Racer
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Yet more corrections to data!
The US Labor Department reported yesterday that the May 4 Q1 productivity data required corrections, though overall numbers related to non-farm productivity & unit labor costs remained unchanged. Specifically, Q1 hourly compensation in the manufacturing sector rose at a 2.4% rate rather than 1.5% while unit labor costs within that sector fell -1.7% & not -2.6% as previously reported. (Reuters)
The US Labor Department reported yesterday that the May 4 Q1 productivity data required corrections, though overall numbers related to non-farm productivity & unit labor costs remained unchanged. Specifically, Q1 hourly compensation in the manufacturing sector rose at a 2.4% rate rather than 1.5% while unit labor costs within that sector fell -1.7% & not -2.6% as previously reported. (Reuters)
A little diversion while waiting for the FOMC this evening :cheesy:
http://www.dilan4.freeserve.co.uk/maths/dond.swf
http://www.dilan4.freeserve.co.uk/maths/dond.swf
leovirgo
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US Iran analysis
http://www.iiss.org/publications/st...us-military-options-against-emerging-nuclear-
This is from IISS aka Chatham House.
http://www.iiss.org/publications/st...us-military-options-against-emerging-nuclear-
This is from IISS aka Chatham House.
The last bear just roared - so should we start running for cover?
Some fear it spells disaster, but the former Cassandra defends his conversion
Larry Elliott, economics editor
Saturday May 6, 2006
The Guardian
Three months ago when the global business elite gathered in the Swiss ski resort of Davos for the World Economic Forum, they were greeted by the regular blast of doom and gloom from Stephen Roach. Morgan Stanley's chief economist had become known as the bear's bear, the analyst who could always find a cloud to any silver lining. Roach could always be relied on to prophesy that the imbalances in the global economy would end in tears. Until now.
Last week, markets were taken aback when Cassandra suddenly cheered up. "I am feeling better about the prognosis for the world economy for the first time in ages," Roach said in a piece of research entitled "World on the Mend". Taken aback, and a tad alarmed. Market folklore has it that the time to sell is when the last bear stops roaring. The reasoning is that once everybody believes things can only get better, markets become gripped by a herd mentality, lose touch with reality and eventually come down with a bump. Roach is clearly irritated by this kind of talk. "I can't get into that 'last bear growling' stuff," he said this week. He made the same call back in 1999 when there was fear of a market meltdown in the aftermath of the Russian debt default and the collapse of the hedge fund Long-Term Capital Management. "I went out on a limb but the world economy came back," he said.
Even so, it's not hard to see why Roach's conversion to the belief that global imbalances can be sorted out without large-scale disruption has caused a stir. Markets have been in a bullish, even euphoric, mood. The three-year plunge in equities which embraced the dotcom bust, the 9/11 attacks and the corporate scandals at Enron and WorldCom has been followed by a three-year climb. The FTSE 100 has risen by almost 25% over the past 12 months to its highest level in five years.
Until recently, the rise in shares was matched by an even more spectacular rise in government bonds, as investors took the view that sustained, non-inflationary growth would be the norm in a globalised world. Gilt yields, which move inversely to gilt prices, fell to their lowest level in 50 years. Commodity markets have told a similar story. The price of gold is at its highest level since the early 1980s, while silver has doubled in price over the past 12 months. In the world of fine art, a reasonable barometer of the frothiness of financial markets, a painting by Picasso was sold for $95.2m (£51m) in New York on Wednesday - the second highest amount ever paid for a painting.
These are just the kind of developments that Roach would have cited in Davos as signs of a tempest to come. So what has changed in the past 100 days? "I haven't changed the way I look at the world in any way," he said. "If anything, the imbalances in the world economy have gotten worse over the last several months. But that's been a good thing, because it has elicited a response from the powers that be that it's an urgent problem that needs addressing."
The moment Roach became more upbeat about the future, he said, was when the finance ministers and central bank governors of the G7 - the United States, Britain, France, Germany, Japan, Canada and Italy - met in Washington a fortnight ago. In addition to the usual communique after the talks, the G7 appended an annexe detailing problems that needed fixing in the global economy. A day later, the IMF was given the task of conducting wide-ranging surveillance of the global economy with a view to coming up with a menu of policy advice for the US, Europe and Asia. Boiled down to its bare components, the problem has been that America has been consuming too much while Europe and Asia have been consuming too little. The US has run up a trade deficit worth 7% of its GDP, and has been allowed to do so because central banks in Asia have been willing to buy US assets in return.
Roach's fear has been that at some point America's creditors would balk at the size of the current account deficit and stop buying US assets, triggering a run on the dollar so pronounced it would bring global financial markets and the world economy down with it. It is a prospect that still worries him. "That's a horrible scenario. But it's bad enough that the world collectively is now going to alter its game plan and respond to it. That's what I wanted all along. What really worried me was that the imbalances were mutating and nobody seemed to care." With oil prices above $70 a barrel and Iran thumbing its nose at the world with its nuclear programme, Roach now wants to see words matched with action. If they are not, the Davos great and good will find next January that the superbear has only been hibernating.
Before: "The mood in Europe is as bleak as I've ever seen it".
After: "I am feeling better about the prognosis for the world economy for the first time in ages"
Some fear it spells disaster, but the former Cassandra defends his conversion
Larry Elliott, economics editor
Saturday May 6, 2006
The Guardian
Three months ago when the global business elite gathered in the Swiss ski resort of Davos for the World Economic Forum, they were greeted by the regular blast of doom and gloom from Stephen Roach. Morgan Stanley's chief economist had become known as the bear's bear, the analyst who could always find a cloud to any silver lining. Roach could always be relied on to prophesy that the imbalances in the global economy would end in tears. Until now.
Last week, markets were taken aback when Cassandra suddenly cheered up. "I am feeling better about the prognosis for the world economy for the first time in ages," Roach said in a piece of research entitled "World on the Mend". Taken aback, and a tad alarmed. Market folklore has it that the time to sell is when the last bear stops roaring. The reasoning is that once everybody believes things can only get better, markets become gripped by a herd mentality, lose touch with reality and eventually come down with a bump. Roach is clearly irritated by this kind of talk. "I can't get into that 'last bear growling' stuff," he said this week. He made the same call back in 1999 when there was fear of a market meltdown in the aftermath of the Russian debt default and the collapse of the hedge fund Long-Term Capital Management. "I went out on a limb but the world economy came back," he said.
Even so, it's not hard to see why Roach's conversion to the belief that global imbalances can be sorted out without large-scale disruption has caused a stir. Markets have been in a bullish, even euphoric, mood. The three-year plunge in equities which embraced the dotcom bust, the 9/11 attacks and the corporate scandals at Enron and WorldCom has been followed by a three-year climb. The FTSE 100 has risen by almost 25% over the past 12 months to its highest level in five years.
Until recently, the rise in shares was matched by an even more spectacular rise in government bonds, as investors took the view that sustained, non-inflationary growth would be the norm in a globalised world. Gilt yields, which move inversely to gilt prices, fell to their lowest level in 50 years. Commodity markets have told a similar story. The price of gold is at its highest level since the early 1980s, while silver has doubled in price over the past 12 months. In the world of fine art, a reasonable barometer of the frothiness of financial markets, a painting by Picasso was sold for $95.2m (£51m) in New York on Wednesday - the second highest amount ever paid for a painting.
These are just the kind of developments that Roach would have cited in Davos as signs of a tempest to come. So what has changed in the past 100 days? "I haven't changed the way I look at the world in any way," he said. "If anything, the imbalances in the world economy have gotten worse over the last several months. But that's been a good thing, because it has elicited a response from the powers that be that it's an urgent problem that needs addressing."
The moment Roach became more upbeat about the future, he said, was when the finance ministers and central bank governors of the G7 - the United States, Britain, France, Germany, Japan, Canada and Italy - met in Washington a fortnight ago. In addition to the usual communique after the talks, the G7 appended an annexe detailing problems that needed fixing in the global economy. A day later, the IMF was given the task of conducting wide-ranging surveillance of the global economy with a view to coming up with a menu of policy advice for the US, Europe and Asia. Boiled down to its bare components, the problem has been that America has been consuming too much while Europe and Asia have been consuming too little. The US has run up a trade deficit worth 7% of its GDP, and has been allowed to do so because central banks in Asia have been willing to buy US assets in return.
Roach's fear has been that at some point America's creditors would balk at the size of the current account deficit and stop buying US assets, triggering a run on the dollar so pronounced it would bring global financial markets and the world economy down with it. It is a prospect that still worries him. "That's a horrible scenario. But it's bad enough that the world collectively is now going to alter its game plan and respond to it. That's what I wanted all along. What really worried me was that the imbalances were mutating and nobody seemed to care." With oil prices above $70 a barrel and Iran thumbing its nose at the world with its nuclear programme, Roach now wants to see words matched with action. If they are not, the Davos great and good will find next January that the superbear has only been hibernating.
Before: "The mood in Europe is as bleak as I've ever seen it".
After: "I am feeling better about the prognosis for the world economy for the first time in ages"
macbonzo
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So that time has come round again. Will the FOMC drop the "some further policy firming may be needed" and come up with something else? The problem I am beginning to have with the Bernanke chap, is that, he seems a little too easy to understand. With Greenspan using "constructive obsfucation" the market had to pause to digest what was said.
For what its worth I think that the phrase will be dropped but something else will be said about being vigilant on inflationary pressures. One wonders how the market will react to a phrase like
"there will be a temporary pause in tightening in order to assess inflationary pressures"?
My guess is that we will see a rally on the Dow to near the 10722 level then a fall back.
Anyone else want to guess? (could prove a lot cheaper than trading the move)
For what its worth I think that the phrase will be dropped but something else will be said about being vigilant on inflationary pressures. One wonders how the market will react to a phrase like
"there will be a temporary pause in tightening in order to assess inflationary pressures"?
My guess is that we will see a rally on the Dow to near the 10722 level then a fall back.
Anyone else want to guess? (could prove a lot cheaper than trading the move)
Jerry Olson
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macbonzo said:
Hi Mac
they will not be dropping that further policy firming from their statement, and i doubt they use the word pause either...
they might say we are moving to neutral....but in the scheme of things they are very dependent on future eco reports and as well they should be
i think they met their target of 5.00%, so we'll see...
Jerry Olson
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macbonzo said:
Good Mac and you?
I think the DJIA is overbought here and due for a pullback to buy...what ever the outcome today and whatever the pullback is for the next 2-3 days or so, i will be dip buying no matter what till i see the whites of their eyes......................
Bigbusiness
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Isn't it great, the markets go mad over the word "yet". Reminds me of Rolf Harris, "Can you see what it is yet?"
macbonzo
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Bigbusiness said:Isn't it great, the markets go mad over the word "yet". Reminds me of Rolf Harris, "Can you see what it is yet?"
Oh, but it is an important word. It suggests that they may be done tightening. It creates a probable chance that nothing will happen in June.
What was interesting was the market's initial reaction. It sold off. I must say, to me, the statement should have been viewed positively pretty well immediately. Still just demonstrates the fickle nature of the beast.
Racer
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After hours
American International Group (AIG :
(66.54, +0.33, +0.5% ) lost 3.8% at $64. The insurance giant said that first-quarter net income came in at $3.2 billion, or $1.22 a share, down 16% from a year earlier when it made $3.8 billion or $1.45 a share. Excluding net realized investment gains and losses and certain accounting changes, AIG made $3.38 billion, or $1.29 a share, up from $3.23 billion or $1.23 a share, last year.
Analysts expected AIG to earn $1.36 a share in the period.
American International Group (AIG :
(66.54, +0.33, +0.5% ) lost 3.8% at $64. The insurance giant said that first-quarter net income came in at $3.2 billion, or $1.22 a share, down 16% from a year earlier when it made $3.8 billion or $1.45 a share. Excluding net realized investment gains and losses and certain accounting changes, AIG made $3.38 billion, or $1.29 a share, up from $3.23 billion or $1.23 a share, last year.
Analysts expected AIG to earn $1.36 a share in the period.
leovirgo
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Mixed Signals From the Fed not What the Market Wanted
Briefing.com-- The stock market did not get the indication it wanted from the Fed that the interest rate hikes are finished with the announced hike in the fed funds rate to 5% this afternoon.
To some extent, this is partly because suggestions that the Fed might "pause" in its current rate hike cycle were taken to mean that the Fed would raise rates today and then be done. The hopes were that if the Fed indicated it would not raise rates at the June 29 meeting, that time would allow the previous rate hikes to slow the economy and thus eliminate the need for further hikes in the second half of the year. Today's policy statement does not support that conclusion.
The statement says the committee believes "some further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook."
This leaves open the possibility that the Fed will pause at the next meeting, or even that the rate hikes are done (if economic growth slows appreciably). It also, however, leaves open the possibility of two or even more rate hikes. The use of the word "extent" implies that there certainly could be more than one more rate hike.
The question now is whether the incoming data will warrant further rate hikes. If economic growth continues strong, further rate hikes are likely. If inflation picks up much at all, rate hikes will be almost certain. If economic growth slows, however, and inflation remains contained, this could possibly be the final rate hike.
The key point for the stock market today is that there was no clear sign that the Fed will pause at the next meeting. The statement isn't bearish, but the lack of the bullish sentiment that was hoped for is disappointing. Our view is that the economic momentum will remain strong, and that 5% is not the top in this rate cycle.
Briefing.com-- The stock market did not get the indication it wanted from the Fed that the interest rate hikes are finished with the announced hike in the fed funds rate to 5% this afternoon.
To some extent, this is partly because suggestions that the Fed might "pause" in its current rate hike cycle were taken to mean that the Fed would raise rates today and then be done. The hopes were that if the Fed indicated it would not raise rates at the June 29 meeting, that time would allow the previous rate hikes to slow the economy and thus eliminate the need for further hikes in the second half of the year. Today's policy statement does not support that conclusion.
The statement says the committee believes "some further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook."
This leaves open the possibility that the Fed will pause at the next meeting, or even that the rate hikes are done (if economic growth slows appreciably). It also, however, leaves open the possibility of two or even more rate hikes. The use of the word "extent" implies that there certainly could be more than one more rate hike.
The question now is whether the incoming data will warrant further rate hikes. If economic growth continues strong, further rate hikes are likely. If inflation picks up much at all, rate hikes will be almost certain. If economic growth slows, however, and inflation remains contained, this could possibly be the final rate hike.
The key point for the stock market today is that there was no clear sign that the Fed will pause at the next meeting. The statement isn't bearish, but the lack of the bullish sentiment that was hoped for is disappointing. Our view is that the economic momentum will remain strong, and that 5% is not the top in this rate cycle.