so disturbing to one’s well-being and judgment as to see a friend get rich” -Charles Kindleberger: Manias, Panics, and Crashes

In the case of herd mentality, we fail to manage risk as we become so focused on rewards.

Straddling the Line

In 1999, we showed current equity valuations are as extreme as those periods leading to the four crash events. A 40-50% market decline or even more would be statistically expected. There is no doubt our risk awareness should be on high alert. Blindly following your friends, neighbors, and Jim Cramer is a recipe for disaster. Do not ignore the palatable risks.  

While blindly following the herd is dangerous, focusing too heavily on prior market crashes is also problematic. There is no golden rule that says markets must correct when they appear too expensive. Valuations may stay grossly elevated this year and next year. It’s also feasible, although highly unlikely, prices are stable, but valuations correct because earnings growth is fantastic.

Solely focusing on prior crashes and current extreme valuations may result in the inability to compound your wealth. If you sat out the last year, you missed outsized returns, which could have cushioned recent declines and made risk management a little easier.  


Zen-like awareness allows us to run with the bulls and hide from the bears.” – Zen and the Art of Risk Management 

Growing wealth is complex, especially when markets are at extremes like today. Worrying about 1987 or 1929 can leave you woefully underinvested while markets roar ahead. Blindly following stock promoters may leave you dangerously at risk.

As important as it is to think for ourselves, it is equally important to understand our psychological makeup. A strong understanding of a market’s technical and fundamental backings and the ability to fend off the urges of fear and greed is the equation for long-term investment success. Such is far from easy, which helps explain why so few investors continually make fortunes over decades.   

The post Fear and Greed: An Investors Two Worst Enemies appeared first on RIA.


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Euro drifting ahead of FOMC meeting

The euro continues to have a quiet week and is trading just shy of the 1.13 level. All eyes on FOMC It has been a calm week for the euro, but that could…

The euro continues to have a quiet week and is trading just shy of the 1.13 level.

All eyes on FOMC

It has been a calm week for the euro, but that could change later today when the FOMC releases its policy decision.  Fed policy makers are in an unenviable position, as they strive to find that proper balance between responding to the inflation threat while also being careful not to be overly aggressive in raising interest rates. If the markets feel that the Fed has not achieved this delicate balance, it will let the central bank know loud and clear and we’ll see volatility in the financial markets after the meeting. Powell & Co. have done a good job telegraphing the markets and being transparent, and effective communication ahead of the lift-off of rate hikes will be crucial for market stability.

The Fed is virtually certain to raise rates in March, with FedWatch pegging the likelihood of a hike at 94%. The key question swirling in the markets is how aggressive will the Fed be in 2022. The baseline assumption is that the Fed will implement four rates hikes of 0.25% each. Still, the risk of additional hikes, given the surge in inflation, is tilted towards the upside. There is also the possibility of a 0.50% rate hike during the year, which would send a strong message to the markets that the Fed is determined to put a lid on inflation.

Another factor on the minds of investors is the tense stand-off between Russia and NATO over Ukraine. The US has said it is ready to send 8500 troops to Eastern Europe on short notice, but they will not be deployed in Ukraine. The crisis has escalated into a powder keg which could explode at any time. If Russia invades Ukraine, risk sentiment would sink and the safe-haven US dollar would likely jump at the expense of the other major currencies.


 EUR/USD Technical

  • In the European session, EUR/USD tested support at 1.1285. Below, there is support at 1.1226
  • There is resistance at 1.1359 and 1.1418

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Author: Kenny Fisher

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Yelp Inc. (NYSE:YELP) Expected to Announce Quarterly Sales of $271.90 Million

Analysts forecast that Yelp Inc. (NYSE:YELP) will post $271.90 million in sales for the current fiscal quarter, according to Zacks Investment Research….

Analysts forecast that Yelp Inc. (NYSE:YELP) will post $271.90 million in sales for the current fiscal quarter, according to Zacks Investment Research. Four analysts have issued estimates for Yelp’s earnings, with the highest sales estimate coming in at $273.70 million and the lowest estimate coming in at $270.50 million. Yelp posted sales of $233.20 million during the same quarter last year, which suggests a positive year-over-year growth rate of 16.6%. The company is scheduled to announce its next earnings results on Tuesday, February 8th.

According to Zacks, analysts expect that Yelp will report full-year sales of $1.03 billion for the current financial year, with estimates ranging from $1.03 billion to $1.04 billion. For the next year, analysts expect that the firm will post sales of $1.16 billion, with estimates ranging from $1.14 billion to $1.18 billion. Zacks Investment Research’s sales averages are a mean average based on a survey of sell-side research analysts that follow Yelp.

Yelp (NYSE:YELP) last released its quarterly earnings data on Thursday, November 4th. The local business review company reported $0.23 earnings per share (EPS) for the quarter, topping the Thomson Reuters’ consensus estimate of ($0.01) by $0.24. The business had revenue of $269.20 million during the quarter, compared to analysts’ expectations of $261.87 million. Yelp had a net margin of 3.79% and a return on equity of 4.60%. The company’s revenue for the quarter was up 21.9% on a year-over-year basis. During the same period in the previous year, the company earned ($0.01) EPS.

A number of equities research analysts recently weighed in on YELP shares. Credit Suisse Group reduced their price target on shares of Yelp from $53.00 to $51.00 and set an “outperform” rating for the company in a research report on Friday, November 5th. JPMorgan Chase & Co. reduced their price target on shares of Yelp from $44.00 to $40.00 and set a “neutral” rating for the company in a research report on Wednesday, December 15th. Barclays boosted their price target on shares of Yelp from $31.00 to $32.00 and gave the company an “underweight” rating in a research report on Friday, November 5th. Finally, Zacks Investment Research cut shares of Yelp from a “strong-buy” rating to a “hold” rating and set a $38.00 price target for the company. in a research report on Thursday, January 13th. Two investment analysts have rated the stock with a sell rating, six have assigned a hold rating and three have issued a buy rating to the company’s stock. According to data from, the company has a consensus rating of “Hold” and a consensus target price of $39.69.

In other news, CTO Sam Eaton sold 4,169 shares of the business’s stock in a transaction dated Monday, November 22nd. The shares were sold at an average price of $36.65, for a total transaction of $152,793.85. The sale was disclosed in a document filed with the SEC, which can be accessed through the SEC website. Also, insider Vivek Patel sold 6,090 shares of the company’s stock in a transaction dated Tuesday, November 23rd. The stock was sold at an average price of $36.12, for a total transaction of $219,970.80. The disclosure for this sale can be found here. Insiders own 8.70% of the company’s stock.

A number of institutional investors and hedge funds have recently modified their holdings of the business. Vanguard Group Inc. grew its position in Yelp by 1.4% during the second quarter. Vanguard Group Inc. now owns 7,388,435 shares of the local business review company’s stock worth $295,242,000 after buying an additional 101,396 shares during the period. Boston Partners lifted its holdings in shares of Yelp by 1.7% in the third quarter. Boston Partners now owns 3,645,209 shares of the local business review company’s stock valued at $135,978,000 after purchasing an additional 60,568 shares in the last quarter. Invesco Ltd. lifted its holdings in shares of Yelp by 11.4% in the second quarter. Invesco Ltd. now owns 2,441,034 shares of the local business review company’s stock valued at $97,543,000 after purchasing an additional 250,022 shares in the last quarter. Dimensional Fund Advisors LP lifted its holdings in shares of Yelp by 2.0% in the second quarter. Dimensional Fund Advisors LP now owns 1,637,638 shares of the local business review company’s stock valued at $65,441,000 after purchasing an additional 31,916 shares in the last quarter. Finally, Macquarie Group Ltd. lifted its holdings in shares of Yelp by 1.0% in the third quarter. Macquarie Group Ltd. now owns 1,588,236 shares of the local business review company’s stock valued at $59,146,000 after purchasing an additional 16,394 shares in the last quarter. Institutional investors own 88.51% of the company’s stock.

Shares of YELP opened at $33.03 on Wednesday. Yelp has a 1-year low of $31.60 and a 1-year high of $43.86. The stock has a market capitalization of $2.41 billion, a PE ratio of 70.28 and a beta of 1.76. The company has a fifty day moving average of $35.74.

Yelp Company Profile

Yelp, Inc operates a platform that connects consumers with local businesses in the United States and internationally. The company’s platform covers various local business categories, including restaurants, shopping, beauty and fitness, health, and other categories, as well as home, local, auto, professional, pets, events, real estate, and financial services.

Further Reading: How does the Beige Book influence monetary policy?

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