If you participate in the financial markets (either directly or indirectly through money managers or pension funds) I strongly suggest you read this short article and think very hard about what you read.
Topical Reference:
Roubini sees ‘perfect storm ‘ of risks for global economy, from
The Financial Post, from The Associated Press, Dan Perry, September 7, 2012 – reading time 2 minutes, thinking time much longer.
World >> North America >> Canada: Coming changes to Canada’s GDP measurements
Governments, Central Banks, economists, stock analysts, investors, traders, the world financial markets and a lot of others make important decisions every day that are partially underpinned by government statistics.
Read the referenced article and, aside from learning of changes Canada is about to make to the derivation of some of those statistics, consider how many of the people using government released statistics do so without fully understanding their underlying derivation and assumptions. Also consider how much fragility there has to be in the conclusions derived from such statistics, which have to be:
- at some level ‘best estimates at given points in time’; and,
- which are always subject to subsequent revision following receipt of new information.
Also consider that a world of imperfect information means a world of imperfect decision-making. This, of course, goes only to risk assessment if one makes what I think is the practical assumption that government generated information is not purposefully misstated.
Topical Reference:
Canada to revise guidelines for GDP, other data to adopt new standards, from
The Financial Post, from Reuters, August 31, 2012 – reading time 2 minutes.
Eurozone: Germans voice concerns over ECB’s Outright Monetary Transactions Program
In what has to be no big surprise, German politicians and citizenry vocally protested – and some are said to be threatening legal action – over the ‘unlimited government bond buying program’ announced by the European Central Bank last Thursday.
The referenced article discusses this, and says among many other things, that:
- Germany gets but one vote at the ECB Governing Council negotiating table, as do all other ECB member country – irrespective of size or economic importance to the European region;
- Jens Weidmann, President of the Deutsche Bundesbank, was ‘isolated’ (whatever that means) in last Thursday’s ECB Governing Council meeting; and,
- a study released last Thursday said that 73% of Germans fear the costs to taxpayers of the euro debt crisis, and 65% see continued existence of the euro under threat.
I included a commentary in:
- last Friday’s (September 7) Newsletter titled Are German Parliamentarians Dutch Burghers or are they Germans?, where I said “In the end Germany will act on what it assesses to be its own self-interest”; and,
- last Tuesday’s (September 4) Newsletter titled German central banker said to have threatened resignation: , where I discussed reports that Mr. Weidmann had threatened resignation of the bond-buying strategies of the ECB up to that point (i.e. before the ECB’s Outright Monetary Transactions Program announcement).
Those two Newsletters currently are available on the Internet only to Stock Research Portal paid Subscribers. However, you ought to be able to re-visit them if you have not permanently deleted them from your e-mail system.
I continue to think:
- things are now coming to a head in the Eurozone; and,
- if you participate in the financial markets you need to be as informed about what is going on macro-economically as you can be, with particular focus on the Eurozone in coming weeks.
Topical Reference:
Merkel steps in to defend ECB after German outcry, from
The Financial Post, from Reuters, Gareth Jones, September 7, 2012 – reading time 3 minutes.
Brief Commentaries prompted by world headlines (collective reading time 3 minutes)
Europe >> United Kingdom: UK business optimism index lower, PMI index higher
The BDO UK Business Optimism Index is reported as having fallen to a 20 year low, while in conflict to that the Lloyd’s Regional Purchasing Managers’ Index is reported as having risen. Many economists are said to expect the UK economy to grow in Q3 based on increased activity following the Queen’s Jubilee celebrations and the Olympics.
That seems to be a somewhat meaningless longer-term prediction given the non-recurring nature of those two things.
Topical References:
UK business optimism hits 20-year low – BDO, from
The Telegraph, September 19, 2012 – reading time 3 minutes.
North America >> United States: U.S. August jobs report
By now you know that last Friday’s U.S. Jobs Report said the U.S. economy created just 96,000 new seasonally adjusted jobs in August, significantly below expectation. You also know that the U.S. unemployment rate was reported as 8.1%, down from the 8.3% reported one month ago.
This is an article you might want to read and think about. Raw statistics are not as meaningful as ‘analyzed statistics’.
Topical Reference:
Jobs being added, but good ones still tough to find, from
MSN Lifeinc., Allison Linn, September 7, 2012 – reading time 3 minutes.
North America >> United States: ‘Bad jobs’ versus ‘Good jobs’
You might want to read an overview of a paper just published by The (U.S.) Center for Economic and Policy Research titled ‘Bad Jobs on the Rise’. The referenced article includes a link to the paper should you want to read it in its entirety. The paper is 20 pages long. The Executive summary can be found at page 3 of the paper – reading time 3 minutes.
Topical Reference:
Bad Jobs on the Rise, from
The (U.S.) Center for Economic and Policy Research, John Schmitt and Janelle Jones, September 2012 – reading time 1 minute, or longer if you read the paper.
Important Snippets From Today’s Commentaries
Snippet #1: An OECD report was released September 6, 2012 that said the G7 economies would grow at an annualized rate of 0.3% in Q3 2012 – and that there now exists worldwide “dampening global confidence, weakening trade and employment and slowing economic growth”.
Snippet #2: Consider how many of the people using government released statistics do so without fully understanding their underlying derivation and assumptions.
Snippet #3: Consider how much fragility there has to be in the conclusions derived from such statistics, which have to be:
- at some level ‘best estimates at given points in time’; and,
- which are always subject to subsequent revision following receipt of new information.
Snippet #4: Consider that a world of imperfect information means a world of imperfect decision-making. This, of course, goes only to risk assessment if one makes what I think is the practical assumption that government generated information is not purposefully misstated.
Snippet #5: In what has to be no big surprise, German politicians and citizenry vocally protested – and some are said to be threatening legal action – over the ‘unlimited government bond buying program’ announced by the European Central Bank September 6, 2012.
Snippet #6: If you participate in the financial markets you need to be as informed about what is going on macro-economically as you can be, with particular focus on the Eurozone in coming weeks.
