Russian economy ministry issues revised forecasts
- 2021 GDP growth forecast up to 3.8% from 2.9%
- lifts Urals oil price forecast to $65.9/bbl from $60.3/bbl
- 2021 inflation forecast to 5% from 4.3%
- 2021 capital investment growth forecast to 4.5% from 3.3%
- 2021 average dollar/rouble rate to 72.8 from 73.3 seen in April
The ministry comments on the higher forecasts:
- We see the economy is recovering faster than we had expected
- Our experts say the economic recovery potential is not exhausted yet
On the currency:
- We all realise that the rouble price should be different at oil prices of $75 per barrel
- current rouble weakness blamed on sanction risks, OPEC+ uncertainty around global oil output.
Russia’s inflation target is 4%, the latest reading has it at 6.5%. Russia’s central bank is expected to raise its key rate again from 5.5% on July 23.
USD/RUB daily chart:
The view from TD is that forecasting the extent of coronavirus contagion to the global economy or ‘risk’ is difficult.
- “we don’t expect the Fed to go more dovish simply because the market has become more nervous”
- yield on the 10 yr is significantly lower since the start of the year
- “We don’t think the Fed is going to be a catalyst for a continued move lower in Treasury yields”
However, the Fed will keep an eye on developments re the virus, on market sentiment and potential cascade for risk-off.
They’ll also keep an eye on what this guy wants, right?
British Chambers of Commerce cut its forecast for economic growth this year and next
- slower global economy
- U.S.-China trade tensions
- persistent drag from Brexit
Growth forecast for this year to 1.2% from its June forecast of 1.3%
- 2020 to 0.8% from 1.0
- “Our latest forecast shows a number of warning lights are flashing for the UK economy, even if we are able to avoid a messy and disorderly exit from the EU in just a few weeks’ time,” BCC director general Adam Marshall said.
In the 1954 work ‘New Blueprints for Gains in Stocks and Grains’ William Dunnigan stated:
“We think that “forecasting” should be thought of in the light of measuring the direction of today’s trend and then turning to the Law of Inertia (momentum) for assurance that probabilities favor the continuation of that trend for an unknown period of time into the future. This is trend following, and it does not require us to don the garment of the mystic and look into the crystal balls of the future…Let us believe that it is possible to profit through economic changes by following today’s trend, as it is revealed statistically day-by-day, week-by-week, or month-by-month. In doing this we should entertain no preconceived notions as to whether business is going to boom or bust, or whether the Dow-Jones Industrial Average is going to 500 or 50. We will merely chart our course and steer our ship in the direction of the prevailing wind. When the economic weather changes, we will change our course with it and will not try to forecast the future time or place at which the wind will change.”
The quote above is from Mike Bellafiore’s The Playbook: An Inside Look at How to Think Like a Professional Trader.
Unfortunately, too few make it in the trading business, not for lack of desire or want for success, but for ignorance of what is necessary for success. Successful trading is not about predicting the future but about managing it.
If you find that each day your time is consumed with searching for the next great indicator or a combination thereof or with the endless search for the best time frame to use, then you are trying to predict. If, on the other hand, you focus on a specific, well-defined price pattern for entry and exit on a specific time frame, allowing the price to dictate your future action (win, lose, or draw) then you are managing the future.
The former is a “path to trading failure”; the latter the road to success.
I just finished reading Walter A. Friedman’s Fortune Tellers: The Story of America’s First Economic Forecasters (Princeton University Press, 2014), which I highly recommend. Readers will probably be familiar with some of the main characters, but in a depersonalized form—for instance, Babson action/reaction lines and Moody’s Investors Service. Other characters, such as Herbert Hoover and Irving Fisher, are rescued from the one-sided simplifications of history—failed president during the Great Depression, false prophet who claimed just prior to the 1929 crash that the stock market had reached “a permanently high plateau.”
Friedman accomplishes two main tasks in this book. First, he brings his characters to life, recounting their personal, intellectual, and entrepreneurial successes and travails, their pet social and political ideas (more…)
On why so many experts missed the 2008 financial crisis: “Experts have always missed big events like this. If you look at the record of statistical forecasting models, they tend to get to the recession when it’s starting to come. A casual observer might start to worry about it. Forecasting it years out, they don’t get; in particular, if you look at the Great Depression of the 1930s, nobody forecasted that. Zero. Nobody. Now there were, of course, some guys who were saying the stock market is overpriced and it would come down, but if you look at what they said, did that mean a depression is coming? A decade-long depression? That was never said.”
On short-term thinking: “I think that there’s too much faith in analysis of short-term data. You see some pattern, and you can do a statistical test and prove that will prove that it is significant or passes the smell test to a statistician. But the problem is, the world is always changing. It’s not a stable thing. The underlying human parameters may be stable, but you can see that there is institutional and cultural evolution, and it’s not something that you can quantify.”
A few people have asked me over the past couple of weeks to share some of my favorite books outside of finance that are applicable to investing. The majority of these books are based on psychology because it plays such an important role in making better investment decisions. Here’s my list:
Mindless Eating: Why We Eat More Than We Think by Brian Wansink
The analogy between your finances and losing weight has been used over and over again throughout the years. It’s a useful analogy because the decisions in both activities are mainly affected by people’s behavior (or a lack of behavioral change). A couple of my favorites stats from this book: (1) People make an average of over 200 food-related decisions each day and (2) It’s estimated that 95% of all people who lose weight on a diet gain it all back.
Influence: The Psychology of Persuasion by Robert Cialdini
This one has been recommended by Charlie Munger on a number of occasions so I finally read it this year. It’s one of the best psychology books I’ve ever read. This book really helps you step into the shoes of the mind of a marketer or sales-person trying to get you interested in their product. These people are masters at getting into people’s heads to get them to act. Cialdini also touches on the social proof theory, which states that most people look to see what others are doing to figure out acceptable behavior. (more…)