Dollars and Jens
Saturday, July 18, 2009
Buffett Partnership Letters
Warren Buffett ran an investment partnership from 1959 to 1969, and sent out letters to his partners (as he now does to Berkshire Hathaway shareholders). These letters are now available online.
Friday, July 17, 2009
seasonal adjustments and the business cycle
Note some important caveats about seasonally adjusted data:
On an unadjusted basis, the initial claims data showed a fairly large increase last weekâup 86,000 workers. But claims for unemployment compensation typically rise in early July as auto plants shut down to retool for the new model year. The jump in claims this July hasn't been as large as in years past since many of the auto plants were waylaid earlier in the year. So on a "seasonally adjusted" basis, the data showed a drop in claims of 47,000 workers.Fewer remaining factory workers might reduce the number of workers available to furlough. Similarly, some of the price increases pushing up the recent CPI report were actually decreases which might have run into support as already squeezed margins simply couldn't squeeze as much as usual.
Labels: Initial Claims of Unemployment
Initial Claims, yet again
As I expect this interests me more than anyone else, I'll try to restrain myself a bit here, but this line is the long-run (two weeks out) prediction that would be made based on data up to the time for which it's plotted using an ARIMA(0,1,2) model with both MA coefficients set to -0.2. It clearly hugs the data fairly well over any period of more than a couple weeks, it's previsible at the time of the data release to which you would compare it, and the change from one period to the next exhibits one third of the variance of the original series.
The last point on the new curve is 555,000, down from 590,000 the week before; the last two points have been significantly below recent values, and this figure responds more quickly to repeated deviations like that than the exponential moving average I posted before, while still filtering out two-thirds of the noise. I might, however, persist in using the exponential moving average just because 1) it's simpler to explain, and 2) it requires less "state"; if I give you today's exponential moving average, and you see next week's release, it's easy to calculate next week's average, while this requires two data points and is less mathematically simple. I haven't decided yet which I prefer, and I'd welcome any input anyone else wants to offer.
Labels: Initial Claims of Unemployment
Thursday, July 16, 2009
Initial Claims -- general notes
Incidentally, let me give some love to Karl Smith, whose posts on initial claims inspired me to start paying attention to (and posting on) a series I followed religiously for several years until about a year and a half ago.
He, like most of the world, smoothes the series with a 4-week sliding-window average; I use a three-week exponential, which I discovered a few years back frequently gave a better prediction of the next number than the consensus forecast did, except in the immediate post-Katrina period. I dislike sliding-window averages in particular for anything in which I'm looking for a trend; "trend" suggests I'm looking at changes from one week to the next, and the change from one week to the next with a sliding window is just a multiple of the change from one week to the week four weeks later, so it's noisy and is affected by a fair amount of old information. The change in an exponential moving average is more plausibly the innovation in that moving average.
It happens that the exponential-moving average amounts to modeling the series as an ARIMA(0,1,1). If you don't know what ARIMA is, it doesn't really matter; I didn't know what ARIMA was when I started doing this, and didn't actually work out that that's what this was until about a week ago; playing around in the last week, I find as a fairly robust result that ARIMA(0,1,2) seems to fit the data better, though the coefficients change a fair amount if I try fitting different 2-year data samples to that model. (ARIMA(0,1,1) seems to bounce around a bit, too, though a coefficient corresponding to a 3-week average doesn't seem to get much more than one standard error from the estimate regardless of the sample I look at.) I may start using a smoothing technique based on an ARIMA(0,1,2) at some point.
Labels: Initial Claims of Unemployment
Initial Claims of Unemployment
Last week's figure was revised up very slightly, but this week's number was 522,000, dropping the moving average to 576,000. This looks very good, at least by recent standards
Labels: Initial Claims of Unemployment
Friday, July 10, 2009
Extrapolating
This cartoon isn't directly related to finance, but sometimes it comes uncomfortably close.
Thursday, July 09, 2009
initial claims
Seasonally adjusted initial claims was 565,000 last week. Note possible holiday effect and imperfect "seasonal adjustment". Still, good news.
Moving three-week exponential average:
High by the standard of an average point in the business cycle, but looks like a confirmed downtrend. The calendar issue makes next week's release more interesting.
Labels: Initial Claims of Unemployment
Thursday, July 02, 2009
bank failures
It's Friday for federal purposes, and that means the FDIC is closing down failing banks. Before today six banks had failed in Illinois this year; today, as of right now, another six have as well. (Also, one in Texas.)
The PrivateBank and Trust Company, Chicago, Illinois, Assumes All of the Deposits of Founders Bank, Worth, Illinois
State Bank of Texas, Irving, Texas, Assumes All of the Deposits of Millennium State Bank of Texas, Dallas, Texas
First Financial Bank, National Association, Terre Haute, Indiana, Assumes All of the Deposits of the First National Bank of Danville, Danville, Illinois
Galena State Bank and Trust, Galena, Illinois, Assumes All of the Deposits of the Elizabeth State Bank, Elizabeth, Illinois
The Harvard State Bank, Harvard, Illinois, Assumes All of the Deposits of Rock River Bank, Oregon, Illinois
The First National Bank of Beardstown, Beardstown, Illinois, Assumes All of the Deposits of the First State Bank of Winchester, Winchester, Illinois
State Bank of Lincoln, Lincoln, Illinois Assumes All of The Deposits of the John Warner Bank, Clinton, Illinois
Friday, June 26, 2009
inflation
Trimmed-mean PCE is out. 1.3% (annual rate) for May.
On this measure, I tend to look at an exponential six-month average, which has just dipped below 2%, to 1.96%; the monthly figures have been lower than this for the last three months. This moving average hit 1.55% in 2003.
The trimmed-mean PCE deflator still isn't suggesting either (bad) inflation or deflation.
