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Archive for the ‘Thematic Piece’ Category

Global Modified Misery Index as a Barometer for Civil Unrest

January 27th, 2011 Michael McDonough Comments off

Social unrest in Tunisia has shone a spotlight on the country’s high inflation and unemployment, characteristics shared by many of its neighbors. The misery index developed by economist Arthur Okun traditionally adds a country’s inflation rate and unemployment to measure quality of life.

Bloomberg Brief modified this for the map below, adding in the Democracy Index as calculated by the Economist Intelligence Unit. The following formula was used: Annual inflation + unemployment rate + (10 – EI U Democracy Index), where 10 represents a perfect democracy. The countries in orange and red represent those most at risk.

Tunisia and Egypt, which have already experienced unrest, scored 24.9 and 27.8, respectively in this calculation. Many other countries in the region also scored high. The global average is 19.3.

***This is an excerpt from an article in the Bloomberg Brief: Economics.  To subscribe to the newsletter please go to {BRIEF <GO>} on your terminal or www.bloomberg.com/brief

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November 11th, 2010 Michael McDonough Comments off

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The QE Trade Road Map From the Bloomberg Brief: Economics

November 3rd, 2010 Michael McDonough Comments off

When the Federal Reserve launched its unprecedented program of quantitative easing in early 2009, it was difficult to predict how various asset classes would react. Now, as the Fed considers a second round of asset purchases, the first program has left a blueprint of sorts behind that could be useful in predicting how markets might respond. The table here shows, as measured by R^2, how strongly the fluctuations in a variety of assets are correlated with the level of securities held by the Fed during the first six months of 2009. The table also displays the performance of these assets during the first half of 2009, as well as in the period since Fed Chairman Benjamin Bernanke’s Jackson Hole speech, where he laid out the case for additional quantitative easing.

To subscribe for free go to {BRIEF <GO>} on any Bloomberg terminal or if you don’t have a terminal go here to subscribe for a fee: www.bloomberg.com/brief

**This is an excerpt from the Brief published on 10/29/10**

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Weekend Musings: High Tech Stein Keeps Beer ‘Frosty’ For Days

April 3rd, 2010 Michael McDonough Comments off

Source: Bloomberg

As a fan of beer, technology, and business I may have stumbled upon the perfect article this morning on Bloomberg to write a quick weekend note.  Apparently, a nuclear scientist–who looks like he would feel quite at home in any brewery–crafted a beer mug designed with the same technology used to store liquid nitrogen.  The effect beer, that will stay ‘frosty’ for days once placed inside the mug.  The problem , the stein doesn’t come cheap, currently they are being sold for $375 (the gallon size).  However, considering I recently purchased a $400 vacuum as a gift for someone, the high price point for a magic beer stein doesn’t seem so bad!

Apparently, Phil Broughton–the creator–presently an employee of UC Berkeley, came up with the idea while on forced furlough in September due to California’s state budget problems.  Prior to working at Berkeley, Phil had positions at the Lawerence Livermore Lab and the Amundsen-Scott South Pole Station (suffice to say he is a bright guy).  It was reported that while working at the South Pole station he twilighted as a bartender and would increase the alcohol content of drinks by removing excess water with liquid nitrogen.  I am beginning to think if there was a Nobel Prize for the art of drinking, then this guy would be a serious contender.  The steins can be purchased here, but look to be presently sold out.   I do not receive any commission, or any advertising revenue for the link, but nevertheless if you have the money I think you should buy this.

And in case you missed it you can buy this miracle stein here:  http://www.etsy.com/view_listing.php?listing_id=43362684

As a side note, to see my most recent column on Bloomberg please click here (I wish the topic was as interesting!)

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1981 Data Coming To a TV Near You (A Fun Retrospective)

March 8th, 2010 Michael McDonough Comments off

Recently I have found plenty of enjoyment looking through old Popular Science magazines online.  Today I came across an article from 1981 in which the author was very serious about a new service rolling out that would deliver data directly to your TV via phone lines or antennas (traffic, scores, weather, etc…).  I am assuming back in 1981 this technology was eventually superseded by computers and the internet, but comparing it to the functions of today’s Tivos, digital cable boxes, and other TV hardware, this article couldn’t have rang more true if penned in 2001 (20 years after it was originally published).  Better late than never I suppose.  The article goes into detail about the pros and cons of three competing services that will all be vying for your business.  But, in any case enjoy some screen shots:

Take a look at the interface…  (Looks like the Giants still couldn’t catch a break):

There’s more:  (Fresh Direct 1.0?):

Sources: http://www.popsci.com/archive-viewer

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Japan Still a Big Concern; More so Than Greece?

March 1st, 2010 Michael McDonough Comments off

While all eyes remain on Greece, Japan’s fundementals continue to weaken, and in some instances look worse than Greece.  There are of course numerous technical and economic differences between the two nations; however, I do not believe Japan’s current deficits and debt load will be sustainable without drastic changes.  This is an update from my piece titled ‘Positioning Yourself for Japan’s Potential Demise…’.  The charts below illustrate some areas of concers for the Land of the Rising Sun:

Fiscal Deficit

Source: Bloomberg

 

Debt to GDP

Source: Bloomberg

 GDP Growth

Source: Bloomberg

Debt Coming Due % of GDP

Source: Bloomberg

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Kindling a Fire

February 5th, 2010 Michael McDonough Comments off

Intellectual property, mobile internet technology and national censorship make an incendiary mix for global business and consumerism. This was brought to center stage recently with the escalating disagreement between Google and the Chinese government over privacy rights for online content. The clash of swords has most recently become a truly intergovernmental affair as well with U.S. Secretary of State Hillary Clinton’s policy speech on global internet rights and the just announced cooperation between Google and the National Security Agency in the search for the hackers behind the intrusion into some customers’ personal emails. Once Google felt its property rights had been impinged, its first headline-making reaction was to immediately provide unfiltered search results to its individual Chinese customers, reversing the policy of acquiescence to China’s political and cultural internet censorship by which it had abided since entering the country.

Yet, l’Affaire Google could have even wider implications for a burgeoning technology taking the world by storm: the eReader. These devices have the ability to carry libraries of books and other information inconspicuously across borders, an issue that no government has apparently considered a discrete policy matter to date.

In China’s case, the threat to the censorship regime could be too big for the government to ignore, both in terms of the potential quantity of subversive material and the ease of dispersing it. As one traveler’s first-hand commentary puts it, “You’ll be fine, as long as it’s not a suitcase full of books and then it’d kinda start looking like you’re smuggling in anti-Chinese propaganda.” Well, the eReader is a suitcase full of books that can be loaded onto the internet and sent via email without requiring any access to the Chinese firewall.

The next question for the broader global business community is whether they will face governments that refuse to honor their asserted intellectual property rights if they do not bind themselves to national censorship requirements. Nor can this be viewed as a purely China vs. World conflict. Western countries including Germany, Canada, and France, for instance, qualify free speech rights in relation to some material regarded as derogatory or anti-social. The implications, like the communication capacities of the devices, are likely to grow virally. Will China be manufacturing components for the key weapons in breaking down its own firewall? And would consumers start requesting confiscation refunds as part of their eReader warranties?

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Twitter

February 5th, 2010 Michael McDonough Comments off

I finally caved and opened a Twitter account for Fiat Economics:  https://twitter.com/FiatEconomics

I plan on using this to post short timely financial/economic musings that pop into my head throughout the day.  The expect some days will have many while others will be rather slow.

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FT Highlights What I Believe is the Next Big Threat: A U.S. Downgrade

February 5th, 2010 Michael McDonough Comments off

“Unless further measures are taken to reduce the [U.S.] budget deficit further or the economy rebounds more vigorously than expected, the federal financial picture as presented in the projections for the next decade will at some point put pressure on the triple A government bond rating,” -Moodys

This quote came from a note Moody’s released on Wednesday that went largely unnoticed by investors.

You can find the FT Article Here

In order for the U.S. to shift course we will need to see major reductions in spending coupled with an increase in taxes, that will probably resemble that of the 1970’s, where the highest tax bracket went north of 70%.  Today’s growth is coming at a price, which will eventually need to be paid.

I should note that before the financial crisis  rating agencies were releasing reports reaffirming sub-prime assets AAA credit ratings, however, with a caveat.  The caveat was that this rating would be secure so long as there was no decline in home prices.   But, at this point in time you would have been hard pressed to find an economist on Wall Street–even the optimistic ones I was working with–who were not calling for a decline in home prices.  The rating agencies realized the consequences of downgrading these assets, and likely did not want to be known as the spark that caused the biggest financial crisis since the great depression.  Instead they waited until it became completely apparent to everyone that these assets were in no way investment grade (as they subtly alluded to with their caveat) and waited to downgrade until the damage was already done.  It looks like they do not want to repeat this mistake.

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GM’s New Battery Plant

January 7th, 2010 Michael McDonough Comments off

Hearing about GM’s new battery plant I started reminiscing about an article I wrote back in July of 2008.  Will this movement in the U.S. have the same impact it had on Japan?  We will have to wait and see.

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