Noted for your morning ruminations or procrastinations – take your pick.
These are various news items that I have read during the day and early morning in preparation for the trading day. I make notes as I read the articles. Some are trading related, some are economics related and others are just for intellectual stimulation.
- The Germans Are Making The Same Huge Mistake Bill Clinton Made – the boom in securitisation contributed to channel into mortgages a large pool of savings that had previously been directed towards other safe assets, such as government bonds.
- Europe’s Anti-Business Stance – With all the problems facing Europe, the recent European Central Bank decision to buy bonds amounts to reaching into a medicine cabinet when the patient needs open-heart surgery.
- I Do Not Think That Number Means What You Think It Means – What we see is that Italy is somewhat out of line — but the real standout is Germany, which has had much too little wage growth. And this in turn suggests that if we’re looking for the key to European problems, it lies in Germany’s beggar-they-neighbor relative wage deflation
- Arithmetic Is Very Simple, But It’s Still True – Rattner also warns about Europe and even Germany losing “competitiveness.” It is not clear what meaning he assigns to that word, but Germany has a trade surplus of more than 6.0 percent of GDP, in contrast to a deficit of 2.4 percent of GDP in the United States.
- Labour Costs: Who is the Outlier? – If we take the OECD average as a benchmark, Ireland and Spain were outliers in 2007, as much as Germany; And while since then they reverted to the mean, Germany walked even farther away. It is interesting to notice that unreformable France, the sick man of Europe, had its labour costs increase slightly less than OECD average.
- Games People Play – But the Fed, uniquely in my opinion, will move up the Monopoly board’s interest rates in late 2015, hoping to avoid landing on the figurative Park Place and Boardwalk in the process. It won’t however, move quickly – capitalism has been damaged by the change in rules since 2008. Caution, therefore will prevail in the U.S. and elsewhere for a long time. Bonds despite their ridiculous yields will not easily be threatened with a new bear market. Investors should expect as well, that because of the slow unwinding of zero percent rates in the U.S., that U.S. and global stocks will be supported.
- Europe Stocks Head for Best January Since 1989 – The benchmark measure has advanced 7.6 percent in January as the European Central Bank unveiled a 1.1 trillion-euro ($1.2 trillion) quantitative-easing program to combat deflation. Euro-area consumer prices fell more than economists forecast in January, data showed.
- Goldman Set to Be Largest Dow Member After Visa Stock Split – Visa currently accounts for more than 9 percent of the Dow. The split theoretically would cut the share price to $62 based on today’s close and bump it down to 21st place behind Merck & Co. Goldman Sachs has a 6.5 percent weighting in the Dow average.
- Spain’s Surging Growth Figures Make It Europe’s Star Performer – Despite that stronger growth, Spain remains one of the weakest economies in terms of the levels of activity. GDP is still almost 6% below its 2008 peak, pointing to the existence of a very large amount of spare capacity in the economy.
- The Eurozone Is Tumbling Into Its Deepest Deflation Ever – That’s a joint-record low for the 15-year old currency union, matching the drop seen in 2009, when prices tumbled immediately after the financial crisis.
- How Scary Is The Slowdown In China? Shanghai Is Refusing To Set New Growth Targets After Reporting A Huge Miss – Of China’s 31 provinces, 30 managed to miss their 2014 growth targets with Tibet the only one to hit its forecast as evidence mounts that the country’s economy is slowing.