Archive for 2011

Americans now Only Spend $1.98 on Wine For Every Dollar Spent on Beer (vs $3.00 in 2000)

September 21st, 2011 Michael McDonough Comments off

Prior to prohibition there were a large number of craft breweries in the U.S., during prohibition they all of course were forced to close.  In the years following the repeal of prohibition Americans acquired a taste for questionable quality macro-breweries (Bud, Pabst, Coors, etc).

About a decade or two ago the craft beer movement in the U.S. started a resurgence with the likes of Samuel Adams and Anchor Steam.  In fact over the last couple years the number of craft brewers in the U.S. has again reached the levels seen prior to prohibition.  According to the Brewers Association “1,753 breweries operated for some or all of 2010, the highest total since the late-1800s.”

So Americans are re-acquiring a taste for better, more expensive beer, which is why we are most likely seeing the amount of money spent on beer rising relative to wine.  I am in favor of this trend, and really enjoy the growing selection of high quality craft beers.

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Money Market Fund Crunch

July 29th, 2011 Michael McDonough Comments off

Investors are begining to flock away from low yielding money market funds as the U.S. debt ceiling impasse lingers on, reducing short-term liquidity.  Over the past two weeks investors have pulled out more than $62 billion from such funds echoing moves leading up to Lehman’s collapse where investors withdrew nearly $200 billion.  The loss of short-term liquidity may also act as a de-facto tightening for the U.S. economy, which has already begun showing signs of loosing steam moving into the second half.

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No Publicity is Bad Publicity? Tell that one to Greece…

June 21st, 2011 Michael McDonough Comments off

While it’s often said no publicity is bad publicity Greece is a clear exception to the rule.  Mentions of Greece in stories on the terminal are approaching its May 2010 high; corresponding with the period Greece first accepted an EU sponsored bailout.  Greece’s more frequent mentions has come at a cost for the country and investors alike as bond yields soar, while the price of protecting against a Greek default through CDS rises precipitously.

Greece’s ten year yield is presently trading just shy of 17 percent, highlighting that investors have likely already accepted the inevitable that the country cannot survive without bond holders taking a significant haircut.  The cost of protecting against a Greek default is approaching 2000 basis points, making it more than three times as risky as Argentina on a five year CDS basis.

Greece will be holding a critical confidence vote tonight for Prime Minister George Papandreou that will likely determine whether the country will be forced to default/restructure now or in several months’ time.  After this vote Greece will have two weeks to pass additional austerity measures to unlock an additional EUR12bn in aid from its neighbors—Greece owes approximately EUR18bn in debt payments now through August.  In any case, any European aid will likely prove to be a temporary relief with this scenario playing out again and again until a painful restructuring is finally undertaken.

Hesitation from Eurozone officials around a Greek restructuring are being stoked by the possible impact on their own countries.  Officials are likely trying to buy time in hopes of finding calmer markets before forcing Greece to restructure limiting the potential contagion effect.  The problem is markets can’t calm, while there is still a hurricane raging in Greece.

Categories: Europe Tags: , , ,

Bloomberg Briefs’ Global Central Bank Monitor

March 24th, 2011 Michael McDonough Comments off

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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