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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
Other transformations frequently used in economic analysis are aggregation, whereby data points are summed or averaged. There are times when only the last data point of the month is desired. In addition, the analyst might like to perform many different applications like absolute values, logarithms, exponential, and power transformations.
Because economic indicators can adopt a leading, lagging, or coincident nature, the ability to transform the data by leading or lagging a few periods is also a common analytical tool that economists perform on data. Some indicators are lagged by sizable periods – five or six months, or even a year. You'll want to be able to make these adjustments to the many indicators.
Nearly all of the major trading floors have a morning squawk. During this internal broadcast, market participants – particularly those on the trading floor – are alerted to the top events, earnings announcements, and economic data.
Basically, this is a condensed and informative interpretation of the events and economic calendars. Discussions about potential market trends and possible market conditions are also mentioned. This is also a forum for analysts to pitch ideas, as well as investment products and securities, to the salespeople. Bloomberg has a version called the First Word Audio Squawk, and can be accessed on the terminal by typing SQUAWK <GO>.
Another type of communication on the Street is called the hoot-and-holler, whereby an economist would analyze the economic releases as they hit the tape. Admittedly, these instant analyses were much more prevalent in the 1970s through 1990s, but there are a few trading institutions that carry on this live interpretation of the data.
The task of the hoot-and-holler is not one for an amateur and is extremely difficult; a mere slip can cost traders millions. You have to be aware of the underlying market conditions, particularly the fixed-income market, and you must know what the Street expectations for the release are. It's also important to know how the markets will react to economic releases.
The Bloomberg Orange Book of CEO Comments
The Bloomberg Orange Book of CEO Comments (Exhibit 1.8) is a creation born out of the need to improve an existing, and somewhat staid publication used by policy makers, the Beige Book. Every seven weeks or so – eight times a year – the Federal Reserve releases the Beige Book Summary of Commentary on Current Economic Conditions by Federal Reserve District. This is essentially a compilation of anecdotes gathered by economists in each of the Fed's 12 districts. Once collected, the Fed economists strip away the source information (the name of the person or company making the comment) and don't offer a date of when the comments were made.
Exhibit 1.8 The Bloomberg Orange Book of CEO Comments
Source: Bloomberg
The Bloomberg Orange Book of CEO Comments is assembled by reading some 300 quarterly earnings transcripts of the most economically sensitive companies and extracting the most economically relevant comments by C-suite executives. Anything related to hiring, inflation, capital spending, interest rates, growth, spending, consumer developments, global economic conditions, or confidence makes it to the Orange Book. They are all collated by company and posted to the terminal. These are the actual unedited comments made by executives, identified by the person making the comment and the date that it was made.
By typing ORANGE <GO> on the Bloomberg terminal, you will access the history of all entries, ordered by several different classifications. By clicking on a sector in the pie chart on the Orange Book page depicted in Exhibit 1.8, any of the companies may be found. So, for example, if you wanted to know the comments made by executives in the energy sector, a mere click would reveal the comments made by Hess, Chevron, Halliburton, or Arch Coal.
In addition, there is a search function that permits the user to filter comments by Fed District. So, if you wanted to mimic the Fed's Beige Book by district, you simply check the regional bank on the left, say Atlanta, and all the comments made by executives that are headquartered in the district will be revealed – for example, in the Atlanta District: Flowers Foods, UPS, Coca-Cola, Beazer Homes, Home Depot, and so on.
One of the more useful functions of the Orange Book is to identify trends in specific economic conditions. By entering a specific phrase of word like deflation, job cuts, or Obamacare in the <Narrow Search> field, any mention of those terms from a conference call would appear.
This makes the analysis of so many topics and themes considerably easy. With the Bloomberg Orange Book, you can learn what is on the minds of some of the most important business people in the United States.
In addition, the company transcripts are each scored with respect to its tone – that is, positive, negative, or neutral. Admittedly, the overwhelming majority (usually 290 of 300) are neutral since every conference call doesn't exude a definitive tone. But it is quite evident when a company is downbeat or sanguine about the economic outlook. Keep in mind, the gist of the Orange Book is not to understand how an individual company is performing, but what their perceptions are regarding the U.S. economic situation. A company can have stellar financial results, soaring earnings and escalating profits, but if they mention a near-term recession or a mass furlough of workers that might be scored a “negative.” This is another reason so many companies are graded as “neutral,” C-suite officials don't always mention the economic assessment.
Economists need to know where the financial markets are trading throughout the session, particularly those of Treasuries and currencies. The equity market is a very important measure as well, but its relevance is somewhat limited since it is not open as long as the fixed income and currency market. For example, when an economic release hits the tape at 8:30 a.m. ET – as so many major reports do – the U.S. stock market hasn't begun trading and will not for another hour. Not only will the fixed-income and currency markets be open and trading for the majority of economic releases, but in the event that some news or event breaks overseas (in Europe, Asia, or Africa and the Middle East) and overnight, bonds and currencies will trade with respect to the circumstances.
The Treasury and Money Market Rates
One of the more informative sources for all of this information – and more – is the Bloomberg Treasury and Money Market page (BTMM <GO>) and is depicted in Exhibit 1.9. This is essentially a summary of the more important measures and indicators that trade throughout the day. Circled are the “on the run” Treasuries (the latest issues for the major maturities) and currencies of five of the most popular traded currencies with respect to the U.S. dollar, which is the world's reserve currency.
Exhibit 1.9 Bloomberg Treasury and Money Market page
Source: Bloomberg
There are also many money market instruments including commercial paper, 90-day euro dollar futures, LIBOR fixings, and Fed funds futures. There are a few major stock market aggregates like the Dow Jones Industrial Average, the S&P 500, and the NASDAQ Composite.
Other important economic indicators are posted on this page as well, including the CRB Commodity Index and the latest price of gold and crude oil (West Texas Intermediate).
If something is stirring the markets, it will be identified by movements in several, if not all, of the measures on this page. Professionals can tell how severe or mild the market swings are simply by looking at a snapshot of this page.
There is a rather unique financial market metric that the Street now focuses on in order to appreciate the underlying tone of the markets.
The Bloomberg Financial Conditions Monitor
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