Colin Twiggs, Author at the patient investor

August 19, 2012

"François Hollande’s Wrong Idea of France" by Brigitte Granville | Project Syndicate

Since the euro’s introduction, unit labor costs have risen dramatically faster in France than they have in Germany. According to Eurostat data published in April 2011, the hourly labor cost in France was €34.2, compared to €30.1 in Germany – and nearly 20% higher than the eurozone average of €27.6. France’s current-account deficit has risen to more than 2% of GDP, even as its economic growth has ground to a halt.

The high cost of employing workers in France is due not so much to wages and benefits as it is to payroll taxes levied on employers. The entire French political class has long delighted in taxing labor to finance the country’s generous welfare provisions, thus avoiding excessively high taxation of individuals’ income and consumption – though that is about to come to an end as Hollande intends to slap a 75% tax on incomes above €1 million. This is a version of the fallacy that taxing companies (“capital”) spares ordinary people (“workers”).

via “François Hollande’s Wrong Idea of France” by Brigitte Granville | Project Syndicate.

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

August 19, 2012

The Oil Drum | America’s Deficit Attention Disorder

According to the World Wildlife Federation’s 2012 Living Planet Report, at the current rate of consumption, “it is taking 1.5 years for the Earth to fully regenerate the renewable resources that people are using in a single year. Instead of living off the interest, we are eating into our natural capital.” This is a path to never-never land. Unlike with financial deficits, simple debt forgiveness is not an option.

When we deplete Earth’s bio-capacity—its capacity to support life in its many varied forms—we are not borrowing from the future; we are stealing from the future. Even though it is the most serious of all human-caused deficits, it rarely receives mention in current political debates.

via The Oil Drum | Drumbeat: August 18, 2012.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 18, 2012

See which presidential candidate you side with

Answer the following questions to see which presidential candidates you side on most issues with.
Click the image below to complete the quiz.

via See which presidential candidate you side with.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 18, 2012

French Industrial Policies Are Aiding Rapid Decline of Peugeot – SPIEGEL ONLINE

By Dietmar Hawranek and Isabell Hülsen:

When Helping Is Hurting
Ironically, the victims of these two developments — focusing on production in France and high wage increases — are those whose cause is being championed by governments and labor representatives: the autoworkers themselves. Workers at the [Peugeot] Aulnay plant had to look on as their company went into gradual decline. Aulnay was once one of the most modern plants in the country, annually producing more than 400,000 cars. Today, fewer than 140,000 vehicles roll off its assembly lines each year. An auto plant that produces so few vehicles can hardly be profitable. If President Hollande and the unions compel Peugeot to keep the plant in operation, they will only accelerate the company’s demise.

via French Industrial Policies Are Aiding Rapid Decline of Peugeot – SPIEGEL ONLINE.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 18, 2012

In the classroom | Abstruse Goose

In the Classroom

via Abstruse Goose.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 18, 2012

New Wave of Deft Robots Is Changing Global Industry – NYTimes.com

The cost of automated assembly lines is falling and at some point will become cheaper than their labor-intensive equivalent. The result could be a tectonic shift in manufacturing but where will the redundant assembly workers find jobs? JOHN MARKOFF of the NYTimes writes:

The falling costs and growing sophistication of robots have touched off a renewed debate among economists and technologists over how quickly jobs will be lost. This year, Erik Brynjolfsson and Andrew McAfee, economists at the Massachusetts Institute of Technology, made the case for a rapid transformation. “The pace and scale of this encroachment into human skills is relatively recent and has profound economic implications,” they wrote in their book, “Race Against the Machine.”

In their minds, the advent of low-cost automation foretells changes on the scale of the revolution in agricultural technology over the last century, when farming employment in the United States fell from 40 percent of the work force to about 2 percent today.

via New Wave of Deft Robots Is Changing Global Industry – NYTimes.com.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 16, 2012

ASX revenue from high frequency trading soars

A new data center, catering for high-speed trading, is becoming a major revenue-source for the ASX. My concern is that this could change the entire focus of the ASX, outweighing revenue from traditional stock market trading. Tom Steinert-Threlkeld at the Securities Technology Monitor writes:

The Australian Securities Exchange Group said Thursday that its revenue from Technical Services in its 2012 fiscal year topped the amount of revenue it received from stock market trading……

The growth in Technical Services revenue came as the company introduced different order types and execution services, and completed a state-of-the art data center. That data center operates at high speed and handles high volumes of trading orders, from computers belonging to trading firms that are located inside its walls. ASX said it was hosting 59 clients in the new data center as of June 30.

via Stock Trading Revenue Topped by Technology at Australia Exchange.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 16, 2012

Friedman’s Japanese lessons for the ECB « The Market Monetarist

Milton Friedman, December 1997:

Defenders of the Bank of Japan will say, “How? The bank has already cut its discount rate to 0.5 percent. What more can it do to increase the quantity of money?”

The answer is straightforward: The Bank of Japan can buy government bonds on the open market, paying for them with either currency or deposits at the Bank of Japan, what economists call high-powered money. Most of the proceeds will end up in commercial banks, adding to their reserves and enabling them to expand their liabilities by loans and open market purchases. But whether they do so or not, the money supply will increase.

There is no limit to the extent to which the Bank of Japan can increase the money supply if it wishes to do so. Higher monetary growth will have the same effect as always. After a year or so, the economy will expand more rapidly; output will grow, and after another delay, inflation will increase moderately. A return to the conditions of the late 1980s would rejuvenate Japan and help shore up the rest of Asia.

via Friedman’s Japanese lessons for the ECB « The Market Monetarist.

Friedman was suggesting that the BOJ implement QE to boost the money supply and create inflation. Inflation would rescue the banks and real-estate-owners with underwater mortgages.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 16, 2012

Forex: Euro, Pound Sterling, Canadian Loonie, Australian Dollar and Japanese Yen

The Euro is testing short-term support at $1.2250 on the daily chart. Recovery above $1.2400 would indicate another rally, while failure of support would test primary support at $1.2050. The primary trend is still downwards, but breach of the descending trendline means the primary down-trend is losing momentum and a bottom is forming. Failure of primary support is unlikely but would warn of another down-swing, with a target of $1.185.

Euro/USD

* Target calculation: 1.215 – ( 1.245 – 1.215 ) = 1.185

Pound Sterling found support at €1.255 against the Euro before rallying to €1.28. Narrow consolidation between €1.27 and €1.28 suggests continuation of the rally. Breach of resistance at €1.29 would signal an advance to €1.315*. Rising 63-day Twiggs Momentum reflects a strong primary up-trend.

Pound Sterling/Euro

* Target calculation: 1.285 + ( 1.285 – 1.255 ) = 1.315

Canada’s Loonie is headed for a test of resistance against the greenback at $1.02. Bullish divergence on 63-day Twiggs Momentum on the weekly chart suggests a primary up-trend; confirmed if resistance at $1.02 is broken.

Canadian Loonie/Aussie Dollar

Shallow retracement of the Aussie Dollar against the greenback suggests trend strength. Recovery above $1.06 would indicate an advance to $1.075. Breakout above $1.075/$1.08 would offer a long-term target of $1.20* but RBA intervention, to protect local industry, could be a factor.

Aussie Dollar/USD

* Target calculation: 1.045 + ( 1.045 – 1.015 ) = 1.075

The greenback found support at ¥78 against the Japanese Yen. Rising Twiggs Momentum and penetration of the descending trendline both warn that a bottom is forming. Recovery above ¥80.50 would complete a double bottom reversal, suggesting an advance to ¥84.

US Dollar/Japanese Yen

* Target calculation: 81 + ( 81 – 78 ) = 84

The Aussie Dollar broke medium-term resistance at ¥82 against the Japanese Yen, headed for a test of the upper range border at ¥88/¥90. Rising 63-Day Twiggs Momentum and recovery above zero suggest a primary up-trend as the Aussie Dollar attracts capital inflows.

Aussie Dollar/Japanese Yen

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

August 15, 2012

Air cargo volume indicator points to weakening of industrial activities

10 August, 2012, 1:53. Posted by Zarathustra

Nomura has a Air cargo volume index (as we first mentioned here), which correlated with global industrial activities pretty with (correlation = 0.84).

Nomura: Industrial Production and Air Cargo Volume

via Air cargo volume indicator points to weakening of industrial activities.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.