Archive | August 2015


Picking Up the Pace


Lost amidst the market turmoil this week were a number of reports of a strengthening US economy. Consumer confidence soared last month, as did new home sales. Durable goods orders surprised with a 2% jump in July, and personal incomes rose, and are up 4.3% over the past twelve months. 2Q GDP was revised sharply higher, from a 2.3% annual growth rate to 3.7%. This pace is above the 3.2% quarterly average over the past 65 years (see Graph below). All major components of GDP were revised higher, indicating broad strength in the economy, with business investment particularly strong. In Read More




Two weeks ago (13 August, No Panic (Yet)) I noted that the renminbi devaluation was officially described as a modest alignment with market forces, which may have been true, but that it was strongly indicative of protracted weakness in China’s economy. I saw no need to panic two weeks ago, but last week would have been more timely; the “(Yet)” part of the title came upon us with a fury. Yesterday, US stocks lost more than 3%, but the intraday move was cumulatively more than 25%, up and down 5,000 Dow points. But US (or European) markets are not the drivers Read More


Land of Borat


I probably should not confess to enjoying Borat (full title: Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan), 86 minutes of low-brow, sophomoric gags lest I shatter my highly refined, cultured and sophisticated image. So I’ll never admit (in writing) to laughing almost non-stop. It’s the story of a reporter from Kazakhstan traveling across America to discover what makes the country great. I don’t know how the 17 million people of Kazakhstan feel about being portrayed by an imbecile, but Sacha Baron Cohen does a pretty good job of pointing out the fatuousness of Americans. All this Read More


No Panic (Yet)


Earlier this week, China devalued its currency 1.9% against the US dollar. On one level, this is not a big deal. China’s currency has been appreciating considerably for many years (see Chart 1 for the last five years; note the scale is inverted). Even in the past year, the yuan is down just 3.5%, whereas our largest trading partners—the Canadian dollar, Mexican peso, yen and euro—are each off 15-20%. So, who cares? Perhaps we need a distraction from the Donald Trump – Megyn Kelly spat, and mid-August is typically a sparse news period, but some pundits are trying to stir concerns Read More


Criminals in Diapers


Japan grew from the (literal) ashes of the Second World War to become the second largest economy in the world by creating products we all wanted. Some were revolutionary, like the Sony Walkman, some just a better version of an existing product, like the Toyota automobile. And some were wildly popular for inexplicable reasons, such as Hello Kitty or Teenage Mutant Ninja Turtles. The Japanese economy was an amazing success story. But two decades of no growth, deflation and a shrinking population combine with public comments from politicians and CEOs that are often platitudinous, mysterious and contrary to reality, leaving Read More