These days the whole country are focusing on Terri's case. No one would bother to come up with the econ implication from the issue. But someone does. It's foxnews-- the well dressed hype tool of republican americans.
I guess what is happening does have an effect in that regards in terms of psycological impact on people's behavial and mindset on insurance or social security aspect. While I would say it is still at very marginal level. We can hardly find any correlation between the market and these kinds of issue although it attracts the attention of the market players.
It raise an intersting topic of guadian right. The issue we watch in my view is not the right for Terri to live for any longer time but that of the guadians to excute their rights. Is her husband in a postion to terminate terri's life from what he understand terri's living will? We see that's exactly the ruling from local as well as federal judges. The government or the Bushes are not in a postion to behave against it in that sense. Well, I hope this crisis will end peacefully without causing damages to the social integrity. But again this is where there is nothing people can do to bring about it.
Saturday, March 26, 2005
Friday, March 25, 2005
Liquidity Bubbles
Liquidity Bubbles
Just back from New York trip, wonderful - I'd rather say, and decided to make up my travellog next day. But an article from Washingtonpost.com caught my eyes and the important thing is that it makes sense. The liquidity eccess accumulated over years will ultermately set itself in a crisis in anytime soon. Central Bank of China is blamed, Fed is blamed, even the best technology years are blamed for they make the corporate world awash in cash.
"There is an excess of liquidity around, and it is proving very hard to get rid of it," said John Makin of the American Enterprise Institute, using the term preferred by economists.
"The possibility of a liquidity bubble around the world concerns me," Citigroup Chairman Charles Prince told the Financial Times last week.
To some degree, this excess liquidity is what you'd expect as a giant baby boom generation reaches its peak earnings years and begins to save more for retirement.
And surely a good part of the story is the stimulative monetary policies of central banks around the world for most of the period since the Asian financial crisis in 1998. The Bank of Japan has been pumping out cheap money for years in an effort to revive the Japanese economy and slay the deflation dragon. In the United States, the short-term interest rates that the Federal Reserve controls have been below the inflation rate for more than three years.
The biggest culprit of all, however, may by the central bank of China, which, to prevent the appreciation of the Chinese currency, has had its printing presses working overtime to churn out the yuans needed to buy all those dollars earned through exports.
Fed Maestro Alan Greenspan has argued that nobody can really identify a financial bubble until after it has popped, which was one reason the Fed did little to try to prick the stock market bubble in the late 1990s. That sophistry was exposed last month when transcripts of Fed meetings from 1999 were released showing that Fed officials, including Greenspan, were quite aware that they were dealing with a bubble of immense proportions. And it is now belied, as it was then, by any number of objective indicators of the widening gap between the economic and market value of various assets.
The downtown office-building market is also red hot, despite the fact that, nationally, there has been little increase in net rents. Torto said most of the price escalation can be explained only by an expectation that price appreciation will continue at its current pace.
Phil Verleger, the energy expert, brings a similar analysis to the recent run-up in oil prices, which he said is being driven less by fundamentals (supply, demand and the cost of replacing reserves) than it is by the upward pull of futures markets. He said OPEC and its silent partners, the major oil companies, know that they earn the highest profit when oil inventories are lean, and the best way to keep them lean is to keep spot prices higher than futures prices. Now that every hedge fund and college endowment is in the futures market placing bets on higher prices over the next year, spot prices are following suit.
The current bond-market bubble was attested to by no less an authority than Greenspan, when he admitted he was puzzled by long-term interest rates that have failed to respond to the 1.75-percentage-point increase in short rates engineered by the Fed. Greenspan called it a "conundrum." I call it a speculative market driven by irrational exuberance and herd behavior.
A similar story is told by narrowing "spreads" on riskier bonds -- the interest-rate premium that borrowers have to pay over "risk-free" U.S. Treasury bonds. On the junk-bond market, spreads are near historic lows, with many new issues oversubscribed. In the market for emerging-market bonds, spreads that peaked at more than 10 percentage points at the time of the Argentine debt crisis in late 2001 fell to a low of 3.3 percentage points earlier this month.
It is more of a stretch to argue that stock prices have again entered bubble territory. Certainly as a multiple of earnings, today's prices are only slightly above historic averages. But there is a strong sense of deja vu in seeing banks and Wall Street investment houses tripping over one another to provide gobs of money on easy terms to companies and private equity funds engaged in bidding wars for telecom and software firms. And I assign some significance to the fact that Warren Buffett, who correctly identified the last bubble, now has $43 billion sitting in the bank, unable to find acquisitions to make at reasonable prices.
The tendency among economists has been to assume that bubbles happen only when there is too much cheap money around and that responsibility for controlling the money supply and containing bubbles rests with the Fed and other central banks. Adam Posen of the Institute of International Economics did a nice job of knocking down such outdated monetarism in a short, pithy article in a German newspaper last week.
But Posen -- like the Greenspan Fed -- also makes a mistake in concluding from that observation that policymakers need not worry about asset bubbles, largely because they have little long-run impact on what economists call "the real economy." That may once have been true. But this is a world in which billions of dollars earned by Chinese exporters can be recycled into Fannie Mae bonds, lowering U.S. mortgage rates enough to give a couple in Rockville the wherewithal to spend an extra $50,000 for their dream house. It's also a world in which billions of extra petrodollars now quickly make their way into hedge funds and real estate investment trusts that are bidding up the prices of satellite companies, Manhattan real estate and Treasury bonds. In such a world, the old distinctions between financial markets and the "real economy" quickly blur.
I don't know whether this means the Fed was right or wrong this week in not raising interest rates more than a quarter of a point and in sticking to its promise of "measured" increases in the future. What I do know, however, is that it is silly for the Fed to continue to ignore the condition of asset and currency markets when making such decisions and explaining them to the public.
Steve Pearlstein- for Washingtonpost.com
Just back from New York trip, wonderful - I'd rather say, and decided to make up my travellog next day. But an article from Washingtonpost.com caught my eyes and the important thing is that it makes sense. The liquidity eccess accumulated over years will ultermately set itself in a crisis in anytime soon. Central Bank of China is blamed, Fed is blamed, even the best technology years are blamed for they make the corporate world awash in cash.
"There is an excess of liquidity around, and it is proving very hard to get rid of it," said John Makin of the American Enterprise Institute, using the term preferred by economists.
"The possibility of a liquidity bubble around the world concerns me," Citigroup Chairman Charles Prince told the Financial Times last week.
To some degree, this excess liquidity is what you'd expect as a giant baby boom generation reaches its peak earnings years and begins to save more for retirement.
And surely a good part of the story is the stimulative monetary policies of central banks around the world for most of the period since the Asian financial crisis in 1998. The Bank of Japan has been pumping out cheap money for years in an effort to revive the Japanese economy and slay the deflation dragon. In the United States, the short-term interest rates that the Federal Reserve controls have been below the inflation rate for more than three years.
The biggest culprit of all, however, may by the central bank of China, which, to prevent the appreciation of the Chinese currency, has had its printing presses working overtime to churn out the yuans needed to buy all those dollars earned through exports.
Fed Maestro Alan Greenspan has argued that nobody can really identify a financial bubble until after it has popped, which was one reason the Fed did little to try to prick the stock market bubble in the late 1990s. That sophistry was exposed last month when transcripts of Fed meetings from 1999 were released showing that Fed officials, including Greenspan, were quite aware that they were dealing with a bubble of immense proportions. And it is now belied, as it was then, by any number of objective indicators of the widening gap between the economic and market value of various assets.
The downtown office-building market is also red hot, despite the fact that, nationally, there has been little increase in net rents. Torto said most of the price escalation can be explained only by an expectation that price appreciation will continue at its current pace.
Phil Verleger, the energy expert, brings a similar analysis to the recent run-up in oil prices, which he said is being driven less by fundamentals (supply, demand and the cost of replacing reserves) than it is by the upward pull of futures markets. He said OPEC and its silent partners, the major oil companies, know that they earn the highest profit when oil inventories are lean, and the best way to keep them lean is to keep spot prices higher than futures prices. Now that every hedge fund and college endowment is in the futures market placing bets on higher prices over the next year, spot prices are following suit.
The current bond-market bubble was attested to by no less an authority than Greenspan, when he admitted he was puzzled by long-term interest rates that have failed to respond to the 1.75-percentage-point increase in short rates engineered by the Fed. Greenspan called it a "conundrum." I call it a speculative market driven by irrational exuberance and herd behavior.
A similar story is told by narrowing "spreads" on riskier bonds -- the interest-rate premium that borrowers have to pay over "risk-free" U.S. Treasury bonds. On the junk-bond market, spreads are near historic lows, with many new issues oversubscribed. In the market for emerging-market bonds, spreads that peaked at more than 10 percentage points at the time of the Argentine debt crisis in late 2001 fell to a low of 3.3 percentage points earlier this month.
It is more of a stretch to argue that stock prices have again entered bubble territory. Certainly as a multiple of earnings, today's prices are only slightly above historic averages. But there is a strong sense of deja vu in seeing banks and Wall Street investment houses tripping over one another to provide gobs of money on easy terms to companies and private equity funds engaged in bidding wars for telecom and software firms. And I assign some significance to the fact that Warren Buffett, who correctly identified the last bubble, now has $43 billion sitting in the bank, unable to find acquisitions to make at reasonable prices.
The tendency among economists has been to assume that bubbles happen only when there is too much cheap money around and that responsibility for controlling the money supply and containing bubbles rests with the Fed and other central banks. Adam Posen of the Institute of International Economics did a nice job of knocking down such outdated monetarism in a short, pithy article in a German newspaper last week.
But Posen -- like the Greenspan Fed -- also makes a mistake in concluding from that observation that policymakers need not worry about asset bubbles, largely because they have little long-run impact on what economists call "the real economy." That may once have been true. But this is a world in which billions of dollars earned by Chinese exporters can be recycled into Fannie Mae bonds, lowering U.S. mortgage rates enough to give a couple in Rockville the wherewithal to spend an extra $50,000 for their dream house. It's also a world in which billions of extra petrodollars now quickly make their way into hedge funds and real estate investment trusts that are bidding up the prices of satellite companies, Manhattan real estate and Treasury bonds. In such a world, the old distinctions between financial markets and the "real economy" quickly blur.
I don't know whether this means the Fed was right or wrong this week in not raising interest rates more than a quarter of a point and in sticking to its promise of "measured" increases in the future. What I do know, however, is that it is silly for the Fed to continue to ignore the condition of asset and currency markets when making such decisions and explaining them to the public.
Steve Pearlstein- for Washingtonpost.com
Saturday, March 19, 2005
Market amid index reshuffle and oil story
Again oil price set a record high yestoday. The market seems unaffected with the true cause of the heavy trading volume of NYSE is simply the market index readjustment. Kept busy are those fund manager who need make sure they will not come off with tracking error.
The following is sourced from foxnew.com:
"stocks rallied off their session lows late in the day, pulling the Dow and the S&P 500 back to a position of little change at the close.
All three major indexes posted their second straight week of losses. For the week, the Dow fell 1.34 percent, the S&P was down 0.87 percent, and the Nasdaq lost 1.66 percent. The Nasdaq is down 7.7 percent for the year to date.
Trading was heavy, with 2.34 billion shares changing hands on the New York Stock Exchange, way above the 1.46 billion daily average for last year.
The last time that volume on the NYSE exceeded 2 billion shares was December 2004, making Friday the busiest volume day of 2005.
"It's a really choppy day," Larry Peruzzi, senior equity trader at The Boston Company Asset Management, said. "Everybody is guarded ahead of the S&P re-balance. It's going to be a really big deal in the last half hour of trading. Forty billion worth of stocks will be traded on the close."
Four types of March futures and options contracts expired or settled Friday, a quarterly event that usually stirs high volume as investors adjust or exercise their derivative positions.
An unusual event also coincided with the quadruple witching. The S&P is making adjustments to its benchmark S&P 500 affiliated indexes to full float in 2005. Half of that adjustment was set to take place after the market closed Friday. That event increased trading in some of the stocks involved as fund managers rebalanced their portfolios.
The adjustment means that only the shares available to investors are reflected in the index -- not shares held by a control group, founding family or government.
Oil prices climbed higher, with a barrel of light crude settling at a record $56.72, up 32 cents, on the New York Mercantile Exchange (search).
"Even if we were to see a quick pullback in oil, I don't think that'll reverse the trend, and there are still some negative implications for the market," said Chris Johnson, manager of quantitative analysis at Schaeffer's Investment Research in Cincinnati. "I think you'll start to see companies, like the airlines, fessing up to the fact that these oil prices are going to hurt."
Bonds fell along with stocks Friday, with the yield on the 10-year Treasury note climbing to 4.51 percent, up from 4.46 percent late Thursday. The dollar gained ground against most major currencies, while gold prices fell.
"The fact that bonds are falling has the markets a little worried," said Bryan Piskorowski, market analyst at Wachovia Securities. "The past couple times that oil spiked, bonds rose higher and the equity investors took solace in that. Now you've got to wonder if bonds are feeling the effects of inflation as well."
The following is sourced from foxnew.com:
"stocks rallied off their session lows late in the day, pulling the Dow and the S&P 500 back to a position of little change at the close.
All three major indexes posted their second straight week of losses. For the week, the Dow fell 1.34 percent, the S&P was down 0.87 percent, and the Nasdaq lost 1.66 percent. The Nasdaq is down 7.7 percent for the year to date.
Trading was heavy, with 2.34 billion shares changing hands on the New York Stock Exchange, way above the 1.46 billion daily average for last year.
The last time that volume on the NYSE exceeded 2 billion shares was December 2004, making Friday the busiest volume day of 2005.
"It's a really choppy day," Larry Peruzzi, senior equity trader at The Boston Company Asset Management, said. "Everybody is guarded ahead of the S&P re-balance. It's going to be a really big deal in the last half hour of trading. Forty billion worth of stocks will be traded on the close."
Four types of March futures and options contracts expired or settled Friday, a quarterly event that usually stirs high volume as investors adjust or exercise their derivative positions.
An unusual event also coincided with the quadruple witching. The S&P is making adjustments to its benchmark S&P 500 affiliated indexes to full float in 2005. Half of that adjustment was set to take place after the market closed Friday. That event increased trading in some of the stocks involved as fund managers rebalanced their portfolios.
The adjustment means that only the shares available to investors are reflected in the index -- not shares held by a control group, founding family or government.
Oil prices climbed higher, with a barrel of light crude settling at a record $56.72, up 32 cents, on the New York Mercantile Exchange (search).
"Even if we were to see a quick pullback in oil, I don't think that'll reverse the trend, and there are still some negative implications for the market," said Chris Johnson, manager of quantitative analysis at Schaeffer's Investment Research in Cincinnati. "I think you'll start to see companies, like the airlines, fessing up to the fact that these oil prices are going to hurt."
Bonds fell along with stocks Friday, with the yield on the 10-year Treasury note climbing to 4.51 percent, up from 4.46 percent late Thursday. The dollar gained ground against most major currencies, while gold prices fell.
"The fact that bonds are falling has the markets a little worried," said Bryan Piskorowski, market analyst at Wachovia Securities. "The past couple times that oil spiked, bonds rose higher and the equity investors took solace in that. Now you've got to wonder if bonds are feeling the effects of inflation as well."
Wednesday, March 16, 2005
Oil Pirce Hike
Nearly record high as the world is staring at oil price in astonishment. While it is far from a suprise considering demand from China, even the new comer in subcontinent. We had assumed the oil price hike last year as the fallout of Iraq war and speculation in the finanicial market. But the situation now seems to different. The implication in Stock market is a mixed information. It is intepreted as indifferent in the absense of inflation. We all knows that US is a service driven economy today, which is sharply distinguished from the oil crisis in 1970s. The guess in wall street lies in the assumption that Fed will continues raise interest through the year. However, that pose is just a pose, no ones has a clear idea of what's happening in the finanial world. Some thing is happening, beyond all economists' can predict. It seems like it might be some fundemental changes in economics theory.
Thursday, March 10, 2005
Relief of Lenovo IBM 'Or'deal
The pending Lenovo IBM deal is after all resolved without concessions of any kind, according to the management of both IBM side and its chinese conterpart. The deal is approved by the government investment oversight commitee today.
No concession? God knows what it was. Did it seem like it might be a bunch of lawmakers' drama queen prank? Good thing it's over. It is fair to say that this is a game of no losers, but IBM is the big winner, shaking off worst assets, earning 19% stake of the company still in great potential of growth. Beyond that, I Even spot an artical on internet saying the dedicate plan behand the merger is IBM's ambition to gobble this Chinese new player. At the moment what we should focus on is for Lenovo management whether and how to handle the integretion after such a big deal. With its new headquarter in New York, how Lenovo is able to overcome the fierce competetion from those veteran players such as Dell and HP?
Hopefully we will find out soon.
No concession? God knows what it was. Did it seem like it might be a bunch of lawmakers' drama queen prank? Good thing it's over. It is fair to say that this is a game of no losers, but IBM is the big winner, shaking off worst assets, earning 19% stake of the company still in great potential of growth. Beyond that, I Even spot an artical on internet saying the dedicate plan behand the merger is IBM's ambition to gobble this Chinese new player. At the moment what we should focus on is for Lenovo management whether and how to handle the integretion after such a big deal. With its new headquarter in New York, how Lenovo is able to overcome the fierce competetion from those veteran players such as Dell and HP?
Hopefully we will find out soon.
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