What to read today: May 19


One and done. Bruegel has done the job for me by summarizing all the recent economic debates on whether the economy is self correcting.



What you should read today


Heard in the Hutong: The Chinese View of India

Benedict Evans on Apps versus the Web and why the future is mobile, except it isn’t.

Sanjeev Sanyal says the world population will top earlier and at a lower level than the World Bank believes.

And if you are in for an economics paper read, Roger Farmer’s Animal Spirits, Persistent Unemployment and the Belief Function is worth a good time slot (warning: pdf).

The European Centre for Medium Range Weather Forecasts is forecasting a super El Nino this year. Here is Bob Tisdale talking about it.




Max Max Fury Road


What was that about?

Another movie from the dystopian world of Mad Max; after a gap of about 30 years. This is only the second in the series I have watched (Beyond Thunderdome being the only other). Still as far as I can remember it, it retains the spirit of the “desert” and post-apocalypse.

Having said that, there is no real story here. It is all linear. Except for a literal turn off the main road right at the start and a uey at the end. But as an action movie, it works very well.



Unfair bond ruling


I wanted to link to this news article about a judge ruling that a municipality can choose to put pensioners ahead of bondholders in bankruptcy. The judge herself says that the ruling may be “unfair.”

California’s public retirement fund holds so much power over local officials that pension-bond investors can’t expect equal treatment when a city goes bankrupt, a judge said in a ruling that she acknowledged seems “unfair.”

U.S. Bankruptcy Judge Meredith Jury on Monday threw out a lawsuit in which investors had claimed their pension bonds must be paid off at the same rate as the California Public Employees’ Retirement System in the San Bernardino bankruptcy. The $304 billion fund is the biggest in the U.S.

Normally this has no impact on my life, but what an aptronym. I mean a Judge whose name is Jury!!!!

Ok. Bye.


US GDP reported

US GDP growth – not as weak as it seems


The headline is that US GDP growth in the first quarter of 2015 slowed to a 0.2% annualized rate down from the 2.2% rate in the December quarter. I believe that this hides the real growth in the economy. To be sure non residential investment would have fallen (thanks in large part due to oil related investments), but real incomes and consumption actually benefited from the fall in inflation. See also FT Alphaville – Another Winter of Discontent (registration required).

The problem with looking at quarter on quarter data is that we are dependent on the seasonal adjustment factor used. Using a year/year measure removes this “adjustment” but has issues with being dated, i.e. not representing current growth. Nevertheless when we look at the year-on-year numbers, the growth in Q1 was 3.0% compared to 2.4% y/y growth in December. In fact Q1 2015 has been one of the fastest growing quarters post-recession as shown in the chart:

US GDP Reported

Note the big divergence between the quarterly and annual rates of growth. Sharp eyed readers will note that the quarterly numbers for the March quarter in previous years too seem depressed (notably in 2014 and 2011). This should not be the case if we use seasonally adjusted numbers. The point of using seasonal adjustment is that this sort of seasonality is removed. Looking at the post recession period (2010 onwards), we see an interesting trend in the average for each quarter:

US GDP Average Quarterly

Consistently the Q1 number is low, while the variation in other quarters is limited. Note that the variation in y/y numbers is also small. Clearly there is a problem with the seasonal adjustment methodology used by the US commerce department. So I did a quick readjustment and calculated my own seasonally adjusted GDP series using the data in the post recession period and this is how it looks:

US GDP Revised

The number for Q1 2015 is a growth rate of 2.0%, and the y/y rate is (no change here) 3.0%. This is certainly a slowdown relative to the 4% growth that was seen in June and Sept 2014. The slowdown in December and March quarters in this series are also consistent with the strength in dollar leading to weak net export performance.

And the average growth rates for each quarter now:

US GDP Average Revised

The Q1 anomaly has disappeared in the new series as it should.

Bottom line:

Growth in the US is slower than before but a 2% growth rate is pretty decent. The Fed is right in dismissing the weak GDP print, but for the wrong reason. It is not transitory factors, but rather the seasonal adjustment methodology. By the time Q2 numbers roll out, we could be in for an upside surprise in growth. Note that the GDP series is also due for revision in July. Perhaps we may see some recalculation of the Q1 numbers.


Big disclaimer: This is just a rough and ready calculation. Please do not use this to make investment decisions. Also note this is a personal blog and a personal view. This does not necessarily represent the view of my employer.



Avengers: Age of Ultron


Warning: contains spoilers


Another installment in the ever expanding Marvel Cinematic Universe. Another action packed superhero movie. It cannot be said that this movie is better than 2012’s Avengers, but it does not have to be. That movie set a rather high standard and this one comes close enough.

Before you go on, read a few good reviews out there including:

Guardian, Telegraph (7 questions) and Den of Geek (22 questions)

So here is the thing: The first Avengers movie marked the end of “phase 1″ and was the Avengers Assemble movie. Before that we had seen standalone Hulk, Iron Man and Captain America films. So here we got Nick Fury pulling all these heroes and more into one (sometimes bickering) team. All fun. This second movie does not have that feeling of threads coming together. In some sense we can see the threads fraying – although not as much as we could have gotten.


China Rat Tribe

China’s Rat Tribe


NPR has done a moving story on Beijing’s Rat Tribe: people living illegally in basements of buildings.

China Rat Tribe

In Beijing, even the tiniest apartment can cost a fortune — after all, with more than 21 million residents, space is limited and demand is high.

But it is possible to find more affordable housing. You’ll just have to join an estimated 1 million of the city’s residents and look underground.

Below the city’s bustling streets, bomb shelters and storage basements are turned into illegal — but affordable — apartments.

This is basically underground slums. These poignant words sum it up:

“They’re hoping that their next generation, their children, will be able to live above ground,” Kim says. “It’s this sense of longing and deferring a dream. And so it makes me wonder how long this dream can be deferred.”

This sounds like Neverwhere, does it not?



This is why I follow Arnold Kling


From his post this weekend:

I take an outlier point of view, which is that the Fed is not important for the macro economy. Walrasian economists needed something to pin down the nominal price level, so they nominated the money supply. I instead take the view that money and inflation are largely social conventions. Extreme measures by the government can change these social conventions. Otherwise, in my view, the belief in the power of the Fed is a superstition. This superstition is best maintained if the Fed’s actions are mysterious. If the Fed were to follow a transparent rule, I think that the superstition would be exposed for what it is.

This is at the bottom of his take on the Neo-Fisherite (keeping rates low encourages low inflation) & market monetarist (target nominal market levels) thinking.


Guardians of the Galaxy


One of the best comic book based superhero movies. It is a part of the Marvel Cinematic Universe, but unlike the other 10 or so films that have come so far, it has no continuity elements in common with the “mainline” story. What makes this movie tick is that it is just fun. Not taking itself seriously too much, lots of gags and wise cracks, but not just a series of poor jokes. Fantastic, and if you can see it on an IMAX 3D screen do yourself a favour and watch it in large format.

This movie is what Star Wars could be if it was made today.


Eye of Siva

Germany – Brazil (7-1)


What a match! 4 goals in six minutes, 5 before the half-hour mark! Germany handed Brazil their worst defeat ever. With this match the following records got set:

  • Made themselves the top scoring team in the WC history (taking the top spot from Brazil) (223 vs. 221)
  • Equaled Brazil’s worst ever defeat (6:0, back in 1920, against Uruguay)
  • Achieved the biggest ever victory in WC semi-finals (last one was 6:1)
  • Made Klose the top scorer in WC history (taking over the top spot from Ronaldo)
  • Scored 4 goals in 6 minutes & 5 under 29. No team has ever done that in WC.
  • Scored as many goals as Brazil conceded in their previous 9 World Cup final games combined
  • Bestowed Brazil their first official defeat at home since 1975.
  • Became the team with most appearances in World Cup Finals at 8, after being tied with Brazil at 7.

And they could have scored more except that they decided to take it easy in the second half. Probably “resting” themselves ahead of the final. Not risking injuries, etc.

Five Germans on the score sheet: Muller, Klose, Khedira, Kroos and Schuller. The last two scoring twice each. A stoppage time goal by Oscar was the only thing Brazil got. Neuer was as good as ever in front of the goal keeping out about 4 shots at the start of the second half.

Muller now was five goals in this Cup and he got the same the last go around. 10 goals in 12 matches is probably the third fastest of all time. And he is young enough to be playing in another couple of tournaments. He should be having Klose’s 16 goal record in his sights soon.

The crowd started booing the home team towards the end, especially Fred who has been ineffectual throughout the tournament. Hulk showed some speed and skill, but he remains unable to finish. Substitutions (Ramires and Willian) showed some promise at the start of the second period, but with a five goal deficit that was just a bit of a show.

As a neutral this was a nice thrashing to watch after the way Brazil played against Colombia. That was one of the dirtiest games with Brazil playing in a very foul manner. They needed to be punished for that game, and this was sweet to watch from that perspective.

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