Economic News that will Thoroughly Confuse
Posted by Pat Kitano at 10/30/2006 11:54 PM 
Categories: Real Estate Economics, Events and Premieres, Social Media
Categories: Real Estate Economics, Events and Premieres, Social Media
During my last year on Wall Street in 1998, there was a mysterious product that at the time, I just could not believe still existed - the Bloomberg Terminal. When a trader needed some real time tidbit bond data, get a real time quote or just watch some news ticker, that trader would shlep across the trading room, plant himself (all the traders I worked with were guys) in front of the monitor for five minutes and then shlep back... and sometimes you had to wait in line.
Now in 1998, there was an internet, there were online tickers, stock quotations and news "readers"... it was called "push" technology (which you may recall did not work because all that pushing hogged all the bandwidth in those Bernoulli-challenged T-1 lines). So with wired PCs on all desks in 1998, how could Bloomberg possibly exist? So I thought...
Simply because the traders were used to Bloomberg Terminals... and btw, I checked today, they still exist... they are still sold as Terminals, separate from PCs! Now, they are superfluous (I think)... but old habits and even older products die hard...
Which brings me to - I love Bloomberg.com - the reason Bloomberg survived/survives is their exacting financial content... I "grew up" with it. Bloomberg has none of that lifestyle and mutual fund stuff on CNN Money or Marketwatch. When Bloomberg talks about Halloween, it's not about haunted houses (actually a good real estate topic), they slip in how Halloween costumes are a $5bn industry...
Bloomberg is now bombarding us, the public, with so much contradictory news on the economy, I'm becoming convinced there are two entirely separate masses of population in America (besides the obvious color-coded one) - one side who believes the economy is cruising along and inflation is inevitable and the other side sweating over the impending recession and applauding the sliding gas prices and concurrent lower inflation rates that will stave off the doom scenario.
Here's what I mean - today's Oct. 30 Bloomberg headlines:
Raise the Interest Rates!
Global Cash Glut Fuels Investment Boom, Rate Concern -
"When monetary growth is strong, the housing markets are very dynamic and the stock markets are vigorous, the probability of an inflationary episode within three or four years is very strong,'' says Jose Manuel Gonzalez-Paramo, a member of the ECB's executive board.
Translation - there is so much cash wafting around the coffers of banks worldwide NOW... you know what happens to cash - it gets invested, it buys stuff like houses and stocks - you can forget about housing bubble or even "soft landing", it could be takeoff time again. There's now evidence of that in the record stock market.
"When monetary growth is strong, the housing markets are very dynamic and the stock markets are vigorous, the probability of an inflationary episode within three or four years is very strong,'' says Jose Manuel Gonzalez-Paramo, a member of the ECB's executive board.
Translation - there is so much cash wafting around the coffers of banks worldwide NOW... you know what happens to cash - it gets invested, it buys stuff like houses and stocks - you can forget about housing bubble or even "soft landing", it could be takeoff time again. There's now evidence of that in the record stock market.
Rates are going Down!
The U.S. Treasury cut the amount it plans to borrow from investors this
quarter by 39 percent because of an unanticipated surge in tax revenue.
The decrease might provide a lift to government bonds, which rallied
last week on a report of weaker home sales and comments by the Federal
Reserve suggesting inflation will slow.
Translation - what inflation? A month ago, the Fed was talking about dropping Fed fund rates to ensure a soft landing and avoid a RECESSION.
Complete contradiction... ready for more convoluted thinking?
Here's a simple, but real example (I've heard this line of thought
several times) of what the Man/Woman on Market Street thinks of today's
economy - 1) We're financing wars all over the world (remember, we're
in San Francisco), 2) Wars cause budget deficits, 3) Deficits cause the
dollar to lose value, 4) Interest rates must increase to keep currency
afloat, 5) So we're in trouble, inflationary pressures will always
exist because of those DAMN wars that we continue to finance even
today, 6) Expletive Bush.
Now here's a followup paragraph from the above "Treasury Slashes" article:
"The improving fortunes of the U.S. budget deficit is one of the great
stories for the bond market this year,'' said William O'Donnell, head
of U.S. debt strategy at UBS Securities LLC.
Translation - Man/Woman on Market Street: "What?!? I studied economics
in college and here's some debt strategist that says my assumptions are
completely wrong... and that's why inflationary pressures have
abated... gee whiz, expletive me"
Not only is the daily news contradictory, but now our basic assumptions from Economics 101 are being upended...
And you wonder why your buyer can't figure out if interest rates are rising or falling? And why they can't pull the trigger on a purchase? Say "crapshoot"...
I have noticed that economic read today will be contradicted tomorrow and the next day it will revert back. I don't think we really get news about anything here in the US. I watch a news program from France that I get via cable T.V. and the news is much different than what we get here. If the show were in English I would get more out of it, but still think the news is more factual than what we get here in the US.
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Pat - I think you are right. It is like everyone is so into sensationalism right now, that everyone has become confused. Just saw a piece last night on the local news where 40 percent thought the market was great; 40 percent thought it was horrible; and 20 percent thought it was okay. Now that is a pretty polar set of thoughts.
Teresea - Check out the BBC sometime. They give you a different take on the news from another perspective.
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Toby, here's an example of another blog Property Grunt who posted a similar article about contradictory economic news reports on the same day as mine... everyone is confused.
My favorite daily business news sources are Bloomberg and Financial Times ... whenever I see anyone saying they check BBC for perspective (and that is what we Americans need to do), I look at their address... go Delaware OH!
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Not only do they still sell Bloomberg Terminals, they earn 4-5 Bln dollars' from them each year.
A part of what they're selling with those terminals is their own fiber network. It's a masive intranet that even carries their live TV signals between bureaus.
By the way yer right about the conflicting stories. It's bizarre that currency traders and bond traders can both watch the same speech and draw opposite conclusions from it when they jump into the market right after.
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Yeah! That's what I want to hear - a seemingly archaic business model based on proprietary networks and hardware that pulls in $4-5bn... that means Bloomberg has squarely locked its product into the financial network infrastructure... thank you for the tip.
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