Archives of “inflation” tag

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U.S. Treasury to China – Revalue Remnimbi or We Will

  
Analysis, Economy, Education
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There’s a lot of talk around the markets and in Washington about China’s currency policy. What many want to know is whether the US Treasury will name China as a currency manipulator. Perhaps a more important question is, should China be named as a currency manipulator? And if it were named as such, what actions could the US take? In recent days the Chinese and the US administration have taken shots in the press at each other. The US is hinting that China is manipulating its currency to boost its economy. The Chinese is firing back saying that the US “should not politicize the remnimbi exchange rate issue.”

First, some background on the problem. Basic economics says that if you keep the currency of your country at a weak (but not so weak as to cause a collapse in it) level you help boost exports. The currency becomes weaker making your goods cheaper for foreign consumption. In a freely floating exchange system, the market determines the equilibrium value. Speculators look at economic statistics like GDP growth, interest rates, inflation etc. to figure out what a currency should be worth and then place bets accordingly. If speculators think that an economy can grow strongly while keeping inflation at a benign rate, they will bid up the currency of that economy. As that happens, the country whose currency is getting stronger could see a decrease in exports. This is caused by the larger amount of currency the importer uses to make the same purchase as previously made. (more…)

U.S., U.K. 'most stretched' by debt, Moody's says

  
Analysis, Economy, Education
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Uncle Sam isn’t in danger of losing his top credit rating, but he’s not in the greatest shape, either.

So says Moody’s Investors Service in its quarterly assessment of triple-A-rated countries.

Paying the interest on their debt remains manageable for these countries, Moody’s says, so their governments aren’t in any immediate danger of a downgrade.

But among the AAA countries, the U.S. and the U.K. are “most stretched” by their debt obligations, Moody’s says.

The debt ratings are important because a downgrade raises a country’s borrowing costs. And virtually every big country faces a difficult challenge in removing bailout and stimulus money quickly enough to avoid inflation and slowly enough to keep the weak recovery going.

“This exposes governments to substantial execution risk in the implementation of their exit strategies, which could yet make their credit more vulnerable,” says Arnaud Mares, senior vice president in Moody’s sovereign risk group and the main author of the report.

Japan – National CPI for March: 1.6% y/y (vs. 1.6% expected) & the rest of this data

  
Analysis, Education
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Japan inflation data:

National CPI y/y for March,  1.6%

  • expected 1.6%, prior was 1.5%

National CPI y/y excluding Fresh Food for March,  1.3%

  • expected 1.4%, prior was 1.3%

National CPI excluding Food, Energy y/y for March,  0.7%

  • expected 0.7%, prior was 0.8%

Tokyo CPI y/y for April,  2.9%

  • expected 3.0%, prior was 1.3% (Note: the ‘expected’ is much higher than the prior due to the introduction of the higher sales tax rate on April 1 …. note we get Tokyo inflation figures for April, with national figures are for March)

Tokyo CPI excluding Fresh Food y/y for April,  2.7% (this is a 22-year high … but, of course, skewed by the sales tax hike)

  • expected 2.8%, prior was 1.0% (ditto) (more…)

Don't Get Trapped

  
  Education
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1) Anchoring trap. The mind gives a disproportionate amount of weight to the first information received on a topic. Keeping an open mind and avoiding premature conclusions is a way to avoid this trap.

2) Status quo trap. Forecasts tend to perpetuate recent observations. If inflation has been high, it is expected to remain high. It is a psychological risk to assume something different. The authors suggest rational analysis within decision-making to avoid falling into this trap.

3) Confirming evidence trap. Individuals give greater weight to information that supports an existing point of view. Being honest to oneself about one’s motives, examining all evidence with equal rigor, and enlisting independent-minded people to argue against you are ways of mitigating this bias.

4) Overconfidence trap. Individuals overestimate the accuracy of their forecasts. Widening the range of expected possible outcomes is one way to mitigate this tendency.

5) Prudence trap. There is a tendency to temper forecasts that appear extreme. If a forecast turns out to be extreme and then wrong, it could be damaging to one’s career. Therefore, sticking to the herd is safer. The authors again suggest widening the range of expected possible forecasts to avoid falling into this trap.

6) Recallability trap. Individuals are overly influenced by events that have left a strong impression on a person’s memory. These events tend to be catastrophic or dramatic. To avoid falling into this trap, individuals should ground their conclusions in objective data rather than emotion or memories.

Eurozone December inflation stays low at 0.8%

  
Analysis, Education
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The eurozone’s annual inflation rate for December has just been confirmed at 0.8 per cent, in line with expectations and the preliminary reading of the data.

Eurostat, the EU’s offical data provider, also confirmed that prices in the last month of 2013 rose by 0.3 per cent from November in the shared currency area.

From the full release:

The largest upward impacts to euro area annual inflation came from electricity (+0.11 percentage points), tobacco (+0.08) and restaurants & cafés (+0.05), while telecommunications (-0.14), fuels for transport (-0.13) and medical & paramedical services (-0.07) had the biggest downward impacts.

The European Central Bank’s inflation target is 2 per cent.

If inflation stays significantly below target in the months ahead, it is likely to stoke calls for the ECB to do more. If price pressures were to continue to disappoint, the most likely options would be another cut to the benchmark main refinancing rate or negative deposit rates, which amount to a levy on banks for funds parked in the central bank’s coffers. (more…)

20 Signs That The Global Economic Crisis Is Starting To Catch Fire

  
  Education
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If you have been waiting for the “global economic crisis” to begin, just open up your eyes and look around.  I know that most Americans tend to ignore what happens in the rest of the world because they consider it to be “irrelevant” to their daily lives, but the truth is that the massive economic problems that are currently sweeping across Europe, Asia and South America are going to be affecting all of us here in the U.S. very soon.  Sadly, most of the big news organizations in this country seem to be more concerned about the fate of Justin Bieber’s wax statue in Times Square than about the horrible financial nightmare that is gripping emerging markets all over the planet.  After a brief period of relative calm, we are beginning to see signs of global financial instability that are unlike anything that we have witnessed since the financial crisis of 2008.  As you will see below, the problems are not just isolated to a few countries.  This is truly a global phenomenon.

Over the past few years, the Federal Reserve and other global central banks have inflated an unprecedented financial bubble with their reckless money printing.  Much of this “hot money” poured into emerging markets all over the world.  But now that the Federal Reserve has begun “tapering” quantitative easing, investors are taking this as a sign that the party is ending.  Money is being pulled out of emerging markets all over the globe at a staggering pace and this is creating a tremendous amount of financial instability.  In addition, the economic problems that have been steadily growing over the past few years in established economies throughout Europe and Asia just continue to escalate.  The following are 20 signs that the global economic crisis is starting to catch fire…

#1 The unemployment rate in Greece has hit a brand new record high of 28 percent. (more…)

Sir John Templeton 16 Rules For Investment Success

  
  Education
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Interesting set of rules from legendary investor John Templeton:

1. Invest for maximum total real return
2. Invest — Don’t trade or speculate
3. Remain flexible and open minded about types of investment
4. Buy Low
5. When buying stocks, search for bargains among quality stocks.
6. Buy value, not market trends or the economic outlook
7. Diversify. In stocks and bonds, as in much else, there is safety in numbers
8. Do your homework or hire wise experts to help you
9. Aggressively monitor your investments
10. Don’t Panic
11. Learn from your mistakes
12. Begin with a Prayer
13. Outperforming the market is a difficult task
14. An investor who has all the answers doesn’t even understand all the questions
15. There’s no free lunch
16. Do not be fearful or negative too often

 Complete explanation after the jump (more…)

Per capita income in India is Rs 46,492

  
Analysis, Economy, Education
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Per capita income of Indians grew by 14.5 per cent to Rs 46,492 in 2009-10 from Rs 40,605 in the year-ago period, as per the revised data released by the government today.

 The new per capita income figure estimates on current market prices is over Rs 2,000 more than the previous estimate of Rs 44,345 calculated by the Central Statistical Organisation (CSO).

Per capita income means earnings of each Indian if the national income is evenly divided among the country’s population at 117 crore.

However, the increase in per capita income was only about 6 per cent in 2009-10 if it is calculated on the prices of 2004-05 prices, which is a better way of comparison and broadly factors inflation.

Per capita income (at 2004-05 prices) stood at Rs 33,731 in FY10 against Rs 31,801 in the previous year, the latest data on national income said.

The size of the economy at current prices rose to Rs 61,33,230 crore in the last fiscal, up 16.1 per cent over Rs 52,82,086 crore in FY’09.

Based on 2004-05 prices, the Indian economy expanded by 8 per cent during the fiscal ended March 2010. This is higher than 6.8 per cent growth in fiscal 2008-09.

The country’s population increased to 117 crore at the end of March 2010, from 115.4 crore in fiscal 2008-09.

12 Market Wisdoms from Gerald Loeb

  
  Education
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It is funny how the best traders of all times basically repeat the same things with different words. 

Gerald Loeb is the author of ‘The Battle for Investment Survival’ and is one of the most quotable men on Wall Street.  Here are 12 of the smartest things he has ever said about the stock market:

1. The single most important factor in shaping security markets is public psychology.

2. To make money in the stock market you either have to be ahead of the crowd or very sure they are going in the same direction for some time to come.

3. Accepting losses is the most important single investment device to insure safety of capital.

4. The difference between the investor who year in and year out procures for himself a final net profit, and the one who is usually in the red, is not entirely a question of superior selection of stocks or superior timing. Rather, it is also a case of knowing how to capitalize successes and curtail failures.

5. One useful fact to remember is that the most important indications are made in the early stages of a broad market move. Nine times out of ten the leaders of an advance are the stocks that make new highs ahead of the averages.

6. There is a saying, “A picture is worth a thousand words.” One might paraphrase this by saying a profit is worth more than endless alibis or explanations. . . prices and trends are really the best and simplest “indicators” you can find. (more…)

Is The Market Always Right?

  
  Education
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George Soros likes to joke that market has predicted seven of the past two recessions. And he is right. Since the market is forward looking, it will sometimes discount fundamentals that will never become a reality.

Prices reflect people’s expectations about the future, mostly about the near-term future. To say that the market is always right means to assume that people’s expectations about the future always come true. We all know that this is not the case. No one has a crystal ball. People are often wrong.

Is the market always right?

No, but this does not stop people who follow price trends to make a lot of money. The market could remain “wrong” (irrational) for a very long period of time and even become “wronger”. (more…)

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