It is now two and a half years since the Great Recession officially ended. The 18-month downturn was the longest and most severe since World War II according to the National Bureau of Economic Research, a private, nonprofit research group which officially calls the beginning and ends of recessions. But things are getting better you say. Why bring up the ugly past? Some economic data have indeed shown improvements, particularly of late. Manufacturing has been a steady stalwart of the recovery. Exports have been generally strong for months, while the much touted automobile industry has made a ‘remarkable’ turnaround domestically. GM regained the lead over Toyota for goodness sake.

Last week in Measuring Uncertainty I focused on the pitfalls of using performance alone to measure progress toward reaching your financial goals. It’s only natural to use returns because they are the universal language of the financial services industry. And if the language of the industry is returns, then the methodology for producing them is active management; where managers make specific investments with a primary goal of outperforming an investment benchmark index. But with return alone as your guide, you are left to wonder just how effectively your managers are improving your situation relative to your goals, how are they managing your wealth?

In the investment process there are things which can be controlled; such as expenses, taxes, and under-performing market indices, and there are things that cannot; the uncertainty of markets. It is, however, quite possible to measure uncertainty not only of historical market returns, but also of potential market returns. So why is it important for investors to measure uncertainty and how is it measured?

It has been a busy week for news on the economy and most of it has been good. The best comes today with news that unemployment in the US has fallen to a three-year low of 8.3%.Payroll jobs grew 243,000 in January following gains of 203,000 December and a 157,000 rise in November. The averages for workweek and hourly earnings improved which will continue to propel consumer income growth which got a bump first of the week