Big Week, Big Decisions

Well, in case you had not noticed this is a rather big week in the markets so allow me to jump the bandwagon of market participants in dire need of some action after past’s weeks calm before the tempest. I will consequently be featuring Alpha.Sources’ first insta-blogging event which will take place in this post. Of course, I am rather busy this week too so I am not sure how much live blogging I will actually do, but do stay tuned anyway … I might surprise you.

Speaking of surprises, the RBA initiated the central bank action by saying ‘f’ck off, we can take it’ to all actual and soon-to-be QE wielding central banks out there.

(quote Bloomberg)

The Reserve Bank of Australia unexpectedly increased its benchmark interest rate on concern stronger growth will cause inflation to accelerate, driving the nation’s currency toward parity with the U.S. dollar. Governor Glenn Stevens raised the overnight cash rate target a quarter point to 4.75 percent in Sydney, saying the economy has “relatively modest amounts of spare capacity” and citing risk of “inflation rising again over the medium term.” It was the RBA’s first move in six months.

The move signals Stevens wants to avoid a repeat of 2007, when he held off raising rates for months as slowing inflation masked a buildup in price pressures. Growth in Australia, which skirted a recession during the crisis, may strengthen as energy companies such as BG Group Plc add construction jobs.

Now, on the basis of the economic dynamics in Australia I can see why this makes sense but in a global economy where the Fed, the Boj and soon, I think, the ECB are in full QE mode it takes a brave soul to go the other way and actually offer yield for all that leveraged carry that is about to flow Stevens’ way.

48 Months

With the latest unemployment stats being reported it has now been a full 4 years since the regional unemployment rate was higher than the nation’s. Though nobody mentions that trend.  Not just that factoid, but there are a few other things that pop up from the data worth noting.

As the Trib version mentions in its very last line, the data just released for September is the first time since 2007 that the year over year change in the unemployment rate has not been up.  I’ll just point out that a drop of 3/10ths of a percentage point in the unemployment rate over a single month is about as fast a drop as you can get in a stat like that.  A drop much bigger than that and something artifically lumpy must have happened, like maybe one of the larger strikes of the past coming to an end or something like that.  I count only 2 instances in the last decade where the unemployment drop over a given month was larger than that… and one of those months was earlier this year, so you are talking a pretty fast and consistent drop in the local unemployment rate through all of 2010 thus far.

G20 or not, manifestations of Pittsburgh pessimism continue to pop up.   More often than not when I point out some version of the 48 months factoid, if it someone from Pittsburgh they retort that the recession will eventually catch up to us and it will be even worse here.  It is a belief that reflects another one of those myths that we always lag into recessions, but then peak higher and then lag getting out.  It just is something that has not been true for decades and did not manifest itself in the most recent recessions before this one.  If the current trend continues we are leading out of the recession pretty fast.  If the national unemployment rate dropped by as much as it has in Pittsburgh in the last 7 months (from 8.8% in February to 7.9% in the latest data) then I bet more than a few things would be different in both the national economy, but also the politics of the election today.

Speaking of the nexus of politics and the economy… in light of these stats this is pretty interesting:  Economic Cycle Could Boost Winners.

Economic Events on November 2, 2010

The latest Federal Open Market Committee meeting begins today.

At 7:45 AM EDT, the weekly ICSC-Goldman Store Sales report will be released, giving an update on the health of the consumer through this analysis of retail sales.

At 8:55 AM EDT, the weekly Redbook report will be released, giving us more information about consumer spending.

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