Putting the spice back into investing.

PMI again

Thursday, September 30, 2004
The Chicago Purchasing Managers Index (pdf!) came out today at a better than expected 61.3. Although the number is better than expected it is still below the average level seen during the beginning of this year.

The employment figure came in at 53.9 which constitutes a recovery from the lows seen in July. Inventories were up (same as new orders) while production was lower. In all this just looks to me as if the current muddle-through phase is still in place.

Now we wait for the ISM which is much less volatile than the Chicago PMI and then we wait for payrolls next week...

Gross on the CPI

I have a great suggestion for all of you out there who think that the CPI is a sham: go over to Pimco's website and read Bill Gross' latest commentary.

The King of Bonds provides his readers with an industrial strength smackdown of hedonic adjustment. Some extracts follow
Talk about a con job! The government says that if the quality of a product got better over the last 12 months that it didn't really go up in price and in fact it may have actually gone down! Why, we could be back to Bernanke deflation real soon if the government would quality adjust enough products.
Similarly, government statisticians manipulate the price increases for cars and just about any durable good that comes off an assembly line but find it difficult to extend that theory to underwear or a pair of shoes. Perhaps that’s next.

A glass half full

Wednesday, September 29, 2004
Remember the old adage about an optimist saying that a glass is half full while the pessimist says it is half empty? Something similar is happening with official attitudes to the US currency.

The strong dollar policy of the past has been tacitly abandoned over the past two years. While nobody has come out in defense of the greenback, officials have also refrained from loudly touting the benefits of a soggy currency.

It looks as if this is slowly changing. Letting the dollar gradually fade against other currencies could do wonders to help trim the current account deficit - that is a subject I wrote about a couple of days ago. Now the Federal Reserve Bank of Kansas President Thomas Hoenig is making the same kinds of noises
The dollar fell against the yen in Asia after Federal Reserve Bank of Kansas President Thomas Hoenig said a lower dollar "helped" with the U.S. trade deficit and that the news on inflation is "good."
This comes after the opening salvo fired by Fed Governor Susan Bies saying that
[T]he exchange rate is going to have to adjust just because we are running a current account deficit of 5 percent of gross domestic product, which is very large.
A fading dollar would of course reduce the current account deficit by making imports more expensive. The only problem with this kind of nifty solution would be that a dearth of cheap imports may just be the straw that breaks the consumers back. Stagnating wages, high(ish) energy costs (which a falling dollar won't solve) and more expensive doodads from China may just be the thing that causes the man and woman on the street to reconsider his financial health.

A weak currency does have one large advantage: an administration can always shift blame for it on the market. One thing remains burned into my cortex: the balancing act the Fed is trying to pull off is getting ever more difficult. They are juggling "soft patch" rhetoric whilst walking a tightrope over the valley of dollar collapse.

One last thought on our headline: the engineer says that the glass is twice as large as it needs to be.
11:54 AM :: Karsten :: permalink ::

A wave of warnings?

Tuesday, September 28, 2004
While the Fed is still toeing the party line regarding the longevity of the recovery ("just a soft patch") a couple of influential market players are sounding the alarm klaxons. It looks as if Merrill Lynch put out a note warning investors to expect a Tsunami of earnings warnings. This is pretty consistent with my view that equity markets have been bid up so far as to be priced for perfection. Alas the picture is developing a few flaws and these are finding their way into the market.

Oil again

Fighting in Nigeria caused oil to break through the "psychologically" important USD 50 level. This actually means - well - not much. Oil would have to rise to something like USD 80 to come near the historical highs in real terms.

Obscene Interest Rates?

Monday, September 27, 2004
The Washington Post has a short primer on what the neutral Fed Funds rate is. You can find the article here (registration needed). The two most important points are reproduced below (italics mine)
The level at which the Federal Reserve's federal funds rate, the overnight rate charged between banks, neither stimulates nor slows economic growth.
A number that Fed Chairman Alan Greenspan has declined to specify, saying, "When we arrive at neutral, we will know it."
This reminded me of another quote which was about a very different subject (italics mine)
In 1964, Justice Potter Stewart tried to explain "hard-core" pornography, or what is obscene, by saying, "I shall not today attempt further to define the kinds of material I understand to be embraced . . . [b]ut I know it when I see it . . . "
Quote from here or here for the case
Now is it just me or is the neutral Fed Funds rate somewhat akin to obscenity?


Friday, September 24, 2004
My newest Postcard from Old Europe is up over at Angry Bear's place.

It's risk Jim, but not as we know it!

Thursday, September 23, 2004
The past years have given rise to quite a few conceptions about investing that are now firmly embedded in the consciousness of investors. One of these is the implied assertion that "expected return" means that an investor with a life span shorter than Methuselah can actually expect the quoted return.

Another is that your investment advisor means the same thing you do when he uses the word "risk". Almost everyone has seen those nifty risk/return graphs where you can easily see how much return to expect and how much risk you are going to have to take. But what exactly is "risk"? Your financial advisor will tell you that risk
"...is the financial uncertainty that the actual return on an investment will be different from the expected return."
Finance-types distill this concept of risk into a single neat number called "volatility". To make things just a little more complicated, volatility is an alias for the standard deviation of returns. In other words
Simply put, the standard deviation tells us how far a typical member of a sample or population is from the mean value of that sample or population. A large standard deviation suggests that a typical member is far away from the mean. A small standard deviation suggests that members are clustered closely around the mean.
If we put this in an investing context we can say that an investment whose yearly returns don't really deviate from the average return is less risky than an investment whose returns fluctuate wildly from year to year.

This concept looks pretty sound - the only sad part is that this concept of risk doesn't bear much resemblance to what an investor might perceive risk to be. An investor will probably welcome returns that diverge from the mean to the upside. In other words: normal people will gladly bear the risk of outperforming the average return - "real" risk is usually interpreted as downside risk.

If we take this line of argument further, we can say that risk can be broadly defined like this
"Risk is the potential future harm that may arise from some present action."
This is much more in line with what an investor might think. Risk could be the potential future harm which comes from not having enough money to retire on at age 60. This takes risk away from "failing to achieve the mean return" to "the possibility for disaster".

What exactly constitutes risk can be an extremely idiosyncratic decision. Some people might define risk as "the risk of missing a good opportunity" or the "risk of my investments underperforming those of my golfing buddy". There is no nice "one size fits all" definition of risk out there. You have to find out what financial event would cause you distress - that answer will be different for different people. Once you've figured that out you can see what kind of statistical wizardry will help you quantify your gut feeling.

So the next time someone lays out risk in a nice mathematical parcel be sure to check if that is the kind of risk you can live with in practice. Don't just nod and say "nice graph" - ask your broker or advisor to explain exactly what those little dots mean. You might just find yourself re-examining your investment decisions.


The FOMC statement came in almost exactly as expected. The T-word (as in "traction") surfaced in a sentence which encapsulated the Fed's mindset:
After moderating earlier this year partly in response to the substantial rise in energy prices, output growth appears to have regained some traction, and labor market conditions have improved modestly.
The statement on policy accommodation ("will be removed at a measured pace") is unchanged so we should see another 25bp hike in November. The only thing that could derail this policy is massive weakness in payrolls over the next two months.

Against the backdrop of my worldview things work out like this: Barring a complete disaster we'll get another hike in November. The economy will continue to lose momentum until then, which will in turn lead the Fed to take a break from raising rates.

Here is the full statement with the changes highlighted:
The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 1-3/4 percent.

The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. After moderating earlier this year partly in response to the substantial rise in energy prices, output growth appears to have regained some traction, and labor market conditions have improved modestly. Despite the rise in energy prices, inflation and inflation expectations have eased in recent months.

The Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters to be roughly equal. With underlying inflation expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.

FOMC day

Tuesday, September 21, 2004
Meetings of the FOMC show typical market behavior. Everyone is virtually certain the Fed is going to hike by around 25 basis points. But virtually certain also means that there is some residual risk of the Fed doing something crazy out there. This in turn means that everyone will stayed glued to their screens to then watch the inevitable unfold.

The FOMC statement will probably echo the views that Fed policymakers have espoused for a while now. We should expect something upbeat about employment and/or growth.

All this discussion about rate hikes has not found its way into the bond market lately. The yield at the long end doesn't actually look as if that segment of the market is looking for much higher rates going forward. A series of articles has looked at why this might be the case (hint: foreign buying of US Treasuries...) - a quick summation can be found here.

Not much other data out today - we'll see the latest on housing starts and not much else.

Smart CFOs?

Friday, September 17, 2004
A survey of CFOs has revealed that almost 60% of those asked think that the US economy is at risk of suffering lower growth in the next twelve months. You can read about the results here, but I'll just give you the gist in the following couple of paragraphs
Financial executives are concerned that the U.S. economic engine might become derailed," said John Graham, the director of the survey and a finance professor at Duke.
"Maybe Main Street knows something that Wall Street and the Fed have overlooked," said Campbell Harvey, the founder of the survey and a finance professor.
Speaking of Campbell Harvey, be sure to visit his homepage - it is a treasure trove of material including the world famouse online hypertext financial dictionary!


My newest Postcard from Old Europe is up over at Angry Bear's place. This week's column looks at the economic soft patch the US economy is in.

The good news - brought to you by the IMF

Thursday, September 16, 2004
The real good news is that the global financial system is stable and that the sky will not fall. At least the IMF is saying so. The IMF is actually using pretty upbeat language to describe the current state financial markets are in. They write
The financial system has not looked as resilient as it does in the summer of 2004 in the three years since the bursting of the equity bubble.
Short of a major and devastating geopolitical incident or a terrorist attack undermining consumer confidence, it is hard to see where systemic threats could come from in the short term.
This doesn't mean that its all smooth sailing ahead - the risks are still there - or as the IMF puts it
"Overall, when conditions are as benign as they are at the moment, the major risks - especially in the medium term - are on the downside."
The IMF report cites complacency via "indiscriminate risk behavior" or "chasing yield" as the main risk. Other bogeymen are rising US interest rates because of higher inflation and "current account imbalances".

The current account situation in the US is something that does concern me. I very much agree with the IMF when they state that
The sustainability of capital flows to the United States, however, remains a matter of concern. A sharp and disorderly decline of the dollar would, among other things, cause significant losses to many international institutions holding dollar assets or generating dollar income.
True. But the converse is true as well - a gradual depreciation of the US currency would help redress the current account situation and might therefore look like a very appealing policy option for the next US administration.

The US current account deficit is like a 600 pound gorilla on a diet of steroids. It is equal to around 5% of the economy and keeps getting bigger. The deficit is being funded mostly by foreigners as the population of the US prefers to blow ever larger portions of their stagnating incomes on consumption.

This behavior is being mirrored by the Federal government which is running a budget deficit amounting to around 5% of GDP. If the US government makes no efforts to address this situation it might just find that the worst case scenario described by the IMF comes to pass. A loss of confidence in the fiscal stability of the US spell disaster against the backdrop of a strong reliance on foreign capital inflows.

Three bits of data

All eyes are firmly on the US again as today sees the release of the CPI (i.e. the inflation number), weekly initial claims and the Philly Fed index.

Speaking of which: Yesterday's NY Fed index painted looked pretty strong - the data on new orders and employment were pretty solid. We shouldn't get all that carried away though, the Empire State survey is notorious for its volatility. The markets didn't really respond to the data anyway - methinks that people are girding their collective loins for next weeks FOMC meeting.
11:29 AM :: Karsten :: permalink ::

Blogroll Update

Wednesday, September 15, 2004
Just a quick post to let you know that I've updated my blogroll with two great new(ish) blogs I know you're dying to check out.

Fat Pitch Financials looks like it's going to turn into a great personal finance and investing site. Wondering about the name? Wonder no more
Are you ready for the next fat pitch that the stock market might throw your way? Preparedness is the key to taking advantage of great opportunities.
I'm sure that reading the blog on a regular basis will help us be prepared!

The other site is Cheese Monkey which offers a fantastic mix of, well, everything. Just go there and take a look.

Shifting worldview

Today's industrial production data was pretty robust - albeit at the second glance. The headline number was slightly weaker than expected but the data on manufacturing output was pretty heartening. Capacity utilization in manufacturing was up by almost 4% and confirmed the strong numbers seen in past manufacturing surveys. This should leave us on track for two more pretty certain rate hikes going forward.

I still believe that the rate of expansion will moderate in the fourth quarter and that we'll end the year at a Fed Funds rate of two percent. My belief in a slowing rate of growth was somewhat supported by the NY Fed data out today. Although the Empire State survey came in at a higher level than last month, the data series is still off its highs which it reached earlier this year. This is the same behavior we've been seeing in diverse other (leading) indicators so I still stand by my opinion that growth in Q4 will be around one percentage point lower that in Q3.

The OPEC meeting didn't bring us any real news so the oil story today was that US crude oil stocks were down by around 7.1 million barrels vs. last week. Oil caught a bid and rose by around 70 cents on the back of this.

Data flow

Markets are looking at two things today - the OPEC meeting and the NY Fed survey. The OPEC meeting is expected to result in a hike of supply quotas to the tune of one million barrels a day. Sounds like much? Well, no. In the arcane world of OPEC, quotas are not really quotas. Confused? Reuters explains
OPEC started meeting at 5 a.m. EDT to discuss a deal that will do little to change real supplies -- it is already pumping some two million bpd over existing limits of 26 million bpd.
Although OPEC is delivering near flat out, most ministers do not want to legitimize all they are pumping in formal supply quotas.
Delegates said keeping official allocations lower than actual supply would allow OPEC more flexibility to cut back quickly, without readjusting quotas, should prices suddenly fall.
In another bit of divergence Fed representatives keep talking about the economy regaining "traction" after navigating a "soft patch". Just too bad that the economy continues supplying us with data that says "momentum slowing!". The NY Fed survey will shed some more light on where the economy is going.

Stay tuned for more...

Food for thought

Tuesday, September 14, 2004
Interesting article over at The Christian Science Monitor regarding asset allocation.

The author does a good job defining (modern) portfolio theory thusly
Essentially, portfolio theory holds that investors reap the greatest return with the least risk when they allocate their money among diverse classes of assets, hold them for the long term, and rebalance the portfolio when the various classes of assets stray too far from their original allocation.

To make it work, you need to own asset classes that don't move in lock step, make accurate estimates of their future returns, and use a very long time horizon. A miscalculation in even one of these steps, however, can seriously hurt the prospects for reaching your ultimate goal.
True. The point that I still find woefully underexposed in these kinds of definitions is that people keep telling investors to maximize the expected value of their investment strategy. I take issue with this kind of reasoning because most investors have a finite period to live. In other words: you probably won't get the mean return.

The average return is just a bit of mathematical fiction which tells you what you can expect to achieve if you repeat your strategy a large number of times. Problem is that you don't have a large number of attempts. If your 30-year strategy doesn't pan out nobody gives you a second chance! That is why I keep saying that it is much better to maximize the modal return - i.e. the most commonly occurring return. You are much more likely to actually realize this value.

The article goes on to challenge conventional investing wisdom by asking questions such as "Should you own stocks at all?" and "Is buy and hold the way to go?". The answer is obviously "yes" to both questions if you happen to have the secret to immortality in your kitchen cupboard. In other cases you might do better with a much more conservative and/or active strategy.

Oil Update

Monday, September 13, 2004
The oil price has come off of the levels we saw just one or two weeks ago leaving many people perplexed by the reasons for the hike. Is it supply-driven? Is it fear-driven? Is it just pure speculation?

The Bank for International Settlements has a very readable publication called which goes by the name of "BIS Quarterly Review: International Banking and Financial Market Developments". The current issue (linked above) looks at the speculative component of the oil price movements. The article looks at the CFTC data and thereby spares us the rather dull job of going through those numbers ourselves. In case you really want to look at the raw material, go here.

The BIS researchers find that (italics mine)
Open positions in crude oil futures - contracts entered into but not yet offset by a reversing trade or delivery - increased by more than 25% over the first eight months of 2004. Positions held by non-commercial traders increased to 37% of all open long positions on average over this period, up from 32% in 2003. By contrast, non-commercial traders' share of open short positions was on average down slightly from 2003. Changes in non-commercial traders' net long position - open long positions less open short positions - have tended to coincide with changes in the oil price. In fact, the correlation between weekly changes in oil prices and weekly changes in non-commercial traders' net long positions was close to 0.8 over the first eight months of 2004.
OK, looks like we have fools investors jumping in and out of the market based on momentum. Nothing new there. The only problem is that this still doesn't tell us all that much. The increase in speculative activity (defined as positions held be non-commercial traders) isn't large enough to convince me that that is the whole story. The economists at BIS come to the same conclusion and write
However, it is also possible that shifts in activity in the futures market were driven by changing perceptions of fundamental imbalances in the supply of and demand for oil, including the changing perceptions of commercial traders.


If you're looking for something to sink your teeth into at the start of this week you just have to breeze by d-42 and sample this week's Carnival of the Capitalists.

Next week will see one of my favorite blogs, voluntaryXchange, host the Carnival.

Overnight news

Friday, September 10, 2004
I've posted in some detail on the subject of the trade deficit (here or here) and I'm pleased to report that raw material for new musings will be released today. We should see some sort of rebound after last month's record low but I'm pretty sure that will still see something in the range of -$53bn.

Not much in the way of overnight news. The Bush administration has said no to calls to punish China for pegging its currency to the USD. As there is an election coming up the challenger has to weigh in on the subject.
Democratic presidential nominee John Kerry criticized the Bush administration for rejecting the petition just hours after it was filed at the U.S. Trade Representative's office. He accused President George W. Bush of leading the United States "in the wrong direction" by failing to enforce trade agreements and protect manufacturing jobs.

"As president, I would take America in the right direction -- acting vigorously to end China's illegal currency manipulation without tying one hand behind my back and taking potential options off the table," Kerry said in a statement.
Maybe someone can enlighten me as to how he would accomplish this without hurting the domestic economy? High taxes on Chinese imports? The answer is of course "yes"
The group's petition argued the yuan was undervalued by about 40 percent, which they said acted like an illegal export subsidy. If the United States won a case on that issue at the WTO and China refused to comply, it would open the door for Washington to slap 40 percent tariffs on Chinese goods.
Great idea - I'm sure that his constituents would love to pay through their collective noses for US-made doodads. Oh my.
10:41 AM :: Karsten :: permalink ::

New Postcard

My weekly column is up over at Angry Bear's Blog.
10:39 AM :: Karsten :: permalink ::

The last line of defense...

Thursday, September 09, 2004
Planning for retirement usually rests on three pillars - whatever the government pays you, the pension you receive from your employer and your nest egg. Social security won't be enough for those people who have been working at good jobs and have become used to a high standard of living. Continuing budget deficits might also lead future administrations to increase taxes or lower benefits (...or to fund the system with more debt which would then probably erode benefits via higher inflation).

The record low in the US national savings rate doesn't bode well for the prospects of drawing down savings in the future. The lackluster performance of equity markets has been somewhat camouflaged by the strength in some housing markets so that the balance sheets of households probably don't look all that bad. The only problem is that a home is something rather illiquid and valuation is often quite tricky. You can't just sell the garage to finance your next cruise either. The concept that saving today means consuming more tomorrow seems to be defunct in a culture with EZ credit terms. Consumers demand instant gratification - who cares what happens tomorrow!

That leaves us with pensions. Sadly this last line of defense is creaking at the seams. Company's pension plans are often woefully underfunded and the Pension Benefit Guaranty Corp. is already running a deficit of about $2bn a year. And anyway, the guarantee provided by the PBG isn't all that great - plans which get taken over usually reduce payouts and slash other benefits such as medical insurance. The story here is much the same as with social security - either raise the amount paid in today or reduce the amount promised tomorrow.

The problem here is that higher funding of plans would divert huge amounts of a company's cash flow into the plan today. This is bad news for shareholders as the company is at that point being run for the benefit of current and future pensioners.

As always, something has got to give. I believe that the weakest link is the savings rate. If the current expansion slows markedly and we continue to be confronted with high geopolitical uncertainty and high energy prices we just might see a cultural shift at the consumer level. Ostentatious consumption might just slink out the back door over the next couple of years as consumers slowly retrench and start to build up their nest eggs again.

Blogger Time Warp

Wednesday, September 08, 2004
Blogger was not very cooperative today. That is why my little post from this morning (the middle of the night for most of my US readers) just managed to pop up a couple of minutes ago.

The Fed chief was nice enough to do as I (and almost everyone else) predicted. So not much news there. My big picture is still intact - I expect a rate hike later this month and expect the Fed to do enter a little wait and see phase after that.

There was actually someone out there who did take the US government to task for the budget deficit - IMF head Rodrigo Rato gave out some free advice:
"The monetary stimulus has already been addressed by the monetary authorities in a very clear way..," he said.

"But the budgetary stimulus has not, so I think that the U.S. budgetary authorities have to match the monetary authorities in their clear determination to reduce the deficit"
The US President had better hope that not all to many people come around to this kind of view - it might just lead to yields rising without any Fed fiddling. But I'm pretty sure that word will not get out - after all, the IMF head honcho was on his way to Burkina Faso - not all that many US T-Bond holders in OUAGADOUGOU, Burkina Faso.
10:24 PM :: Karsten :: permalink ::

All eyes on Greenspan

The day has started off here on a very slow note. Volumes are thin and everything which is in the newspaper today was already in the paper yesterday. Economic news addicts are looking forward to Fed Chairman Greenspan's testimony before the House Budget Committee today.

Not many people are waiting with bated breath though. Most everybody thinks that the strongish job data will allow Greenspan to reiterate the Fed's view that the expansion is still on track. This will allow the Fed to stick to Plan A and hike rates. If Greenspan does in fact mumble something about removing policy accommodation, then we can be virtually certain that the Fed will hike again this month.

Only two things might upset the apple cart:

1) The very unlikely possibility that the Fed Chairman says something to the effect that the recovery is dead
2) Greenspan throwing a curveball in the subsequent Q&A session

I'm pretty sure that Greenspan will use much of his allotted speaking time to talk about the fiscal impact that the impending retirement of the so-called baby boom generation will have. The Fed Chairman recently spoke about this very subject and had quite a few things to say that should be high on the agenda of something that calls itself the House Budget Committee. To give you a little taste:
The aging of the population in the United States will significantly affect our fiscal situation. Most observers expect Social Security, under existing law, to be in chronic deficit over the long haul; however, the program is largely defined benefit, and so the scale of the necessary adjustments is limited. The shortfalls in the Medicare program, however, will almost surely be much larger and much more difficult to eliminate. Medicare faces financial pressure not only from the changing composition of the population but also from continually increased per recipient demand for medical services. The combination of rapidly advancing medical technologies and our current system of subsidized third-party payments suggests continued rapid growth in demand, though future Medicare costs are admittedly very difficult to forecast.
This scenario is something that legislators will surely try to use to advance partisan agendas ahead of the election. This is going to be pretty difficult because nobody is really addressing the horrible budget situation in the campaign - I guess it is much more important to look at what the contenders did or did not do in 1968 than to look into the future.
10:04 AM :: Karsten :: permalink ::

Oil again

Tuesday, September 07, 2004
I firmly believe that we won't run out of oil - we may however run out of money to pay for the stuff as it becomes ever more rare. The recent strength in oil prices has done exactly what one might expect - it has encouraged exploration and investment in companies that go out there and look for the black stuff.

In fact exploration companies have turned into a really hot sector. A Reuters article looks at the recent strength in exploration company's stock and notes
Shares in some exploration firms -- often a boom-or-bust bet for investors -- have tripled and quadrupled in value in the past year, outperforming the sector and giant integrated peers such as Shell and Total.
Investing in these companies is somewhat akin to buying into a certain portion of the biotech market - they either manage to actually invent something which gets FDA approval or they blow up.
11:02 AM :: Karsten :: permalink ::


Friday, September 03, 2004
Contrary to what I wrote in the previous post I did get a chance to watch the payroll data come over the ticker. At 144k new jobs we have a solid number and the unemployment rate was a little better at 5.4%.

The good news is that weekly earnings increased by a larger than expected 0.3%. I watch the earnings numbers like a hawk because I'm pretty concerned about consumer's pocketbooks - any rise in income here is a good thing. The workweek was flat - I would have liked to see some strength here as well, but I guess you can't have everything. I'll look at the data over the weekend - if I find something intersting, I'll post on Monday.

To be fair: good call by the consensus this time!

Payroll day

A familiar ritual will unfold today. We will glance at what the consensus is expecting (150k new jobs) and then wait for the reported number. This number will then be nothing like what the consensus is expecting.

If I look at the margin by which forecasters have been off over the past couple of months I feel pretty safe in saying that today's payroll number will be either 20k or 300k new jobs.

I probably won't stick around to see the number - because of the magic of time zones the release of the data will see me in my private helicopter flying out to my luxurious summer retreat.
10:13 AM :: Karsten :: permalink ::


My Postcard from Old Europe is up over at Angry Bear's place. This week I take a look on what kind of policy choices might result from the US trade deficit.
10:10 AM :: Karsten :: permalink ::

Data update

Thursday, September 02, 2004
The ISM followed the Chicago PMI downwards and came in at a "still-expansionary-but-not-blazing" level of 59 (down from 62 in the previous month). The story behind the numbers is not all that exciting - things are still looking good, just not as good as they looked a couple of months ago.

As everyone is waiting with bated breath for the payroll on data on Friday the employment part of the ISM garnered particular attention. The numbers in the ISM tell us that companies are continuing to hire, albeit at a slower pace than a couple of months ago. The sad part is that these hiring intentions have yet to make an impression on the hard employment data.
11:37 AM :: Karsten :: permalink ::