economics

February 25, 2011

Comparing Chinese provinces with countries All the parities in China Which countries match the GDP, population and exports of Chinese provinces?

Filed under: Uncategorized — ktetaichinh @ 4:44 am
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http://www.economist.com/content/chinese_equivalents
China is now the world’s second-biggest economy, but some of its provinces by themselves would rank fairly high in the global league. Our map shows the nearest equivalent country. For example, Guangdong’s GDP (at market exchange rates) is almost as big as Indonesia’s; the output of both Jiangsu and Shandong exceeds Switzerland’s. Some provinces may exaggerate their output: the sum of their reported GDPs is 10% higher than the national total. But over time the latter has consistently been revised up, suggesting that any overstatement is modest.

What about other economic yardsticks? Guangdong exports as much as South Korea, Jiangsu as much as Taiwan. Shanghai’s GDP per person is as high as Saudi Arabia’s (at purchasing-power parity), though still well below that in China’s special administrative regions, Hong Kong and Macau. At the other extreme, the poorest province, Guizhou, has an income per head close to that of India. Note that these figures use the same PPP conversion rate for the whole of China, but prices are likely to be lower in poorer provinces than in richer ones, slightly reducing regional inequality.

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March 15, 2010

Greece Outlines More Steps to Pare Deficit Markets Hail New $6.5 Billion in Austerity Plans; Reaction at Home Is Resigned, but Civil Servants Pledge Resistance

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[Greece]

—Ainsley Thompson and Mark Brown in London contributed to this article.

The latest austerity measures include an increase of two percentage points in the top value-added tax rate, stepped-up levies on tobacco, alcohol and fuel, a one-year freeze on civil servants’ pensions, and a 30% reduction in the two-month bonuses traditionally enjoyed by Greece’s public-sector workers.

London markets greeted Greece’s austerity plan, which is a combination of budget cuts and tax hikes, with some trepidation, Steve Goldstein tells the News Hub panel.

Public support for Prime Minister George Papandreou’s austerity policies is strong, despite recent strikes by organized labor, according to opinion polls taken before Wednesday’s announcement.

A survey published in newspaper Ta Nea over the weekend, when the measures were already widely expected, showed 52% of people view the government’s handling of the economic crisis as “effective.”

Zuma PressPensioners assail the latest austerity measures Wednesday by rioting outside the premier’s office in Athens.

GREECE

GREECE

Many Athenians’ support is grudging, however, combining fear of financial pain with anger at a political class that many here say has misruled Greece for years.

“If I have to tighten my belt even further, I at least want to see some of those people who stole state money to end up in jail,” said Andreas Papavasiliou, a 68-year-old retiree.

Many civil servants, the group that would be hardest hit by the planned cuts, vowed to resist the new package.

“The new measures will be the fatal blow for the average income earner. We will fight back with all means. Those who have money must pay, but those who don’t must be supported. But those measures only hurt the poor,” said Spyros Papaspyros, president of the public-sector union federation ADEDY, which had already called for a 24-hour general strike on March 16.

EU Commission President José Manuel Barroso praised the Greek measures, saying Greece’s budget consolidation was “now on track.”

Europe’s Debt Crisis

Take a look at events that have rattled European governments and global markets.

Growing Apart

Take a look at the premium in percentage points that selected euro-zone governments must pay on their 10-year bonds.

Germany, Europe’s biggest economy and the key to any financial assistance for Greece, called Greece’s package a “clear signal” that Greece was determined to bring its finances under control—but it also said no bailout was in the works, or immediately necessary.

Many Greeks have mixed feelings about Europe’s reluctance to help the country out. “The Germans are not our parents. We will have to deal with this ourselves,” said Andreas Christou, a 37-year-old civil servant. But Germany’s parsimony so far “proves that there is no such thing as EU solidarity,” he said.

December 29, 2009

Bulls On Parade- Brian S. Wesbury and Robert Stein 2009

Filed under: Uncategorized — ktetaichinh @ 10:49 pm
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What a difference a year makes. At this time last year, when many thought the whole economic and financial world was falling apart, we forecast that the Dow Jones Industrial Average would rally and recover to 11,000 by the end of 2009. As it stands now, it looks like the market is going to fall a bit short of our expectations, but not by much.

Today, our model for valuing the broad U.S. equity market signals that “fair value” for the Dow is around 19,000. This does not mean the Dow will hit that level anytime soon. To get fair value for the stock market, we take the level of corporate profits that the government reports (based on filings with the Internal Revenue Service) and then discount these profits by the prevailing 10-year U.S. Treasury interest rate. This simple “capitalized profits” model suggests the broad equity market in the U.S. is still extremely cheap.

Of course, our capitalized profits model is vulnerable to overestimating fair value during periods of abnormally low Treasury interest rates, like the one we are in right now. If interest rates are low, the model discounts profits less than usual, meaning profits appear more valuable than they actually are.

But even with a 10-year Treasury yield of 5% (compared with the current 3.8%), fair value on the Dow is still a very appealing 14,500. That assumes higher interest rates would not be accompanied by any further increase in profitability–an unlikely outcome given the V-shaped economic recovery and recent surge in corporate profits. In other words, those who can stay bullish in 2010 are likely to be well rewarded.

We realize that some investors fear a large upward move in interest rates in the year ahead, largely due to rising inflation. These fears are not completely unsound. We believe inflation will rise above consensus expected levels next year and that interest rates will also move higher.

But the 10-year Treasury yield would have to be almost 7%, and without any additional profits, for the stock market to be fairly valued at current levels. Even then, the model would simply signal that investors should anticipate future returns consistent with historical averages, not a bear market.

Nonetheless, some investors are still skittish about stocks in 2010 because they expect the Federal Reserve will finally pull the trigger and start raising short-term rates. In the past, these moves have caused some “indigestion” for the stock market. But any indigestion is likely to be temporary. After an initial stumble in 2004, right after the Fed started lifting interest rates, the Dow rallied strongly late in the year even though the Fed raised rates at every meeting for the next two years.

Stocks also rallied in 1999 after the Fed started raising rates, until investors finally realized monetary policy was too tight. This time around, with interest rates at essentially zero, it will take a great deal of time for monetary policy to actually get tight.

Moreover, everyone already knows that the Fed’s next move is up. So why should a move that everyone already anticipates hurt stock market values in any significant way?

We expect stocks to rally to 13,000 by the end of 2010, with further gains ahead for 2011. If there is one wild card that could upset this forecast, it’s the health care bill now wending its way through Congress toward President Obama’s desk. We think the Senate bill is already priced into the market. But a final law along the lines of what House Speaker Pelosi wants–which is unlikely–could cap the Dow at 12,000 and slow its growth in the future. Much like the 1970s, government policy would be detrimental to long-term stock market valuation.

Brian S. Wesbury is chief economist and Robert Stein senior economist at First Trust Advisors in Wheaton, Ill. They write a weekly column for Forbes. Brian S. Wesbury is the author of It’s Not As Bad As You Think: Why Capitalism Trumps Fear and the Economy Will Thrive.

Leading Natural Gas Exporters Russia, Canada, Norway & Algeria Are Top Gas Export Countries Read more at Suite101: Leading Natural Gas Exporters: Russia, Canada, Norway & Algeria Are Top Gas Export Countries

Filed under: Uncategorized — ktetaichinh @ 5:29 pm
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Top Ten Natural Gas Exporting Countries

The top four gas exporters account for more than a third of overall global exports.

1. Russia … 182 billion cubic meters (14.7% of estimated total world exports)

December 28, 2009

US yield curve predicting inflation, not growth surge

Filed under: Uncategorized — ktetaichinh @ 11:12 pm
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This time, some say the steep curve presages a potential jump in inflation, as the Federal Reserve prints massive amounts of money to prop up the economy. Others point to the increasing supply of longer-dated Treasuries, as the government extends the life of its debt while investors, worried about a rate increase, crowd into shorter-dated notes and bills.

“If you look at the back end of the curve it’s predicting higher rates somewhere out at year four — inflation would be a threat that far out. That is what the yield curve is predicting here, that this policy is opening the door to future inflation,” said Ronti Pal, head of US dollar rates trading at Barclays Capital in New York.

Inflation ahead

The Treasury is expected to issue as much as $2 trillion in government debt in 2010. The size of the planned issuance has stoked fears that the new money flooding the economy will depress the dollar and drive prices sharply higher.

Inflation erodes the value of Treasury debt over time. The recent dip in longer-dated Treasury prices and the spike in the yield curve reflects investors’ worries that real returns on their longer-dated US bonds could fall.

The yield curve has in the past not been a strong predictor of inflation, but in those instances rates were notably higher than now and acted as more of a constraint on prices. The two-year note is currently yielding 0.92%. At the end of November, it hit a closing low of 0.66%, lower than at any time in the last 25 years.

“The vast majority of people think that the next phase of the interest rate cycle is going to be one where the market and the (Federal Reserve) more broadly is worried about inflation — that means that the overall risk is that we’re going to have high inflation that leads to a steeper curve,” said Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford.

Since the Fed has emphasized that it will keep interest rates low for an “extended period of time,” investors generally feel comfortable buying shorter-dated notes. But the more distant future of interest rates isn’t clear. And the supply of longer-dated notes and bonds is set to grow faster than the supply of shorter-term securities.

Just as the current steepness of the yield curve suggests that the market expects inflation, the development of a weaker recovery with slower growth could cause the curve to flatten a bit.

“It is safe to say we will probably have growth that may warrant a positive yield curve, but maybe it doesn’t need to be as steep as it is because … of the headwinds that the economy is facing,” said David Coard, head of fixed-income sales and trading at The Williams Capital Group in New York.

If economic indicators next year offer less robust readings, investors may return more eagerly to longer-dated Treasuries.

Unheeded warning

To be sure, investors may want to think twice before shrugging off the predictive powers of the yield curve. The curve “inverted” through much of 2006 and early 2007, with the yield on 10-year notes falling below two-year note yields. An inverted yield curve has often preceded recessions over the past 70 years, including the Great Depression.

The majority of economic analysts shrugged off the curve inversion, however, claiming the situation was atypical because a voracious appetite for long-dated bonds from overseas, especially China, was keeping long-dated yields unusually low.

However, the US economy descended into one of the worst recessions in its history at the end of 2007 following the collapse of the US subprime mortgage market and then the financial crisis.

“In hindsight, people should have paid more attention to it in 2006 and 2007,” said John Canally, investment strategist and economist with LPL Financial in Boston.

Still, Cannally suggests the yield curve’s predictive ability is in question, though he says it should portend at least a steady improvement in demand. “It tells you the current expansion is sustainable through 2010,” he said, adding “it may be less predictive, but not ‘un-predictive’ — it bears watching closely.”

A record wide gap between the yields of two-year and 10-year US Treasury notes may have more to say about the threat of inflation down the road than the popular view that it’s a harbinger of dramatic recovery.

Market wisdom dictates that when the yield curve is steep, a rapid economic upswing is in store. Earlier this week, the spread between yields on two-year and 10-year notes reached a record-wide 287 basis points.

But many analysts believe the steep curve may mean something different this time — though they’ve been wrong on such assumptions before

The Decade In Data

Filed under: Uncategorized — ktetaichinh @ 9:25 pm
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BURLINGAME, Calif. — All around us is evidence that we’ve been living in a decade ruled by 1’s and 0’s. A household in the U.S. is now 10 times more likely to have a broadband connection than in 2000. And analog cameras, music and media players have become quaint rarities during this past decade, replaced by their increasingly pervasive digital counterparts.

Here’s a list that compares key data points from 2000 to 2009, or the latest available figures.

–Percentage of U.S. households with a broadband connection in 2000: 6.3%

–Percentage of U.S. households with a broadband connection in 2008: 63%

–Number of e-mails sent per day in 2000: 12 billion

–Number of e-mails sent per day in 2009: 247 billion

-Revenues from mobile data services in the first half of 2000: $105 million

–Revenues from mobile data services in the first half of 2009: $19.5 billion

–Number of text messages sent in the U.S. per day in June 2000: 400,000

–Number of text messages sent in the U.S. per day in June 2009: 4.5 billion

–Percentage of U.S. households with at least one digital camera in 2000: 10%

–Percentage of U.S. households with at least one digital camera in 2008: 68.4%

–Percentage of U.S. households with at least one MP3 player in 2000: less than 2%

–Percentage of U.S. households with at least one MP3 player in 2008: almost 43%

–Number of pages indexed by Google in 2000: 1 billion

–Number of pages indexed by Google in 2008: 1 trillion

–Number of Google searches per day in 2001: 10 million

–Number of Google searches in 2009: 300 million, estimated

–Number of total Wikipedia entries in 2001: 20,000

–Number of Wikipedia entries in English in 2009: 3.1 million

–Number of blogs in 2000: less than 100,000

–Number of blogs 2008: 133 million

–Minimum free hard-disk space needed to install Windows 2000: 650 megabytes

–Minimum available hard-disk space needed to install Windows 7: 16,000 megabytes (16 gigabytes)

–Amount of hard-disk space $300 could buy in 2000: 20 to 30 gigabytes

–Amount of hard-disk space $300 could buy in 2009: 2,000 gigabytes (2 terabytes)

Sources: Forrester Research ( FORR news people ), CTIA, Radicati Group, Technorati, Wikipedia, Google and Microsoft ( MSFT news people ).

December 23, 2009

new home sale vs. existing home sale

Filed under: Uncategorized — ktetaichinh @ 5:55 pm
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existing home sales definition – finance
A monthly statistical report compiled by the National Association of Realtors of sales of existing homes. These statistics are closely watched by the financial markets as a sign of the strength of the economy; The purchase of a house typi-cally prompts additional sales of furniture, appliances, and new decorations, which help to fuel consumer demand and thus economic growth. The report also includes sales on a seasonally adjusted annual rate, which reflects the number of homes that would be sold if the same number of sales in one month occurred for twelve months. In 2002, a record 5.56 million homes were sold, which beat the previous record of 5.3 million in 2001.
new home sale Definition- econoday
New home sales measure the number of newly constructed homes with a committed sale during the month. The level of new home sales indicates housing market trends and, in turn, economic momentum and consumer purchases of furniture and appliances. Why Investors Care
This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as new home sales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic “ripple effect” can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, new home sales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the new home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.
Frequency : every month
Census Bureau

Comparing New Home Sales and Existing Home SalesNew home sales and existing home sales are released each month at about the same time. Many comparisons are made between the two series, but before doing any comparisons, one must be aware of some definition differences that affect the timing of the statistics.

The Census Bureau collects new home sales based upon the following definition: “A sale of the new house occurs with the signing of a sales contract or the acceptance of a deposit.” The house can be in any stage of construction: not yet started, under construction, or already completed. Typically about 25% of the houses are sold at the time of completion. The remaining 75% are evenly split between those not yet started and those under construction.

Existing home sales data are provided by the National Association of Realtors®. According to them, “the majority of transactions are reported when the sales contract is closed.” Most transactions usually involve a mortgage which takes 30-60 days to close. Therefore an existing home sale (closing) most likely involves a sales contract that was signed a month or two prior.

Given the difference in definition, new home sales usually lead existing home sales regarding changes in the residential sales market by a month or two. For example, an existing home sale in January, was probably signed 30 to 45 days earlier which would have been in November or December. This is based on the usual time it takes to obtain and close a mortgage.

Effective with January 2005, the National Association of Realtors created a new monthly series to overcome the lagging effect of the existing home sales definition. This new series is called Pending Home Sales and is based on sales of existing homes where the contract has been signed but the transaction has not been closed, making it roughly equivalent to the new home sales definition. Monthly estimates are expressed as an index where the year 2001 has been set to equal 100.0.

New and Existing Home Sales: The Distressing Gap- calculated risk

Note: For graphs based on the new home sales report this morning, please see: New Home Sales Decrease in September

This is obvious but worth stating: new home sales are far more important for employment and the economy than existing home sales. When an existing home is sold, the housing stock doesn’t change, and the only direct contribution to the economy are the transaction costs. When a new home is sold, the housing stock of the nation increases, and there is a significant amount of spending on material and labor.

During the housing bust, new home sales fell much further than existing home sales (as a percent of sales). I’ve jokingly referred to the difference in percentage declines as the “Distressing” gap, because of all the distressed sales of existing homes.

More recently the gap has been supported by misdirected government policy.

Here is a graph of the “gap”:

Distressing Gap Click on graph for larger image in new window.

This graph shows existing home sales (left axis) and new home sales (right axis) through September.

I believe this gap was initially caused by distressed sales, but more recently the gap has also been widened as a result of the first-time home buyer tax credit.

The second graph shows the same information, but as a ratio for existing home sales divided by new home sales.

Ratio: Existing home sale to new home salesThe ratio is now at an all time record high.

Although distressed sales will stay elevated for some time, eventually I expect this ratio to decline back to the previous ratio.

The ratio could decline because of an increase in new home sales, or a decrease in existing home sales – I expect a combination of both.

Although I think we’ve seen the bottom for new home sales, I think we will see further declines in existing home sales as the impact of the home-buyer tax credit wanes, and as we see fewer distressed sales in low priced areas.

Comment from Kathy Lien on Dec 23 rd 2009

Another round of weak economic data has forced the U.S. dollar to give up its gains.  Although the lofty University of Michigan consumer confidence numbers were revised lower for December, it does not draw away from the fact that confidence improved dramatically this month. The big surprise was in new home sales which fell by a staggering 11.3 percent in November.  This is the sharpest decline that we have seen since January and the lowest number of units sold since April.  Not only does the large decline offset the strong demand for existing home sales but it provides a taste of what may be to come for the housing market when the tax break ends next year. With such weak demand for new home sales, we are surprised to see an increase in the median new home price last month.  Although prices fell 1.9 percent when compared to the year prior, they rose 3.8 percent between October and November.  Nonetheless the teflon dollar has finally buckled under the weight of disappointing economic data and we believe that the buck will remain weak for the rest of the trading day.

December 5, 2009

Banks and information technology: Silo but deadly

Filed under: Uncategorized — ktetaichinh @ 4:08 am
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Dec 3rd 2009
From The Economist print edition

Messy IT systems are a neglected aspect of the financial crisis

NO INDUSTRY spends more on information technology (IT) than financial services: about $500 billion globally, more than a fifth of the total (see chart). Many of the world’s computers, networking and storage systems live in the huge data centres run by banks. “Banks are essentially technology firms,” says Hugo Banziger, chief risk officer at Deutsche Bank. Yet the role of IT in the crisis is barely discussed.

It should be. Corporate IT systems—collections of computers, applications and databases—always tend to be messy, but those of banks are particularly bad. They were the first to adopt computers: decades-old mainframes are still in use. Lots of product innovation means new systems, as does merger activity, which has proliferated in the industry in recent years: Citigroup had a notoriously fragmented IT set-up going into the crisis. The need to comply with regulations, and the global presence of big banks, adds complexity.

The demands of financial markets make matters worse. Hedging positions, trading derivatives and modelling financial products all require highly sophisticated programs that are only really suited to specific asset classes. The code for new financial products has to be developed quickly. Innovation often takes place on Excel spreadsheets on traders’ desktops. “The big task of management is to manage down the number of spreadsheets,” says one risk chief, whose bank creates 1,000 product variations a year.

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As a result, many banks have huge problems with data quality. The same types of asset are often defined differently in different programs. Numbers do not always add up. Managers from different departments do not trust each other’s figures. Finding one’s way through all these systems is detective work, says a former IT manager at a big British bank. “And sometimes the trail would go cold.”

This fragmented IT landscape made it exceedingly difficult to track a bank’s overall risk exposure before and during the crisis. Mainly as a result of the Basel 2 capital accords, many banks had put in new systems to calculate their aggregate exposure. Royal Bank of Scotland (RBS) spent more than $100m to comply with Basel 2. But in most cases the aggregate risk was only calculated once a day and some figures were not worth the pixels they were made of.

During the turmoil many banks had to carry out big fact-finding missions to see where they stood. “Answering such questions as ‘What is my exposure to this counterparty?’ should take minutes. But it often took hours, if not days,” says Peyman Mestchian, managing partner at Chartis Research, an advisory firm. Insiders at Lehman Brothers say its European arm lacked an integrated picture of its risk position in the days running up to its demise.

Whether the financial industry would have hit the brakes if it had had digital dashboards showing banks’ overall exposures in real time is a moot point. Some managers might not have even looked. And better IT would have done little to counteract the bigger forces behind the crisis, such as global economic imbalances.

Illustration by S. Kambayashi

Yet most in the industry agree that its woeful IT systems have, in Mr Banziger’s words, “exacerbated the crisis”. The industry spent billions on being able to trade faster and make more money, but not nearly enough on creating the necessary transparency. “Banks had lots of tools to create leverage, but not many to manage risk,” says Roger Portnoy of Daylight Venture Partners, a venture-capital firm that invests in risk-management start-ups.

Technology may have contributed to the crisis in other ways. IT systems have led to a “deskilling of the risk process”, says Steve O’Sullivan of Accenture, a consultancy. At one end of the credit chain, bank employees were not given the proper incentives to review on-screen loan-application forms (a big British bank once had a surprising number of “astronauts” applying for loans because the job description was the first choice on a pull-down menu, says a former employee). At the other end, computer-generated risk numbers gave executives a false sense of security.

Others think that IT has played an even more fundamental role in the crisis. Because things are so interconnected, largely thanks to technology, a problem in one part of the system can quickly lead to problems elsewhere. The global financial markets have evolved over the years into an inherently unstable network, says Till Guldimann, a strategist at SunGard, a software and IT services firm. The rapid unwinding of positions by ultra-fast quantitative-trading programs at the start of the credit crunch in August 2007 is one example of this cascading effect.

Have chastened bankers learned their lesson? Some are now spending a lot of money on building integrated systems of the kind that a few banks, such as Deutsche, JPMorgan Chase and Goldman Sachs, had in place before the crisis. Deutsche does not dump all its trading information into what is called a “data warehouse” and then painstakingly sift through it when need arises. Instead, the firm has developed a system of “feeds” that give it access to information in almost real-time.

But many other banks are still in firefighting mode, says Mr Mestchian. Much of the money invested in IT still goes into making things faster rather than more transparent. And there is a question-mark over whether the biggest banks will ever really be able to get their systems in order. Many banks have become too complex to be managed properly, says Glenn Woodcock, a director at Andromeda Capital Management and a former head of credit-risk infrastructure at RBS. IT alone cannot fix that problem for them.

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