ECB cuts rates to ward off euro zone deflation threat
(Reuters) - The European Central Bank cut interest rates to new record lows on Thursday, unexpectedly lowering borrowing costs to try to lift inflation from rock-bottom levels and support the stagnating euro zone economy.
The ECB cut its main refinancing rate to 0.05 percent from 0.15 percent. ECB President Mario Draghi had said after the ECB's last rate cut in June that "for all the practical purposes, we have reached the lower bound".
In a landmark speech on Aug. 22, however, Draghi said indications from financial markets showed inflation expectations "exhibited significant declines at all horizons" in August.
Euro zone inflation slowed to 0.3 percent last month, sinking deeper below the ECB's target of just under 2 percent and raising the specter of deflation in the euro zone.
On Thursday, the ECB also said it had lowered the rate on bank overnight deposits to -0.20 percent, which means banks pay to park funds at the central bank, and cut its marginal lending facility - or emergency borrowing rate - to 0.30 percent.
Markets now turn their attention to ECB President Mario Draghi's 1230 GMT (0930 EDT) news conference, at which he is expected to give a more detailed explanation of the ECB's decision.
European Central Bank and US Treasury Bonds - Comment
Note the refinancing rate of 0.05% and the overnight deposit rate of -0.20%. Imagine losing 0.2% on your money for a deposit. As interest rates are reduced in Europe the interest rate on bonds also goes down. This makes the interest rate of the US Treasury Bonds look attractive. The net effect is money flowing from Europe to the US that offsets the action of the Federal Reserve.
The bottom line is as long as the ECB is keeping interest rates low, US Treasury Bond interest rates will stay low. In the future when ECB policy change and interest rates start to rise the impact will be that US Treasury Bond interest rates will rise.
Math Exercise
Rugs or Miles
Are their more square inches in a carpet 15 yards by 5 yards or feet in a 20-mile run?
ANSWER - Feet in a 20 mile run.
There are 12 inches in a foot, and 1,760 yards in a mile. There are 105,600 feet in a 20-mile run. There are 97,200 square inches in a carpet 15 yards by 5 yards.
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My Bathtub
My bathtub has two water faucets, a drain, plus a leak. The cold-water faucet, by itself, fills the tub in 20 minutes. The hot water faucet, by itself, fills the tub in 30 minutes. With both faucets turned off the drain can empty the tub in 16 minutes. The leak, by itself, will empty a full tub in 2 hours. How long will it take to fill the tub if I leave both faucets turned on and the drain open?
ANSWER - 80 minutes -
In 24 hours the cold-water faucet can fill 72 tubs. In 24 hours the hot water faucet can fill 48 tubs. The drain can empty 90 tubs in 24 hours. The leak can empty 12 tubs in 24 hours.
Therefore in 24 hours we have 72 plus 48 minus 90 minus 12 = 18 tubs in 24 hours. Therefore one tub would take 80 minutes to fill.
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Sweet Tooth
Tom can eat 27 Chocolates in an hour, John can eat 2 Chocolates in 10 minutes and Kate can eat 7 Chocolates in 20 minutes.
How long will it take them to share and completely eat a box of 120 Chocolates while watching TV?
ANSWER - 2 hours
In 1 hour Tom eats 27 – John 12 – Kate 21 which = 60 Chocolates in one hour. Therefore 120 divided by 60 = 2 hours.
Saturday, September 6, 2014
Sunday, August 24, 2014
Global Economic Growth Summary
Global Economic Growth Summary
Economic growth ground to a halt in much of continental Europe in the second quarter. Real Gross Domestic Product in the Euro-Zone was essentially flat, with GDP down in Germany, France, and Italy. Industrial production also fell in Europe in the second quarter as big declines in May were not fully reversed in June. However, the European Union’s production expectations index, still in positive territory in July, suggests that May’s big decline in industrial production
overstates the weakness. The Markit PMI (purchasing managers index) for the Euro-Zone suggests slowing but still-slightly-positive growth in manufacturing.
The proximate cause of the recent economic weakness in Europe is the hit to consumer and
business confidence caused by tensions between Ukraine and Russia. The (German) ZEW Economic
Sentiment Index has fallen sharply since January and in July suffered its largest one-month decline since 2012. But the weakness also reflects the slow underlying growth rate caused by high government debt, demographics, and structural rigidities. When the trend rate of growth is only 1-2%, it doesn’t take much of a negative shock to drag the growth rate down to zero.
Off the European continent, growth is much better. Real GDP in the United Kingdom has grown
at an above-trend rate for six consecutive quarters, raising year-over-year growth to 3.2%, the highest
among major developed countries. Growth has also been strong in Ireland. Ireland hasn’t reported
second-quarter data yet, but real GDP was up 5.1% year-over-year in the first quarter.
Economic weakness is not confined to continental Europe. Real GDP declined sharply in Japan
in the second quarter, albeit not as much as feared. The April 1 increase in the Value-Added Tax shifted economic activity from the second quarter to the first quarter. GDP declined at a 6.8% annual rate in the second quarter after rising at a 6.1% rate in the first quarter. Industrial production in Japanese manufacturing, which rose 11.2% from November 2012 to January 2014, has fallen 7.1% since then. Elsewhere in Asia, there is still no growth in manufacturing in Korea. Industrial production in Korean manufacturing was at the same level in June 2014 that it first reached in February 2012. Growth in industrial production has perked up in Australia, India, and Taiwan. Growth seemed to be picking up in China in May and June, but a series of weak data reports in July and a weak “flash” PMI report for August have called that pickup into question. Year-over-year growth in industrial production in July, at 9.0%, wasn’t bad, but construction was down year-to-date, and electricity generation was up just 5.3% year-over-year, its lowest growth rate since March 2013. In Chinese manufacturing, growth is concentrated in motor vehicles and consumer electronics.
Aside from the British Isles and a few countries in Asia, the only significant bright spot in the global economy is North America. Real GDP in the United States was reported to have risen at a 4.0% annual rate in the second quarter after falling at a 2.1% rate in the first quarter, and recent data suggest that second-quarter growth will be revised up. Industrial production in U.S. manufacturing rose 1.0% (seasonally adjusted) in July, pushing the year-over-year growth rate up to 4.9%, the highest in more than two years.
The Canadian economy is also doing well. Industrial production in Canada was up 4.7% year-over-year in May (latest data available). Canada shares some of the competitive advantages of the United States and benefits from strength in the U.S. auto market. Industrial production isn’t growing quite as fast in Mexico as it is in the United States and Canada, but Mexico is doing far better than the rest of Latin America, and recent reforms boost the prospects for faster growth in coming years.
There is a tendency among some market analysts to dismiss the current weakness in Europe and other parts of the world as “just geopolitics,” implying that underlying economic fundamentals are fine and that economic growth will go back to “normal” when geopolitical problems abate. There are two problems with that argument. First, underlying fundamentals aren’t that great and neither is the new “normal.” Second, geopolitics is an ever-present part of the global economy and has always played a role in causing the economic fluctuations we call “cycles.” Every U.S. recession since 1973 (and perhaps earlier) has been triggered by an oil price shock, and all of those oil shocks have been caused, at least in part, by geopolitical events. Today, persistent geopolitical problems, especially in the Middle East and North Africa but also in Nigeria and Venezuela, are keeping oil prices perhaps $15/barrel higher than they would otherwise be.
If peace were to miraculously break out in the Middle East and North Africa, oil prices would drop sharply. This would severely damage the economies of Russia and Venezuela, perhaps forcing the Russians to re-evaluate their involvement in Ukraine and prompting Venezuelans to elect a new government that would rebuild their declining oil industry. That would further lower oil prices. Given the paramount importance of oil prices to economic growth, this would provide a significant boost to global growth rates. I wouldn’t hold my breath, but one can always dream.
TRIVIA
Month & Year
Take the number of days in a leap year, add the number of months having 30 days, divide by the number of doughnuts in a Baker’s Dozen, add the number of days in March, add the square root of 9, and divide by the number of days in a week. Which month are you left with and what year is it?
ANSWER – September of 2014
The numbers used are – 366, plus 11, divided by 13, plus 31, plus 3, divided by 7 = 9. And of course, it is now 2014. (All of the months have 30 days except February.)
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Teamwork
Three workers are laying a brick wall. John can lay 1,000 bricks in three hours. Kate can lay 1,000 bricks in two hours. Tom can lay 1,000 bricks in six hours. How long will it take them to lay 2,500 bricks if they work together as a team?
ANSWER – 2 1/2 hours
How many bricks can be laid in six hours?
In six hours John lays 2,000 bricks. Tom lays 1,000 bricks. Kate lays 3,000 bricks. Therefore, in six hours they individually lay a total of 6,000 bricks.
This means it will take 2 1/2 hour to lay 2,500 bricks by working together?
=============================================================================
My Allowance
On Monday I spent a quarter of my allowance on clothes. On Tuesday I spent one third of my remaining money on a CD. On Wednesday I spent half of my remaining money on candy. On Thursday I spent my last $1.25 on a beer. How much is my allowance?
ANSWER - $5.00
Working backwards.
• On Thursday I had $1.25.
• On Wednesday I had $1.25 X (1 divided by one-half) = $2.50.
• On Tuesday I had $2.50 X (1 divided by two thirds) = $3.75.
• On Monday I had $3.75 X (1 divided by three quarters) = $5.00.
Economic growth ground to a halt in much of continental Europe in the second quarter. Real Gross Domestic Product in the Euro-Zone was essentially flat, with GDP down in Germany, France, and Italy. Industrial production also fell in Europe in the second quarter as big declines in May were not fully reversed in June. However, the European Union’s production expectations index, still in positive territory in July, suggests that May’s big decline in industrial production
overstates the weakness. The Markit PMI (purchasing managers index) for the Euro-Zone suggests slowing but still-slightly-positive growth in manufacturing.
The proximate cause of the recent economic weakness in Europe is the hit to consumer and
business confidence caused by tensions between Ukraine and Russia. The (German) ZEW Economic
Sentiment Index has fallen sharply since January and in July suffered its largest one-month decline since 2012. But the weakness also reflects the slow underlying growth rate caused by high government debt, demographics, and structural rigidities. When the trend rate of growth is only 1-2%, it doesn’t take much of a negative shock to drag the growth rate down to zero.
Off the European continent, growth is much better. Real GDP in the United Kingdom has grown
at an above-trend rate for six consecutive quarters, raising year-over-year growth to 3.2%, the highest
among major developed countries. Growth has also been strong in Ireland. Ireland hasn’t reported
second-quarter data yet, but real GDP was up 5.1% year-over-year in the first quarter.
Economic weakness is not confined to continental Europe. Real GDP declined sharply in Japan
in the second quarter, albeit not as much as feared. The April 1 increase in the Value-Added Tax shifted economic activity from the second quarter to the first quarter. GDP declined at a 6.8% annual rate in the second quarter after rising at a 6.1% rate in the first quarter. Industrial production in Japanese manufacturing, which rose 11.2% from November 2012 to January 2014, has fallen 7.1% since then. Elsewhere in Asia, there is still no growth in manufacturing in Korea. Industrial production in Korean manufacturing was at the same level in June 2014 that it first reached in February 2012. Growth in industrial production has perked up in Australia, India, and Taiwan. Growth seemed to be picking up in China in May and June, but a series of weak data reports in July and a weak “flash” PMI report for August have called that pickup into question. Year-over-year growth in industrial production in July, at 9.0%, wasn’t bad, but construction was down year-to-date, and electricity generation was up just 5.3% year-over-year, its lowest growth rate since March 2013. In Chinese manufacturing, growth is concentrated in motor vehicles and consumer electronics.
Aside from the British Isles and a few countries in Asia, the only significant bright spot in the global economy is North America. Real GDP in the United States was reported to have risen at a 4.0% annual rate in the second quarter after falling at a 2.1% rate in the first quarter, and recent data suggest that second-quarter growth will be revised up. Industrial production in U.S. manufacturing rose 1.0% (seasonally adjusted) in July, pushing the year-over-year growth rate up to 4.9%, the highest in more than two years.
The Canadian economy is also doing well. Industrial production in Canada was up 4.7% year-over-year in May (latest data available). Canada shares some of the competitive advantages of the United States and benefits from strength in the U.S. auto market. Industrial production isn’t growing quite as fast in Mexico as it is in the United States and Canada, but Mexico is doing far better than the rest of Latin America, and recent reforms boost the prospects for faster growth in coming years.
There is a tendency among some market analysts to dismiss the current weakness in Europe and other parts of the world as “just geopolitics,” implying that underlying economic fundamentals are fine and that economic growth will go back to “normal” when geopolitical problems abate. There are two problems with that argument. First, underlying fundamentals aren’t that great and neither is the new “normal.” Second, geopolitics is an ever-present part of the global economy and has always played a role in causing the economic fluctuations we call “cycles.” Every U.S. recession since 1973 (and perhaps earlier) has been triggered by an oil price shock, and all of those oil shocks have been caused, at least in part, by geopolitical events. Today, persistent geopolitical problems, especially in the Middle East and North Africa but also in Nigeria and Venezuela, are keeping oil prices perhaps $15/barrel higher than they would otherwise be.
If peace were to miraculously break out in the Middle East and North Africa, oil prices would drop sharply. This would severely damage the economies of Russia and Venezuela, perhaps forcing the Russians to re-evaluate their involvement in Ukraine and prompting Venezuelans to elect a new government that would rebuild their declining oil industry. That would further lower oil prices. Given the paramount importance of oil prices to economic growth, this would provide a significant boost to global growth rates. I wouldn’t hold my breath, but one can always dream.
TRIVIA
Month & Year
Take the number of days in a leap year, add the number of months having 30 days, divide by the number of doughnuts in a Baker’s Dozen, add the number of days in March, add the square root of 9, and divide by the number of days in a week. Which month are you left with and what year is it?
ANSWER – September of 2014
The numbers used are – 366, plus 11, divided by 13, plus 31, plus 3, divided by 7 = 9. And of course, it is now 2014. (All of the months have 30 days except February.)
=============================================================================
Teamwork
Three workers are laying a brick wall. John can lay 1,000 bricks in three hours. Kate can lay 1,000 bricks in two hours. Tom can lay 1,000 bricks in six hours. How long will it take them to lay 2,500 bricks if they work together as a team?
ANSWER – 2 1/2 hours
How many bricks can be laid in six hours?
In six hours John lays 2,000 bricks. Tom lays 1,000 bricks. Kate lays 3,000 bricks. Therefore, in six hours they individually lay a total of 6,000 bricks.
This means it will take 2 1/2 hour to lay 2,500 bricks by working together?
=============================================================================
My Allowance
On Monday I spent a quarter of my allowance on clothes. On Tuesday I spent one third of my remaining money on a CD. On Wednesday I spent half of my remaining money on candy. On Thursday I spent my last $1.25 on a beer. How much is my allowance?
ANSWER - $5.00
Working backwards.
• On Thursday I had $1.25.
• On Wednesday I had $1.25 X (1 divided by one-half) = $2.50.
• On Tuesday I had $2.50 X (1 divided by two thirds) = $3.75.
• On Monday I had $3.75 X (1 divided by three quarters) = $5.00.
Saturday, August 9, 2014
Economic Data
ECONOMIC DATA - VANGUARD
This week's economic data continued to signal improvements across the economy—from manufacturing to services to consumer borrowing. The markets, however, were more focused on developments in a number of hot spots in the Middle East and the ongoing tensions between Russia and the West.
For the week ended August 8, 2014, the S&P 500 Index was up 0.3% to 1,931 (for a year-to-date total return—including price change plus dividends—of about 6%). The yield on the 10-year U.S. Treasury note fell 8 basis points to 2.44%, for a year-to-date decrease of 60 basis points).
Services sector strengthens further
The ISM Non-Manufacturing Index rose to 58.7 in July, the highest level since 2005. (A reading above 50 indicates that the sector is expanding.) Among the equally weighted components of the index, the strongest gains were seen in business activity and new orders, but increases were seen in employment and supplier deliveries as well.
In total, 16 non-manufacturing industries reported growth, thanks to a stabilization or improvement in market conditions, with utilities alone reporting a contraction in activity.
Across-the-board improvements in factory orders
New orders for manufactured goods rose 1.1% in June, a stronger than expected rebound from the previous month's –0.6% reading. Orders for durable goods—manufactured products expected to last for three years or more—rose 1.7%, helped by the often volatile transportation segment, which saw a surge in orders for commercial and defense aircraft and parts.
Other segments made healthy gains as well, including machinery, computers, and electronic products, which bodes well for business investment. Orders for nondurable goods rose a more modest 0.6%. Compared with a year earlier, overall factory orders were up 2.5%.
Trade deficit narrows
The U.S. trade deficit (exports minus imports) shrank 7% in June to $41.5 billion compared with a revised figure of $44.7 billion for May. Exports inched higher on increased sales of commercial aircraft, automobiles, and pharmaceuticals.
However, more of the drop in the deficit was due to imports. Record-high food imports were offset by declines of more than $1 billion in both automobile and cell phone imports. With the recent energy boom in the United States, petroleum imports also fell, hitting their lowest level in more than three years.
"The shrinking trade deficit in June is supportive of stronger growth in the second quarter," said Vanguard economic analyst Vytas Maciulis. "It means that the next estimate of second-quarter gross domestic product may be revised up from the initial reading. However, while exports are likely to remain strong, the strength of domestic demand is the wildcard in the trade balance outlook."
Consumers continued borrowing for big-ticket items
Consumer credit, excluding mortgages, climbed $17.3 billion in June to a total of $3.2 trillion, according to data released by the Federal Reserve. That represents an increase of 6.5% over the previous year, a little off the 7.4% gain reported for May.
The lion's share of the rise was due to consumers taking on more nonrevolving credit, a category that includes automobiles, appliances, and student loans. Revolving credit, which includes credit card debt, expanded by $942 million, suggesting consumers are still reluctant to significantly increase their discretionary spending.
Productivity swings higher
The productivity of U.S. workers climbed by 2.5% on an annualized basis in the second quarter, according to a preliminary estimate from the Labor Department. That increase follows on the heels of a downwardly revised figure of –4.5% in the first quarter, the sharpest drop in productivity in more than 30 years.
Unit labor costs were unusually volatile as well, rising by only 0.6% in the second quarter compared with a revised first-quarter estimate of 11.8%.
Year over year, productivity was up 1.2% and unit labor costs rose 1.9%.
ENGLISH LANGUAGE
You think English is easy?
1. The bandage was wound around the wound.
2. The farm was used to produce produce.
3. The dump was so full that it had to refuse more refuse.
4. We must polish the Polish furniture..
5. He could lead if he would get the lead out.
6. The soldier decided to desert his dessert in the desert..
7. Since there is no time like the present, he thought it was time to present the present.
8. A bass was painted on the head of the bass drum.
9. When shot at, the dove dove into the bushes.
10. I did not object to the object.
11. The insurance was invalid for the invalid.
12. There was a row among the oarsmen about how to row.
13. They were too close to the door to close it.
14. The buck does funny things when the does are present.
15. A seamstress and a sewer fell down into a sewer line.
16. To help with planting, the farmer taught his sow to sow.
17. The wind was too strong to wind the sail.
18. Upon seeing the tear in the painting I shed a tear..
19. I had to subject the subject to a series of tests.
20. How can I intimate this to my most intimate friend?
Let's face it - English is a crazy language. There is no egg in eggplant, nor ham in hamburger; neither apple nor pine in pineapple. English muffins weren't invented in England nor French fries in France . Sweetmeats are candies while sweetbreads, which aren't sweet, are meat. We take English for granted. But if we explore its paradoxes, we find that quicksand can work slowly, boxing rings are square and a guinea pig is neither from Guinea nor is it a pig.
And why is it that writers write but fingers don't fing, grocers don't groce and hammers don't ham? If the plural of tooth is teeth, why isn't the plural of booth, beeth? One goose, 2 geese. So one moose, 2 meese? One index, 2 indices? Doesn't it seem crazy that you can make amends but not one amend? If you have a bunch of odds and ends and get rid of all but one of them, what do you call it?
If teachers taught, why didn't preachers praught? If a vegetarian eats vegetables, what does a humanitarian eat? Sometimes I think all the English speakers should be committed to an asylum for the verbally insane. In what language do people recite at a play and play at a recital? Ship by truck and send cargo by ship? Have noses that run and feet that smell?
How can a slim chance and a fat chance be the same, while a wise man and a wise guy are opposites? You have to marvel at the unique lunacy of a language in which your house can burn up as it burns down, in which you fill in a form by filling it out and in which, an alarm goes off by going on.
English was invented by people, not computers, and it reflects the creativity of the human race, which, of course, is not a race at all. That is why, when the stars are out, they are visible, but when the lights are out, they are invisible.
This week's economic data continued to signal improvements across the economy—from manufacturing to services to consumer borrowing. The markets, however, were more focused on developments in a number of hot spots in the Middle East and the ongoing tensions between Russia and the West.
For the week ended August 8, 2014, the S&P 500 Index was up 0.3% to 1,931 (for a year-to-date total return—including price change plus dividends—of about 6%). The yield on the 10-year U.S. Treasury note fell 8 basis points to 2.44%, for a year-to-date decrease of 60 basis points).
Services sector strengthens further
The ISM Non-Manufacturing Index rose to 58.7 in July, the highest level since 2005. (A reading above 50 indicates that the sector is expanding.) Among the equally weighted components of the index, the strongest gains were seen in business activity and new orders, but increases were seen in employment and supplier deliveries as well.
In total, 16 non-manufacturing industries reported growth, thanks to a stabilization or improvement in market conditions, with utilities alone reporting a contraction in activity.
Across-the-board improvements in factory orders
New orders for manufactured goods rose 1.1% in June, a stronger than expected rebound from the previous month's –0.6% reading. Orders for durable goods—manufactured products expected to last for three years or more—rose 1.7%, helped by the often volatile transportation segment, which saw a surge in orders for commercial and defense aircraft and parts.
Other segments made healthy gains as well, including machinery, computers, and electronic products, which bodes well for business investment. Orders for nondurable goods rose a more modest 0.6%. Compared with a year earlier, overall factory orders were up 2.5%.
Trade deficit narrows
The U.S. trade deficit (exports minus imports) shrank 7% in June to $41.5 billion compared with a revised figure of $44.7 billion for May. Exports inched higher on increased sales of commercial aircraft, automobiles, and pharmaceuticals.
However, more of the drop in the deficit was due to imports. Record-high food imports were offset by declines of more than $1 billion in both automobile and cell phone imports. With the recent energy boom in the United States, petroleum imports also fell, hitting their lowest level in more than three years.
"The shrinking trade deficit in June is supportive of stronger growth in the second quarter," said Vanguard economic analyst Vytas Maciulis. "It means that the next estimate of second-quarter gross domestic product may be revised up from the initial reading. However, while exports are likely to remain strong, the strength of domestic demand is the wildcard in the trade balance outlook."
Consumers continued borrowing for big-ticket items
Consumer credit, excluding mortgages, climbed $17.3 billion in June to a total of $3.2 trillion, according to data released by the Federal Reserve. That represents an increase of 6.5% over the previous year, a little off the 7.4% gain reported for May.
The lion's share of the rise was due to consumers taking on more nonrevolving credit, a category that includes automobiles, appliances, and student loans. Revolving credit, which includes credit card debt, expanded by $942 million, suggesting consumers are still reluctant to significantly increase their discretionary spending.
Productivity swings higher
The productivity of U.S. workers climbed by 2.5% on an annualized basis in the second quarter, according to a preliminary estimate from the Labor Department. That increase follows on the heels of a downwardly revised figure of –4.5% in the first quarter, the sharpest drop in productivity in more than 30 years.
Unit labor costs were unusually volatile as well, rising by only 0.6% in the second quarter compared with a revised first-quarter estimate of 11.8%.
Year over year, productivity was up 1.2% and unit labor costs rose 1.9%.
ENGLISH LANGUAGE
You think English is easy?
1. The bandage was wound around the wound.
2. The farm was used to produce produce.
3. The dump was so full that it had to refuse more refuse.
4. We must polish the Polish furniture..
5. He could lead if he would get the lead out.
6. The soldier decided to desert his dessert in the desert..
7. Since there is no time like the present, he thought it was time to present the present.
8. A bass was painted on the head of the bass drum.
9. When shot at, the dove dove into the bushes.
10. I did not object to the object.
11. The insurance was invalid for the invalid.
12. There was a row among the oarsmen about how to row.
13. They were too close to the door to close it.
14. The buck does funny things when the does are present.
15. A seamstress and a sewer fell down into a sewer line.
16. To help with planting, the farmer taught his sow to sow.
17. The wind was too strong to wind the sail.
18. Upon seeing the tear in the painting I shed a tear..
19. I had to subject the subject to a series of tests.
20. How can I intimate this to my most intimate friend?
Let's face it - English is a crazy language. There is no egg in eggplant, nor ham in hamburger; neither apple nor pine in pineapple. English muffins weren't invented in England nor French fries in France . Sweetmeats are candies while sweetbreads, which aren't sweet, are meat. We take English for granted. But if we explore its paradoxes, we find that quicksand can work slowly, boxing rings are square and a guinea pig is neither from Guinea nor is it a pig.
And why is it that writers write but fingers don't fing, grocers don't groce and hammers don't ham? If the plural of tooth is teeth, why isn't the plural of booth, beeth? One goose, 2 geese. So one moose, 2 meese? One index, 2 indices? Doesn't it seem crazy that you can make amends but not one amend? If you have a bunch of odds and ends and get rid of all but one of them, what do you call it?
If teachers taught, why didn't preachers praught? If a vegetarian eats vegetables, what does a humanitarian eat? Sometimes I think all the English speakers should be committed to an asylum for the verbally insane. In what language do people recite at a play and play at a recital? Ship by truck and send cargo by ship? Have noses that run and feet that smell?
How can a slim chance and a fat chance be the same, while a wise man and a wise guy are opposites? You have to marvel at the unique lunacy of a language in which your house can burn up as it burns down, in which you fill in a form by filling it out and in which, an alarm goes off by going on.
English was invented by people, not computers, and it reflects the creativity of the human race, which, of course, is not a race at all. That is why, when the stars are out, they are visible, but when the lights are out, they are invisible.
Thursday, July 24, 2014
Economy Update
It is another interesting week for geo-political events. Investors are focusing on corporate earnings that are coming in at fairly strong. This week I found an article that provides an update on the economy. At the end is a section called This Really Happened.
Economic Update:
Global economic growth, as measured by industrial production, accelerated significantly through 2013. Year-over-year growth in global industrial production slowed to just 0.7% in February 2013. By February 2014, it was up to 3.7%. This acceleration was due almost exclusively to recoveries from the November 2012 cyclical troughs in Europe and Japan. These recoveries more than offset a deceleration in China. Growth neither accelerated nor decelerated significantly in the rest of the world.
The only region where growth might still be accelerating is North America. Industrial production in U.S. manufacturing has grown at a 4.2% annual rate since last July, versus a 1.7% rate over the prior 12 months. While the second quarter’s 6.7% annualized quarterly growth rate was partly a temporary rebound from the first quarter’s weather-depressed levels, some of the recent strength reflects the ongoing replacement of a very old vehicle fleet and the continued boost in economic activity from increased U.S. natural gas production. Growth has also accelerated in Mexico, reflecting both increased motor vehicle production for the U.S. market and an improving policy environment. Industrial production in Mexican manufacturing, which was up just 0.4% year-over-year in December 2013 (based on seasonally adjusted data), was up 4.8% in May 2014. Unfortunately, the acceleration in North America is being largely offset by outright declines in industrial production in Brazil and Argentina, leaving the “stabilization” theme intact globally.
This Really Happened
When his .38 caliber revolver failed to fire at his intended victim during a hold-up in Long Beach, CA the would-be robber, James Elliot, did something that can only inspire wonder. He peered down the barrel and tried the trigger again. This time it worked. Good-bye Mr. Elliot.
After stopping for drinks at an illegal bar, a Zimbabwean bus driver found that the 20 mental patients he was supposed to be transporting from Harare to Bulawayo had escaped from his bus. Not wanting to admit his incompetence, the driver went to a nearby bus stop and offered everyone waiting there a free ride. He then delivered the passengers to the mental hospital, telling the staff that the patients were very excitable and prone to bizarre fantasies. The deception was not discovered for three days.
When a man attempted to siphon gasoline from a motor home parked on a Seattle, WA street by suck-ing on a hose, he got much more than he bargained for. Police arrived at the scene to find a very sick man curled up next to the motor home near spilled sewage. A police spokesperson said that the man admitted to trying to steal gasoline, but he plugged his siphon hose into the motor home’s sewage tank by mistake.
Economic Update:
Global economic growth, as measured by industrial production, accelerated significantly through 2013. Year-over-year growth in global industrial production slowed to just 0.7% in February 2013. By February 2014, it was up to 3.7%. This acceleration was due almost exclusively to recoveries from the November 2012 cyclical troughs in Europe and Japan. These recoveries more than offset a deceleration in China. Growth neither accelerated nor decelerated significantly in the rest of the world.
The only region where growth might still be accelerating is North America. Industrial production in U.S. manufacturing has grown at a 4.2% annual rate since last July, versus a 1.7% rate over the prior 12 months. While the second quarter’s 6.7% annualized quarterly growth rate was partly a temporary rebound from the first quarter’s weather-depressed levels, some of the recent strength reflects the ongoing replacement of a very old vehicle fleet and the continued boost in economic activity from increased U.S. natural gas production. Growth has also accelerated in Mexico, reflecting both increased motor vehicle production for the U.S. market and an improving policy environment. Industrial production in Mexican manufacturing, which was up just 0.4% year-over-year in December 2013 (based on seasonally adjusted data), was up 4.8% in May 2014. Unfortunately, the acceleration in North America is being largely offset by outright declines in industrial production in Brazil and Argentina, leaving the “stabilization” theme intact globally.
This Really Happened
When his .38 caliber revolver failed to fire at his intended victim during a hold-up in Long Beach, CA the would-be robber, James Elliot, did something that can only inspire wonder. He peered down the barrel and tried the trigger again. This time it worked. Good-bye Mr. Elliot.
After stopping for drinks at an illegal bar, a Zimbabwean bus driver found that the 20 mental patients he was supposed to be transporting from Harare to Bulawayo had escaped from his bus. Not wanting to admit his incompetence, the driver went to a nearby bus stop and offered everyone waiting there a free ride. He then delivered the passengers to the mental hospital, telling the staff that the patients were very excitable and prone to bizarre fantasies. The deception was not discovered for three days.
When a man attempted to siphon gasoline from a motor home parked on a Seattle, WA street by suck-ing on a hose, he got much more than he bargained for. Police arrived at the scene to find a very sick man curled up next to the motor home near spilled sewage. A police spokesperson said that the man admitted to trying to steal gasoline, but he plugged his siphon hose into the motor home’s sewage tank by mistake.
Saturday, July 12, 2014
End of Federal Reserve Quantitative Easing
This week the Federal Reserve announced that it will most likely end bond purchases and end what has been called Quantitative Easing. The article authored by Jeff Cox is given. My comments on what this means follows. At the end is a section called Food For Thought.
Fed Minutes: QE likely to end with final $15B reduction in October, Jeff Cox, @JeffCoxCNBCcom
Federal Reserve officials indicated at their June meeting that the monthly bond-buying program could end sooner rather than later—with an October exit growing increasingly likely.
"Participants generally agreed that if incoming information continued to support its expectation of improvement in labor market conditions and a return of inflation toward its longer-run objective, it would be appropriate to complete asset purchases with a $15 billion reduction in the pace of purchases in order to avoid having the small, remaining level of purchases receive undue focus among investors," the minutes stated.
"If the economy progresses about as the Committee expects, warranting reductions in the pace of purchases at each upcoming meeting, this final reduction would occur following the October meeting."
That puts the end to quantitative easing at the front end of market expectations. This is the third QE cycle in a program that has stretched the central bank's balance sheet to $4.4 trillion.
Markets showed little reaction to the news, with stocks maintaining modest gains and government bond yields slightly higher, with the two-year note momentarily touching a three-year high.
"Everything was expected, I think the markets continue on," Ernie Cecilia, of Bryn Mawr Trust, told CNBC. "I don't think there was anything that troubling, certainly from a market perspective, or that surprising, from a market perspective."
The Fed at its June meeting voted to reduce the program another $10 billion to $35 billion, while keeping its target funds rate near zero.
Minutes indicated little taste for increasing rates ahead of schedule, with market expectations that the first hike probably won't come until mid-2015 despite improving economic data that has seen both unemployment and inflation at or near the Fed's target levels.
"The Committee again stated that it currently anticipated that it likely would be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continued to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remained well anchored," the minutes said.
There is an active debate over the timing of the Fed's first rate hike, with some arguing the central bank is prepared to move more quickly than markets might expect.
________________________________________________________________________
Comment:
It is about time. The economy is stable to growing and these bond purchases are raising our national debt. It will be good to reduce our national debt by $4.4 Trillion once these bonds mature.
The real question is what does an investor do with this information? The answer is since this has never been done before, nobody really knows. If something happens it would most likely impact bond yields and stock prices. I believe that 3 scenarios exist:
1) Free market reign supreme and nothing really happens to bond yields or stock prices.
2) The economy is not ready for this move and economy starts to shrink lowering bond yields and stock prices go down due to money flow into bonds.
3) The demand for bonds goes down raising bond yields and stock prices go up due to money flow into bonds.
If the growth in the US Gross Domestic Product is higher than the 10 year US Treasury bond yield then scenario 3 makes sense. If the growth is the same or lower then scenario 1 & 2 make sense. It is important to relax, watch it unfold, and have a plan regardless of which scenario occurs.
Food For Thought
A Swiss hotel chef lost a finger in a meat-cutting machine and submitted a claim to his insurance company. The company, expecting negligence, sent a claim adjuster to investigate. The Adjuster tried the machine and also lost a finger. The chef’s claim was approved.
An American teenager was in the hospital recovering from serious head wounds received from an on-coming train. When asked how he received the injuries, he told police that he was simply, “trying to see how close he could get his head to a moving train before he was hit.”
A man walked into a Louisiana Circle-K, put a $20 bill on the counter, and asked for change. When the clerk opened the cash drawer, the man pulled a gun and asked for all the cash in the register, which the clerk promptly provided. The man took the cash from the clerk and fled, leaving the $20 bill on the counter. The total amount of cash he got from the drawer was $15. (If someone points a gun at you and then gives you money, has a crime been committed?)
=============================================================================
“The difference between stupidity and genius is that genius has its limits.” Albert Einstein
Fed Minutes: QE likely to end with final $15B reduction in October, Jeff Cox, @JeffCoxCNBCcom
Federal Reserve officials indicated at their June meeting that the monthly bond-buying program could end sooner rather than later—with an October exit growing increasingly likely.
"Participants generally agreed that if incoming information continued to support its expectation of improvement in labor market conditions and a return of inflation toward its longer-run objective, it would be appropriate to complete asset purchases with a $15 billion reduction in the pace of purchases in order to avoid having the small, remaining level of purchases receive undue focus among investors," the minutes stated.
"If the economy progresses about as the Committee expects, warranting reductions in the pace of purchases at each upcoming meeting, this final reduction would occur following the October meeting."
That puts the end to quantitative easing at the front end of market expectations. This is the third QE cycle in a program that has stretched the central bank's balance sheet to $4.4 trillion.
Markets showed little reaction to the news, with stocks maintaining modest gains and government bond yields slightly higher, with the two-year note momentarily touching a three-year high.
"Everything was expected, I think the markets continue on," Ernie Cecilia, of Bryn Mawr Trust, told CNBC. "I don't think there was anything that troubling, certainly from a market perspective, or that surprising, from a market perspective."
The Fed at its June meeting voted to reduce the program another $10 billion to $35 billion, while keeping its target funds rate near zero.
Minutes indicated little taste for increasing rates ahead of schedule, with market expectations that the first hike probably won't come until mid-2015 despite improving economic data that has seen both unemployment and inflation at or near the Fed's target levels.
"The Committee again stated that it currently anticipated that it likely would be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continued to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remained well anchored," the minutes said.
There is an active debate over the timing of the Fed's first rate hike, with some arguing the central bank is prepared to move more quickly than markets might expect.
________________________________________________________________________
Comment:
It is about time. The economy is stable to growing and these bond purchases are raising our national debt. It will be good to reduce our national debt by $4.4 Trillion once these bonds mature.
The real question is what does an investor do with this information? The answer is since this has never been done before, nobody really knows. If something happens it would most likely impact bond yields and stock prices. I believe that 3 scenarios exist:
1) Free market reign supreme and nothing really happens to bond yields or stock prices.
2) The economy is not ready for this move and economy starts to shrink lowering bond yields and stock prices go down due to money flow into bonds.
3) The demand for bonds goes down raising bond yields and stock prices go up due to money flow into bonds.
If the growth in the US Gross Domestic Product is higher than the 10 year US Treasury bond yield then scenario 3 makes sense. If the growth is the same or lower then scenario 1 & 2 make sense. It is important to relax, watch it unfold, and have a plan regardless of which scenario occurs.
Food For Thought
A Swiss hotel chef lost a finger in a meat-cutting machine and submitted a claim to his insurance company. The company, expecting negligence, sent a claim adjuster to investigate. The Adjuster tried the machine and also lost a finger. The chef’s claim was approved.
An American teenager was in the hospital recovering from serious head wounds received from an on-coming train. When asked how he received the injuries, he told police that he was simply, “trying to see how close he could get his head to a moving train before he was hit.”
A man walked into a Louisiana Circle-K, put a $20 bill on the counter, and asked for change. When the clerk opened the cash drawer, the man pulled a gun and asked for all the cash in the register, which the clerk promptly provided. The man took the cash from the clerk and fled, leaving the $20 bill on the counter. The total amount of cash he got from the drawer was $15. (If someone points a gun at you and then gives you money, has a crime been committed?)
=============================================================================
“The difference between stupidity and genius is that genius has its limits.” Albert Einstein
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