Posts filed under “Economy”

Weekend Wrap Up

Add weatherman to the list of prognosticators (including economists and strategists) who often get it wrong. Despite the forecasts for a rainy weekend in the Northeast, the weather is glorious, and (as of Saturday morning) I’m hitting the beach — before the weathermen end up being right after all.

Before I run, there are a few fascinating stories worth pursuing — print ‘em out, they make for good beach reading!

The Stock Trader’s Almanac has created an interesting new feature:  the Almanac Investor ETF Lab. They will be chronicling the developments and tracking the growth of the ETF universe.

Jeff Hirsch was kind enough to give me permission to post the first installment of this (PDF), which you can download for free. (Stock Trader’s Almanac is by subscription).  Their dissection of the universe of ETFs by sector, trading volume, market cap and performance is terrific. Fascinating stuff.

Half of New Jobs Are Real Estate Related
I’ll bet that title got your attention? Its barely an exaggeration: From the end of 2001 recession until April 2005, 43% of new private sector jobs were housing industry related, according to Northern Trust. From 2001 to the start of the rate hiking cycle, it was over half.  Pick your jaw up off the desk and go read all the details.

• Quite a few Hedge fund stories this week: 
First, the WSJ and the NYT look at each side of the coin of hedge funds. The Journal looks at the Demand for funds, while the Times explains why the Supply is there. (If you lack access to either, go here).

• Hedge fund Performance Numbers: 
Two looks — One from Barron’s, which notes the relative weak fund performance as of late . The second, from Cogent Hedge, which provides an interesting table chock full of data on style (and sub-style) performances. (Same routine: click here).   

•  Prediction markets:
Readers know I have reservations about placing too much trust into things like Tradesports and IEM. But if you want to start researching Prediction Markets, you can’t do better than Chris Masse’s prediction market vortal. Enormous amounts of data and links on the subject.

•  Blogs blogs blogs:
You may be sick of hearing about them, but I suspect the top ain’t in yet. A (free) WSJ story discusses why Measuring the Impact of Blogs Requires More Than Counting is worth a few minutes, C/Net asks whether Blogs are the next big thing for advertisers

The Greenspan Conundrum 
John Mauldin has some choice words for the Fed chair. I do not think he and the Chai see eye to eye on inflation, bubbles and the like. So too for Jim Jubak, who notes that The Fed Is All Wrong About Inflation.

• Wonk Heaven:
Finally, the policy wonks out there might like to read the most recent remarks by Vice Chairman Roger W. Ferguson, Jr. To the Seventh Deutsche Bundesbank Spring Conference, Berlin, Germany on Asset Prices and Monetary Liquidity. Also, have a look at this discussion on Global Imbalances: A Contemporary Rashomon Tale with Five

Lastly, mad props to Paul Kedrosky, who’s RM weekend link fest is always good fun (and the inspiration for my Saturday CC posts). Be sure to check out Infectious Greed, his musing about the money culture.

Category: Economy, Markets, Trading

Half of New Jobs Are Real Estate Related

Category: Economy, Real Estate

Conundrum Revisited

Category: Economy, Markets

What’s the U.S. Savings Rate Really?



Are we spenders or savers?

That’s a significant question looked at by Dan Gross in the Sunday NY Times. Its an issue that has significant ramifications for the economy, interest rates, and the ongoing social security debate.

Gross references Bear Stearns Economist David Malpass:

"Some say that a flaw may exist not in our national character but in the way the government calculates savings: because the bureau’s method of tallying income and consumption doesn’t take into account structural changes in the finances of Americans, it may systematically understate income and overstate consumption.

For example, income includes wages and salaries, interest on bonds, and stock dividends. But it doesn’t include capital gains on stocks, profits from selling a house, or withdrawals from 401(k) plans. Nearly 70 percent of families own homes, nearly half of all households own stocks and mutual funds, and an increasing number of baby boomers are turning to 401(k)’s for income. Those trends, some say, can make a big difference. "The structure of the household portfolio has changed over time," said David Malpass, chief economist at Bear Stearns.

Convinced that Americans aren’t frittering away all their income, Mr. Malpass plumbed the Federal Reserve’s Flow of Funds data, a trove of information on Americans’ spending and saving habits. In 2004, he found that the net worth of all households – their assets minus their liabilities – stood at $48.525 trillion, up 9.6 percent from 2003. Sure, rising home prices helped. "But even if you take out houses completely, it still shows huge savings," he said.

The problem with Malpass’ analysis is that he is taking a mathematical approach to what is essentially a behavioral issue. (Hey, it happens) Call it a rationalization. We tend to see those from both the Bullish and Bullish contingencies, as way to feel comfortable with those ideologies.

Let’s state this another way:  As a nation, are we spenders or savers?

It raises a host of issues, some net positive, others more troubling. How does our behavior as consumer impact economic downturns? (It seems to smooth them out, at least recently). Why haven’t Businesses been as spendthrift as Consumers this recovery?  (My theory is execs are afraid to see their options go underwater again). And the $64,000 question, how might this low savings rate impact retirees when the Baby Boom generation starts playing shuffleboard?   

I believe we are not savers. The fact that so many pension plans, 401ks and IRAs go unfunded is a big clue as to that. (It also reveals how Tax ignorant all too many people are).

But stop for a moment to contemplate this: That people would rather spend their money consuming, rather than put it into a 401K where their employer does dollar-for-dollar matching is proof positive of our savings mindset.

That’s right, as opposed to GETTING FREE MONEY, many Americans still prefer to shop — rather than save.

I’m curious today iof Malpass is correct. So here’s a suggestion for what would be a signifcant and useful analysis:  Use Malpass’ methodology for calculating the national savings rate — and then apply it to as many countries we can get data for. I’d like to see a list that includes at least: the U.S., Japan, Great Britain, Norway, Sweden, France, South Korea, Italy, Germany, Australia, Canada, Spain, Israel and South Africa. That’s a short list, but we want it as extensive and complete as possible.

The goal is to determine whether or not, as judged against a planet of our peers, we Americans are — relatively speaking — savers or spenders.

Should be a rather interesting discussion . . .


UPDATE May 22, 2005 4:20pm
There’s a long but fascinating discussion on related topics at Whiskey and Gunpowder. You can see excerpts and related graphics below.


Is It a Savings Crisis or a Math Error?
By Daniel Gross
NYT, May 22, 2005


Read More

Category: Economy

How Housing Lowers CPI

Tony Crescenzi had an interesting article on RealMoney this week. In it, he notes that as the housing market soars, it ends up knocking rents lower. After all, why rent if ultra low real interest rates allow you to buy for the same price, and with nearly no money down? So what’s the problem with…Read More

Category: Economy, Real Estate

Interest Only Loans, 1.00% Mortgages

Category: Economy, Real Estate

Comparing Real Estate with Equity Market Capitalization

Category: Economy, Markets, Real Estate

Regional Surveys, LEI show Growth Slowing

Category: Economy

Tape vs. Growth

Category: Economy, Markets, Trading

Inflation Rate Tame?

Category: Economy