December, 2010

The Japanese economy released today data concerning the preliminary industrial production index and the preliminary annual industrial production index for the month of October, where the monthly industrial production index showed an actual reading of  -1.8% compared to the previous reading of -1.6% however forecasts were referring to a value of -3.2%. As for the Annual industrial production index the actual reading came at a value of 4.5% compared to the previous reading of 11.5% where it was forecasted to be at a value of 3.1%.

The Japanese economy released today data concerning the preliminary industrial production index and the preliminary annual industrial production index for the month of October, where the monthly industrial production index showed an actual reading of  -1.8% compared to the previous reading of -1.6% however forecasts were referring to a value of -3.2%. As for the Annual industrial production index the actual reading came at a value of 4.5% compared to the previous reading of 11.5% where it was forecasted to be at a value of 3.1%.

The Japanese economy released today data concerning the preliminary industrial production index and the preliminary annual industrial production index for the month of October, where the monthly industrial production index showed an actual reading of  -1.8% compared to the previous reading of -1.6% however forecasts were referring to a value of -3.2%. As for the Annual industrial production index the actual reading came at a value of 4.5% compared to the previous reading of 11.5% where it was forecasted to be at a value of 3.1%.

The Japanese economy released today data concerning the preliminary industrial production index and the preliminary annual industrial production index for the month of October, where the monthly industrial production index showed an actual reading of  -1.8% compared to the previous reading of -1.6% however forecasts were referring to a value of -3.2%. As for the Annual industrial production index the actual reading came at a value of 4.5% compared to the previous reading of 11.5% where it was forecasted to be at a value of 3.1%.

The Fed's lucky streak of luring bond investors with low interest rates may be drawing to a close. Nevertheless, the extended period of low borrowing costs has bred a new breed of investor. To the bulls and bears, we can now add the ostriches – those who bury their heads in the sand of declining debt service ratios while refusing to face up to intractable levels of total US government debt. If these ostriches were to actually look at the numbers, they would realize that it is their investments which are made of sand.   As the issuer of the world’s reserve currency, the US government has enjoyed the benefits of low interest rates despite its inflationary practices. When we run a trade deficit with a country like China, they have a strong incentive to 'recycle' the deficit back into our dollars and Treasuries. This practice has hidden what would otherwise be much higher borrowing costs and much lower purchasing power for...

The commodities currencies are still underpinned by the market expectations of demand rising next year amid the USadopted easing policies which are not expected to be end soon supported by the Chinese decision of lowering its exports of the rare metals. The Canadian dollar has reached parity with the greenback while the Aussi is trading above 1.015 currently. The demand for oil also is widely expected to rise from another side because of the bad cold weather in US, Europeand even in Chinawhich watched degrees below -30 this year. The oil is looking targeting 100$ a barrel in the beginning of next year and the market eyes are now at US inventories data which will be released today after last week decreasing of the crude inventories by 5.3m barrels while they were forecasted to have just 1.1m barrels of declining which is still giving a potential high outlook of the prices. The copper is also at its all times high...

Equities Major Asian markets were mostly lower on Tuesday, as China’s Shanghai Composite fell another 1.7%, adding to Monday’s 1.9% loss.  The Hang Seng dropped .9%, and the Nikkei closed down .6%. In Europe, volume remained low as London’s markets remained closed for another day.  The major indexes ended little changed with the DAX and CAC 40 both closing less than .1% off their previous close. US markets ended mixed in yet another slow day  The Dow gained 21 points, rising to 11575, after hitting a fresh 52-week high of 11591 earlier in the day.  The Nasdaq slipped .2% to 2663. Treasuries and Commodities A $35 billion in 5-year notes drew weak demand, with the yield above the secondary market rate and a low bid to cover ratio.  5-year notes fell 18/32, pushing the yield up to 2.16% from Monday’s 2.02%.  10-year notes fell 1 8/32 to yield 3.49%, and 30-year notes tumbled 2 8/32, to yield 4.54%. Yields Jump as Treasuries Sell Off A $29 billion...

The commodities currency could find strong demand by the year end on increased market expectations of greater demand for them amid the USadopted easing policy which is not expected to be end soon supported by the Chinese decision of lowering its exports of the rare metals. The Canadian dollar has reached parity with the greenback while the Aussi is trading above 1.013 currently. The demand for oil also is widely expected to rise from another side because of the bad cold weather in US, Europeand even in Chinawhich watched degrees below -30 this year. The oil is looking targeting 100$ a barrel in the beginning of next year and the market eyes are now at US inventories data after last week decreasing of the crude inventories by 5.3m barrels while they were forecasted to have just 1.1m barrels of declining which is still giving a potential high outlook of the prices. The copper is also at its all times high...

Overview: With a dormant economic calendar, snowstorms throughout much of Europe and the US, and a many traders away on a holiday shortened week, trade remains mostly quiet, and range-bound with 2 glaring exceptions: Asian stocks still reeling from the bearish implications of the Saturday China rate hike, which portends more Chinese tightening until inflation and growth cool. China had avoided rate hikes but this latest one appears to telegraph that harder monetary tightening and slower growth will be needed to prevent inflation. Cotton also continues to plunge. STOCKS: US: Mixed/Flat - Major US indices close just above or below their starting point on very low volume as snow and holidays kept traders away. Considering that Shanghai fell 1.9% and the major European indices had lost over 1% in reaction to the Saturday China rate hike, the US indices showed resilience. The increase was seen as both a negative for growth and sign that there are more tightening measures to come as...

Figure 1 is borrowed from our paper on productivity [1]. It presents the case of Turkey. This is a difficult example with the rate of productivity growth oscillating since 1980. Since the measured time series is smoothed with MA(3), actual oscillation is even more prominent. Such a behavior is a nightmare for the mainstream models based on capital, labor and multifactor productivity. As a rule, the multifactor productivity has to resemble observations and severe “shocks” to productivity are introduced. This is a lucky hour for an economist – millions of factors to explain these shocks. In reality, the number of explanations is steadily approaching the number of economists involved. At the end of the day, all mainstream models are able to explain only “stylised facts”. This is a euphemism of “failure”.   Our model uses only one variable – real GDP per capita. The intuition behind the model is almost banal. A developed economy is characterized by a constant speed of...