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1 May 27 2010 @ 9:07am by Matt Smith in Capital Markets, Crude Oil, Economy, Global Energy, risk management

Doorbells and Sleigh Bells and Schnitzel with Noodles

Here are a few of my favorite things. I’m going to go a little left field of nerdy on you here, so I apologize in advance. Here are three pictures that paint three thousand words, which help me keep a grasp on what is going on. Actually, they are just three cool things. So here we go, first up, everything:

I know I always bang the drum about this, but it is essential to keep a handle on what is going on across asset classes, as they can help you to understand short-term movements in your own asset, whatever that may be. Above (courtesy of Econompic) is the performance of a smorgasbord of assets for the month to date (through the medium of ETFs). This illustrates how the best performing asset has been Treasuries (= US government debt = flight to safety), while the worst performer has been our poor old buddy, Texas tea. 

Next up is one of my favorite indicators. And I don’t love this indicator for its accuracy (it has an awful track record of revisions), I just love the pure havoc that it wreaks on the first Friday of every month.  So without further introduction, I present to you Nonfarm Payrolls: 

Don’t get me wrong, US unemployment data is an essential barometer of the economy (…but just viewed over a longer time-frame); it’s the hubris and brouhaha it causes that I love. As for the actual data, the chart above shows how in 2008 and 2009 we saw 8.4 million jobs lost (that’s all the down bars on the right-hand side). Although we are seeing improvement across much of the economic landscape, we need to see sustained and improving job creation (extending from the circled area) to spur on consumer spending to spur on a housing recovery to spur on a sustainable recovery.

Finally, if I was stranded on a desert island and could only access one datapoint which to gauge the US economy by, it would be this (I make that comment knowing full well if I were stranded on a desert island I would be much more interested in hunting for coconuts); the Conference Board Coincident / Lagging Ratio, which measures the strength of the business cycle:

A rising Coincident/Lagging ratio (= indicates improvement as current conditions beat yesterday’s) is an historically proven positive indicator. However, should this indicator wobble and turn lower (…it’s awobbling), that would be bearish indeed.

That’s all folks; thanks for viewing my favorite things – feel free to take them with you as you leave…and remember, they will help if a dog bites or if a bee stings. (err, maybe..).

1 Comment on this post:

  1. Lachlan says:

    Great post! Pictures always keep me interested. Now if you can go 3d pop-up style, well, sir, you have a life long reader right here.

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