Dollars and Jens
Thursday, June 29, 2006
Fed rate hike
I don't know what, if anything, it means that Janet Yellen is recorded as having voted (as an FOMC member) for the hike in the funds target today, while the San Francisco Federal Reserve Bank of which she's president was alone in failing to request a hike in the discount rate.

That I noticed could mean I need a life.

Update: I'm sorry, Kansas City didn't request the discount rate hike, either.

Moderate Inflation is Good
Because prices are sticky:
After having her home on the market for nearly a year — with about 30 showings, multiple price drops, and only one not-so-tempting offer — Phyllis Troia decided to try something different. Very different.

She and her husband put her Dutch colonial in Plymouth up for auction, to be sold to the highest bidder.


After the weekend, there were nine bidders — a very promising development. But in the end, she was not satisfied with the final two bids, and exercised her right to close the bidding. She's now moved on to a for-sale-by-owner model.
Of course, a seller could also try the same tricks and hold out for an excessive price in a hot market. But I suspect it's more common when the market-clearing price is falling than when it's rising.

Wednesday, June 28, 2006
The Russian oligarch Aleksei Mordashov lost the battle for Arcelor for one reason, Russian politicians say: Russophobia, a bias against Russian businesses and businessmen.

The billionaire and his steel company, Severstal, were bumped aside last weekend as Arcelor's board accepted a takeover offer of €26.5 billion, or $33 billion, from Mittal Steel, saying it was a better fit. Mordashov's offer to take a big stake in Arcelor went by the wayside.
Mordashov may be right. Note that the story refers to him as an "oligarch". Draw your own connection, or keep reading:
Western investors readily admit that the markets may not be completely comfortable with a wave of Russian takeovers.

"There is still this image that Russia is not a nice cuddly teddy bear, it is an aggressive bear" than can turn against investors, said Stephen Pope, head of equity research at Cantor Fitzgerald in London. Some investors still think that anything to do with Russia is "a little bit doubtful and dubious," he said.

When asked why they do not trust Russian businesses, European investors often mention Mikhail Khodorkovsky, founder of the Yukos oil company, who is serving an eight-year prison sentence in a Siberian penal colony, and the Russian company Gazprom's shutoff of gas supplies to Ukraine last year in a price dispute. Both examples show that the government has a strong hand in business matters, they say.

"One is not always clear whether these are genuine companies or fronts for the state," said Geoffrey Wood, a professor of economics at Cass Business School in London.
Also, if it's a genuine company, how long will it be before the state decides to confiscate it? It seems safer to invest in a country whose government respects rule of law.

Thursday, June 22, 2006
Inflation measures
My new favorite measure of inflation is the Dallas Fed's "trimmed mean" PCE.

Wednesday, June 14, 2006
Dean, last week:
Incidentally, there seems to be a developing consensus now around another hike at the end of the month. The one point I want to make is not to bet more money than you'd be willing to lose on it until after the inflation reports next Tuesday and Wednesday. If [the core rate] come[s] in at 0.3%, though, the doves will be facing a real headwind.
On a seasonally adjusted basis, the CPI-U advanced 0.4 percent in
May, following a 0.6 percent rise in April. Energy costs continued their
advance--up 2.4 percent in May. Within energy, the index for petroleum
based energy increased 4.8 percent, while the index for energy services
fell 0.6 percent. The food index increased 0.1 percent in May. The index
for all items less food and energy rose 0.3 percent in May, the same as in
each of the preceding two months; the index for shelter again accounted
for over half of the monthly advance.

Thursday, June 08, 2006
federal funds
Incidentally, there seems to be a developing consensus now around another hike at the end of the month. The one point I want to make is not to bet more money than you'd be willing to lose on it until after the inflation reports next Tuesday and Wednesday. If those come in at 0.3%, though, the doves will be facing a real headwind.

Update: I want to clarify that I meant the core rate when I said 0.3%. Market expectations are for the headline numbers to come in at 0.4% or so, but the core numbers to come in at 0.2%. If they do, the fed is still likely to raise rates, but it seems to me the wiggle room still exists. At 0.3%, the markets would really need an explanation if the fed stood pat.

accrued interest
Ah, accrued interest, you wife-beating drunk. The very idea makes me want to slap whoever came up with it; the 30/360 convention makes my head hurt. But the idea that "actual/actual" has two different meanings, when the name looks like it must be the most straightforward convention — that makes me wonder whether it mightn't be worth living in a cave hunting large prey with a big stick.

A bit of a test coming up, I have.

Wednesday, June 07, 2006
November 2
In case you were wondering when the Nasdaq last closed below the level at which it did today.

oil markets
Incidentally, in thinking about oil prices, particularly in terms of U.S. government public policy towards them, I tend to think in terms of domestic demand and another quantity that is equal to the world-wide supply minus foreign demand. If I need to give this thing a name, I call it "effective supply". Anyone have a better term for it?

Greenspan on Energy
He's still testifying in front of Congress, this time for the Senate Foreign Relations Committee. His message: the market works.

Tuesday, June 06, 2006
Namespace Collisions
Professor Mankiw notes:
Because I live in Boston, when people hear that my dog is named Tobin, the most common first reaction is, "Oh, like the bridge?"

When I had a dog named Keynes, the reaction was, "Oh, like the mayonnaise?"
As I commented over there, I've never heard of Cain's mayo.
On the other hand, when I learned of Tobin in my finance class, my first reaction was, "oh, like the bridge." I started referring to the line on the risk-return graph connecting the risk-free rate and the efficient frontier of the set of risky portfolios as the Tobin Bridge. Which didn't seem to amuse anyone but me.

Hawkish talk from Poole
Bill Poole — not a voter on the FOMC — sure sounds hawkish on the funds target.

Sunday, June 04, 2006
The connection between oil prices and the Canadian dollar.

Friday, June 02, 2006
Stocks on Sale
The stock market has been falling recently. At Morningstar, they're pretty psyched.

Jobs report
And, wouldn't you know it, the next day this comes out. It is Not Inflationary. Aggregate wages per week actually dropped by 0.2%, according to the establishment survey; benefits probably did a bit better, but the income to labor seems to have abruptly come back down to earth. July interest rate futures moved 6.5 basis points quite quickly.

Thursday, June 01, 2006
What will the fed do?
I read the minutes of the last FOMC meeting, and I have to say, if I fully believed the things they seem to believe, I think I'd be hankering to raise rates again.

The options, as of close yesterday, suggest that as the most likely path, but give an 11% chance that rates after the August meeting will be 25 bp lower than now.

It's data-dependent, as they say.

productivity report
Productivity had strong gains in the first quarter, unit labor costs were moderate, largely a bounce-back from the post-Katrina period. Inflation-adjusted compensation per hour bounced back, though not to its record high level of the first quarter of 2005.

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