The week in the markets (6-13 Nov)

Personal comment.

On Friday the markets seemed to launch a feeling of strength: General Motors touched historic lows and reported that without government help would go into bankruptcy and unemployment in the U.S. grew in two months in more than half a million people and yet the stock market rose. However, if one takes into account that since 1896 he had never lost the Dow Jones in the three days of a presidential election, which the lower SP on Wednesday and Thursday together is the biggest in two days since 1987 and that the rebound technician, was lowered after so much with little volume, and could give an explanation and feared it was an exception to the trend weekly. The large package of measures the Chinese government at the weekend ($ 600 billion is the fifth of GDP, "it will be another and a few cartridges) extended this positive feeling in Asia and Europe on Monday morning With the exception of Ibex. There are over the joys until the afternoon of Thursday in USA.

The bank Santander on Oct. 28, at the mouth of its CEO Alfredo Saez, refused to need more capital. On November 10 announced an expansion. In these few days has been convinced of the impossibility of selling the Bank of Venezuela, the assets in ABN shares, Cepsa, which manages the funds and insurance, at the price demanded. In short, you have bought unsold before and now has been found with a liquidity problem ... (safe somewhere caught in a mortgage-bridge that sounds something) and the expansion is costing him all shareholders in market capitalization million euros. And serve to illustrate what is happening with the economy and that makes this crisis unique: no matter how much lower interest rates, including the Euribor, if that cheaper finance is not paid and if there is interest in using this possible liquidity to invest. Until Santander wants to sell assets and unable to do so raises the liquidity of its shareholders or tries to tap new. Santander can do that but, how many companies can do the same, how much they will get lower financing rates?

I attached two charts USA, with shaded on the cycles of recession, one is the unemployment rate in the U.S. and its forecast to reach 8%

This is another of the ISM manufacturing index:

In Spain the situation is similar, we have known in the past economic data and much worse if we do if the figures do not even bank bad debt is still worrisome (http://www.economistas.tv/la-morosidad-oficial-no- is-so /) As can be seen in other economic cycles figures have been more hopeless, it could be a cyclical crisis and give more reason for the optimists who think they can get out of it in months. But it is necessary to recover the credit market, without that status data will continue to deteriorate and, as we have seen this week, the suspensions of payments that began in financial, went to banks and then to insurance companies, will reach shops and industrial companies.

And that perception is reversing in the economy and stock markets, the beneficial impact of lower interest rates. If we add to this the fact that I commented on the need to sell assets as they lose value to dispose of cash, accounts for the balance of the week. The best quality of the bag-your-liquidity is now one of the biggest obstacles to the upward trend because it is one of the few markets to resort to if you need cash, even at the level of citizens is easier to sell shares even though much is lost to try to sell some other property. As positive aspects of this bad stock market week, two factors: the low volume on downhill (although it can mean that we are still far from the capitulation of course also of the soil) and the finding by the Telecoms sector as a refuge-of-date valid. Now we have to have faith in the famous meeting this weekend but particularly in the aspect stock market got more faith in the possible manipulation of the bullish effect by next Friday 21 to the expiration of some futures (which is the Ibex) and options almost all indices. In fact, statistically the next week is a pretty favorable to the stock exchanges.

Finally, it is very remarkable, despite a rebound from yesterday evening, the lower crude (although the effect of the weakness of € and other causes less understandable its effect on the price of a liter of fuel is less noticeable) of gas natural and generally of all raw materials. This is no longer seen as something positive on the stock exchanges because it's getting a lot of problems in economies where there are a lot of money invested ... the prime example is Russia. You may see manipulative maneuvers to prevent the oil-icon of all raw materials-stop-down and personally I hope to make a speculative-operation in a possible rebound in oil prices and gold. (More ...)

Droblo written by the November 14, 2008 with 337 reviews
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Real CPI

Since he is no longer the "gold standard" and a ticket does not represent anything physical but simply faith in its issuer has formalized the old adage that says that the basis of the economy is confidence. As long as there is confidence the economy may go well although there are points "dark". Why? Because if consumers and businesses and banks believe in a good future, spend, invest and lend and this will generate well-paid jobs so the virtuous circle will continue to operate and will continue to spend, invest and banks to finance projects future.

For that confidence is not lost speeches by political and economic decision usually mostly reassuring because if you lose falling economic growth and are entering a vicious circle: consumers do not spend, businesses earn less and reduce their investment and the banks get the credit because bad debt increases. And the order may be reversed as is happening with the current crisis: the banks reduce credit before the outbreak of the housing bubble and late payment by bad investments, get the credit to businesses and consumers, scared by all this, spending less and therefore less to buy companies that reduce their profits and, ultimately, generate unemployment. Besides the problem in society that this generates, it is clear that if unemployment rises and companies and banks earn less income are also lower because of the administration are charged less tax at a time that should increase social spending.

All this is very basic, nothing original but there is one factor that can undermine the confidence that usually goes unnoticed: the veracity of official data. And because they are not certain or not, but by the manner of calculating them. And it would take pages to explain how such data in the USA is distorted industrial orders each month with the orders of governmental machinery of war or the handling of the Department of Labor with the monthly employment data ... there are many examples. However, one of the most striking to me is the calculation of the CPI.

Take the example of Spain, whose CPI in 2007 was 4.2%, which should mean that average prices rose by 4.2% but it is clear that a TV-for example, do not shop every week or even every year But the milk (which went up 31%) is almost daily, or the pan (+14%) and fuels (+16.2%). Some say that the perception of these costs-to-be everyday makes us believe that inflation is higher than it is but I think that is the weighting system which is not fair.

How is it possible that if housing prices went up by 30% annual inflation was only 3% if half of the household budget goes to pay the house itself? Let us go further: In the mid-20, share prices in the U.S. grew an average of 3.5 times in five years, but the prices of consumer goods did not vary significantly. Should we conclude that there was no inflation? Why? Why exclude the rates of inflation, for no reason, financial assets? If low interest rates we had in Spain in recent years had flow, rather than mortgage credit, to consumer credit, the CPI would have been fired (instead of housing prices) and it would have suffered Official inflation.

The current base weights of 2001 and are adjusted each year minimally. The latest data available are these:

With these data you can see that inflation affects the poorest who are based consumption especially in the first paragraph.

Now that every reader will see if this table is in line with their usual costs and check that this calculation very similar in all the countries around us, is very subjective ... Of course, while we believe the data and return to the issue of confidence - Everything will be fine and accept that our salaries and pensions go up each year, the official CPI and so we think that we do not lose purchasing power.

At this official website you can calculate the CPI has risen far from the official dates (data from 1961):

PD - Still others are doing worse, look at the figures of the country most inflationary in the world:

Summary: press

• The German economy entered into recession after contracting 0.5%
• U.S. will not buy more active "toxic" but will invest in banking capital
• BBVA forecasts: the rates drop to 1.5% and the Euribor will be at 2.5%
• Up to 25,000 shops miss the closing this year
• The interbank still does not work: only cross transactions a day
• Santander began the largest capital increase in cash from Spain
• The government shuffled back onto the light in January
• The crisis that Spaniards will spend up to 11% less this Christmas

Droblo written by the November 13, 2008 with 428 comments
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The week in the markets (23-30 October)

Personal comment

Sometimes it seems that markets have entered a dynamic so strange that even acting against what would be logical: OPEC lowers production and instead of rising, oil low, the stock market collapses and gold instead of serving Value refuge, also collapses, USA has the largest deficit in the world, which will be maintained for years, with a central bank that is assuming the risk millionaire asset that nobody wants and that its currency, the dollar reaches maximum years . I'm beginning to think that facing the end of the year and more than likely departure of money from investment funds what is happening is simply that all positions are rolled back in search of liquidity. And of course, as lower the percentage is more active and feedback movement. And also to push sales in other non-stock, hence, not hedges. But that same process also works the other way around because if the market rises there is less interest in selling, it's like the one that has a debt and has only one floor, according to the low price of the floor more quickly is worth before they sell it unless debt but if you have the floor suddenly rises in price no longer needs to sell it because you can get the liquidity it needs with the assurance that floor without the need to get rid of him. This causes a lot of volatility.

But why not just the irrationalities: Now the stock market likes that the crude will rise and depressed when low and the same with the €, unlike that for months, Cepsa (much smaller and lower profit at least 7 times) has come to worth more on the stock exchange that Repsol by the sharp drop of it, (this reminds me of when they arrived in Telepizza worth more than Domino's Pizza or Terra more than BBVA) and according to Bespoke 10% of companies that have submitted results in line with Expected been completed on the day of publication with an average drop of 1.80% (as if the results had been ill). However, the biggest example we know that Volkswagen had reached a EGY 90 when the Dax has a PER this year of less than 8 and Daimler has it at 3.7 and have even more value for capitalization that all companies producing cars of world together. Are we really learning something from all this if we continue to promote bubbles as dangerous as these?

Beyond these factors, there is a rational exercise we can make each of us self-polls. There are many securities that are in 2002 prices and are tempting us to make some investment but ask ourselves: Is the economy better or worse than in those years? And most importantly, our confidence in leaving the rut, Is now higher or lower than then? Then I remember that the biggest economic problem was the fear of terrorism and that it would start a war in Iraq ... now we still have more that all the problems we have been talking for months: credit crisis, high inflation, housing bubble and so on. and joined it in recent weeks: Stop worrying figures, emerging markets to the brink of collapse, public deficits to astronomical assumed by mismanagement of the banks and so on. I mean, what's the same bag goes up, that's something unpredictable at least for me, but since then it is clear that the real economy is not invited to optimism. Yet it must be stressed that in the USA have left two data consecutive home prices that give a respite to the bearish trend, at least in that sector and in this country ...

The summary of the week can be summarized in a nutshell: On Friday marked minimum annual all bags that I still except the Chinese and, curiously, the Dow Jones and SP500. On Monday, China, all European and Brazil signed the new minimum but not American. Tuesday marked the first bars minimal Japan and China but no more. However, if we take into account the future it that both the Dow Jones SP500 marked as the minimum of 5 years and a half but perhaps there were some concerns that they did not want to be in regular time mark. On Tuesday, with rumors of a sharp drop in rates in Japan, the USA had the second highest increase in history. On Wednesday, rose much Europe but not USA, which broke the increases in minutes from the descent of the EDF. And on Thursday, thanks mainly to Japan, continued to climb. ¿Conclusion? After so many vicissitudes week (Thursday to Thursday) has had a very positive (except on Ibex and China that ended flat to lower in recent days by 6% in total, all have had remarkable progress) and many believe has already passed the worse in October and has complied with its reputation for month of the crash but also from the soil ... I keep seeing that the resistance of speaking last week (1000's sp, 10 thousand of Ibex and the Dow, 5000's Dax) are still there and only have been overtaken, on Thursday for a few minutes, the Dax, who this week has behaved in plan rate banana republic by the theme of Volkswagen.

And just months and despite what has been disastrous and it has not observed any statistically negative-except for those who want to invest we can be confident that it will comply with these average data showing that November is the best month of year for the stock market since 1980:

However, against my usual, I will "get wet" a little more: to bet on a possible upward rally in November or even early January and be more secure is important to see what makes the bags on the first day of November . If you go up, does not mean anything special but if you fall, it is better to keep out of the bag because that means the funds are still undoing positions (the term that is becoming fashionable is "desapalancamiento") and not spend the cash to equities. So my advice is to wait until the end of Monday or Tuesday that the opening of comprobéis not dropped before they come to buy, if you decide to buy.

(more ...)

Written by Droblo on October 31, 2008 with 247 comments
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The economy of Homer

The other day searching the net I could find an interesting article by a professor who uses episodes of the Simpsons to teach economics, so I have put on a plate to go on it little by little and we can give it turns on some basic economic concepts .

In the episode "The way in which we were" we are moved to the era in which Homer had hair and was in high school. By then, that Marge was trying to be established at him, which decided to join the same activities that it, including the debate team. The topic for discussion was "Determined: The speed limit is reduced to 80km / h". Homer, upon learning that reacts immediately shouting "This is ridiculous!. Save some lives, but millions will arrive late. " Without doubt, a little politically correct and that may not Saldías in a debate in which everyone would be focusing on the same subject (save lives) but shows a different view of both the problem and the solution.

Sometimes we tend to think that economics is an exact science and that if you like heat water to over 100 degrees it boils, lower rates and increase the consumption point. Unfortunately it is not as simple as the amount of side effects and long-term effects produced are as important as unpredictable. In some cases, the reactions are obvious and some of the side effects are predictable. This is what distinguishes a good economist from a bad one, the possibility of providing these invisible effects.

Yesterday the FED again lower rates and a fairly strong 1.5% to 1% which is placed in minimum not seen since June 2003. The short-term effects are predictable, falling dollar, rising stock markets and revival in consumption. At least this is what the manual says the economist, but all we ask. What are the side effects in the long term, which will produce the return to historically low levels of rates?. For many years, we praise the policy of Alan Greenspan as head of the EDF because it managed to get us out of a crisis (caused by the. Com and the attacks of 11S) as well as their speeches prepared, but now is in the spotlight many of which already seen in perspective it looks as if it had wanted to cure a cold with chemotherapy causing one of the biggest real estate bubbles and financial crises in history. On the other side of the pond, we have a guy named Trichet more cautious, as the case may have sinned by trying to cure the cold low with only juices, as the case has the advantage of being able to see a patient with the disease more advanced and well able to see whether the solutions implemented in the U.S. are working or not. It is always easier to do experiments, when the other has done before.

So to complete the famous phrase of Freeman Clarke said that "A politician is one who thinks of the next election, a statesman is one who thinks. in the next generation "could add further that a good economist is one who thinks so unpredictable. So, as things stand now, we need good statesmen and good economists.

And finally, the usual summary of the press:

Written by Carlos Lopez on Oct. 30, 2008 with 304 comments
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Comment and chart of the week

Building on that this week I have worked very little on the blog I get up prontito this Saturday to bring the commentary of the week and present an interesting graphic courtesy of Droblo.

Let's turn to the comment that came from a doubt that he had "clarified" about the collective thoughts and behaviors:

# 14, rinsing

And as a gift, an interesting graphic, it is the Japanese stock prices (the Nikkei index) short and you hit what you told me Droblo (and who today says the Carpathians in Five Days):

THE FIGURE OF THE DAY: The Nikkei has marked the second lowest closing since 1983, the April 28, 2003 was the lowest closing (7607) although the figure to be weekly gave the impression that today is lower. In any case, catastrophic ... and if we take into account the rise in inflation in these 25 years and the figure is even worse ...

"The stock market is the best long term investment" Menuda irony

Written by Carlos Lopez on Oct. 25, 2008 with 66 comments
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The week in the markets (17-23 October)

Personal comment .-

Last Friday, shares of ING in Amsterdam stock market suffered strong selling pressure (at the close lost 27%) and rumoreaba were urgently in need of capital. The bank's management held a press conference to give figures for the financial soundness of the institution. Over the weekend the Dutch state has injected 10 billion € in the bank. This time no one can accuse the situation of the bank to a massive withdrawal of deposits since the Dutch state had guaranteed all loans until 2009 and, in fact, the rumor did not say that ING suspend payments but that it would expand capital and the Netherlands. So, what was said at the press conference on Friday was false. Once again, as he lied with Bear Stearns, Fortis or Northern Rock. In all countries the same process: the trend is more reliable stock of a bank can assert that what the authorities. And no one takes responsibility for the lies to shareholders. ¿Conclusion? At the moment there is confidence in the statements that assume the mismanagement of private banking but do Confidence in the financial system? What would be weird having it (the text of the press):

"The measure was taken just ten days after the same ING took control of the assets of the failed bank islándico Kaupthing. At that time, a communique from the bank said it did from a position of strength because it had more than $ 1.8 trillion in assets and 85 million customers around the world. "

And the British Barclays state offered him money after assuming the risk of buying the spoils of Lehman and I am sure if the Santander would like the Spanish state would give money with which to finance their adventures in high-risk British and American ...

Another topic, it appears that Spain wants Arab countries to buy state debt, up there perfect, but coincides in time with the purchase of the Spanish state debt from the banks. Ie Spain with its own guarantee fund picks, with that money buy what they do not sell their banks, trusts that these banks use the money to increase the credit and that those who capture the credit it back to the state via taxes ... I know that but as I said, Why do so many middlemen? If Spain is debt, which is to inject money into society and not to those banks which can not be compelled to increase the credit. Lower taxes or subsidies for mortgages and loans before recapitalize banks would be a lot more social and above all faster to end the crisis. Instead, we still do not return to those who were negative ...

As to bag it is clear that we have entered a range that is below a support at least a year and are now above the 10 thousand of Ibex (and the Dow again be paired), 5000's Dax or 1000 of SP500, breaking that level would accelerate the movement in the short (as we have seen this Thursday when the Ibex lost its previous annual minimum) without necessarily changing the trend in the medium term, which remains bearish aplastantemente. As it is not all bag, I think it is noteworthy that gold, rather than value refuge from the crisis, is another asset that is at minimum a year. And the explanation, apart from the rising and falling $ crude, which usually follows, is that gold has traditionally been the refuge against inflation and recession may now be discounted prices that seem been removed as a problem. This is Scramble to many investors and funds who once were compensated for losses in equities with earnings of metals, oil or food ... and even within the equities exchanges between emerging and non emerging. This year the losses are accumulated in a variety of products.

Finally, it was assumed that the October 29 the FED will cut rates and that the ECB will make the Nov. 6. The bearish trend continues and with it the Euribor. Hopefully crude oil continue to support the lowering of inflation although I must admit last week I was too optimistic about the price of petrol and I am confused by looking at graphics fiarme USA and a poor source of the Internet for transforming a gallon in his corresponding liters. And to top it all, the $ is going against us. And it's really odd that just before the elections the U.S. $, despite the huge deficit and its rates so low, is in the $ maximum of two years.

(more ...)

Written by Droblo on October 24, 2008 with 438 reviews
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