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...Red Bull Drinks.

Posted by: Tom Keene on December 15, 2010

Investment Before Jobs

“The interaction between gross investment spending and spare capacity is not straightforward.” Kevin Daly, Goldman Sachs International

Okay. If the interaction is not there, then what? It is a mystery and has been so for a good decade. Daly measures out combined US, Eurozone, Japan and UK consumption at 61% and business fixed investment at 12%. But, and it is a critical but, the volatility of investment suggests 40% of the recession was investment reduction while consumption was a small 2%.

ecochat121510 inv.bmp

GDP$FIXI INDEX GPL Y ROLL: Here is Nominal Fixed Investment showing the unprecedented return to 1999/2000. What’s more amazing is it’s plotted semi-log (slope matters) with the 1990s mirroring the 1960s. We’ve gone flat. An eyeballed extrapolation of the good times suggests we are about $1.1 trillion light on investment. It’s a Danny O’Keefe moment.


.BFIGDP INDEX GP Q ROLL: The same as above but compared to nominal GDP. The regression is 1950ish to the advent of the investment collapse. Summary: Fixed Invesment to GDP has evaporated, barely turned and is about 4-deviations off trend. We struggle for job formation avoiding the Econ 101 reality that investment leads to jobs.

Where is the investment? a) abroad? b) pending? c) waiting for the new new? d) the world does not need any more __________ fill in the blank?

Europe, Again

In the December rhetorical quiet, Europe gently “widens” as stress is seen from Belgium to Spain. Here is one spread that suggests markets are ahead of the Brussels.


.SPGER10 INDEX GP W ROLL: The Spanish 10-year widens, again, compared to the German equivalent. The real yield in Madrid is roughly 5.45% minus 2.3% = a 3ish% real rate. Not good.

Finally, here is my fave European chart. It’s trade-weighted Swiss (CHF), that has exploded: strong Swiss franc versus a set of trading partners.


BPFXCHFS INDEX GP M ROLL: Here is the BNP Paribas T-W Swiss franc. From the contained, yet strengthening of 1997 to 2007. The currency has exploded 8+ deviations.

Surplus with China

Surprise! Switzerland has a trade surplus with China (Finland, Ireland and Sweden, as well.) Too often, market participants and the media focus on interest rates and simplistic one-off justifications for a trend (think, deposit flows from fearful Europeans to Switzerland). Perhaps, not.

Here is Philipp Hildebrand, Chairman of the Governing Board of the Swiss National Bank in a November 23 speech:

“Aside from Switzerland’s classic exports - such as watches, cheese and chocolate - newcomers include Nespresso coffee capsules and Red Bull drinks.”


Reader Comments

Firozali A.Mulla DBA

May 15, 2011 11:09 AM

Euro up means $ is down oooops that is bad for all if euro down and $ is up well done Obama for getting Osama. I thank you Firozali A.Mulla DBA

weight loss lose

May 15, 2011 11:35 AM

These kind of post are always inspiring and I prefer to read quality content so I happy to find many good point here in the post, writing is simply great, thank you for the post

India Advisory Stock Research

June 23, 2011 3:37 PM

In the time of recession one job or one work is hardly fulfilling needs of people. So everyone is looking for supplementary source of income.
Now the question is what can be that source of income in such a bad phase of economy??

Well it’s very difficult to start new business at this point of time as it requires lot of cash and efforts. So again question is how to make more money in such conditions when needs are same and income is low?

We strongly suggest that if you like to take bit of risk and don’t want to spend too much money and time on new venture then stock market is the right place for you.
To be very frank this is not the right time for investment that is for long term to medium term investment but every day is a favourable day for day trading. No matter if NSE or BSE
is bullish or bearish as In stock market one can earn in both of these trends.

So just think about it and see if stock market can be the right place to make some extra money.

Please feel free to contact us for any query.

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EconoChat captures Tom Keene's thoughts on economics, finance and investment. He is editor-at-large for Bloomberg News and hosts Bloomberg Surveillance and Bloomberg on the Economy on NYC1130, Sirius 129 and XM 130 and Surveillance Midday on Bloomberg Television. His complete interviews are at Tom Keene on Demand. Look for Tom on twitter @tomkeene

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