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Sunday, April 6

6th Apr - W/E: Markets & Economics

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Profit Margins: The Death of a ChartPhilosophical Economics
Killing a chart, but not the margin questionFT
What does the chart suggest for future equity earnings growth and equity total returns? High profit margins are obviously a headwind, but the specific answer depends on your expectations with respect to mean-reversion.  If, for example, you think profit margins will have to contract to the average of the entire data set, or even worse, to the average seen from 1968 to 2002, then future equity earnings growth is going to be negative, at least in real terms, and equity total returns will likely be poor.  But those aren’t the only possibilities–nor are they necessarily the most likely possibilities. 

Pivot Points, Tick and Vwap in Day TradingFat Pitch
Simple is essential, because timeframes are short and decisions have to be made quickly. There are a lot of ways to day trade; this post is about just one of those. We can do everything with just three tools: pivot points, tick and vwap.

Transmission of Fed tapering news to emerging
In 2013, policymakers began discussing when and how to ‘taper’ the Federal Reserve’s quantitative easing policy. This column presents evidence on the effect of Fed officials’ public statements on emerging-market financial conditions. Statements by Chairman Bernanke had a large effect on asset prices, whereas the market largely ignored statements by Fed Presidents. Emerging markets with stronger fundamentals experienced larger stock-market declines, larger increases in credit default swap spreads, and larger currency depreciations than countries with weaker fundamentals.

Carry Trade: The AfterlifeWSJ
Carry trade was unprofitable for the last few years due to low rates and stimulus measures. 2014 could change that.

EM fund flows: they’re back!FT
Is this a turning of the tide? After 22 straight weeks of outflows, dedicated EM equity funds recorded inflows of $2.44bn in the week… EM bond funds, too, had inflows in the week.

The Modern View of the Stock MarketMorningstar
The great insights of the 1960s, half a century later.

Unconventional Monetary Policies Spell Success in Any Language, Fed Paper SaysWSJ
Central banks in the U.S., Japan, the U.K. and Europe all have resorted to unconventional policies in recent years to combat the global financial crisis and recession. The details have differed across international borders, but in all four cases, they’ve proven successful in terms of easing overall monetary conditions, according to new research from the Federal Reserve.

Conditionality in Evolving Monetary Policy RegimesIMF
With single-digit inflation and substantial financial deepening, developing countries are adopting more flexible and forward-looking monetary policy frameworks and ascribing a greater role to policy interest rates and inflation objectives. While some countries have adopted formal inflation targeting regimes, others have developed frameworks with greater target flexibility to accommodate changing money demand, use of policy rates to signal the monetary policy stance, and implicit inflation targets.

Readings from the book of SamFT
After a half-century with the FT, Sir Samuel Brittan retired last week, signing off with a valedictory essay and video chat.

Fiscal adjustment, growth, and credit
The recent debate on the link between austerity and growth has focused on the short run. This column discusses recent research into the link between fiscal consolidation and medium-term growth under different financial conditions. If credit is not available to consumers and investors, private demand is less able to compensate for cutbacks in public demand, so large spending cuts can have a negative effect on growth. Difficult financial conditions probably explain why fiscal adjustments that worked in the 1990s have not produced similar beneficial effects on growth in recent years.

Euphemistic At The IMFKrugman / NYT
Raise the inflation target to 4 percent, dummies. But the IMF wouldn’t,and presumably can’t, say that outright. And I suspect that the people who need to hear that won’t at all get what the Fund is really saying.

The end of human progress, really?George Magnus
Gordon’s proposition is that economic and productivity growth in the US will be appreciably lower in the next 25-40 years than it has been in the last century.

Buttonwood: Now you see themThe Economist
Central banks will be financing governments on a permanent basis

Long-Term Unemployed Make for Just as Strong Hires: StudyBB
People who have been out of work for an extended period, once hired, tend to be just as productive on the job as those with more typical work histories, according to an analysis of almost 20,000 employees.