Today in the economy

[CGM]

I just found an ETF that inverslely tracks consumer confidence, when consumer confidence goes down, it's value goes up. It's riding at $109 a share I wish I would have had it last december it paid out a $33 dividend per share

If anyone's interested in researching it (I am not advising you to buy or sell any securities) here's a link

SCC: Summary for ULTRASHORT CONSUMER - Yahoo! Finance
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huh? that is bizarre. Surely you don't mean it really does track consumer confidence. I could read up on it, but I'd rather hear you describe the mechanism by which an etf can inversely track consumer confidence. I mean, how can you have shares in that?

It doesn't invest in consumer confidence, but it plays against consumer services things like food, vitamins, clothing and other perishables, of course a decrease in stock values (belief of value of ownership) of this nature has a direct correlation to consumer confidence. Consumer confidence is a measure of how much consumers plan to spend vs. save today and in the future. Since the fund shorts stocks of manufacturers, retailers and distributers of said items it is always betting that consumer confidence as well as demand is declining. The 207 companies this fund invests in are believed to be a good cross section of what the average consumer would be expected to spend their money in a given year, it's mostly average income things like Autozone, Bed, Bath and beyond, Chipotle, burger king, eBay and things like that.
This is a bear market security and is expected to do very well in bear markets, but extremely poorly in bull markets. Make sense?

Bottom line you can expect this fund to go up when consumer confidence goes down and down when consumer confidence goes up.

OK thanks, that helps. It explains the tracking but it does seem to imply that the demand for these perishables goes up when consumer confidence goes down, and it's not clear to me why this should happen, but I guess it happens.

[killersheep]

huh? that is bizarre. Surely you don't mean it really does track consumer confidence. I could read up on it, but I'd rather hear you describe the mechanism by which an etf can inversely track consumer confidence. I mean, how can you have shares in that?

It doesn't invest in consumer confidence, but it plays against consumer services things like food, vitamins, clothing and other perishables, of course a decrease in stock values (belief of value of ownership) of this nature has a direct correlation to consumer confidence. Consumer confidence is a measure of how much consumers plan to spend vs. save today and in the future. Since the fund shorts stocks of manufacturers, retailers and distributers of said items it is always betting that consumer confidence as well as demand is declining. The 207 companies this fund invests in are believed to be a good cross section of what the average consumer would be expected to spend their money in a given year, it's mostly average income things like Autozone, Bed, Bath and beyond, Chipotle, burger king, eBay and things like that.
This is a bear market security and is expected to do very well in bear markets, but extremely poorly in bull markets. Make sense?

Bottom line you can expect this fund to go up when consumer confidence goes down and down when consumer confidence goes up.

OK thanks, that helps. It explains the tracking but it does seem to imply that the demand for these perishables goes up when consumer confidence goes down, and it's not clear to me why this should happen, but I guess it happens.

It happens when people make a conscious decision to make do with less, it doesn't track commodity items like staple foods wheat, corn, beans etc. which is naturally what people gravitate towards as essentials in rough times. Rather, it reflects one step past that, look at it this way "If I get things that are essential to me and have $10 left will I spend it or save it?"

[CGM]

It doesn't invest in consumer confidence, but it plays against consumer services things like food, vitamins, clothing and other perishables, of course a decrease in stock values (belief of value of ownership) of this nature has a direct correlation to consumer confidence. Consumer confidence is a measure of how much consumers plan to spend vs. save today and in the future. Since the fund shorts stocks of manufacturers, retailers and distributers of said items it is always betting that consumer confidence as well as demand is declining. The 207 companies this fund invests in are believed to be a good cross section of what the average consumer would be expected to spend their money in a given year, it's mostly average income things like Autozone, Bed, Bath and beyond, Chipotle, burger king, eBay and things like that.
This is a bear market security and is expected to do very well in bear markets, but extremely poorly in bull markets. Make sense?

Bottom line you can expect this fund to go up when consumer confidence goes down and down when consumer confidence goes up.

OK thanks, that helps. It explains the tracking but it does seem to imply that the demand for these perishables goes up when consumer confidence goes down, and it's not clear to me why this should happen, but I guess it happens.

It happens when people make a conscious decision to make do with less, it doesn't track commodity items like staple foods wheat, corn, beans etc. which is naturally what people gravitate towards as essentials in rough times. Rather, it reflects one step past that, look at it this way "If I get things that are essential to me and have $10 left will I spend it or save it?"

ok . People who might normally buy more expensive food items switch to basic stuff, so more basic stuff gets consumed. Taht's part of it. The "one step beyond" part I'll have to let that one settle in. thx

[killersheep]

OK thanks, that helps. It explains the tracking but it does seem to imply that the demand for these perishables goes up when consumer confidence goes down, and it's not clear to me why this should happen, but I guess it happens.

It happens when people make a conscious decision to make do with less, it doesn't track commodity items like staple foods wheat, corn, beans etc. which is naturally what people gravitate towards as essentials in rough times. Rather, it reflects one step past that, look at it this way "If I get things that are essential to me and have $10 left will I spend it or save it?"

ok . People who might normally buy more expensive food items switch to basic stuff, so more basic stuff gets consumed. Taht's part of it. The "one step beyond" part I'll have to let that one settle in. thx

That is correct and looking back on my original I explaination, I can see that I didn't make that clear at all, sorry about that.

[Kirkland Laing]

Okay once you've nationalized the banks and cleared out the toxic assets how do you go back to private ownership? Do the CEOs and board members keep their jobs?

No, they all get the sack. The shareholders get wiped out too. The government cleans up the debt and raises as much as it can to offset the debt by creating new bank stock in the nationalised bank, which is then sold to investors. The governmwent just took over two banksa t the weekend and is in the process of doing this to them as it has with almost twenty this year and lots more to follow.

TM, some bankers will end up working for a million or half a million or whatever the government sets as a cap. There are plenty of unemployed bankers and some of the ones currently at risk of getting a government paycut will accept it as the alternatives are less attractive. This will give the government a bunch of people to point to and say see, we've done what we said we would on executive pay. But most will move to greener pastures. The govt. will actually make loopholes so they can keep as many talented people working for the welfare banks as they can.

[VictorCharlie]

So why the hell didn't we just do this from the start and not spend 700 billion and counting

[killersheep]

3/2/09

Canada - GDP

Actual-1.00%|Forecast-0.70%|Previous-0.70%

Gross Domestic Product (GDP) determines the total worth of all goods and services produced by the economy. GDP is the broadest measure of activity and the primary gauge of the economy's health. To foreign investors, a strong economy is viewed favorably as it spurs investment opportunities in the domestic stock and bond markets. More importantly, the central bank is more likely to raise interest rates in the face of a strong and growing economy. The combination of these effects can have a large impact on the demand for the country's currency. An upward trend has a positive effect on the country's currency.

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USA - ISM Manufacturing Index

Actual35.80|Forecast34.00|Previous35.60|


The Institute of Supply Management (ISM) Manufacturing Index determines the activity level of purchasing managers in the manufacturing sector, with a reading above 50 indicating expansion. To produce the index, purchasing managers are surveyed on a amount of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely as purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance. A rising trend has a positive effect on the nation's currency.

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Australia - Retail Sales

Actual0.20%|Forecast-0.50%|Previous3.80%|

Determines the worth of sales at the retail level. Traders pay close attention to Retail Sales as it is usually the first significant indicator of the month that relates to consumer behavior and is susceptible to surprises. A rising trend has a positive effect on the nation's currency as Retail Sales make up a large portion of consumption, which is a key driver of the economy and has a sizable impact on GDP.

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Australia - Interest Rate Statement

Actual3.25%|Forecast3.00%|Previous3.25%

Each month, excluding January, the Reserve Bank of Australia (RBA) Board meets to set the nation's short term interest rate (i.e., "cash rate"). The Board announces the decided rate shortly after the meeting, and when there is a change in rates they also releases a statement that contains the economic conditions that effected their decision. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 3%, they will respond by raising interest rates in an attempt to bring prices down. A rising trend in interest rates has a positive effect on the nation's currency. Short term rates are the paramount factor in currency valuation; traders look at most other indicators merely to predict how interest rates may change in the future. High interest rates attract foreigners looking for the best "risk-free" return on their money, which can dramatically increases demand for the nation's currency. The decision on where to set interest rates depends mostly on inflation.

[Kirkland Laing]

So why the hell didn't we just do this from the start and not spend 700 billion and counting

Because America is a corporate socialist economy. Since this crisis started the welfare of the banks' shareholders and bondholders has been the main priority of both the Bush and Obama admins.

Today's AIG bailout is part of that too. AIG insured hundreds of billions of mortgage securities from default, now they've all defaulted and so AIG has to pay out on them and they don't have any cash left so the government has to pay. If the govt. doesn't pay then the firms that AIG insured will go bust, notably US investment banks and French/German commercial banks. They should stop pretending and nationalise everything already, they're already backstopping the whole system. Yet they keep on bailing these balck holes out.

[Kirkland Laing]

3/2/09

Canada - GDP

Actual-1.00%|Forecast-0.70%|Previous-0.70%

Gross Domestic Product (GDP) determines the total worth of all goods and services produced by the economy. GDP is the broadest measure of activity and the primary gauge of the economy's health. To foreign investors, a strong economy is viewed favorably as it spurs investment opportunities in the domestic stock and bond markets. More importantly, the central bank is more likely to raise interest rates in the face of a strong and growing economy. The combination of these effects can have a large impact on the demand for the country's currency. An upward trend has a positive effect on the country's currency.

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USA - ISM Manufacturing Index

Actual35.80|Forecast34.00|Previous35.60|


The Institute of Supply Management (ISM) Manufacturing Index determines the activity level of purchasing managers in the manufacturing sector, with a reading above 50 indicating expansion. To produce the index, purchasing managers are surveyed on a amount of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely as purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance. A rising trend has a positive effect on the nation's currency.

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Australia - Retail Sales

Actual-|Forecast-0.50%|Previous3.80%|

Determines the worth of sales at the retail level. Traders pay close attention to Retail Sales as it is usually the first significant indicator of the month that relates to consumer behavior and is susceptible to surprises. A rising trend has a positive effect on the nation's currency as Retail Sales make up a large portion of consumption, which is a key driver of the economy and has a sizable impact on GDP.

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Australia - Interest Rate Statement

Actual-|Forecast3.00%|Previous3.25%

Each month, excluding January, the Reserve Bank of Australia (RBA) Board meets to set the nation's short term interest rate (i.e., "cash rate"). The Board announces the decided rate shortly after the meeting, and when there is a change in rates they also releases a statement that contains the economic conditions that effected their decision. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 3%, they will respond by raising interest rates in an attempt to bring prices down. A rising trend in interest rates has a positive effect on the nation's currency. Short term rates are the paramount factor in currency valuation; traders look at most other indicators merely to predict how interest rates may change in the future. High interest rates attract foreigners looking for the best "risk-free" return on their money, which can dramatically increases demand for the nation's currency. The decision on where to set interest rates depends mostly on inflation.

Australia are a bunch of irrelevany upside down motherfunkers as far as the global economy and many other things are concerned. Canada's heavily regulated socialist-style banking system has meant that Canada is the biggest economy least affected by this whole snafu. Contrast with ultra free-market Europe whose system is more in debt than the US and with no Fed to bail it out. A prediction. At some point Europe's banking system will suffer a near-terminal event and send the global system into panic. American conservatives will seize on this and blame socialist Europe and its socilaist banks for causing the whole crisis and claim it shows how government should be kept out of banking and the financial markets, even though Europe is a more free-market version of the US system. By the next election this will be an article of faith for all conservatives.

Europe melting down will have effects all over too, not least in America. The joys of globalisation and a globalised financial system.

[CGM]

Here's one year charts of the Toronto Stock Exchange and the Toronto Dominion Bank. If this is a big economy least affected, I'd hate to see the worst affected.

[Kirkland Laing]

Here's one year charts of the Toronto Stock Exchange and the Toronto Dominion Bank. If this is a big economy least affected, I'd hate to see the worst affected.

A recession and a global financial system meltdown has quite an adverse effect on any stock market index or financial stock so looking at the numbers right now doesn't give you the real picture. The measuring stick is solvency. None of Canada's banks are bankrupt and they haven't needed a bailout to remain solvent either. Despite already having been bailed out with trillions of dollars, major US/European/Asian banks are all bankrupt.

[CGM]

Here's one year charts of the Toronto Stock Exchange and the Toronto Dominion Bank. If this is a big economy least affected, I'd hate to see the worst affected.

A recession and a global financial system meltdown has quite an adverse effect on any stock market index or financial stock so looking at the numbers right now doesn't give you the real picture. The measuring stick is solvency. None of Canada's banks are bankrupt and they haven't needed a bailout to remain solvent either. Despite already having been bailed out with trillions of dollars, major US/European/Asian banks are all bankrupt.

OK, if we are talking about bank solvency, then perhaps we are better off in some respects. But when it comes down to the usual recession and market issues and impact to the average person because of what has happened, Canada is not really that much better off than anyone else, which is the point I was making.

[Kirkland Laing]

Here's one year charts of the Toronto Stock Exchange and the Toronto Dominion Bank. If this is a big economy least affected, I'd hate to see the worst affected.

A recession and a global financial system meltdown has quite an adverse effect on any stock market index or financial stock so looking at the numbers right now doesn't give you the real picture. The measuring stick is solvency. None of Canada's banks are bankrupt and they haven't needed a bailout to remain solvent either. Despite already having been bailed out with trillions of dollars, major US/European/Asian banks are all bankrupt.

OK, if we are talking about bank solvency, then perhaps we are better off in some respects. But when it comes down to the usual recession and market issues and impact to the average person because of what has happened, Canada is not really that much better off than anyone else, which is the point I was making.

I was kind of hoping your PM would stick to the no stimulus policy so we could have a control experiment in a major economy to compare to countries that had one. Sorry about that. And having a solvent banking system definitely makes you better off. You won't have to raise trillions in taxes over the next few decades to pay for late 2000s losses by your banks unlike other major economies.

[killersheep]

3/3/09

Canada - Interest Rate Statement

Actual0.50%|Forecast0.50%|Previous1.00%

Eight times per year the Bank of Canada (BOC) Governing Council meets to set the nation's short term interest rate (i.e., "overnight rate"). Shortly after the meeting they release a statement that contains the decided rate, a brief commentary of the economic conditions that effected their decision, and most importantly, clues regarding the outcome of future meetings. The decision on where to set interest rates depends mostly on inflation. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 2%, they will respond by raising interest rates in an attempt to bring prices down. A rising trend in interest rates has a positive effect on the nation's currency. Short term rates are the paramount factor in currency valuation; traders look at most other indicators merely to predict how interest rates may change in the future. High interest rates attract foreigners looking for the best "risk-free" return on their money, which can dramatically increases demand for the nation's currency.

---------------------------------------------------------------------

Australia - GDP

Actual-|Forecast0.10%|Previous0.10%

Gross Domestic Product (GDP) determines the total worth of all goods and services produced by the economy. GDP is the broadest measure of activity and the primary gauge of the economy's health. To foreign investors, a strong economy is viewed favorably as it spurs investment opportunities in the domestic stock and bond markets. More importantly, the central bank is more likely to raise interest rates in the face of a strong and growing economy. The combination of these effects can have a large impact on the demand for the country's currency. An upward trend has a positive effect on the country's currency.

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USA - Bernanke testifies

Ben Bernake, US federal reserve chairman will be testifying before a house panel regarding America's economic outlook and financial markets.

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EU - Trichet speaks

European Central Bank (ECB) President Jean-Claude Trichet will hold a press conference after the bi-monthly Bank for Intercountryal Settlements (BIS) meeting, in Basel. As head of the ECB's governing body, which is responsible for setting the euro zone's short term interest rate, his speeches can sometimes cause market volatility as Currency traders react to clues regarding future monetary policy.

[Kirkland Laing]

Protecting the taxpayer


Federal Reserve Chairman Ben S. Bernanke acknowledged for the first time that a U.S. recession is possible because homebuilding, employment and consumer spending will deteriorate.........


Bernanke, making his first extensive public comments since the Fed's decisions two weeks ago to back the takeover of Bear Stearns and lower interest rates by 0.75 percentage point, is trying to fend off criticism of the deal while struggling to prevent a deeper economic slump.........

Bernanke, questioned by lawmakers about putting taxpayer money at risk, expressed confidence the Fed won't lose money on the Bear Stearns deal. ``I feel reasonably confident that we'll be able to recover all the principal and indeed some interest, and there is some chance of even upside beyond that,'' Bernanke said.

Ben Bernanke
Fed Chairman
Testimony to Congress
April 2nd, 2008








U.S. taxpayers may be stuck with losses on $30 billion of Bear Stearns Cos. assets owned by the Federal Reserve even though the central bank has said otherwise, according to Robert A. Eisenbeis, Cumberland Associates Inc.’s chief monetary economist. “There is no prospect for a profit on the assets,” Eisenbeis wrote in a report yesterday. “Losses are mounting.”.........



“The transaction was not structured with adequate over- collateralization to protect the taxpayers from losses,” based on the risks associated with housing-related assets at the time, Eisenbeis wrote.
The central bank’s Board of Governors wrote in a Dec. 29 report to Congress that it didn’t expect “any net loss to the Federal Reserve or taxpayers” from the Bear Stearns holdings.



Bloomberg
February 4th 2009


















Federal Reserve Chairman Ben S. Bernanke said American International Group Inc. operated like a hedge fund and having to rescue the insurer made him “more angry” than any other episode during the financial crisis. “If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG,” Bernanke told lawmakers today. “AIG exploited a huge gap in the regulatory system, there was no oversight of the financial- products division, this was a hedge fund basically that was attached to a large and stable insurance company.”....




AIG is getting as much as $30 billion in new government capital and relaxed terms on its bailout announced yesterday...........


In his testimony, the Fed chief said that policy makers may need to expand aid to the banking system beyond the $700 billion already approved, and take other aggressive measures even at the cost of soaring fiscal deficits......


The insurer’s first bailout package grew to $150 billion last year. After failing to sell enough subsidiaries to repay the government, the company had to turn to the government again. The company may need more support if financial markets don’t improve, the Treasury and Federal Reserve said in a joint statement yesterday.
Bernanke said the revised bailout gives taxpayers “the best chance” of eventually recovering “most or all of the investments” the public has.



Bloomberg
March 3rd, 2009