| |
| |
|
Investing Information |
|
|
|
The Perfect Economy?
The U.S. economic data reported this week showed strong output growth with tame inflation. Industrial Production expanded at about 1% in June, three times greater than expected, while both the June Consumer and Producer Price Indices were unchanged. Also, the June Capacity Utilization rate rose to 80.0%, and the June Unemployment Rate fell to 5.0%. The June data generally show there is neither strain nor slack in the U.S. economy. Therefore, the U.S. economy is expanding at an optimal rate. It seems, the "Goldilocks" economy (of neither too hot nor too cold) may continue for several months. The longer-term trend has shown slowing output growth with rising inflation (i.e. stagflation). In 2003 and 2004, the U.S. economy expanded at about 4.0% real growth, while inflation rose from 1.6% to about 3.0%. Sustainable growth, which is optimal, is 2.7% real growth. So far in 2005, output growth has slowed to just above 3.0% real growth, while inflation has stabilized or fallen somewhat. U.S. output growth and inflation have been quite impressive, over the past few years, after the bubble boom in the late '90s (where resources were under great strain) and the shallow recession in 2001 (during of a massive "Creative-Destruction" process, which made the U.S. economy more efficient). The U.S. economy owes a great debt (no pun intended) to the skill of the U.S. Federal Reserve (Greenspan & Company) for smoothing-out the business cycle, and to a lesser extent the (continuing) stimulative fiscal policies of the Bush Administration. Future inflation is both actual and expected inflation. The U.S. Federal Reserve has done a masterful job lowering inflation expectations, through a combination of actual tightening and "jawboning." However, to keep future inflation in check, the Fed may need to tighten (at a "measured pace") at each FOMC meeting this year, because monetary policy is still quite accommodative, and the lags in monetary policy force the Fed to work in the future economy. NAIRU (the Non-Accelerating Inflation Rate of Unemployment) is estimated to be 5.0%, which is where the Unemployment Rate fell to last month. Also, the Capacity Utilization Rate rose to 80%, and over 80% is an indication of rising or accelerating inflation. Moreover, the output gap (between potential and actual output) has closed, taking the slack out of the economy. So, the U.S. economy is "perfect." To maintain the optimal growth rate, the Fed will need to correctly anticipate the future economy and make the appropriate adjustments. The Fed has done an excellent job bringing the economy up to "perfection." However, it may need to continue tightening until monetary policy reaches a neutral stance, and then tighten further to preempt inflation and maintain price stability. Arthur Albert Eckart is the founder and owner of PeakTrader. Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998. Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time. This methodology has resulted in excellent returns with low risk over the past five years.
MORE RESOURCES:
Investing - Google News |
|
|
|
RELATED ARTICLES
Retirement - Its Sooner Than You Think!! (Honestly) Many people hear "retirement" and think- what? 401K? Roth vs. Traditional IRA? Stocks, bonds, mutual funds? Do they?Or do many people put money away according to the suggested amount and then simply hope that when retirement comes all will work out?One report I read estimated that 66 million Americans have put away a Whopping $0 towards retirement. Online Trading Options Strategies - Rolling Rolling is defined in options online trading as moving a position from one strike to another either vertically in the same month, horizontally to another month or some combination thereof.Other times, you may have to buy your short call back so that you will not lose your stock. Advice for International Investors on How to Safeguard Their Profits What are the risks?Today, investors are increasingly turning to global markets to find opportunities for profit, giving urgency to the issue of protecting returns from foreign exchange risk. While there are many excellent investment opportunities to be found all over the world, volatility in the currency markets can and does affect the profitability of these investments. How Eating Bitumen Made Me a Better Stock Trader Stock market trading is a fascinating activity.There are so many layers to it. The Conflict of Interest Game Disgruntled investors are going after Wall Street once again, this time accusing one of investment bank Morgan-Stanley's high-tech mutual funds of making biased stock picks.Recent lawsuits allege the Morgan Stanley Technology fund was influenced to buy and hold stocks of companies that delivered huge investment banking fees - or could potentially bring big business - to the investment bank. Buying a Home - Your BIGGEST Investment This column has often focused on intangible investments like stocks that a young investor might hold in their portfolio. While these are one of the most important components of an investment plan, it is not the dominant one for most young people. Financial Planners "Financial planners are like dentists: they may occasionally inflict pain, but in the end, you will be better off for following their advice!"Whoever wrote these lines must have either been a financial planner or someone who relied heavily on planners for finance management. We all know that planning our finances is vital. Retirement Is A Scary Proposition If Youre Without A Plan, And Running Out Of Time Of the 75 million baby boomers nearing retirement today, many are:* Debt Ridden* Severely unprepared for retirement* Under Funded* Without a StrategyThis is a very serious problem in a country that we can all remember used to assure most people of a retirement where you are taken care of financially.We all know that social security alone is not the answer to this problem. Raising Capital Using a Public Company Going public in this manner is ideal for companies that may not be large enough to attract an underwriter for an IPO and those that don't need to raise capital immediately. They want to go public because of the many benefits that being a public company offers such as increased valuation, using public stock as currency to acquire other companies and assets, liquidity, prestige and to reduce the need for expensive venture capital and other financing sources. Raising Capital in Today's "New Economy" We've helped a number of clients develop business plans and raise capital from "angel" investors, corporate entities and venture capitalists during the last 6-8 years. It's always a daunting process that can be full of pitfalls and require a tremendous amount of work - but it can be done! Here is some perspective gleaned from years of experience. Investing in New Zealand - Learn how to Find Unique Investment Opportunities Investing in New Zealand might be much easier than investing in other western countries, thank to the excellent infrastructure, the low taxes and the assistance of the supportive NZ government.Technological Face of New ZealandNew Zealand has a unique reputation within the global market place. Invest or be Pink Slipped Firing an employee seems to be easier and easier for corporations. Up until now you allowed them to set your clocks. Scots Beat Yanks in China Bank Deal With visions of an ATM in every neighborhood in China, foreign banks and investment firms are queuing up to join the "China Club."Moneybags CommunismThe initiation fee for the "China Club" is straightforward and pure moneybags communism: invest cold hard cash in its largely insolvent state-owned banks, put your reputation on the line, reassure nervous foreign investors about upcoming IPO's, and share your risk management, corporate banking and other expertise with eager Chinese executives. Trading Tips No 3: Online Trading and Investing: Buy, Hold, and Hope So you have learned how to trade the markets by mastering a few trading tools like Moving Averages, Channels, Stochastics, MACD, or RSI - that is a great accomplishment achieved by only a few. However, having the tools and rules to trade markets successfully, year in and year out, is only half of the challenge. How to Use Annual Report There are many steps in calculating the fair value of a company. However, before we even do that, it is imperative to know how a company earns its profit. California Deparment of Corporations and Franchise Opportunities Law What CA Needs To Do To Address Issues in FranchisingWe should not allow anymore degradation of California through incessant over regulations in the franchising sector. No other sector of our economy provides as many jobs as franchising. Trading Is Not Rocket Science! Despite what some people may lead you to believe; day trading, swing trading and trend trading is not anywhere as difficult as they would like you to think. It really boils down to two key components. 5 Day Trading Tips for Success 1. How to Treat Gap Openings A gap up or gap down open is an emotional move, and it often will reverse course and turn in to "trap open". The Arrow-Debreu Contingent Claims Model of Investment Throughout the discussion of speculation and stability, we emphasized that uncertainty theorists now have a generally accepted framework for modeling choice under uncertainty. Economic theorists have chosen to model uncertainty as the revelation of a state of the world. 25 Ways to Find Companies to Buy When you start your program to purchase your "ideal" company, you quickly realize that your ultimate success will depend on two primary skill sets: 1) Your ability to FIND viable companies that are for sale, and 2) Your ability to effectively qualify the potential acquisition investment once found.This article is about only step one, how to creatively find viable companies and one's that are able to be purchased.
|
| home | site map |
| © 2006 |
