Putting the spice back into investing.

Investor education

Tuesday, February 08, 2005
Read this. Thank you.

Understatement of the year?

Monday, February 07, 2005
A look at the calendar shows me that we're only in February but Federal Reserve Board Governor Edward Gramlich is already stepping up to the plate to swing for a home run in the understatement of the year award. Here he goes (via Reuters):
The one thing that I think is a little bit of a worry is that if you look at the share of output that the U.S. economy devotes to building up the future -- that share is called the nation's saving rate -- that's on the low side
Wow. How nice of someone from the Fed to explain things in terms even I can follow. But wait, there's more - he also explains vendor financing asian style:
In effect, Japan and China are printing money, buying Treasury securities and building up huge hoards -- they're over $2 trillion, which is a very large share of our debt and keeping the dollar strong and their own currency weak
Yeah, that's cool, gimme more Ed, don't stop
This really hasn't happened before to this degree in the history of world capital markets
But Ed, please tell me: how long will this keep going on? I can just see you, you manly man, grasping the tiller of monetary policy firmly in your gnarled hand - you turn to me with alook of utter confidence on your face and say:
We don't know how long it can last or how long it will last.
Oh. OK then. Sorry for asking. Let's change tack here: Ed, what do you think about the Fed's monetary policy - I mean, what's your opinion on the pace of tightening?
I stand by that. I voted for it, so it must be what I think.
Oh my.
10:49 PM :: Karsten :: permalink ::


Friday, February 04, 2005
The first Friday of every month brings us the start of a weekend and jobs data. I was looking forward to both as an exceptional amount of work has forced me to keep my head down wrt real life. The weekend will bring me a brief respite from an insane workload.

The jobs data was not that amusing. Payrolls rose by 146k in January - this was nicely below the 200k consensus and caused the rolling 3m average to drop further away from the highs seen last year.

The unemployment rate managed a fall thanks to decreasing labor force participation an gains in hourly wages were very slim.

This is more of the sort of not-too-hot, not-too-cool news we've been getting over the past weeks. In particular it won't force the Fed to do anything radical - they'll continue to tighten at a measured pace (as they reiterated a couple of days ago) while the economy will continue to muddle through the proverbial soft patch.

What really bothers me is that I can't shake the feeling that we're experiencing a collective Wile E. Coyote moment in which Wile runs a while on thin air before realizing that gravity still works. In other words: it might just be that the economy is just running on momentum. Any decline in - say - manufacturing employment and/or (perish the thought) consumer spending might just kick-start the laws of Newton. If this should happen we should be prepared for the Fed to change tack pretty quickly.