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EconGrapher (< 20)

February 2010



GDP Review: US, UK, South Africa, Taiwan, Thailand

February 28, 2010 – Comments (0)

This week we look at GDP; revisions and releases. First up is a look at the revision to the US GDP results for Q4 2009, then there's the first revision to the UK GDP stats. Then we look to some of the fresh data coming from some emerging markets; we've got South Africa, Taiwan, and Thailand, all showing a reasonably strong bounce back from the recession.

At a high level we've basically got the developed nations (US, UK) recording growth on a quarterly basis, but still with poor growth on a year on year basis - and still with significant risks to the recovery and persistent structural problems.

On the other hand you've got emerging markets showing a strong bounce-back from the recession due to a number of drivers such as the global recovery in international trade, government spending, manufacturing, and to a lesser extent consumption. One thing to note though is that in every single case reported here the result beat consensus estimates...

1. US GDP - first revision
The US officially revised its Q4 GDP annualised quarterly growth rate up to 5.9% from 5.7% previously reported (against consensus estimates for no change at 5.7% with a range of 4.2% to 6.3%). On a quarter on quarter basis the rate was about 1.47%, and a year on year basis was 0.1%. So not a huge shift in the headline rate, but some of the details to note include that purchases of equipment and software grew the most in about a decade at 18.2% annualised. Also inventories ended up making an even larger contribution to the growth rate, which shows that it's still very much at this point a temporary recovery; the question is, will it remain a temporary recovery or will it become a sustained, real recovery?



Top 5 Graphs - Growth and Inflation in the Financial Centers

February 20, 2010 – Comments (2)

This week we look at Japanese GDP figures which show an improving situation, poor performance in UK retail sales, a lift in UK inflation, a pause in US inflation, and the start of the US Federal Reserve testing the exit strategy waters in policy normalisation. So thematically I suppose we've got a bit of a growth and inflation slant this time.

Thus we've got what were for a time the 3 main financial centers in this article, where the growth situation is mixed; the UK really just struggling along, Japan benefiting from global trends in stimulus and presently largely artificial pick ups in demand, while the US is still in economic limbo - what happens when the stimulus is gone?

Meanwhile on the inflation front things are currently also largely mixed, the UK is probably the leader of the three on current inflation, while the US is a close second, and Japan is still in deflation. The risks to accelerating inflation are similar in the US and the UK, but as we'll see in the US the Fed has been making some promising moves towards preventing sowing the seeds of more powerful inflationary pressure in the years to come.

1. Japan GDP - thank you exports, thank you stimulus
Last week Japan released its GDP figures for Q4 2009; q/q it was up 1.1%, and above the expected 1%. However you need to be careful with that figure as they ended up revising down Q3 from about 1% to 0%... so the growth was shuffled forward I guess. Year on year the decreases reduced to a mere -0.90%, but overall GDP was down 5% for 2009 vs 2008. The main drivers of growth were private consumption (spurred on by stimulus measures), and a revival in net exports (helped by Chinese demand - in part stimulus related, and global demand from inventory restocking). The Japanese economy still remains firmly export oriented, and is set to gain from any improvement in international trade.




BIS Economists on "The Future of Public Debt"

February 18, 2010 – Comments (0)

Public debt and spending has become a particularly hot topic recently. The key driver is a ballooning of fiscal deficits on the back of the crisis. Governments around the world have transferred troubled assets from the private sector to the public sector in order to prevent a major meltdown, they have also taken large moves to stimulate demand. But this has worsened existing vulnerabilities in terms of fiscal sustainability. Hot spots have flared up like Greece and Dubai. The worse may still be yet to come.

In these times it is prudent to soak up new information and insights to position yourself to not only avoid loss but, if possible, make gains. This is a review of a BIS (Bank for International Settlements) conference paper entitled "The Future of Public Debt: Prospects and Implications", by Stephen G Cecchetti, M S Mohanty and Fabrizio Zampolli. This new resource should provide some insights and warnings about the future of government balances and debt positions for investors and strategists. The paper can be found here.

There are a few good charts and tables in the paper which outline current and projected positions under various scenarios e.g. interest expense as a fraction of GDP, inflation expectations, industrial economies' gross public debt and primary fiscal balances, projected population structure and age related expenditure, CDS spread regressions against various fiscal indicators. I've taken two visuals from the report to discuss in this review:  [more]



Econ Grapher's Top 5 Graphs of the Week - fragile, gradual, uneven recovery...

February 12, 2010 – Comments (0)

This week we look at the EU GDP numbers showing a pretty fragile and mixed recovery, then US retail sales showing a back-loading of holiday spending. Then we look at some of the China data that came out over the week, focusing on inflation data, and international trade stats. Finally we look at Aussie employment stats which shows continuing strength down under.

The key takeaways or themes to pull out of this edition are probably first of all that things are continuing to recover, but at a very gradual pace - and at a very mixed pace. Some positive signs could almost be called false positives, and some arguably negative signs could in fact be pointing to stronger long term growth.

1. EU GDP - gradual improvement
The EU saw 0.1% growth q/q in Q4 2009, this was against expectations of 0.4% (the same as in Q3). Year on year the declines moved closer to -2% than the previous -4%. Of course it was a mixed picture again too. The leading economies of Germany and France even differed this time with Germany recording 0 growth q/q while France recorded its 3rd quarterly gain. Of course you're probably wondering about Greece; the numbers were -0.8% q/q and -2.6% y/y, which on both case was the 3rd quarter of worsening results. So the overall message from the EU is a recovery; but a slow one, a fragile one, and an uneven one.  [more]



Social Media For Economists: Part II - Publishing and Promoting

February 11, 2010 – Comments (1)

In the previous article of this two-part series we talked about how to tap into social media sites for research purposes and connecting with interesting people that have interesting things to say. This time the emphasis is on the other side; publishing and promoting. This is about how to publish your articles and then distribute them to the widest audience possible, and to ultimately build your personal brand. Just remember though, promotion doesn’t beat good content; while it’s good to spread the word, make sure it’s worth spreading.

We’ll look at it in two parts: first we’ll look at where to publish your articles. This will include various blogs and media sites that allow you to contribute articles. Then we’ll look at how to tell people about your articles and how to get links up. It’s possibly a little overkill to use every single one of these, so it’s up to you to find the right mix. You don’t want to be seen as spamming, but at the same time you want the maximum amount of people to see your stuff and find out how smart you are and hopefully start following you.

I guess you need to quickly review your own goals. Is it to build maximum brand recognition? Is it to build maximum amount of links? Is it to go for credibility first? Is it simply to reach as many people as possible? You need to have your aims at least somewhere in your head so that you can best execute your article distribution and promotion plan.

Where To Publish Your Articles
Similar to part one of the series on social media for economists, I’ll review some key websites and assign a score out of 5 for effectiveness, and of course a paragraph on how to get the most out of it and a few tips and hints.

Your Own Blog/Website – 5/5
The first place to start is to build your own website, or blog. If you are not very tech savvy it may pay to go for a blog. Blogs are a dime a dozen these days, and many services offer them for free. Google has their own service called Blogger. It is relatively easy to use and fairly common too. Plus it has social features in that people can follow you, and comment on articles. Of course there’s also the ad sense bit so you could make a few cents here and there. I would say having your own blog is a must as it gives you a sort of home base.

Seeking Alpha – 5/5
Another must is Seeking Alpha, you have the option of just doing blog (“instablog”), or submitting the article for publishing. If your article gets selected it will be published and will feature on the daily emails (e.g. macroview), and possibly make it to the home page. If your article is really good – or popular it may get and “editors pick” which is a bit of a badge of honor. Basically this is one of the best avenues for publishing articles as you can build a up a following (people can follow you) which will say something about credibility. There’s also the interactivity of comments and messages. Also pays to get certified and add the badge to your blog.

Motley Fool CAPS – 4/5
The Motley Fool CAPS isn't too special, just another avenue for publishing your articles on your personal blog there (plus you can leverage off the established brand). The main benefit is the large audience of people who’re into the stock market. It has various other interesting features, but is definitely a distant second to Seeking Alpha. 3/5
Hedgehogs is similar (slightly superior) in function to the other two, this one lets you publish a blog on their site but also offers high touch interactivity and social features. A must if you’re aiming for maximum distribution or if you have a particular emphasis on hedge funds.

iStockAnalyst 2/5
iStockAnalyst has the benefit of publishing just about anything that you submit, and a reasonably large relevant audience. But it lacks social aspects that make sites like Seeking Alpha stick out. Use this and the other two for maximum readership and linkages, but not so much for credibility…

Daily Markets 2/5
Daily Markets will tend to automatically publish your articles if you prove to have worthy and relevant content. It’s similar to iStockAnalyst but I would say a little better in terms of quality and layout, but it lacks on the social features front.

GuruFocus 1/5
GuruFocus is another stock pickers website that allows you to submit articles for publication. Nothing special, but worthy of a look, and has a few social features, but not a huge following.

How to Promote Your Articles
Now that you’ve got some ideas on where to publish your articles, and you’ve probably published a few, it’s time to look at how to tell people about your articles. This is the promotion side of things – same deal with the descriptions. This side of things is just another aspect to the whole promotion and distribution mix – and it pays to have your goals in mind.

Business Exhange – 5/5
As mentioned in Part I business exchange is virtually a must. Join up and you can add your own articles to relevant topics. It pays to also occasionally add other articles so you attract a reasonable following on there.

Twitter – 4/5
Twitter is a must as well, you’ll want to join Twitter and also sign up with a url shortening site such as or, so that you can shorten those long blog urls to fit in your twits (it also helps on distribution as some apps pick up links from url shorteners). Also make sure you sign up with Stock Twits, and simply add $$ to your post of $ by relevant stock tickers and your tweets will show up there too. It’s also worth understanding things like hash tags i.e. you add a hash to key words e.g. see my #economic analysis.

Facebook – 3/5
Simple: create a Facebook fan page and share links to your articles. Or if you have a personal Facebook account simply share the links. I’d recommend going for the fan page as it works better for attracting/building a fan base.

Tip’d – 3/5
Tip'd is an article sharing service, kind of like Digg, but with a business focus. You can add articles under “economy” topics, etc. Well worth adding to your article promotion habits.

bizSugar – 2/5
Similar function to Tip’d, bizSugar is nothing too different, has a specific focus on small business - which is interesting... Just sign up and submit your articles with a witty summary.

fwisp – 2/5
fwisp is similar to bizSugar and Tip’d but has a slightly smaller user base, worthy of a look.

InvestorLinks – 2/5
Investor Links has an add your article feature, but it’s a little difficult to navigate – it’s ok to miss this one off your list, but include it for maximum punch if that’s your goal.

Others – 1/5
Then there’s a whole host of others from yahoo buzz, to digg, to reddit, in fact it’s worth integrating an “add this” button to your blog or website so that people can easily add your articles to those more generic social media sites. It’s probably a waste of time to go submitting your article to every service under the sun, but worth being aware of what’s out there.

So there you have it, a whole range of options for publishing and promoting your work on the Internet. To give you the bottom line; you need to have a blog, you need to be on Seeking Alpha, and you really should connect to business exchange and twitter. All the rest are nice to have and will augment the main ones, but will suit various strategies and goals. So get out there and start publishing and promoting.

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Social Media For Economists: Part I - Connecting to Intelligent Sources

February 11, 2010 – Comments (0)

This article is part of a 2-part series on social media, specifically targeted towards economists, strategists, and more broadly, investors. The objective is to educate people with an interest in economics and financial markets on how to best use Social Media websites.

The first article will explain how to tap into social media websites to obtain unique information and insights, and connect to individuals whose work you respect. The second article goes more into detail on how to publish your own work, as well as promoting both your work and your own personal brand.

What is Social Media?
Social Media, or interchangeably, social networking, is any web-based facility where people can connect and share information. Popular examples of this are Facebook, LinkedIn, Twitter, etc. In fact there’s a good chance you’ve come to this article through, or are reading it on a social media website.

Over the past decade social media and social networking capability on the Internet has developed from simple “Web 1.0” e.g. bulletin boards, email, to more advanced and innovative “Web 2.0” e.g. more advanced networking options “following”, “adding friends”, easy sharing of articles and websites, mobile access, etc. The sector continues to evolve and change, so it’s important that you stay up to date and experiment – not all social media websites are useful, and even the useful ones take a bit to make the most of them.

Why Should You Use it?
Social media is an effective way of tapping into smart minds and resources. In some ways it can be considered a valuable alternative to traditional media websites e.g. you can either scan all the headlines yourself or you can follow someone who picks up important news. It is also a source of news, with people publishing their own thoughts and analysis on their own blogs or blogging sites like Seeking Alpha.

In short, you can circumvent the traditional – arguably limiting – way of knowing, and tap into a new way of knowing. Blogs are an excellent example in that collectively they represent a diverse range of people with real expertise sharing their own thoughts and analysis – usually you wouldn’t gain access to this unless the author was considered important enough to be quoted in the media (or have the right friends) or if you were a client of theirs.

But of course, since there’s generally no editor or quality controller, you have to take the good with the bad. There are bloggers who are worth paying attention to, and then there are some that you can probably skip. It’s also true that you have to take their analysis with a grain of salt – check their references, and be mindful of unjustified assertions. You can also gain some confidence in their work by judging from the number of people that follow them. But now I’m jumping the gun…

Important Sites, and How to Make the Most of Them
Now that you’ve had a brief introduction to social media, it’s time to learn by doing. Below I’ve listed some of the key social media websites of relevance to economists and strategists, along with a paragraph on how to make the most of each site. I will link to my own profile on each site as an example – so sorry if this seems like a self-promotion drive, but my objective is first and foremost to educate you on social media. I’ve also given them a score out of 5, depending on my judgment of their usefulness for helping economists and investors tap into useful news and analysis.

Seeking Alpha – 5/5
Seeking Alpha is the first on the list, and is an absolute must to get involved in. There are wide ranges of people that publish articles on Seeking Alpha, on both broader macro-economic themes, as well as individual stocks. There are a number of high quality contributors on the site and it pays to join up and start following a few of your favorite authors. They send you daily updates of new articles, and this can be a good way of automatically tapping into that site.

Motley Fool CAPS – 3/5
This Motley Fool site is more stock focused, and allows you to participate in a stock picking game of sorts. The main value of this site is the blogs section. Here you can tap into a similar crowd as Seeking Alpha, albeit more of a stock-picking site with no quality control. The only vote of quality is posts that have a large amount of ‘recommendations’. It’s worth keeping on the radar, but definitely a distant second compared to Seeking Alpha. – 4/5
Hedgehogs is a new up and coming site, which has the potential to compete with Seeking Alpha, yet offering something quite unique and different. It is targeted more towards the hedge fund community and has a focus on creating apps and sharing programming/software. Definitely a must if you’ve got anything to do with hedgefunds, but also worth paying attention to generally – they aim to become something of a next Bloomberg. On the site you can connect with other like-minded individuals and follow their blogs and discussions.

Twitter – 3/5
If you’re not on Twitter yet then you should get on it right away. It’s definitely not the be-all and end-all but it is a useful way of connecting to streams of news and updates. Basically what you ought to do is find people worth listening to on there and start following them – they will post updates e.g. a one liner on what happened, and/or a link to the story. But it’s up to you to keep visiting the site and checking what people are doing/saying.

StockTwits – 4/5
Stock Twits is basically a Twitter app – or in other words Twitter for investors. This distinction puts it at a rank above Twitter on the relevancy scale. However it still has usability issues. Best to give it a try and see how it works for you.

Business Exchange – 5/5
Business Exchange is somewhat similar to Twitter, but I’d go out on a limb here and say that for economists/investors this is a much better, more useful tool. Basically people join up and share articles, then they and others can comment on (“react” to) articles. You can follow and be followed by people. It’s worth connecting to this site and simply monitoring the content channels (you can pick relevant topics to keep an eye on) for interesting news. You can also follow a few people that have added articles you like in hopes that they continue to do so.

Facebook – 2/5
Facebook is of marginal use, the main benefit is to connect to fan pages of companies, authors, bloggers on there that you’re interested in and you’ll be kept current with what they’re up to. It’s worthy of mention, but is probably more of a fun/social thing than an information source per se.

LinkedIn – 2/5
More of a professional networking tool than a research tool. Worth looking into from a professional standpoint, you can also link in to career groups and share links with people in your network.

Econolog – 4/5
Not a social media site per se but highly relevant – basically a real time directory of economics blogs. Definitely a must to monitor… indeed blogs should have their own category in this article, but this is probably a good proxy for all blogs in general. Another way to find and connect to blogs is generally via most of the previous sites e.g. Seeking Alpha, Twitter – most people link to their main blog.

Google Buzz - ?/5
Of course I should mention the new Google Buzz. So far it seems like an interesting tool; a mix of Facebook, Twitter, Google Reader, Gmail … all mashed into something that’s somewhat uncomfortably slotted into your trusty Gmail account. So far it seems to have promise, but I’ll need to keep using it for a bit before I can make an informed comment. But with most things in this area, the general advice line is to give it a try.

There are other sites out there that will offer similar functionality to those listed in this article; the main thing is to keep trying new things. Social media offers a new way of knowing, and if used wisely will offer you an often entertaining and fulfilling way of accessing insights and analysis while also interacting with your peers.

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How to Read GDP Reports

February 09, 2010 – Comments (0)

A country’s Gross Domestic Product, or GDP, is one of the most accepted and widely recognized metrics for gauging the level of activity in an economy. Yet there are many pitfalls in analyzing GDP to provide quality insights for investment strategy, market timing, and understanding broader economic themes that are playing out.

This article serves as a primer for those with limited-to-medium knowledge about using GDP metrics, and takes a markets and investment perspective. It’s also intended to act as a bit of a thought starter and I welcome those with extra hints and tips to post them on Seeking Alpha, or the Econ Grapher blog.

GDP Values and Percentages
There’s a range of different values you can look at e.g. PPP adjusted, nominal, real, local currency, and then there’s production versus consumption methods of calculation. The main thing you need to know is that most countries release GDP on a quarterly basis and generally in value terms, but sometimes in the form of indexes.

One of the best ways of using this data is by taking quarterly percent change e.g. Q2 divided by Q1. This shows the rate of economic growth through the year and is best examined in a series e.g. the last 5 years. Once examined over a series you can detect trends, and see booms and busts. It is also worth taking an annual percent change e.g. Q2 2009 divided by Q2 2008. This measure tends to be less choppy and gives you a better gauge as to where the economy is now versus a year ago.

On percent changes, the US tends to report GDP results using a peculiar method called “annualizing”; this is a misleading and not particularly helpful way of measuring GDP growth. To convert the number back to simple quarterly percent change you can divide it by four.

The point of looking at growth in GDP is that it flows through into things like earnings growth, disposable income, interest rates, etc. For example if economic growth is consistently high, you would expect that on average companies’ earnings will be growing. On interest rates, it’s a little more complex, but a strong economy will tend to lead to higher interest rates as more companies borrow to fund expansion (borrowing means an increase in the supply of debt – so if demand for debt is constant then the price will fall; which means an increase in the interest rate).

So at this point we’ve established that % changes in GDP are important for figuring out whether the economy is growing or not, and therefore what will in turn happen to investment markets. The next step is to look at three important terms for GDP growth rate releases.

Estimates, Preliminaries, and Revisions
There are three things you need to know here. First one is about estimates; many news outfits like Bloomberg, Reuters, Econoday will poll economists and strategist to obtain their estimate of what the GDP figure will be. These “consensus estimates” will tell you what the market is broadly expecting. It also sets the scene for how the market will react e.g. if forecasts are for 5% growth and the result comes in at 1% then it is a disappointment and the market will probably sell-off.

There is a caveat to this though, and that is to look closely at the components (next section) because sometimes the market will react more to the hidden messages in the report.

The next distinction to make is between preliminary and final results – it’s fairly simple; most countries give a first estimate as a means of providing a timely indication of economic activity. Naturally revisions follow as more information becomes available and assumptions are updated. These revisions can also move the markets if significant.

Components: GDP = C + I + G + (X – M)
The next thing to look at is the components. This is critical for drilling into what exactly is driving economic growth and assessing the make up of an economy. Quickly, the components are basically: C=Consumption, I=Investment, G=Government, X=Exports, M=Imports (sometimes the trade balance is simply referred to as “net exports”).

You can approach this from a few angles e.g. what proportion of GDP is accounted for by consumption expenditure (e.g. US is about 70%). This is useful for assessing the make up of an economy and therefore where it’s key strengths and weaknesses are.

Another important angle to look at is how each individual component is changing both on the quarter-by-quarter basis, and annual percent change basis. By looking at it this way you can tell where the growth is coming from e.g. in the recent US GDP report the bulk of the growth came from growth in investment, and net exports. In most GDP reports you can drill further into subcategories e.g. investment can be split into real estate versus business investment etc.

The value of investigating the individual components of GDP results is developing a better understanding of the economy. With this better understanding you can better position yourself to figure out what might come next…

Past, Present, and Future
As an investor or someone with a vested interest in the level of economic activity (generally everyone who exists in that economy!), you’re generally more concerned about the third: the future. The past is useful for understanding previous relationships and trends, the present is useful for understanding the current make up and position of the economy, the future is largely unknown and of critical importance in making quality decisions.

So it’s important to probe into components to see if trends are building e.g. imbalances like over-reliance on consumption, or large growth in investment that might herald stronger future growth, or excessive contributions of government that will likely reverse at some point. This is the part where more in-depth analysis of GDP results can really add value to investment decisions and market timing.

Finding the Data
Now that you know a bit more about analysing GDP data it’s worth outlining some of the source of the data. Another important angle to look at is how one economy compares with another e.g. a common comparison is emerging market economic growth versus developed economies. To this end it’s useful to consult databases that store commonly measured data. For this you can visit the websites of the OECD, IMF, World Bank, as well as data aggregators like Trading Economics.

The other option is to go straight to the source; this tends to be the national statistics office of the country in concern. A quick google search will often get you there, but to get you started here’s a few examples:
-US Bureau of Economic Analysis,
-China National Bureau of Statistics,
-EU Eurostat,
-UK National Statistics Office,
-Australia Australian Bureau of Statistics,
-New Zealand Statistics New Zealand.

Then of course there’s the countless articles and analyses in the media and on blogs like Seeking Alpha. There’s also economic and investment research reports from investment banks and asset management firms. Econ Grapher recently published an article that looked at GDP results from the US, UK, and South Korea (here), which you can check out for an example.

GDP reports often contain useful information about an economy, and provide important basis for solid analysis that can support investment decisions and other decisions that depend on outcomes that are determined by the state and course of an economy. Through paying attention to the details and knowing how to make good comparisons and asking the right questions you can arm yourself with knowledge and insights to make good decisions.

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Top 5 Graphs of the Week - US update, global monetary policy, employment

February 05, 2010 – Comments (0)

In this edition we look at the positive signs in the US PMI release, more 'less-bad' data in US nonfarm payrolls, the RBA pausing on its road to neutral policy, the BoE and ECB keeping policy easy, and New Zealand employment. If there's any theme to it all, it could be an employment and monetary policy theme.

Indeed, it would be interesting to think about things around this theme, because these indicators are likely to tell you where the recovery is at (e.g. faster recovery = jobs growth, and monetary policy tightening). At the same time it could tell you where the recovery might be going too (e.g. easy monetary policy stimulates - or perhaps even over-stimulates activity, slow job growth impacts on consumer deleveraging).

1. US ISM PMI - Onwards and Upwards?
The main index came in at 58.4 for January vs 54.9 in December and beating consensus of 55.0. This was a pretty positive report overall, and pointed to a continuation of the momentum spurred on by stimulus measures and the inventory cycle. One of the key features again was the state of New Orders, the green line in the chart below, this leading indicator points to what will likely be another strong quarter of economic activity in Q1 2010. There were other interesting points in the report too, e.g. the prices index jumped further to 70, the exports index grew faster than the imports index, the employment index showed net positive hiring, and inventory levels still showed up as being too low.  [more]

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