Markets

Yikes! Trade and Economic Policy Uncertainty

First, overall (news-based) economic policy uncertainty: Figure 1: Economic Policy Uncertainty index (blue), and centered seven day moving average (red). Source: policyuncertainty.com accessed 6/11, and author’s calculations. Second, how the trade policy component has jumped in the Trump era. Figure 2: Economic Policy Uncertainty index (blue), and trade policy categorical index (dark red), through March 2018. Source: policyuncertainty.com accessed 6/11.

Trade Deficit Rising!

Since 2017Q1. By Mr. Trump’s own metric, we’re losing. But it’s a stoopid metric for evaluating “unfair”-ness. From the last GDP release (which incorporates March trade release):Figure 1: Net exports to GDP (blue), and net exports excluding petroleum products (red), as a ratio to GDP, SAAR. NBER defined recession dates shaded gray. Orange denotes 2017Q1-2018Q1. Source: BEA 2018Q1 second release, NBER, and author’s calculations. Here’s a detail, in nominal dollar terms: Figure 2: Net exports to GDP (blue), and net exports excluding petroleum products (red), both nominal, SAAR. NBER defined recession dates shaded gray. Orange denotes 2017Q1-2018Q1. Source: BEA 2018Q1 second release, NBER, and author’s calculations. As noted in numerous instances (EconoFact, Steil/BI), trade deficits usually ...

A Reminder of Why It’s the G-7 and Not G-8

And also why we have sanctions against several Russian citizens, firms and financial institutions. Hint: It has something to do with the orange areas: Source: Euromaidenpress. In particular:Source: Ukrainian Defense Ministry via Euromaidenpress. For those inclined to dismiss the current conflict as merely a civil disorder, I refer them to this historical map. Source: Story of Hawaii Museum.

It’s a big week for the markets, but all signs point to more upside

It’s going to be a big week for the markets, with three central bank meetings (the Fed on Wednesday, the European Central Bank on Thursday and Bank of Japan on Friday) and President Trump’s summit with North Korea dominating the headlines. There also is a pile of economic data on its way: CPI on Tuesday, producer prices on Wednesday, retail sales on Thursday and industrial production on Friday. And to end the week, Friday is quadruple witching, the quarterly expiration of stock and stock index futures and options. That’s a lot for the markets to digest, but for the moment, very little can keep them down. Consider: 1. The right leadership is powering the markets. Tech is still strong, but it has been joined by financials as a market leader. Together, they are north of 40 p...

Ending quarterly earnings guidance won’t solve the issue of ‘short-term’ thinking

Jamie Dimon and Warren Buffett have again made a pitch to eliminate “short-termism” by calling on CEOs to stop providing quarterly guidance. But is earnings guidance really the issue? I don’t think so. To begin with, only about one in five companies still provides quarterly guidance. Second, eliminating earnings guidance or commentary would do nothing to eliminate short-termism. Here’s why: the 1934 SEC Act (which created the SEC) mandates that companies provide quarterly earnings reports. It’s those reports that are used by analysts to generate commentary and guidance. Importantly, neither Dimon nor Buffett called for eliminating quarterly earnings reports, though plenty of other people have. “I wish it would all go away,” Bob Lutz, a former execu...

Cloud security firm Zscaler soars after billings growth drove an earnings beat in its first report

Cloud security firm Zscaler soared as much as 37 percent Thursday, a day after reporting that its billings surged in the company’s third quarter ended April 30. Shares traded as high as $42.16 on Thursday, up from Wednesday’s close of $30.65, before falling to roughly $38.00 by mid-morning. The company reported revenue growth of 49 percent year-over-year, bolstered by a 73 percent spike in calculated billings. Here’s how the company did compared to Wall Street estimates: Loss per share: 2 cents vs. 8 cents expected, according to Thomson Reuters consensus estimates Revenue: $49.2 million vs. $46 million expected, according to Thomson Reuters consensus estimates The company expects revenue of up to $51 million in the fourth quarter and $185 million for fiscal year 2018. It&...

EconoFact: “What is the National Security Rationale for Steel, Aluminum and Automobile Protection?”

From EconoFact, an update: The Trump administration has implemented a number of trade related measures purportedly on the basis of national security. First, it invoked the seldom-used provision of the trade law to investigate whether imposing import restrictions for steel and aluminum is justified by national security reasons. The Commerce Department’s investigation concluded that imports of both metals pose a national security risk and subsequently the administration applied tariffs and quotas to both products. In a new investigation, the Commerce Department has started looking into whether imports of cars or automobile parts could impair U.S. national security. One just has to recall, you don’t typically take Ford Mustangs into war, and even if we took sedans into battle, we get most of ...

Shares of software vendors Cloudera and MongoDB fall even as results beat estimates

Shares of Cloudera and MongoDB dropped in extended trading even after the two developers of open-source data software reported better-than-expected first-quarter financials. Cloudera fell as much as 10 percent to $15.50 after hours, while MongoDB declined as much as 5.6 percent to $48.41. The two companies were part of a crop of software vendors founded about a decade ago to help businesses analyze vast amounts of disparate data in ways that were impossible using legacy databases. Both went public last year and they have almost identical stock market values, right around $2.5 billion. Cloudera said revenue in the period jumped 29 percent to $102.7 million, topping the $101.5 million average analyst estimate, according to Thomson Reuters. Cloudera’s net loss, excluding certain items, ...

Another Thing I Thought I’d Never Have to Explain on Econbrowser: Confidence Interval

Mr. Steven Kopits takes issue with the Harvard School of Public Health led study’s point estimate of (4645) and confidence interval (798, 8498) for Puerto Rico excess fatalities post-Maria thusly: Does Harvard stand behind the study, or not? That is, does Harvard SPH believe that the central estimate of excess deaths to 12/31 is 4645, or not? Does it stand behind the confidence interval, or not? Is there still a 50+ probably that the death toll comes in over 4600? If there is, then the people of PR need to start looking for the 3,250 missing or the press needs to assume PR authorities are lying. Those are the implied action items. Or should we just take whatever number HSPH publishes in the future and divide by 3 to get a realistic estimate of actual? Let’s show a detail of the graph previ...

Opening Bell 06.05.2018

Tech stocks at record high as FAANGs and BATTS bite [Reuters] MSCI’s global tech index .dMIWO0IT00PUS scored the milestone as the FAANGs — Facebook, Apple, Amazon, Netflix and Google — looked set to drive the technology-heavy Nasdaq NQc1 to fresh highs when New Tork reopens shortly. The upbeat mood had raised Asia’s big BATTS — Baidu, Alibaba, Tencent, Taiwan Semiconductor, Samsung — with Alibaba notching a new high and Baidu surging 5 percent in its best day in more than a month. [.SS] U.S. Asks OPEC for 1 Million Barrel a Day Oil Output Hike [Bloomberg] The rare request came after U.S. retail gasoline prices surged to their highest in more than three years and President Donald Trump publicly complained about OPEC policy and rising oil prices on Twitter. It also follows Washington’s decis...

Garbage and Non-Garbage Estimates: Puerto Rico Edition

Since the Puerto Rican government ceased publishing mortality data in February, there has been a debate over the death toll arising from Hurrican Maria. The official death toll, focusing on direct deaths, remains at 64. However, starting in November, a number of scholars attempted to gain further insight into the extent of the human disaster in the Commonwealth. One commentator has labeled another study “garbage”. What is the import of these competing analyses? First consider the estimates over time of the death toll, both direct and indirect. Figure 1: Estimates from Santos-Lozada and Jeffrey Howard (Nov. 2017) for September and October (calculated as difference of midpoint estimates), and Nashant Kishore et al. (May 2018) for December 2017 (blue triangles), and Roberto Rivera and Wolfgan...

Measured Economic Policy, 4 June 2018

It’s elevated. Hard to say exactly why. Hard to say why it isn’t higher. Figure 1: US Economic Policy Uncertainty index (blue) and centered 7-day moving average (bold red). Source: policyuncertainty.com accessed 4 June 2018, and author’s calculations.