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:
| Groups | CPI base 2001
Weights 2002 | CPI base 2001
Weights 2003 | CPI base 2001
Weights 2004-2005 | CPI base 2001
Weights 2006 |
| 01. Food and soft drinks | 21.86 | 21.93 | 22.60 | 22.28 |
| 02. Alcoholic drinks and snuff | 3.22 | 3.18 | 3.17 | 3.07 |
| 03. Clothing and footwear | 9.93 | 9.90 | 9.73 | 9.25 |
| 04. Housing | 11.03 | 10.68 | 10.69 | 10.71 |
| | | | |
| 05. Tableware | 6.36 | 6.41 | 6.41 | 6.17 |
| 06. Medicine | 2.81 | 2.75 | 2.68 | 2.72 |
| 07. Shipping | 15.58 | 15.32 | 14.40 | 14.91 |
| 08. Communications | 2.57 | 2.73 | 2.99 | 3.28 |
| | | | |
| 09. Leisure and culture | 6.73 | 6.83 | 6.76 | 6.78 |
| 10. Teaching | 1.74 | 1.67 | 1.67 | 1.68 |
| 11. Hotels, cafes and restaurants | 11.27 | 11.18 | 11.23 | 11.45 |
| 12. Other goods and services | 6.91 | 7.39 | 7.39 | 7.72 |
| | | | |
| TOTAL | 100.00 | 100.00 | 100.00 | 100.00 |
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
Droblo written by the November 13, 2008 with 428 comments
Read more articles on Euribor.
The other day I read that the American figure that the state is being spent on trying to resolve the financial crisis is already 2.7 billion dollars, and that in a country that already, even before all this and much needed money. He also knew the number of jobs: 524 thousand new unemployed in two months. And I began to search for information on the actual state of U.S. finances. Let a couple of numbers and put all the zeros, that more than a trillion translates as billions and trillions when we lees and I had to document only on American websites:
- A day on November 11 at 09.14, the debt is U.S. $ 10.635.794.969.002, an amount that is increasing second to second, and in fact there is a ticking clock that will (http://en.wikipedia.org/wiki / National_Debt_Clock) and discussed here not long ago that going from 9 billion to 10 had to fix it. Currently 500.000.000.000 is increasing each month since October, a figure of growth that is expected to be sharply reduced because it is what they grew on average annually since 2003. In September the U.S. government expanded, very appropriately, the limit of indebtedness from 10.6 trillion to 11.3 but everything points that will run short in 2009
- The estimated GDP-American 2007 is 13,800,000,000,000, then the current debt is around 75% of GDP and it seems to get worse closer to 90% only by increasing the debt if we have to account that GDP may actually be reduced if there is recession, this could be even worse. They are not the all-time highs as can be seen in figure but let's remember that it was exceeded 100% due to World War II:
However, many countries are worse off and for years (from among the "big" Japan is close to 200%, in Europe and Italy, Belgium and Greece around 100%) the big problem is that this is only the debt State that is a fraction of the total debt of banks, families and American companies estimate is about 50,000,000,000,000, almost 5 times more than the public and more than 3 times the entire GDP. In Spain, where we have this sense of indebtedness total private debt is double the GDP. (Continue reading ...)
Droblo written by the November 11, 2008 with 243 comments
Read more articles on Euribor.
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.
(continue reading ...)
Written by Droblo on October 31, 2008 with 247 comments
Read more articles on Euribor.
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 no Saldías possibly 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 more cautious Trichet, 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
Read more articles on Euribor.
In November will be a year of historic peaks of the American and Spanish stock exchange. The anniversary coincides with a stock exchange and financial crisis that has led many states to use public money to try to resolve the situation. Right in between those dates to April 2007 - came news that seems forgotten today: The G7 posed an ultimatum to the banking system by which gave them 100 days to emerge all of their losses. That same G7 decided that these days, along with other economic institutions and policies, go to the aid of those same banks that ignored the ultimatum.
They say that it was necessary, it is possible, but these banks are still the same executives and managers leading a policy so dire that have needed enormous amounts of public money to survive. How is it possible to be a blank check to solve this to those who badly managed and also ignored the warnings?
Looking back a few links:
This could be very long but is easily summarized: The FED lowered rates in the late summer of 2007 thereby delaying the solution to the crisis and the stock exchanges in November (both the SP500 as the Ibex) touched historic highs, in a movement of blindness total on economic reality. Falls from January to be blamed "mad trader" and from June to a storm of summer ... and have needed the collapse of these days to finally act together.
Hopefully it is true that it is not too late but I think it took too much. And of course what we consider unacceptable is not rolling heads. Many people have been complicit and active-passive-from the current crisis, but one who spent 120% of their income on credit and relied on an expectation wrong in their meat is suffering the consequences. And many innocent, too. The companies closed or poorly managed change their management teams, but what happens to the treasurers of banks, managers of pension funds, what happens to the political system, what happens with the ratings agencies, and the recommendations of Analysts?
In April this year was very famous video of the CNBC in which he interviewed Meredith Whitney, an analyst at Oppenhaimer, and suddenly asked about the survival of Lehman and she, logically thought that would eventually break, spent several seconds without knowing what say, if hesitating between telling the truth or not cause any "mistrust" was his famous "mmm". She and her bank has been among the few who have months and months recommending selling in banks and announcing that they rebajarían dividend and capital increase, something that managers of these banks refused and returned to deny. Now the "totem" is to be given confidence, that means not telling the truth? Or stay with the comment made by the same dates one of the most prestigious analysts Spaniards among Internet users: "I recommend buying the stock exchange because years ending in 8 when in January he has behaved badly, they tend to go up very strongly about everything from the first quarter, so a year that ends in 8, which in January has behaved very badly, it is very likely to rise by 30% since the minimum in the first quarter. "
But this is anecdotal when compared to what happens to the head: Why is it that has not resigned after Paulson stressed many times the financial strength of Bear Stearns, Freddie Mac and Fannie Mae among others? And Bernanke, how was not affected by its mismanagement of the crisis? Where are the resignations among ratings agencies that ensured the financial strength of many entities fall? Why do governments have not demanded purges of personnel responsible for the banks which injected capital? How is it possible to continue in the same place as AIG and also wasted?
It can not be that the ordinary citizen who has been affected by a crisis that barely understands is the only one who suffers the consequences and will use the money from their taxes for those who have led us to the crisis and all its accomplices continue in his Seat. Do you have to recover confidence? True, but that there is nothing better than sincerity and responsibility. Let us tell the truth once and did not commit the revenue for the state in some managers who have brought us to this, it does not foresee nor knew how to fix. Without accountability monetary, political and even criminal if need be, I believe that it will not be a lack of confidence in the system.
Written by Droblo on October 23, 2008 with 240 comments
Read more articles on Euribor.
Spectacular two consecutive incumbents who could see in investing. The two made reference to the results of the first half of 2008 at The Colonial, but an era of agency EFE and the other from Europa Press.
AGENCY EFE 31 - 08 - 2008 - 22:52
Barcelona, Aug 31 - The real estate group Colonial has provided the Commission Nacional del Mercado de Valores (CNMV) results for the first half of 2008, in which the operating result amounted to 128.7 million euros, 0.9 % More than in 2007, the company reported today in a statement.
EUROPA PRESS 31-08-2008 - 22:33
MADRID, 31 - Colonial closed the first half of the year with a net loss of 2381 million euros, compared with profit of 316.4 million euros recorded in the same period of 2007, reported today the real estate.
Apparently are two of the same day on news the company and talk about situations completely contradictory and I understand that the journalist of the Agency EFE and Europa Press were of the same news conference, which makes me weird ending with conclusions so disparate.
Reading more carefully and with a little knowledge of the facts will come to see that in a headline speaks of "operating result" meaning the outcome of the activity of the company without taking into account depreciation of assets and the investments on the contrary if it is mentioned in another article.
In fact the reporter of the agency EFE, could argue that drafted the operator based on EBITDA. According to wikipedia "It means in English:" Earnings Before Interest, Taxes, Depreciation and Amortization "..." It represents the margin, or gross operating of the company before deduction of interest (financial burden), depreciation or amortization and corporate income tax. "
"Is a good indicator of the profitability of the business. It is now widely used in the business press EBITDA as a measure of profitability, and for the purposes of valuing companies. "
Once placed in a situation and following the advice of Jack the Ripper, go for parties.
Firstly it is clear that the Colonial in the first half had missed some of 2381 Million Euros, almost nothing.
Secondly, we see that the use of technical words in the press sometimes does not benefit in any way the understanding by the reader, even at difficult times and becomes a weapon of disinformation.
Thirdly, we seize the opportunity that provides us with this "false" operating results for the following consideration:
If the operating margin is positive means that sales less operating expenses (raw materials, salaries and outsourcing industry, etc ...) continues to provide benefits. Construction is a profitable business.
What then will this sinking? (What is excluded in EBITDA)
1 .- Interest. Too high a burden of interest because of the excessive level of debt coupled with the increased cost of financing (and noticed archiconocido The Euribor)
2 .- The depreciation of assets. The correction of the speculative part of their business.
In short, the building remains a business with margins but as long as this well-financed (with a significant equity ratio). The return to the structure of the stock of construction of years ago, returning to sustainable levels of leverage is the way to overcome the crisis, but of course, to bull past ... (often "analisto" I'm done).
In closing let's see the headlines of a week that will be dominated by the media as a phenomenon called "syndrome postvacacional" syndrome that today will not have the Americans and that is a holiday for them and I notice in the bags.
Good week at all.
Written by Oriolrc on September 1, 2008 with 136 comments
Read more articles on Euribor.
'Oldest
There are no more new items
(4.68 sobre 5) 