Google Analytics

Friday, May 15

15th May - Charts

Australia shows how monetary policy is done. When a shock hits, you ease the policy, and economy recovers. Europe thought the opposite would be a good idea. Thank you very much.

Perspective. Never lose it, but think how things would look "from the other side".

Euro area is not an optimal currency area. The lack of common fiscal capacity guarantees that the monetary union will not work properly.

The earnings outlook for euro area companies is terrible, near crisis lows. Is this really a recovery?
EURUSD daily chart - bouncing between support-resistance lines. The trend down has ended, but I wouldn't yet say the trend has turned up. Range-trading ahead?

If range-trading is ahead, the next move could be a touch of the support area, lower from here.

Euro area "recovery".

So now the European Central Bank's errors in 2011 have been corrected. But it will take a lot of to reverse what has been lost. Thank the ECB's earlier actions for the lousy recovery. 

Europe's positive surprises are now behind us. The divergence between EZ and US is closing, just as I expected earlier. I believe US will begin to surprise positively in the coming months, which would close the gap further.

Gross domestic production's current distance from the highest peak. Many countries are way below their pre-crisis highs.

Both German and US yields are up and back to December levels. The move in Europe is larger in absolute terms, because ECB's purchase programme led to a "bubble move".

The story of Greek recovery was something the European politicians and spin  doctors wanted to say. It never was real. Blaming Syriza for the recent performance is just scapegoating.

IMF's research suggests structural reforms are not as effective as they are often stated to be. This just shows desperation of the European decision makers - when foreign exchange rate adjustments are not possible, there is very little than can be done. This is why they are desperate to emphasize anything else - even if they won't work.

Sure, Nokia distorts Finland's performance, but at least

As a member of the Finns-party, I was happy about the election result. But still, I don't have high hopes of the future. Internal devaluation will be tried, and it will fail, just as theory, research, and recent experiences suggest. Finland's tragedy is to be in love with the monetary union. That is the trouble with lying to the electorate. When they have been lied for a long enough time, it will be very difficult to erase the mistaken lesson. That's why I feel like Uuno Turhapuro's father-in-law - happy, but I kind of know bad things will happen next.

US consumer confidence remains high. But recent weak economic performance suggests the index could in 2015 go through something similar to 2014 - not move much.

Nasty dent in the first quarter, although the trend remains up.

I worry about the high capacity utilization rate. Usually production behaves badly. Maybe a year or two left before a cyclical downturn?

The ISM indices show weak manufacturing and relatively ok service sector.

US is close to full employment. The people still without jobs are long-term unemployed. The crisis left us with perhaps 2-3% of structural unemployment. The fiscal response should have been larger. But at least the US did whole lot better economic policy than the euro area.

Yield heat map.