Macro Economy

Random news bites.

The NYT (here) talks about items that traditional growth measures like GDP omit or mis-state. Created during the 1930’s, these tools are constantly being revamped to reflect changes in consumer tastes, preferences, and the corresponding weights of components in the “typical” basket of goods and services. Still, what is counted is stuff that is traditionally produced (read: manufactured) and consumed, stuff that has a price. Despite hedonic adjustments for innovation and the consequent quality improvements, much does not get counted. Martin Feldstein points to how increasingly prescribed statins have significantly lowered the incidence of heart disease, but the benefits of that well-being does not get captured anywhere. Furthermore,  in this digital age it is not these goods, but many services that we consume-most must have a value but do not have an obvious price.  Free software updates that we periodically download, streaming services, wikipedia instead of a trek to the library are some examples. Ad revenue is the ubiquitous substitute for a number to capture the economic value of such services, but how good a number is it really? Have to wonder if global growth is being understated.

Meanwhile, the FT (here), talks about demonetization in India offering opportunities for insurers.  Not just insurance, but the abililty to market various financial products was somewhat sneakily given to the newly licensed payment banks which offer mobile banking services to the cashless economy. Of course, “free’ insurance upto a max is bundled with their offerings. Potentially a $60 billion-plus market, says the FT and I think of Fairfax Holdings cashing OUT part of their ICICI Lombard stake for a cool $ 1 billion couple of weeks ago (here). Nice.

And from Al Jazeera (here), admittedly a tiny, symbolic step towards reducing global dollar hegemony as the BRICs have been wanting to do for some time.



Morning look reveals a Bloomberg speculation (here) that Feb buying will continue post-meeting. If stocks have been up because of infinite QE, then sell on the news offers a reason to take profits. If stocks are up because of better economic news as the media would have it, then more QE because of sluggish economic prospects should also be bad news for stocks too. Faced with such binary arguments for why stocks should fall, I tend to lean towards Murphy. Stocks will go up! 

Apple is up in the pre-market once more, subsequent to yesterday’s move after some analyst masterfully spoke the obvious about the stock being cheap. Wonder if the long Apple/short everything else crowd is getting active again. IT spending is really discretionary too, is the lesson of VMware.

It must be a bull market when crazy trades work. Got filled on a HES 62.5 call play yesterday, after the stock was up $3. Wake up to find it trading pre-market above 67 as  billionaires announce large purchases (here). I will be out of most at the open. That compensates for the CAT and FB plays from last week, both companies received multiple upgrades since!

A take on the jobs number.

One take that I read reflects the insanely bullish bent of this market and goes as follows. Great jobs number (>200K) and it is off to the races as the economy is fine. Awful jobs number (<100K) and it is off to the races because the another QE has to come. In between is no mans land, market will bounce around.  I personally have no idea what the number will be, I don’t do economic forecasting.  I also have no idea what the market will do after it prints, so I have very little going into tomorrow, having covered most of the shorts I had left.

Morning update. Goldman clearly nailed the number. Accept that the slowdown is there. Some profit taking as I speak, summer offers far more fun things to do than to sit in front of a screen and look at market prices.


1. Bloomberg critiques the reduced investor protection spawned by the JOBS  (Jumpstart Our Business Startups) Act (HERE).

2. The much awaited jobs number comes out and prints at 100K versus expectations of 200K. Back to just above stall speed.  Despite today being an equity market holiday, the CME lets people trade futures for 45 frenzied minutes before Monday.

3. And, as many of you are perhaps aware, the quality of the jobs available is pretty low anyway (HERE).

4. Collateralized loan obligations are BAA..>AACK says the WSJ (HERE).

5. In praise of renting? (HERE).

Your one-handed economist interprets macro!

Chairman Ben will deliver a 4-part lecture series at the GW-School of Business on the Fed and the financial crisis. This will be in late March. Watch it (HERE).

Meanwhile, the decline in housing prices accelerates (HERE). At this rate, my house may soon be worth what I paid for it 12 years ago!

Several people have remarked on the recent spike in consumer credit.visible in this Bloomberg screenshot below. Is this bullish or bearish? .Bullish because they are spending it,or bearish since without incomes, borrowing is the only way to go? This is not that large a number though, the chart reports a net change of $17 billion, I think the total is in the trillions. Wish I had that Bloomberg rather than stealing screenshots from the Web!



I know I am cherry picking, but  I cannot help myself.  After all, this is the 8759th Greek bailout story. Below  is the complete sentence. The full story is here  if you don’t believe me.

“Data later today may show a measure of euro-area consumer confidence improved to minus 20.1 this month from minus 20.7 in January, according to the median forecast of economists in a Bloomberg survey.”

I am not sure what survey this is or what scale is being used. If it is comparable to US surveys, the domestic number is in the 60-70 range I think.

Upcoming macro-news.

First estimates of q4-2011 GDP growth come out on Friday, with consensus of 3.2% versus 1.8% for the third quarter. I am a little surprised at the size of this estimate, maybe this is why the equity market has been so bullish.  Also out is consumer sentiment data. In my view the latter is particularly unreliable , it seems to reflect recent market activity more than anything else.  Remember too that the former is just the first of 3 estimates that are provided.

Addendum: Friday AM. GDP growth of 2.8% was below consensus. Even more significant is that nearly 2% of that is inventory building which leaves 0.8%. I am UNDERWHELMED and the market is selling off drip drip drip.  There will be  a pop somewhere and I will get more short exposure.