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The Economic Indicator Handbook. Richard Yamarone
Читать онлайн.Название The Economic Indicator Handbook
Год выпуска 0
isbn 9781118233122
Автор произведения Richard Yamarone
Жанр Зарубежная образовательная литература
Издательство John Wiley & Sons Limited
I must express my most sincere thanks to a true diamond at Bloomberg, Reileen Brown. You have saved me on hundreds of occasions. Without you, I would be lost…literally.
To the thousands of clients with whom I interact, thanks for all of your thoughts, comments, and idea-generating conversations. You have contributed to this project in more ways than you may realize. Along these lines, I must extend thanks to the near 700 members of the Bloomberg Macro Economic Chatroom. I cannot divulge any individual members – it is an anonymous chatroom – but I must tell you there are numerous occasions where members have inspired me to read, study, and learn about specific topics and economic issues weeks ahead of them appearing in the broader business press.
Thank you all.
About the Author
Richard Yamarone is a Bloomberg senior economist with more than three decades of experience on monetary and fiscal policy, economic indicators, fixed income, commodities, and general macroeconomic conditions.
As a member of Bloomberg Intelligence–Economics, he is a contributor to the Real-Time Economics product that features analysis, data, and news on the forces shaping the global economy. Mr. Yamarone and the Bloomberg Intelligence–Economics team provide in-depth analysis of macroeconomic data, policy, and trends and how they will impact financial markets.
He is also the creator of the Bloomberg Orange Book of CEO Comments, a compilation of macroeconomic anecdotes gleaned from comments C-suite executives made on quarterly earnings conference calls. He travels extensively to speak to clients and corporate executives on the economic outlook, public speaking, and career and management coaching. The author of Trader's Guide to Key Economic Indicators (Bloomberg Press, 2012), Mr. Yamarone is a member of the National Association for Business Economists, the American Economic Association, the New York State Economics Association, and the Money Marketeers of New York University. He has won numerous accolades for his work, including being featured as one of the top 10 economists in the United States by USA Today in 2007 and “Nostradamus of the Financial Industry” by Bank Advisor in 2008 for his prediction of the financial crises.
Chapter 1
The Daily Blotter
Perhaps the best way to appreciate the most important and meaningful economic indicators used by Wall Street economists is to present them in the manner that they are used by those professionals. Every bank, money manager, hedge fund, or financial institution has an interest in economic indicators, and each of those producing the analysis possesses their own individual routine in which they obtain the data, produce a product, and disseminate their respective analysis. For the most part, Wall Street economists use the Bloomberg Professional service for their data, write a daily newsletter – with oftentimes several updates a day – and send it electronically to their clients, investment professionals, and the media.
This chapter attempts to present the most important information used on Wall Street trading desks, and how the desk economist goes about prepping for the day, understanding and appreciating anything that might move the financial markets or alter the outlook for the economy.
The traditional market reaction to news, events, and economic data – particularly the top tier economic indicators – is usually with respect to what insight the news brings to the entire financial market. While some equity analysts use economic releases to determine the trends in some of their respective industries and stocks, most investment professionals look to see how information will influence the broader markets.
For example, should news break about a refinery fire at an integrated oil company, then there may be an immediate negative reaction to that specific company's stock price. Depending on how severe the damage was to its facilities and how long that refinery would be out of commission would dictate the value of the price adjustment. Similarly, if the refinery was large, producing a tremendous amount of gasoline, then the lost supply could disrupt the commodity market, and send prices higher. This wouldn't upset the entire stock, bond, or currency market, with the damage being concentrated in just the trading of some energy products.
When a major economic release hits the newswires, market participants look at the details with respect to how the information contained in the report will influence the prices of a security.
When economic releases are better than expectations, that is, with a positive or bullish implication, equity prices rise and bond prices fall. Yields on bonds (or fixed-income securities) rise since they are inversely related to prices). The economics behind this is that a stronger economic posting like a large number of jobs added in a month, an increase in the orders for durable goods, or an extremely upbeat reading in consumer confidence, implies companies will be conducting a greater amount of business, which is good for revenues and profits.
The reaction to strong economic data in the fixed income market would be very different. Stronger economic conditions possess potentially inflationary conditions. An increase in demand or production is usually accompanied by greater prices. So exceptionally stronger gains in activity are viewed as inflationary, which erodes the value of a fixed income security. The yields on those bonds would rise since they are inversely related.
The opposite holds true for weak economic reports. In the event that one of the manufacturing condition surveys is less than expectations, industrial production contracts, or housing starts fall, stock prices would sour on that news and bond prices would rise (yields would fall).
While each Wall Street economist has varying responsibilities and individual routines, they do share some common traits. Knowing what releases are scheduled for any given day is atop that list. The economic calendar is so important that vacations and time off is planned around economic releases by order of importance. You never call in sick or walk in late for an Employment Situation release, an FOMC meeting, or a day when three or more top-tier indicators are slated for release.
The Economic Calendar
The Bloomberg calendar depicted in Exhibit 1.1 may be obtained by typing ECO <GO> on the Bloomberg Professional terminal. It is the most comprehensive and trusted source for releases in all of finance, detailing the name of the release, date, time, previous value, and the current Street consensus estimate. There's also a relative importance graph identifying how the Street views each index – the larger the number of subscription alerts there are for an individual indicator, the greater the number of bars highlighted in the bar graph located in the “R” column (relative importance) to the left of the Event column. In the associated exhibit, the ISM Milwaukee index clearly is not considered to be as important as the Chicago Purchasing Managers Index.
Exhibit 1.1 The Economic Calendar
Source: Bloomberg
The Bloomberg ECO calendar may be customized to include economic releases like durable goods orders and economic events like speeches by policy makers or Federal Reserve Open Market Committee meeting announcements. The addition of all the government conferences and speeches like those from the secretaries of the Departments of Treasury or State are also available. All Treasury financing auctions are listed as well. Even the commodity reports such as crop conditions or crude oil inventory levels are available. While we are only addressing the U.S. economic indicators, the ECO calendar is available for 189 countries and regions (e.g., Eurozone, G8, G20).
Traders, analysts, and economists always want to know what the market is thinking, so when an economic release hits the tape, they know whether the report is stronger, weaker, or in line with Street expectations.
With respect to the calendar on economic releases, right-clicking on any