Monday, December 15, 2008

5 Charts

It's said that a picture's worth a thousand words, so what today's post lacks in actual verbiage it makes up in "synthetic text."

1) Quant easing. The dollar is getting slagged, at least partially because of concerns about the long-term impact of the Fed's quantitative easing program. And while it's true that the size of Fed's balance sheet has increased dramatically over the last few months, the ECB's has also increased by quite a bit. Perhaps any readers who are experts in monetary economics can explain why the Fed asset increase matters and the ECB's doesn't?

2) Chinese IP. Oh dear. Year-on-year IP is up just wonder the government has stepped up to the plate with stimulus programs. As is the case elsewhere in the world, it looks like it's going to gt worse before it gets better.
Next, three charts from Google Trends:

3) Google searches for "McDonalds jobs". Thanks to reader Mitesh for pointing this one out. What's a bit scary is that the country with the biggest rise in searches for burger-flipping careers has come not in the United States, but Australia!
4) Google searches for "mortgage broker". Unsurprisingly, there isn't much appetite for the purveyance of fresh mortgage debt these days.
5) Google searches for "unemployment benefits" . It pretty much says it all , doesn't it?


cfarley said...

The searches for "mortgage broker" probably tell too much of the story -- since plenty of that traffic will be from web users researching the credit crisis generally.

Anonymous said...

How does the first chart look if you overlay USD/EUR on it?


Macro Man said...

There is a currency element, given that I had to convert the ECB balance sheet into USD. In euro terms, it has still risen gradually, with a more abrupt jump over the last couple of months.

Anonymous said...

The reason why the ECB's balance sheet has increased is that its gross injections of liquidity into the interbank market have soared after the narrowing of the spread between the policy rate and the deposit rate. Because banks with cash needs no longer get it from other banks, the ECB has to give them the liquidity directly (gross injections). The banks with excess cash (there are some) place their excess with the ECB, so that the use of the ECB's deposit facility has also soared. BUT the ECB's net injections of liquidity have not increased significantly (more than the normal needs of the overall banking system), implying that, even though the ECB's balance sheet has risen, the creation of base money has not. By contrast, the Fed is creating base money through the expansion of bank reserves and also lending directly to the non-financial sector. There is no such thing as quantitaive easing in the case of the ECB.

Adergaard said...

Well actually it says nothing of what is to come.

If you think about it, why would battered companies, where a P/E-situation close to what we have today and slightly less already priced in the quotes today continue down?

The only thing - ONLY thing - driving the markets right now is the sentiment. Sure, the sentiment among the real folks is starting to catch on to the "oh, it can only get gloomier"-sadsong sung by many stock brokers the last year, but that is usually a sign that the bottom has already come and gone.

I'm not a permabull but I fail to see how the charts you just showed us, or any other already known fact, is evidence of further decline in the market (UK and US).

Thanks for a very good blog btw.

t said...

re: 1)
Rate of change?

Congrats on your work rate btw, many (incl myself) would consider your typical blog entry a good day's work in itself.

Anonymous said...

do you take requests from bloomberg impaired macro groupies? I'd love to see a chart of DEMAUD from yesteryear.

Macro Man said...

Adergaard, I've put these charts up as interesting talking points. My rationale for being an equity bear is different- namely, that markets continue to overestimate economic growth and earnings next year.

t, I am actually incredibly lazy (just ask my dad or Mrs. Macro.) But I do think about markets a lot and perform research throughout the day, and the blog is a good discipline to always be on the lookout for things.

Anon @ 12.30, you can;t get AUD/DEM charts on bbg anymore, though they do include a synthetic EUR/AUD back through history. We're near the all time highs for EUR (or DEM.)

Adrem said...

The ECB's balance sheet rise has been gradual. The Fed's is a quantum leap. Happenings like that do not comfort make. Also at the core of the ECB's economy is Germany with a robust manufacturing export sector and a trade surplus. What has the Fed got at the centre of its economy?

Anonymous said...

euraud is indeed at all time highs, but itlaud is not according to my historical series, which is 1) puzzling 2) why i asked


Ian said...

Adrem- check out a chart of German export growth. Seems like they are going to run into the same problem as the Chinese, that there is no one to buy their stuff.

Anonymous said...

lately the bulls are saying 'forced liquidation' is over, what happened to the 700 hedge funds due to close by end of year...looking at the cot report the commercials in SP got shorter net -100k contracts now, while extending their long in US TY, seems to suggest the pain isn't finished...
one thing with the euro is that the commodity bulls tended to run the euro while they were running commodities, so this 'thin' pop in commod's probably their proggy's are running euro right along with them.

Steve said...

I liked the first chart of Fed and ECB balance sheets. This EUR move really has me scratching my head. Seems to me with all of the asset swapping the Europeans have done over the years, if they're sitting on currency swapped "turds" they have to go out and buy dollars sooner or later. Lots and lots of dollars.

mikarsky said...

It's called double deficit:
The first deficit is the US having to import money, the second deficit is the trade deficit. The world gave money to the US so that US consumer can buy the worlds products. Problem is, when the US supply itself the money, it implodes.

mikarsky said...

Very good point Anon 10:55 AM, the ECB acts mainly as broker. Bank A distrusts all banks except the ECB knowing the ECB cant fail. Bank A stores its money at the ECB. The ECB gives that money to bank B. There is no net increase in money supply. With the UK out of Eurozone, chances that Sarkozy and other state interventionist will succeed are *relatively* lower than in US/UK. Another point why Euro will fare *relatively* better than USD or GBP. In case your afraid Sarkozy gets his way, buy CHF. The Swiss are *relatively* more immune to political opportunism.

prophets said...

long porn:

Anonymous said...

"Perhaps any readers who are experts in monetary economics can explain why the Fed asset increase matters and the ECB's doesn't?"

Because - thanks to Germany - the Eurozone has a roughly balanced trade and current account balance?
Coupled with actual household savings that could finance a temporary domestic deficit?
While the USA actually needs to borrow abroad just to stay liquid?

Not to mention that the Fed actually doesn´t seem to care about the foreign exchange value of the dollar?
"Our currency, your problem".

Look, you are an expert. I´m not.
I´m just a German citizen.
If the ECB is really following the Bundesbank they won´t cut rates to 1%. Won´t happen unless events turn out really disastrous.


Camabron said...

All roads lead to hyperinflation through the crossroads of deflation.

Anonymous said...

MM, re. the fed's balance sheet, I read an interesting tidbit elsewhere suggesting that the fed is still carrying its gold inventory on the books at $42/oz. If this were marked to market, it would look considerably healthier, or so said the author of the piece I read.

Anonymous said...

Perhaps it has something to do with rumors of the Fed going ZIRP:

Cijferaar said...

I agree; things are not as dramatic for the ECB as for the Fed.
MM, I gave up keeping track of the UK so I wonder ... What is going on with the Bank of England's balance sheet? Is the UK guilty of every sin described above- no balanced trade, plenty of long-term and short-term debt AND an asset-loaded cb balance sheet?