Urgency: lowering rates by the ECB

Following the reduction in UK rates (from 4.5% to 3%) and Switzerland, the ECB has decided to follow his footsteps with a drop of 0.5 points from 3.75% to 3.25%. The threat of recession, and less inflationary pressure prompted by the drop in oil prices has encouraged Trichet and his team to make this decision. But the drop was not as strong as many analysts expected and the stock markets have reacted with immediate descents. Meanwhile, we have to Euribor with the most bearish streak since 2000.

What do you think of this fall? Is it enough or is left more bullets in the chamber? What is more correct, the descent of the Bank of England bestial or as little risky strategy of the ECB?

PS: For you have arrived late, I remind you that you have the rule of the day here.

Written by Carlos Lopez on Nov. 6, 2008 with 275 comments
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The Economics of Homer (II)

Some economists argue that bureaucracy and the public sector has a very strong tendency to increase their budgets beyond what is considered efficient.

I do not know your work, but mine have cut costs wherever they can, in travel, meals, recruitment, office supplies, telephone, Christmas (yes, it is already here!), And so on. Should we not demand the same from those who are managing our taxes?. Ojo, I do not speak at the official, speaking on a strategic level and move toward smart spending, leaving the studies of the degree of hybridization between the common quail and the Japanese quail for better times.

So after this pataleta by the waste of government to step in the press briefing a day that passes the American elections, touching look at the economy of truth.

• Trichet would lower rates today by 0.5% (at 3.25%) and place them at 2% in 2009
• Ordonez estimates that banks can absorb up to 9% of delinquencies
• Bankinter contemplates returning to some customers for losses by Lehman
• Wall Street slows dry after the End of the Obama effect rebound?
• Industrial production suffers the second largest drop in 15 years
• The boxes prefer to pay exorbitant rates before they go to the bottom of the Government

Written by Carlos Lopez on Nov. 6, 2008 with 282 reviews
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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 stocks 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
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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 we were in that" 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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The week in markets

This is an old article (October 2008) we recommend that you visit the homepage of the website for more current information.

Personal comment .-

To reflect on what they have been these days in the stock markets is unfortunately very comfortable. Just a few figures suffice: the value of stock market capitalization of the largest in the world (SP500) was two Thursdays of approximately $ 10,562,000 million, for 7 days and $ 9,722,000 million at the close yesterday of less than A $ 8,000,000 million times with the percentages we do not realize what it means to a stock market crash of that caliber but we are a subtraction enough to understand that the world's largest companies have lost value and that value in 10 meetings in quantifying More than $ 2.5 trillion! (Spanish GDP is approx. 1 trillion euros)

It seems very rational reaction to rising stock markets to the announcement of the Plan, (even motivating the next day a historic day for increases in European stock markets, what irony that in 2008 will be bearish set the record for biggest rise in one day ), With sharp decreases when Congress rejected it and with a brutal collapse when finally approved it. But neither is it normal that we are talking about this crisis many months and still has not left everything to light and we find ourselves with official denials that have no value. What confidence can make a system like the British on Tuesday, hours after denying that it has requested emergency money to the government, receives a package of millions of emergency to prevent their bankruptcy? The bag is still a human invention and as such behavior has a lot to do with psychology and it is clear that anyone who has money invested in stock market may be quiet and calm usually has a price: the divestment.

Changing the subject, we must not forget that in August marked the € against its maximum at $ 1.6038 and last week lost 1.40, and in this we have seen annual minimum below 1.35. Why is this so important? When the euro rises European exports more expensive for consumers outside the eurozone but imports are cheaper which is causing a minor impact of rising crude. Simplifying, a strong euro is good for inflation and a weak good for growth. View the current economic situation seems this is the second most key now, and this may be a good explanation for why, despite the Plan and all actions of the SEC and the EDF in general bags of Europe are behaving better than the U.S. Despite the latest bad news bank in our continent.

As for next week outside rebounds off (as of Wednesday after the expected lowering of rates: always the same thing happens, you always advised not to go into those rebounds but there is always someone who stays hooked in those movements) the most Liquidity remains sound, and more now that there is a state guarantee up to 100 billion € per person and bank interests and attractions. While my opinion on the extent that is out of the advertising or the injection of confidence that can make people do it so much money in the bank, would serve only to a very small credit union as if a bank or savings bank suspended Payments in Spain would mean that there is another bank or cash to buy it before you can avoid bankruptcy by what that would mean that the entire financial system would be sunk, something unthinkable ... I hope. In addition, there is one factor that can motivate that is 100 thousand euros to the imprudence to withdraw their savings from a bank big to move to another small that offer better returns and logically that would equal if management is bad because it takes the currency risk the state ... Once again, it rewards the most risk.

We are in season presentation of results and I think these figures should be the guide for daily turnover of stock exchanges, but I fear that the only thing that will mean even more volatility for which there ... The fact is that statistics say that the SP500 leads the worst year of the next century to 1974 (although it is true that in the decade of the'30 did not exist as an index) that invites thinking about some kind of makeup for the American elections and the end of the year but I do not think worthwhile to get a trend so overwhelming. Nor do I believe it is at these levels time to get out of favor, that is neither short nor long.

(continue reading ...)

Written by Droblo on October 10, 2008 with 396 comments
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Indicators advanced and backward ...

Methods for predicting the crisis there are many, but none are functioning. We analyze complex ratios, performed thousands of surveys and they look up sales of lipstick or miniskirts to identify the arrival of bad times, but always catches us by surprise. Are the so-called indicators advanced. Before, even studying the number of times the word "crisis" in the newspapers, to see the likelihood that already existed in these cases are usually dealt with self-fulfilling prophecy. If people think that there is crisis, the economy stops. A clear example is the "banking panic" in which, as you depositors are made aware of the vulnerability of banks, their perception of the creditworthiness of these institutions is deteriorating, which precipitated withdrawals of deposits that weaken further the situation banks.

With the advent of the Internet, we have new tools to identify the concerns of citizens by their economic status, thus we can easily see what is written in the media, what they write and what citizens are concerned about the Internet, in Here I will use 3 examples, although not think lecturing and do not guarantee their reliability if I find a fun exercise and the less revealing.

To try to discover what is written in ways we can use the system of labels that many newspapers are online, their system is simple and involves applying a few keywords to each news item. In this case, I'm going to take a social news aggregator (meneame) in which users are those that send news, let's see the outcome of the screenshot of yesterday evening.

The size of the word indicates the number of times that label is on the various news, as you see "Crisis" win win by taking other words quite important as banks, banks, financial crisis, economy and the Euribor. Eye because we talk about pulling half a technological and "geek" who often give less importance to the economy.

Another method is to see how many times that word is written in blogs, which is a less "manipulated" or partisan than that of traditional media. To do this we use this tool Technorati. (A search engine for blogs)

Here the good thing is that we are not seeing a snapshot, not if we get a trend, in this case clearly upward.

And finally we will use the familiar "Google Trends" which shows the number of searches for a particular word. This is where we see the real concerns of citizens.

Here is the search results "Crisis"

In this case the chart is a double line above shows the volume of searches on the floor below and the number of news related (something relatively similar to what we used to meneame, but in this case showing trend).

Another example is very illustrative of the search "Guarantee Fund"

Here, being a word with a few searches fig leaves quite distorted, but certainly enough to think that gives the rise in recent days and more taking into account that in light of these searches end up taking many decisions.

As you can see there is a general concern about the economic situation is certainly higher than in the past and it may be due to greater access to information that we have. This is still a double-edged sword because it's easier to go with panic or rumors like "this force is going to break." Traditionally economic information received either from television, newspapers or radio tagging all political or our bank, so we had some facility to ascertain the reliability of the message and the dye wearing, but now that most sources are anonymous we may lose our criteria in selecting the wheat from the chaff.

So after all this reflection of a 100, I leave with you the daily digest of press, that this at least we know that lame foot.

• The news of the day: The U.S. Senate approved the Plan Paulson
• Unemployment touched its highest level in 11 years in September after climbing to 95,367 people
• Will Trichet expected today 'bell' bearish?
• The volatility opens the door to earn money in the short term
• The dealer asked not to raise the guarantee of deposits
• Warrent Buffett invests 3,000 million dollars in preferred shares of General Electric
• The massive megarricos buy gold bullion because they are not relying on any financial asset

Written by Carlos Lopez on Oct. 2, 2008 with 273 comments
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