General News

Currencies are bound to remain sensitive to developments in Europe, at least early in the week or until something bigger grabs the headlines. Again, focus is on Greece. Newly appointed finance minister, Evangelos Venizelos is due to attend talks with other European Union finance ministers in Luxembourg for a two-day meeting on Europe’s economic outlook. It is almost guaranteed that the meeting will produce some kind of agreement; however, the devil will be in details. This will create uncertain trading conditions and currencies are likely to respond in an unpredictable manner. On a related note, over the weekend reports emerged about UK banks pulling out from the Eurozone interbank lending market. Large institutions like Barclay and Standard Chartered are cutting their exposure to the PIIGS countries. To date these banks have pulled hundreds of millions, perhaps even several billions of Pounds from the continent. If more banks follow, this may severely restrict liquidity when it is needed most – the next time bad...

Ben Bernanke's speech, German ZEW Economic Sentiment in the context of the Greek crisis and US Fed rate decision are the highlight of this week. Here's anoutlookfor the major market-moving events. At the beginning of last week head of the ECB, Jean-Claude Trichet implied the possibility of excluding countries from the Euro-Zone in his speech regarding the Greek debt. Assuming this is a valid option, it could have serious implications on many countries in the EU. Is this only a threat or the EU's new course of action? Let's Start: Ben Bernanke speaks: Sunday, 18:30. Ben Bernanke Federal Reserve Chairman is scheduled to speak in Washington and may speak about the global slowdown and the downward trend in the job market. His words affect the market. Euro-Zone German ZEW Economic Sentiment: Tuesday, 9:00. German economists confidence dropped more than expected in May to 3.1 from 7.6 in April below forecasts of 5.0 amid global slowdown and the crisis in the Euro-Zone. A further drop...

Well, this is embarrassing… When we set up this virtual portfolio on April 9th, the idea was to create a portfolio for people like my Mom, who just became a widow, and so many of her friends, who need a relatively safe place to invest their money but would rather not live off the 6% returns generated by the typical retirement fund. Our primary goals in the portfolio is A) Don’t Lose Money, which is Warren Buffett’s Rule #1 of investing and B) To generate a relatively steady monthly income of $4,000 against our $500,000 portfolio (about 10% a year). Despite the fact that we have allocated less than 40% of our cash, we have accidentally made WAY too much money already and this is NOT the lesson we are trying to teach! What happened is, this past couple of weeks, we had a really nice dip in the markets and our disaster hedges kicked in – as they are supposed to...

May consumer prices in the US came in higher than the consensus had been expecting, with, as we thought likely, with less of a drag from falling petrol prices than had been expected. Overall energy prices fell only 1.0% m/m, erasing only some of April's 2.2% energy price rise. As a result, the headline price level rose 0.2% m/m, taking the inflation rate to 3.6% y/y (Consensus 3.4%, we were looking for 3.6%), and core prices rose 0.3%, taking core inflation up from 1.3% to 1.5%. This leaves the core inflation rate 'spot on' in the middle of the Fed's implicit comfort zone (more than 1.0%, less than 2.0%), and ignoring the activity side of the argument, is utterly inconsistent with the Fed's current policy of exceptionally accommodative monetary policy. There were no particular standouts in the data, with the possible exception of apparel, which jumped 1.2% m/m (0.2% in April). Vehicle prices continued their steady acceleration, rising 1.0% in May,...

Bank of England Governor Mervyn King said policy makers are right to keep the key interest rate at a record low because weak growth in money and wages signal the current bout of above-target inflation will prove 'temporary'."Subdued rates of increase in average earnings, as w ell as remarkably -- some might say disturbingly -- low growth rates of broad m oney have provided strong signals that inflation will fall back in due course," he said in a speech in London on Wednesday.A rate increase "would have meant a weaker recovery, or even further falls in output" and "a risk of inflation falling well below the target in the medium term." King said interest rates will have to rise to "more normal levels" from the current 0.50%, though the timing is "simply impossible" to know because of uncertainty on the pace of the economy’s rebalancing and the impact of inflation that’s more than twice the bank ’s 2.0% target. The governor,...

The Canadian dollar is still well-supported by the release of the Canadian capacity utilization of the first quarter of this year which surged to 79% from 76.8% in the last quarter of 2010 and this figure came after Ivey PMI of May which rose significantly to 69.1 from 57.7 while the median forecast was referring to 60 to show strong improving of the Canadian industrial performance which can lead BOC to hike the interest rate specially after the declining of the Canadian unemployment rate to 7.4% in May from 7.6% in April and after the rising of April Canadian raw materials prices index by 6.8% yearly from 5.8% which can add more weights on BOC to start hiking the interest rate again after keeping it unchanged at 1% since 8th September 2010 to be the second following ECB which hiked it by .25% in April and has signaled earlier this month for another tightening action to come next July while...

The Euro suffered overnight as talks between Euro-zone finance ministers did not come to a conclusion that brought clarity to the market. Euro-zone officials remains deeply divided over the issue of how much participation there should be by private credit-holders with Germany on one side demanded extending maturities of Greek debt, while France and the ECB are on the other side calling for any solution to avoid a “credit event” or default.   With meetings ending acrimoniously, investors had to ponder the possibility of an disorderly Greek default, a worse case scenario that caused traders to abandon the single currency and move towards the relatively safe haven of the USD. Investors also shunned periphery Euro-zone debt with the cost of credit default swaps for Greek, Portuguese and Irish debt hit new record highs. The EUR had been climbing at the beginning of this week, but that rally looked more like a correction to the downswing from last week. We now look to see if the EUR continues its declines this week, as it...

The euro fell on Wednesday on fears Greece might not implement another round of austerity measures aimed at reducing the country's massive debt. At the moment, the euro lost 0.457% of its value against the U.S. dollar to trade around $1.4377. At the same time, the euro retreated against the Japanese yen, falling 0.325% to ¥115.86. The euro has been once again shaken by Greece. The Eurozone's troubled economy is preparing for a vote on the next round of austerity measures, whose goal is to cut the government's massive budget deficit. The Greeks are sending a clear message to the government that its citizens have had enough of cuts as they prepare for a general strike. Protesters plan to gather outside the parliament building and encircle it in an attempt to prevent the MPs from entering the building. Protesters are not the only problem for the government, however, as some members of the ruling party have decided to vote against the...

Is a new recession coming? This is currently one of hot questions in economic blogosphere. We expect it in 2012 and 2013. Our prediction is based on a quantitative growth model.   The first post in this blog was devoted to real GDP growth and its relation to the change in a specific age population. We have presented a number of growth models for various developed counties and validated them by new data. The original model for the U.S. links the change rate of real GDP per capita, dlnG/dt, to the change in the number of 9-year-olds, dlnN9/dt, and the reciprocal value of the attained level of GDP per capita, A/G:   dlnG/dt= A/G + 0.5dlnN9/dt (1)   where A is an empirically derived constant. One can rewrite (1) relative to N9 and obtain the following equation in a discrete form:   N9(t) = N9(t-1)[2.0( dlnG - A/G) + 1] (2)   where dt=1 year.   Figure 1 presents the result of the N9 modeling between 1960 and 2005. The agreement between...

What did the Lord say to Noah? The same thing that Bank of America CEO Brian Moynihan might now be saying to his shareholders. That is, ‘how long can you tread water?’ Bank of America’s stock is down approximately 25% on the year and close to 35% over the last twelve months. While it has doubled from the Armageddon lows seen in 2008, the stock has fully retraced any moves higher since early 2009.   (The graph of Bank of America below is sourced from Market Watch and covers the last three years). What gives? Will Bank of America need to raise more capital? Will it need another lifeline from Uncle Sam? While BofA is heavily involved in virtually every segment of consumer, commercial, and investment banking in the world today, at its core it is a truly a consumer banking franchise. As such, its stock price is a reflection of its consumer banking operations and in turn the health of the American consumer....