Markets

Spreads Watch

In all the excitement between the Italian crisis and the US lashing out with tariffs to be levied against our allies, it was easy to overlook this event: Figure 1: Ten year constant maturity Treasury minus three month Treasury bill yield spread on secondary market (blue), and ten year minus two year yield spread (green), both daily, %. Last observation is 6/1. Source: Federal Reserve via FRED, Bloomberg, and author’s calculations. The 10year-3month spread broke through 1%, to 0.9%, while the 10year-2year spread plumbed new depths, to 0.4%. As the graph indicates, the last time around in 2005, this event presaged the onset of a recession about 2 and a half years later. As I noted in an earlier post, about three of the six times that this has happened in US post-war history, a recession has ...

Please, Do Not Comment on This Post Unless You Understand the Following Terms

Population mean Sample mean Population standard deviation Sample standard deviation Standard error Administrative data Survey data Point estimate Confidence interval Sampling bias Reporting bias Now, let’s begin. Here is a graph of estimates of cumulative fatalities in Puerto Rico over time. 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 Wolfgang Rolke (Feb. 2018) (red square), and calculated excess deaths using average deaths for 2015 and 2016 compared to 2017 and 2018 using administrative data released 6/1 (black square), and Santos-Lozada estimate based on administrative data released 6/1 (larg...

Excess Deaths Inferred from Puerto Rican Administrative Data

The Puerto Rico Department of Health has released official data, up to May (May data can be updated, so is as of 6/1). Figure 1: Official death statistics, by month, from Puerto Rico Department of Health. Source. These data are “harder” than survey data moments that include sampling error. However, that doesn’t mean that the data are without measurement error. See this article for some discussion of the issues surrounding the use of administrative data. Hence, the level of the death count (as opposed to the inferred excess death count) should be considered a lower bound. Here is a graph depicting how this number relates to the other estimates that have been produced, including the most recent Harvard School of Public Health estimate discussed here. I sum the excess deaths, as calculated in...

Estimates of Excess Fatalities in Puerto Rico, Post-Maria

Given some criticisms of the Harvard School of Public Health led study, published in the New England Journal of Medicine, I thought it useful to compare point estimates and 95% confidence intervals of several extant studies, placed in a time context. Figure 1: Estimates from Santos-Lozada and Jeffrey Howard (Nov. 2017) for September and October, and Nashant Kishore et al. (May 2018) for December 2017 (blue triangles), and Roberto Rivera and Wolfgang Rolke (Feb. 2018) (red square), end-of-month figures, all on log scale. + indicate upper and lower bounds for 95% confidence intervals. Cumulative figure for September author’s calculations based on reported monthly figures. The growth rate of cumulative excess fatalities is in the range of 70% per month. Steven Kopits has characterized the stu...

So Does This Whole Trade-War, Employment Tweet Thing Happen Often?

As a lowly intern, I’ll be the first to admit that I don’t really know much about what is going on. So, can someone tell me if this normal? On one hand, all signs point to the fact that the U.S. is actively involved in a trade way. On the other hand, I have fashion guru Larry Kudlow telling me we’re just involved in a trade “family disagreement“, but it really feels like one of those disagreements where Dad is gonna tell Mom he shouldn’t have bought her that jewelry, and she’ll reply by telling him that he’s a failure and underachieved despite his family history of success. Then they’ll do that thing where he sleeps on the couch and eventually goes to a hotel for a few days. I know these kinds of disagreements are more normal in most households. Or at least I think so? Please don’t get a d...

On China: Applying 19th-century remedies to 21st-century problems

My op-ed in today’s The Hill: Is it a trade dispute with China, or is it a trade war? If the latter, is it on hold, or not? The flip-flops in America’s trade relationship with China are coming in ever more frequently, as President Trump issues and rescinds threats. To recap, before the election, Trump promised to declare China a currency manipulator on day one of his administration. That declaration never came; but then over the course of his administration’s first year came the equivalent of a “phony war” where no overt moves were made in trade policy. Only some anti-dumping measures nearly a year into the new administration signaled a possible new direction. That all changed in March, as Trump announced a series of radical measures, rationalized on grounds of national security and intell...

GameStop same-store sales miss estimates, shares fall

GameStop on Thursday reported first-quarter same-store sales that missed analysts’ estimates due to a drop in sales of video game hardware and software at its outlets. Shares of the world’s largest video game retailer fell 4 percent to $12.65 in extended trading. GameStop said its comparable store sales fell 5.3 percent in the latest quarter ended May 5. Analysts on average had expected a 4.2 percent drop in same-store sales, according to Thomson Reuters I/B/E/S. The company on Thursday also named board member Shane Kim interim chief executive officer. GameStop has been facing a slew of management changes after Chief Executive J. Paul Raines passed away in March. Mike Mauler, who was named Raines’ successor, resigned citing personal reasons earlier in May. The companyR...

Lululemon shares hit record as first-quarter profit beats expectations

Canadian athletic apparel maker Lululemon Athletica posted first-quarter profit that beat expectations on Thursday as revenue jumped 25 percent, sending the company’s shares to an all-time high in after-hours trade. Second-quarter earnings are expected to be between 46 and 48 cents per share on revenue of $660 million to $665 million, the Vancouver-based company said in a statement. That compares with per-share adjusted earnings of 39 cents on revenue of $581.05 million a year earlier. The stock surged 6.2 percent to $111.51 in after-hours trading, surpassing an intraday record set on Tuesday. That followed a 0.55 percent decline during the day, as the broader S&P 500 index dropped 0.7 percent. Lululemon, which popularized “athleisure wear” by turning pricey womenR...

Price cuts and freight costs pressure Costco’s margins, sending its shares lower

Warehouse club operator Costco Wholesale reported third-quarter results that topped analysts’ estimates, but price cuts and higher freight costs weighed on its gross margins, sending its shares lower in extended trading. The retailer has aggressively cut prices in order to lure back customers to its wholesale supermarkets, following Amazon.com’s foray into brick-and-mortar retail with the acquisition of Whole Foods Market last year. Gross margins slipped 46 basis points to 11.05 percent as the company also stepped up efforts to provide same-day and two-day delivery through delivery service provider Instacart and invested in packaging equipment. Still, the company said an increase in membership fees implemented earlier this year and customer gains from the closure of more than 5...

Guest Contribution: “Trump’s On-Again Off-Again Trade War with China”

Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. An earlier version appeared in The Hill. The Trump Administration on May 29, nine days after having said that the China trade war was “on hold,” flipped the switch back to “on”. As of now, the White House again plans to move forward by June 15 with plans for 25% tariffs on $50 billion of imports from China. But the areas where Trump is pushing China the hardest are the ones that make the least sense. To try to ascertain the Trump position on trade at any point in time is like trying to ascertain the position of a sub-atomic particle: it is better viewed as having a probabilistic distribution than as hav...

What Will Policy Uncertainty Be Tomorrow?

Below is reported Economic Policy Uncertainty through 5/31/2018, reflecting newspaper accounts through 5/30. Figure 1: US Economic Policy Uncertainty index (blue) and centered 7-day moving average (bold red). Source: policyuncertainty.com accessed 31 May 2018, and author’s calculations. As of 2PM EST, Dow down 1%, VIX up 6.69%.

The Real Reasons Why Millennials Are Investing Less

Traditionally, the stock market has been a relatively good way for young professionals to earn money over time, but according to a recent Gallup poll, people under the age of 35 are investing less. A decade after stockholders lost trillions of dollars in the crash of 2008, younger Americans are still leery of investing their money in stocks. Though the stock market has climbed far above pre-crash levels, the combined percentage of adults younger than 35 with money in the stock market in 2017 and 2018 stands at 37%, down from 52% for people in that age range in the two years (2006-07) leading up to the crash. Lack of faith in the markets, a shaky administration, and general market volatility may be to blame here. As Dealbreaker’s resident millennial, most of my time is spent explaining meme...