Hey!
Your fundamental economic analysis is very thorough and broad, keep up with the great postings!
I usually try to narrow things to the basic fundamentals(not always possible). Let me start with the suggestion of a book: "Alchemy of finance", Soros. This masterpiece gives insight into the thinking behind one of the greatest investors of our time, though outdated the gist of the economy doesn't change all that much. His views are very valid today and time-proof when u read about past facts that to me were unknown, since I'm only 25!
I do weekly, monthly and quarterly scanning of 28 economies (countries):
1- Unemployment rate
2- GDP growt
3- Banchmark interest rates
4- interest rate spreads (i.e. 10yrnote- tbill= spread) this one is particular because it measures something most indicator you talked about don't include - Market sentiment, the eminence of something happening.
6- CPI (because it's the most common inflation indicator around the world). Still I prefer PCE (CPI scond) for US because the economy is 2/3 consumer and very jobs driven, but here is the beauty of this game: if savings rate increase significantly, this approach is rendered ineffective as ppl would have savings to use when needed and make a difference in the forecast of inflation. Summing up we would need an additional indicator to forecast tha same economic force.
7- Current account and Trade balance; this one is mostly meant for my Fx positions, since they have not much of an influence, but very good to forecast where will a recession spread first, if u can get reliable data for bi-lateral relationships or trade partners composition.
8- Money supply, Ms are good to get a feel of "economic fuel" being injected into the economy.
9- The corporate bond spread; there are various approaches to this indicator, but the idea is when corporatebond yield flies off treasury yields, you know credit (the very fuel of the economy) is tightening seriously.
10- Monitoring of economic policy (Fiscal and monetary)
There are more but I'm sure that we will get this thread up and running, as I sense more opportunities to discuss this issue.
I got an article to share, from the ones who have really developed my economic acumen for the past 6 years - The Economist - http://www.economist.com/opinion/displayStory.cfm?Story_ID=10566731
Forecast
Credit may be growing but the real measure for it is not volume, but pricing. Money has goten very expensive very fast, Private liquidity (less governments and state financing) is dead dry, look at private equity, their industry relates very effectively with credit cycle, M&A has slowed so abruptly, that Blackstone must have its hands on their head, as they know now that their chosen date for IPO, was one of the worst timings ever seen.
If credit is the fuel, then what is the analogy to the car, for US economy? Consumer (2/3 of US economy), when retail sales take such a beating in Christmas season it doesn't smell good.
Also, sometimes we are playing against ourselves. Commodities' traders can be very anoying. On the first rate cut they skyrocketed, typical textbook reaction, but if they think twice, which they are starting to, rate cutting entailed serious warning of a possible recession. And with such reactions we get stagflation.
Also, I've learned that when GDP growht goes under 1%, many economist assume we are already in recession (todays GDP figure is under 1% - first quarter of recession?)
Though I believe in Fundamental analysis, I never discard technicals. Fundamentals define the way to go, but technicals will provide the right timing.
Still in line with thread. Have u heard of the economic bureau? They are the authority (in the US) with respect to the definition of recessions, take a look at their site and reports we can always learn something!
Anyway I think it will be a soft recession for stocks because they are more reasonably priced (P/E) than in 2000. But for the economy it will be quite a blow or the creation of another asset bubble depending on the Fed.
A lot for a day already, enjoy ur trading United46!
Cya around
Your fundamental economic analysis is very thorough and broad, keep up with the great postings!
I usually try to narrow things to the basic fundamentals(not always possible). Let me start with the suggestion of a book: "Alchemy of finance", Soros. This masterpiece gives insight into the thinking behind one of the greatest investors of our time, though outdated the gist of the economy doesn't change all that much. His views are very valid today and time-proof when u read about past facts that to me were unknown, since I'm only 25!
I do weekly, monthly and quarterly scanning of 28 economies (countries):
1- Unemployment rate
2- GDP growt
3- Banchmark interest rates
4- interest rate spreads (i.e. 10yrnote- tbill= spread) this one is particular because it measures something most indicator you talked about don't include - Market sentiment, the eminence of something happening.
6- CPI (because it's the most common inflation indicator around the world). Still I prefer PCE (CPI scond) for US because the economy is 2/3 consumer and very jobs driven, but here is the beauty of this game: if savings rate increase significantly, this approach is rendered ineffective as ppl would have savings to use when needed and make a difference in the forecast of inflation. Summing up we would need an additional indicator to forecast tha same economic force.
7- Current account and Trade balance; this one is mostly meant for my Fx positions, since they have not much of an influence, but very good to forecast where will a recession spread first, if u can get reliable data for bi-lateral relationships or trade partners composition.
8- Money supply, Ms are good to get a feel of "economic fuel" being injected into the economy.
9- The corporate bond spread; there are various approaches to this indicator, but the idea is when corporatebond yield flies off treasury yields, you know credit (the very fuel of the economy) is tightening seriously.
10- Monitoring of economic policy (Fiscal and monetary)
There are more but I'm sure that we will get this thread up and running, as I sense more opportunities to discuss this issue.
I got an article to share, from the ones who have really developed my economic acumen for the past 6 years - The Economist - http://www.economist.com/opinion/displayStory.cfm?Story_ID=10566731
Forecast
Credit may be growing but the real measure for it is not volume, but pricing. Money has goten very expensive very fast, Private liquidity (less governments and state financing) is dead dry, look at private equity, their industry relates very effectively with credit cycle, M&A has slowed so abruptly, that Blackstone must have its hands on their head, as they know now that their chosen date for IPO, was one of the worst timings ever seen.
If credit is the fuel, then what is the analogy to the car, for US economy? Consumer (2/3 of US economy), when retail sales take such a beating in Christmas season it doesn't smell good.
Also, sometimes we are playing against ourselves. Commodities' traders can be very anoying. On the first rate cut they skyrocketed, typical textbook reaction, but if they think twice, which they are starting to, rate cutting entailed serious warning of a possible recession. And with such reactions we get stagflation.
Also, I've learned that when GDP growht goes under 1%, many economist assume we are already in recession (todays GDP figure is under 1% - first quarter of recession?)
Though I believe in Fundamental analysis, I never discard technicals. Fundamentals define the way to go, but technicals will provide the right timing.
Still in line with thread. Have u heard of the economic bureau? They are the authority (in the US) with respect to the definition of recessions, take a look at their site and reports we can always learn something!
Anyway I think it will be a soft recession for stocks because they are more reasonably priced (P/E) than in 2000. But for the economy it will be quite a blow or the creation of another asset bubble depending on the Fed.
A lot for a day already, enjoy ur trading United46!
Cya around