World Clock

Friday, 19 November 2010

Top 10 Economic Indicators

He is a list of the the top 10 economic indicators that according to have the most significance based on there potential to move equity markets and impact investors decisions.

  1. Employment Situation Report - Currently at 9.6%
  2. ISM Manufacturing Index - Currently at 56.9 (any reading above 50 indicates expansion, below 50 indicates contraction)
  3. Weekly Initial Claims for Unemployment Insurance - Currently at 439,000
  4. Consumer Price Index - Currently at 1.2%
  5. Producer Price Index - Currrently at 0.4%
  6. Retail Sales - Currently at $373.1bn
  7. Disposable Personal Income - Currently at $11.37trn
  8. Personal Consumption Expenditure - Currently at $10.37trn -
  9. Durable Goods Report - Currently at $199.2bn
  10. GDP (Gross Domestic Product) Currently at 2.0%
Original Ariticle can be found at

A book that I can personally recommend is The Trader's Guide to Key Economic Indicators by Richard Yamarone, which details how each report influences the markets, their importance and crucially how to stay ahead of the curve.

Also you can keep a track of what report is due to be released and when at:

Roubini "kicking the can down the road" in Europe

Today saw Nouriel Roubini aka Dr Doom on CNBCs Squawk Box speaking about the on-going Sovereign debt crisis in Europe regarding Greece, Ireland, Portugal and what he refers to as the elephant in the room Spain. He highlighted that the 'bond vigilantes' have woken up to the European debt issue again after the first warnings were sounded back in the Spring of this year regarding Greece. Roubini then draws to attention America's growing debt crisis as states such as Florida, Illinois & Arizona are technically insolvent. 

Furthermore, reading between the lines Roubini goes as far as comparing Spain to California in regards to both been too big to fail and consequently too big to save. Spain which he calculates has approximately 2trn Euros ($2.7trn, £1.7trn) in liabilities, California on the other hand represents 1/7 of US economy.

In reference to US, he states the 'bond vigilantes' have not yet to woken up to the financial storm brewing in the US specifically in relation to its debt to GDP (currently at 94%) ratio and current account deficit (currently at $123bn. However this could be beginning to show up elsewhere such as the weakness of the US dollar, capital outflows from the US to emerging markets and/or the strength of the gold market. All of which draws attention to the weakening financial health of the US economy.


He is also critical of the IMF and the European Union in regards to their handling of the Sovereign debt crisis, since if you keep bailing out these smaller economies i.e. Greece, Portugal and Ireland then eventually you'll end up with a situation whereby Spain is the next country in line. 

This has created what he coins 'Super Sovereigns' which has the potential to generate far greater problems down the road, since if the crisis continues to deepen then the EU and IMF will eventually reach a stage where it is required to bailout the likes of Spain. Given the overall size of Spain's liabilities this will be practically impossible given the fact the IMF and EU does not have enough official money to carry this out.

That's unless of course either someone from Mars or the Moon underwrites the debt of the IMF and the EU.

Roubini's latest book 'Crisis Economics' can be purchase from

His website:

Sunday, 14 November 2010

Google's Android Making its Mark in the Smartphone Market

It would appear that 2010 was the year of the Android operating system, that's if Q3 2010 sales are anything to go by.

Google's Android operating system has made significant inroads into the smartphone market during the past 12 months, so much so that almost a quarter of smartphones sold globally now run on the Android operating system. Nokia's market share has taken the biggest hit as a result of this dropping from 44.6% a year ago to 36.6% in the most recent quarter.

This growth in popularity for Google has also helped the little know smartphone maker HTC, based in Taiwan come to the forefront of this lucrative market. Additionally the most recent earnings announcement by Google reflected the increase prominence of the Android system as the company has managed to monetise the mobile market at a time when its pay-per click advertising was flagging. This has led to renewed optimism on behalf of investors as its share price has reflected since its earnings release back on October 14th.

Saturday, 13 November 2010

The Eurozone's Periphiral Problems - Short to Medium Term Obstacles

There are some key events to watch out for regarding the fate of the so called 'PIGS' countries in the Eurozone over the short to medium term.

P - Portugul: Current 10-Year Government Bond Spread = 7.01%

Short Term: - 
  • Nov 20 - State Deficit data for Jan-Oct 2010 published
  • Nov 26 - Final vote in parliament on 2011 austerity budget
  • Dec 1 - Debt auction of 12 months bills
Medium Term: -
  • Jan 1 - Public sector pay cuts, state pensions freeze and value added tax increase come into force
  • Jan 23 - Presidential election
I - Ireland:

Short Term: -
  • Nov - Four-year budget plan to 2014 is expected to be annouced, Ireland cancelled bond auctions this month after also cancelling them in October
  • Dec 7 - Budget for 2011 will be annouced
Medium Term: -
  • Feb/Mar - The IMF Article IV consultatition is expected
  • July - Ireland must return to the capital markets to raise funds
  • Nov 11 2011 - A 390m Euro bond is set to be redeemed. Ireland has no debt due until the end of 2011
G - Greece: Current 10-Year Government Bond Spread = 11.62%

Short Term: - 
  • Nov 15/16 - Eurostat will annouce revised figures for Greece's 2009 budget deficit, expected to be 15.4% of GDP
  • Nov 16 - Debt auction of 26-week bills
  • Nov 18 - 2011 budget
  • Dec - Next 9bn Euro instalment of 110bn Euro EU-IMF loan expected to be taken
Medium Term: -
  • Jan 2011 - Greece returns to the capital markets with an auction of short-term bonds under its regular monthly borrowing programme
  • April 23 - First anniversary of Greece's decision to seek a rescue package from the EU and IMF
S - Spain: Current 10-Year Government Bond Spread = 4.58%

Short Term: - 
  • Nov 18 - Debt auction of 10-year and 30-year bonds
  • Nov 28 - Regional elections in Catalonia
  • Dec 2 - Debt auction of three-year bonds
  • Dec 16 - Debt auction of 10-year and 15-year bonds
Medium Term: -
  • May 2011 - Municipal elections and regional polls held in 13 of the country's 17 autonomous communities
10-Year Government Bond Spread Benchmark  2.53% (Germany)

Note that the wider the bond spread over the German 10-year benchmark is the higher degree of risk of investing in that bond due to the increased likelihood of default (as a rule of thumb).

Bond Yield information Courtesy of Thomson Reuters at
Source of Infomation: Financial Times, UK Edition, Wednesday November 10th 2010.

QE2 Creating Unintended Consequences

The impact of the latest round of quantitative easing by the Federal Reserve is already having unintended consequences. Going back to last Friday 5th November, we saw the Labor Department publish better than expected non-farm payroll figures *1, this led a spike in the dollar, which consequently led to a decline in equity prices.  The same happened again this week on the 10th November when better than expected employment figures *2 were released. The dollar reacted positively to this news, where as the equity market went in the other direction.  This is the effect of QE2, better than expected economic data is greeted with a decline in equity markets due to fact investors fear that this will limit how much quantitative easing will be used. Worse than expected economic data leads to a rise in equity markets due to investors believing the economy is recovering less quickly than expected thus the Federal Reserve will plough more money into the economy through the process of QE i.e. buying a range of treasuries with varying maturities.

Notice the month of November towards the far right of the chart showing a gradual rise in the US Dollar Index and compare it with the chart below showing a steady decline in the S&P 500 - the benchmark US equity market.  

This reasoning behind the Federal Reserve use of QE is because it pushes longer term interests down still further, thus pushing investors towards higher yielding asset classes i.e. the equity market (stocks) commodities (gold & silver been the prime targets).
However perhaps the most worrying consequence of Quantitative Easing is that it inflates commodity prices to extreme levels. Commodities such as Sugar, Cotton, Corn and Coffee have soared to new highs since the Federal Reserve hinted it would use further measures to sure up the economy during the Jackson Hole summit back in late August. This has consequences for the consumer who will be forced to pay higher prices at the checkout as a result of soaring commodity prices since companies will have to push the costs onto the consumer. As a result this will have a negative impact on the general population of the US, more specifically the poor whom it will effect the most. ( see charts - & )
In some cases companies such as Walmart in the US and Tesco in UK will be able to absorb these prices, due to the pricing power these giant retailers have, thus limiting the extent to which they have to hike up prices.

In summary if companies begin to push prices onto the consumer this will undermine consumer confidence which could undermine consumer confidence, already dented as a result of the financial crisis and make them think twice about purchasing certain goods that they would have otherwise have done. This could potentially have damaging consequences to US economic growth, due to the size of the consumer base in the US which equates for approximately 70% of the overall economy.

*1/ Increased by 151,000 compared to analysts expectations of a rise of just 60,000.
*2/ Initial Claims 435,000 compared to analysts expectations of 450,000 & Continuing Claims of 4.301 million compared to estimates of 4.350 million.

For a visual explanation of QE courtesy of the FT  Quantitative Easing Explained (FT Video )