Posts filed under “Economy”

Parsing the Fed

It is Fed today. As usual, the WSJ‘s provides an excellent dissection of the Fed Statement:

WSJ: "THE FEDERAL RESERVE’S STATEMENTS reflect how the members of the central bank’s Federal Open Market Committee perceive the economy. Their words have world-wide impact and the slightest changes are scrutinized for clues about where interest rates may be headed.

The May 3 statement, issued after the third meeting of the year, announced that the Fed was raising its key short-term interest rate by one-quarter point to 3.0%, its eighth increase in a row. The central bank showed more concern with oil prices affecting purchasing power, but didn’t signal any plans to alter its current campaign of gradual interest-rate increases — a change some were expecting. In a strange twist, the Fed at first omitted a key phrase on inflation from the previous statement – "Longer-term inflation expectations remain well contained." But then, late in the day, the Fed said the omission was a mistake and issued a revised statement. Below is a look at differences between the March statement and the May one. (Note: All bolding shown below appeared on the Fed statement.)


click for larger graphic

Wsj_0505fedrelease

graphc courtesy of Online WSJ

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Source:
PARSING THE FED
Keeping the Pace
WSJ, May  3, 2005
http://online.wsj.com/documents/retro0505-fedrelease.html

Category: Economy

Twas brillig, and the slithy toves . . .

Category: Economy

Is the Fed a Leading or Lagging Indicator?

Category: Economy, Markets

Anti-Bubble or Anti-Inflation?

Category: Economy, Real Estate

Chart of the Week: China M2 Money Supply vs. Chinese GDP

Category: Economy, Markets, Technical Analysis

A few items worth reviewing

Category: Commodities, Economy, Markets, Weblogs

Understanding the Post-Bubble Economy

"Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again."

– John Maynard Keynes, Tract on Monetary Reform


Overview:

- Economists and fundamental analysts often miss cycle turns.
- There’s always another recession — and expansion — coming (eventually).
- Learn to separate hand-wringing permabears from credible commentators.

If you have been listening to the financial press recently, you might be shocked (shocked!) to learn that inflation has been increasing and the economy is slowing.

You don’t say?

Of course, readers aren’t just now discovering that this economy has been suffering from inflationary pressures for more than two years, as a chart of the CRB shows.

It’s the same with GDP. Follow the numbers: The third-quarter 2003 number was 7.8% (originally reported as almost 9%), the next quarter’s was 4.2% (originally 6%+) and 2004′s quarterly data came in at 4.5%, 3.3%, 4.0% and 3.8%.

This week, we learned the first quarter of 2005′s number of 3.1% was way below consensus expectations. While some will tell you that 3%+ GDP growth is pretty decent, it’s the trend of waning momentum that is the issue. An early mentor of mine used to admonish traders to not look at the photo, but to watch the full movie instead.

So much for the idea of kinda-sorta-eventually-efficient markets hypothesis.

Slowing GDP and rising inflation have been discussed on this site for over a year now. The investing issue with macroeconomic concerns is not the actual data, but how — and when — that data affects psychology. It’s a question of timing. The commentators who are first now discovering weak GDP and inflationary pressures are not much help to you once the ocean is flat again.

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Category: Economy, Markets

New Column up at Real Money (04/29/05)

Category: Economy

Most Have Poor Grasp of Economics

Category: Economy

Economists react to GDP

Category: Economy