Economy Archives - Page 92 of 136 - the patient investor

March 8, 2013

Milton Friedman – The Free Lunch myth [video]

Milton Friedman, recipient of the 1976 Nobel Prize for Economic Science, was one of the most recognizable and influential proponents of liberty and markets in the 20th century, and the leader of the Chicago School of economics. Here he gives his views on the myth of the free lunch.

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.

March 8, 2013

Milton Friedman: The foundations of freedom [video]

Nobel Laureate Dr. Milton Friedman gives his thoughts on the importance of maintaining the foundations of freedom, in 2009.

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.

March 8, 2013

Far from being a disaster, the results of the Italian election could be a turning point for Italy and the Eurozone. | EUROPP

Jonathan Hopkin argues that austerity has failed to produce results in Southern Europe and calls for European leaders to reconsider their approach:

…..perhaps the most important result of the election is that it will likely prove to be a turning point in the way in which the European Union deals with the debt crisis in the South. As was the case in Greece, the attempt to impose technocratic rule on a debtor nation to implement austerity and reform has been a political and economic disaster…… The Monti experiment produced no clear economic gains and has been decisively rejected at the polls. It would be reckless in the extreme of Europe’s leaders not to reconsider their approach.

via Far from being a disaster, the results of the Italian election could be a turning point for Italy and the Eurozone. | EUROPP.

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.

March 8, 2013

Quantitative easing does not address the fundamental problems underpinning struggling western economies. | EUROPP

John Doukas questions the benefits of quantitative easing:

…excessive money supply fails to increase real economic activity because it raises the labour cost while it lowers the cost of capital. Depressing yields at home, as a result of quantitative easing, in an open economy setting, leads yield-seeking investors into higher-risk investments such as emerging markets.

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.

March 7, 2013

Australia: Highest cost of living

Purchasing power parities (PPPs), exchange rates, and relative prices, by country, 2011

At 1.61, Australia has higher relative prices than Norway, Denmark, Sweden and Japan (listed in descending order). 61% higher than the US and 48% higher than the UK.

Index

Source: BLS

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.

March 6, 2013

Non-mining Australia “in recession” last quarter | MacroBusiness

Leith van Onselen considers that Australia’s non-mining economy may be in recession based on two consecutive quarters of negative growth in state final demand:

The blanket statement that Australia grew close to trend in 2012 not only obfuscates the fact that the current growth rate is well below trend and declining even further but also hides the fact that the majority of the population are living in regions which are in recession. That paints a totally different picture than the political spin coming from the Government.

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.

March 5, 2013

Volcker: Wall Street Kills Regs By Running Out the Clock

Josh Boak at Fiscal Times writes:

…..So when Volcker declared on Monday that the financial regulation system is broken, it’s time to sound the alarm. The gist of his complaint is that Dodd-Frank was passed in the middle of 2010, yet many of its biggest regulations have not been finalized and there is no end in sight.

“I know it’s a complicated bill. I know the markets are complicated,” Volcker said at a conference for the National Association for Business Economics. “Two-and-a-half years later you can’t have a regulatory apparatus that’s devised by the most important piece of legislation in recent years? That suggests something is rather wrong. Something is dysfunctional.”

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.

March 5, 2013

Australia: International capital flows into large caps

Westpac reports that the December quarter saw net inflows of:

Debt $10.5bn, up from $7.1bn in Q3 (prev $7.6bn)
Equity $5.1bn, more modest than Q3’s $9.7bn (prev $8.8bn), but still almost twice the average pace of the past three years
Portfolio investment $4.7bn, significantly above Q3’s $0.8bn
Direct investment accelerated to $13.2bn.

The global scramble for yield is driving up the ASX 50. We need to beware that capital inflows are fickle and may bolt at signs of a falling Aussie dollar.

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.

March 4, 2013

Rate cuts: Short-term benefit, long-term pain

Shane Oliver at AMP recently tweeted:

Why rate cuts help household spending: 1/ Aust hholds have approx $750bn in deposits but $1700bn in debt….

…so a 1% rate cuts makes depositors $7.5bn worse off, but borrowers $17bn better off. The net gain for households is $9.5b !

Reason #2 as to why rate cuts help. Depositors r less likely to change spending on rate changes than borrowers (families with mortgage)

He is right that rate cuts stimulate household spending, but that is not the only consideration. Rate cuts also stimulate borrowing and expansion of the money supply — leading to asset bubbles and inflation. They further force savers/investors to take greater risks in the scramble for yield, leaving them exposed if the bubble collapses. If only we could let market forces of credit supply and demand determine the rate — and resist the urge to tinker.

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.

March 4, 2013

S&P 500 and Nasdaq selling pressure

The S&P 500 is oscillating between 1485 and 1530. I avoided using the word “consolidating” because that implies a degree of calm. Far from it. Bearish divergence on 21-day Twiggs Money Flow continues to warn of medium-term selling pressure. Reversal below 1485 and the rising trendline would indicate a correction. Breakout above 1530 is less likely but would offer a target of 1575*.

S&P 500 Index

* Target calculation: 1530 + ( 1530 – 1485 ) = 1575

On the monthly chart we can see that a correction below the secondary trendline would target primary support and the primary trendline between 1350 and 1400. A 63-day Twiggs Momentum trough above zero would indicate continuation of the up-trend, while retreat below zero would suggest a primary reversal.
S&P 500 Index
The VIX Volatility Index remains close to recent lows at 0.15. This does not provide much long-term reassurance: the VIX was at similar levels in May 2008. Breakout above the recent high at 0.20 would be a warning sign.
VIX Index
The Nasdaq 100 displays a bearish divergence on both 63-day Twiggs Momentum and long-term (13-week) Twiggs Money Flow. Reversal below the rising trendline would strengthen the signal. While breach of primary support at 2500 would signal a reversal.
Nasdaq 100 Index

* Target calculation: 2500 – ( 2900 – 2500 ) = 2100

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.