Evening Reading – January 11, 2011
The Big Picture: Inside the Paradox of Forecasting
In yesterday’s afternoon reads, I mentioned a Boston Globe story “That guy who called the big one? Don’t listen to him.”
While it ostensibly looks at the track record of Nouriel Roubini, it isn’t really about him –its really about outliers and mean reversion in forecasting.
Zero Hedge: The US-Japan Congruity Explained By David Rosenberg In Ten Easy Pictures
Much has been said about the parallels and differences between the Japanese and US experience. Today David Rosenberg chimes in in an original fashion, and instead of providing the latest rambling discussion, shares ten simple pictures. Quote Rosie: “Consider the charts below the equivalent of 10,000 words explaining why the U.S. post-bubble economic and financial backdrop is looking more and more like the Japanese experience of the past two-decades.”
Zero Hedge: Who Leaked Last Week’s (Irrelevant) ADP Number?
In a rare example of forensic market analysis, the WSJ tackles the topic of market moving info leakage, focusing on some peculiar action ahead of last week’s bombastic ADP number which ended up being the traditional contrarian indicator we have been saying for months that it is. The WSJ observes: “Data from two independent sources show that trading in select currencies and future contracts surged in the seconds before last Wednesday’s unexpectedly strong private-sector jobs report from payrolls processor Automatic Data Processing Inc., raising suspicions that someone obtained the report ahead of its official release.
Macro Man: Kings and Queensland
So first, the Queensland Floods.
It seems to us that the market reaction here is very much like that to another national disaster several years ago. To set the scene, this particular country was in the process of a strong recovery out of a downturn a few years beforehand and its central bank was in the process of hiking rates from exceptionally low levels at a “measured pace”, when all of a sudden a natural disaster struck.
…
The point here is that the civil service has been running Belgium perfectly well for the past 18months, and there is now an executive (in the form of the King) directing the”correct” policy prescription to deal with the fiscal crisis. TMM would also make the point that the Belgians have not shown themselves to be shy from firing water cannon at disorderly protesters in the past. Extrapolating these developments further we look forward to France being ruled by the House of Bourbon and the next ECB president, far from being a “Weber”, being a “Charlemagne” and Australia scrapping ANY plans for Republicanism with Shane Warne being made King, which would suit Ms Hurley.
FT Alphaville: Go north, jaded government bond investor?
In a sovereign bond market that is becoming more binary by the day (will they default or won’t they? will they bail the others out, or won’t they?), where good-quality and poor-quality debt will become even more differentiated, it is a pleasure to argue for Swedish and Norwegian bonds…
Visualizing Economics: Effect of Dividends Reinvested on US Stock Returns since 1871
Annualized growth rate of since 1871:
Real total return with dividends reinvested = 6.2%
Real stock price return = 1.9%
Paper Economy: Beveridge Curve Balancing Act: November 2010
So, currently job hires are just slightly outpacing separations thus resulting in, more or less, a stagnant job market and more evidence that the unemployment rate may stay elevated for some time.
Calculated Risk: CoreLogic: House Prices declined 1.6% in November
The index is only 1.2% above the low set in March 2009, and I expect to see a new post-bubble low for this index – possibly as early as next month or maybe in early 2011.