5/11/2013: Metro Herald 60 Seconds interview

Prior to the breakfast briefing this Thursday at NCI, Metro Herald asked me few questions about economics, economists, models and tea-leafing... Here's the link to the interview:
http://edition.pagesuite-professional.co.uk/launch.aspx?eid=3cb13124-50ea-40fa-a6b0-3b10de314640&pnum=8 (page 8)

And the article image (click on the image to enlarge):

5/11/2013: My op-ed for Journal.ie on IMHO/AIB initiative

Yesterday, Irish Mortgage Holders Organisation (IMHO) announced the new pilot scheme to help Irish mortgagees in dealing with their lender, the AIB Group (see details here: http://trueeconomics.blogspot.ie/2013/11/4112013-imhos-latest-initiative-to-help.html).

My op-ed on Journal.ie explains this new initiative and the background to the project: http://www.thejournal.ie/readme/imho-aib-group-mortgage-arrears-1160947-Nov2013/

5/11/2013: BlackRock Institute survey: Latin America October 2013

BlackRock Investment Institute released its latest Economic Cycle Survey for Latin America. EMEA region latest survey note is available here (http://trueeconomics.blogspot.ie/2013/11/5112013-blackrock-institute-survey-emea.html) and North America & Western Europe note is available here (http://trueeconomics.blogspot.ie/2013/10/11102013-blackrock-institute-survey-n.html).

"This month’s Latin America Economic Cycle Survey presented a mixed outlook for the region. Brazil, Colombia, Peru, Mexico, Brazil and Chile are described to be in expansionary phases of the cycle and expected to remain so over the next 2 quarters, while Argentina’s growth is expected to deteriorate from expansion to contraction over this horizon. Venezuela is described by the consensus to be in a recessionary state, with no improvement to this outlook at the 6 month horizon."

This is predictable. However, the surprise side is Brazil. Out 6 months from October, expectations are for continued recessionary pressures (35%) basically suggesting that forward-looking bears are slightly more bearish. The country, alongside with Mexico, is in a group that is stuck between higher growth states and Venezuela and Argentina. This despite the improving global outlook: "The global growth outlook remains positive, with a net of 69% of participants expecting a stronger global economy
over the next 12 months compared to 76% in the September report."

Note: these views reflect opinions of survey respondents, not that of the BlackRock Investment Institute. Also note: cover of countries is relatively uneven, with some countries being assessed by a relatively small number of experts.

Here are two summary charts:

5/11/2013: BlackRock Institute survey: EMEA October 2013

BlackRock Investment Institute released its latest Economic Cycle Survey for EMEA region.
 A note on latest survey results for North America & Western Europe is available here.

"With caveat on the depth of country-level responses, which can differ widely, this month’s EMEA Economic Cycle Survey presented a bullish outlook for the region."

"The consensus of respondents describe Slovenia, the Ukraine, Croatia and Russia currently to be in a recessionary state, with an even split of economists gauging Egypt to be in expansion or contraction. Over the next 2 quarters, the consensus shifts toward expansion for Russia, Croatia and Egypt and an even split between expansion and contraction for the Ukraine."

"At the 12 month horizon, the positive theme continues with the consensus expecting all EMEA countries to strengthen or remain the same, with the exception of Russia." Russian sentiment has deteriorated significantly in recent months.

"Globally, respondents remain positive on the global growth cycle, with a net 73% of 57 respondents expecting a strengthening world economy over the next 12 months – a 13% decrease from the net of 86% figure in last month. The consensus of economists project a shift from early cycle to mid-cycle expansion over the next 6 months."

Note: these views reflect opinions of survey respondents, not that of the BlackRock Investment Institute. Also note: cover of countries is relatively uneven, with some countries being assessed by a relatively small number of experts.

Here are two summary charts:

Note: Red dot represents Slovakia, Poland, Israel, Kazakhstan, and South Africa. 

4/11/2013: IMHO's latest initiative to help distressed borrowers

Today was a big day for Irish Mortgage Holders Organisation. Here's our announcement:
https://www.mortgageholders.ie/blog/posts/imho-launches-an-initiative-for-aib-ebs-haven-borrowers

It is a big step for many distressed borrowers and we hope that other banks will follow the AIB Group steps and start treat seriously the need to help homeowners secure independent and client-focused professional advice regardless of people's ability to pay.

The scope of the crisis we face is unprecedented. Here's a reminder:
http://trueeconomics.blogspot.ie/2013/09/592013-sunday-times-september-1.html
and the latest data on arrears:
http://trueeconomics.blogspot.ie/2013/08/2382013-irish-mortgages-arrears-q2-2013.html

2/11/2013: WLASze: Weekend Links on Arts, Sciences and zero economics

This is this week's only WLASze: Weekend Links on Arts, Sciences and zero economics post - sorry folks, busy weekend full of work and a major announcement coming up Monday am.

A NY Times article that resonates on ALL levels with what I have to say about the modern state of intellectual inquiry and our society's willingness to face the truth: ideas, thoughts, words, creativity, innovation, insight - these things are not free. They require effort, input, dedication. And if you value them - you should be prepared to pay for them.

http://www.nytimes.com/2013/10/27/opinion/sunday/slaves-of-the-internet-unite.html?_r=0

The deeper issue here is whether the 'free' nature of these goods in the age of internet is destroying the quality of these goods being supplied? I don't have an answer to this, but I can tell you that I have never had a free lunch that I actually enjoyed. If something has a value, it is never free. If something is free, it has no value.

Many of you have noticed that I significantly cut back on commenting in the media and focused on only such 'free' activities which grant me the power to enjoy real freedom to express myself (this blog, for example) and/or which allow me to do real good (non-profit IMHO work). The reason for this is that I no longer find much satisfaction in what I do.

So can 'free' (or exposure-focused) work be of value?


But that is too close to economics, to be here in a WLASze post, so let's backtrack into arts and sciences…

Those who follow my weekend posts know that I am a bit of a fan of space-defining private Japanese architecture. And here's another example, from a public building, but still on human (private) scale:
http://www.dezeen.com/2013/10/29/the-sea-library-in-awashima-by-etat-arkitekter/
Two images: the table first

and then a wonderful counter-point of the wave-faced reflecting wall:

This is a seamless integration of space (room and framed gardens beyond the window), object (table, wall), subject (wave: water to light), light (window to wall or table), personal (constrained space) to total (open-ended reflection in the wall merging with all dimensions of the space around it)… It is an infinite within the finite… Brodskovian:

"Я обнял эти плечи и взглянул
на то, что оказалось за спиною,
и увидал, что выдвинутый стул
сливался с освещенною стеною.
Был в лампочке повышенный накал,
невыгодный для мебели истертой,
и потому диван в углу сверкал
коричневою кожей, словно желтой.
Стол пустовал. Поблескивал паркет.
Темнела печка. В раме запыленной
застыл пейзаж. И лишь один буфет
казался мне тогда одушевленным.

Но мотылек по комнате кружил,
и он мой взгляд с недвижимости сдвинул.
И если призрак здесь когда-то жил,
то он покинул этот дом. Покинул."

Or in english version:

I threw my arms about those shoulders, glancing
at what emerged behind that back,
and saw a chair pushed slightly forward,
merging now with the lighted wall.
The lamp glared too bright to show
the shabby furniture to some advantage,
and that is why sofa of brown leather
shone a sort of yellow in a corner.
The table looked bare, the parquet glossy,
the stove quite dark, and in a dusty frame
a landscape did not stir. Only the sideboard
seemed to me to have some animation.
But a moth flitted round the room,
causing my arrested glance to shift;
and if at any time a ghost had lived here,
he now was gone, abandoning this house.


And while we are on 'spaces' and architecture and imagery, here are the images from the Open House Dublin 2013 photography competition: http://www.flickr.com/photos/irish_architecture_foundation/galleries/72157636936238606/


And to round off, on science side, two posts on AI and the role it plays and might play in the future…

Via BusinessInsider, the story how use of computers in chess training is shifting the nature of the game when played by humans. Now, loads of good stuff here, but the key to me is the point that grandmasters now have to be more creative in their plays, since computerised training of their opponents assigns disadvantage to predictable opening moves and strategies. In other words, indirectly, computer-assisted training leads to increased creativity...
http://www.businessinsider.com/anand-on-how-computers-have-changed-chess-2013-11
This is a classic example of what I termed computer-enabled innovation and creativity - not a system that operates by design, but a system that generates, promotes, advances human innovation.

As computer-assisted cooking does as well, except in this case, it is computer-generated creativity… http://www.fastcodesign.com/1672444/try-a-recipe-devised-by-ibms-supercomputer-chef
I had a pleasure engaging with IBM few years ago in developing new ideas for using Watson's capabilities in finance and insurance, but I never could have imagined that the most powerful AI system can be used to write new recipes for the kitchen…


Enjoy. I will be cooking Uzbeki Plov tomorrow for the family… Computer un-assisted cooking and a recipe that is centuries old...

1/11/2013: Irish Consumer Confidence: Handle with Caution...

Having written just yesterday about Retail Sales for September 2013 (see here: http://trueeconomics.blogspot.ie/2013/10/31102013-i-am-sorry-but-retail-sales.html) I can now update the Consumer Confidence reading to October.

In October, Consumer Confidence indicator rose to 76.2 from 73.1 in September. This is the 10th highest reading for the index since April 2005 and the highest in 76 months since June 2007. If it were indicative of anything, we are sitting on a cusp of a consumer demand boom.

However, problem is that Consumer Confidence has a negative historical correlation with Retail Sales over the period of current crisis: correlation between Consumer Confidence and Value of Retail Sales since June 2008 is -0.663 and with Volume of Retail Sales it is -0.599. In other words, according to data, higher consumer confidence has been associated with lower retail sales (consumer demand).

Here's an illustration, updated to October for Consumer Confidence figure...

So caution, please, with interpreting Consumer Confidence.

1/11/2013: Decent News on Live Register Front: October 2013

Live Register numbers for October released yesterday are pretty good, for a change. 

On a seasonally-adjusted basis, overall official Live Register counts declined to 409,900 from 413,600 in September. Seasonally-adjusted LR is now down 5.60% y/y - an improvement on decline of 4.9% recorded back in September.

3mo MA also is down 5.03% year on year, and 2.2% lower on 3mo through July 2013. 

So decent headline readings, consistent with continued trends working through LR overall:

1) Outflows due to new jobs creation

2) Outflows due to emigration and benefits expirations

Level changes: m/m down 3,700 and y/y down 24,300. 

Compared with Q1 2011 average - the last period prior to the current Government coming into office, Live Register is down 3.8% in the last 3 months through October 2013.

Two charts above also show Live Register with State Training Programmes participation added to it (LR+STPP). This broader measure of LR currently stands at 485,850 in October (I use September figure for STPPs as this is reported with one month lag). Assuming this holds, LR+STPP numbers are now 5.8% below where they were in October 2012 (note, September STPP figure more likely underestimates the October numbers, as there is very strong volatility and seasonal increases in September-November). 

This contrast with 3.7% decrease in LR+STPP recorded in September. Now, again - keep in mind that September numbers are the true comparative, as they are reflective of the recorded levels of STPPs. 

Back to october figures. The trend for LR+STPP is now to the downside when we strip out some of the monthly volatility. 3mo MA for LR+STPP currently runs at 1.35% lower than 3mo MA through July 2013 and is down 4.2% y/y. This confirms the decline of 2.4% recorded in LR+STPP y/y basis for the 3 months through July 2013.

Current 3mo MA is 4.7% below Q1 2011 reading for LR+STPP.

Broadly-speaking, the numbers are encouraging.

Another interesting trend in the LR participation by the under-25 years of age: this is down massive 10.4% y/y in October and was down 10.3% in September. On 3mo MA basis, the figures are down 10.4% y/y and are down 3.4% on previous 3mo MA through July 2013. I wonder how much of these declines is due to cuts to benefits and expirations of benefits and younger people removing themselves out of the labour force.

Finally, Casual and Part-time Workers on LR have fallen 5.1% y/y in October and were down 3.3% in September. On 3mo MA basis, the figures are down 5.7% on previous 3mo period through July, and are down 3.6% y/y.

Summary: overall we have encouraging changes in the LR. More analysis is needed to decompose these into jobs creation numbers as opposed to benefits expirations and emigration. More current data is needed on State Training Programmes participation (this will be available for October when November LR is released). A summary of changes is shown in the chart below:

Updated: Revealing some of the mysteries of 'improving' Live Register, here's an article from The Examiner: http://www.irishexaminer.com/budget/news/reality-behind-live-register-stats-246183.html

31/10/2013: I am sorry, but Retail Sales did not get any better in September, again...

With some lag, time to update Irish Retail Sales stats to September data. Instead of going over the usual details of the dynamics, let's take a broader look at what is happening in the sector:

Starting with a chart:

As above clearly shows, both the Value and the Volume of core retail sales are going nowhere - the series are bouncing along the bottom, switching direction almost on month basis. This suggests that

1. Consumers are not going to the shops anymore than they absolutely need to; and
2. Consumers are running out of money to spend on things they need to purchase, while retailers are running out of margins to cut prices.

Of course, you would also notice in the above chart the absolutely bonkers behaviour of Consumer Confidence indicator. And you are right: as chart below clearly highlights, the Consumer Confidence has completely detached itself from Retail Sector realities:

Timing the start of the crisis to late the start of 2009 (if we take the start at mid-2008 things are even uglier for the Consumer Confidence), we have:

• Consumer confidence rising along an upward trend;
• Retail Sales in Volume and Value falling along declining trend;
• Consumer confidence being more volatile than Volume and Value indicators for Retail Sales

This implies that Consumers are claiming that which they do not practice. Why? I have no idea. Patriotic duty to be optimistic? By Consumer Confidence recent readings, we should observe retail sales activity around late 2006-2007 levels. Ooops... Value of Retail Sales is now below where they were back at the start of the series in 2005. Volume of Retail Sales is now around late 2005.

The same applies to more smooth 3mo MA series:

There are no statistically or economically meaningful links between 3mo MA for Consumer Confidence and either Value or Volume of Retail Sales. Worse, year on year, the disconnect between the series has grown wider for both, with the widening being steeper for Value index. Again, this potentially indicates that margins in the retail sales have been wiped out and that this is not enough to get consumers spending again.

Which raises one serious question: local authorities are planning to jack up their rates in 2014. How will retail businesses afford these when they are trading in the above conditions?

As you know, I run my own index of Retail Sector Activity - RSAI - and updating this to September shows the flatlining of the trend for Retail Sector activity overall. All in, we are now in 75 months-long period of declining or flat retail sales:

You can turn the numbers upside down and compute them sideways. You can listen to the Government spokespersons telling us about improving consumer confidence until the Halloween pyres consume the last tractor tyre. You can believe that we are in a turnaround.

And I wish I could do so alongside you... but the above figures are not showing this. Perhaps we can add 'not yet' to that statement to keep some hope alive.

31/10/2013: IBF data on Mortgages Approvals: September 2013

Having just covered data on Residential Property Prices here (http://trueeconomics.blogspot.ie/2013/10/31102013-irish-residential-property.html), time to also update the data from the IBF on Irish mortgages approvals.

Excluding mortgages top-ups, lending for house purchases improved in September, with total of 1,544 new mortgages approved, up 10.4% y/y. Cumulative 3mo issuance of mortgages is now up 11.5% on previous quarter and 13.4% up y/y.

Average mortgage approved, however, stood at EUR174,302 in September, down 4.78% y/y. 3mo average mortgage approved was down 0.12% on previous quarter and down 3.69% y/y.

Year-to-date (Q1-Q3) cumulative number of mortgages approved rose 7.5% y/y while average mortgage approved by value fell 2.49%.

As the result of the above, total value of mortgages approved stood at EUR269 million in September, up 5.08% y/y. Q1-Q3 volume of mortgages approved rose 5.12% y on same period 2012.

So overall, reasonable gains, but off extremely low levels.

31/10/2013: Irish Residential Property Prices: September 2013

Updating the Residential Property Price Index data from CSO released earlier this week, here are the core highlights for September 2013:

• All country RPPI rose to 68.2 in September from 67 in August, marking sixth consecutive month of rises The index is now up 3.65% y/y (in August it was up 2.76% y/y).
• 3mo cumulated change in RPPI is 3.96% and 6mo cumulated change is 6.4%. 6mo average rise is 0.66%.
• Nama valuations (with 10% cushion on LTEV uplift and risk sharing) are now 33.97% off the mark.
• Relative to peak, index now stands at -47.74% and relative to absolute minimum it is at +6.4%.

For Houses RPPI:

• Index rose to 71.0 in September from 69.8 in August and posted a 3.35% rise y/y.
• 3mo cumulated gains are at 4.11% and 6mo cumulated gains are at 6.29%. Average over 6 months monthly increase is 0.69%.
• Relative to peak, the index now stands at -46.21% and relative to absolute minimum it is at +6.29%.
• September marked sixth consecutive month of rises in house prices.

For Apartments:

• Index rose to 50.9 in September from 50.0 in August and posted a 8.53% rise y/y. 
• 3mo cumulated gains are at 1.6% and 6mo cumulated gains are at 6.26%. Average over 6 months monthly decrease is -0.41%.
• Relative to peak, the index now stands at -58.92% and relative to absolute minimum it is at +11.38%.
• September marked second consecutive month of rises in apartments prices.

Dublin RPPI:

• Index rose to 65.9 in September from 63.4 in August and posted a massive 12.27% rise y/y.
• 3mo cumulated gains are at 9.47% and 6mo cumulated gains are at 12.07%. Average over 6 months monthly increase is 1.13%.
• Relative to peak, the index now stands at -51.0% and relative to absolute minimum it is at +15.01%.
• September marked sixth consecutive month of rises in Dublin property prices.

Conclusions:

• Twin convergence toward long-term equilibrium prices is now evident in Dublin markets (upward price pressures) and National ex-Dublin prices (downward pressures). 
• The core question is when will Dublin prices overshoot their long-run trend and moderate again?
• Another core question is what the fundamentals determined price levels are for Dublin and for the rest of the country?
• I have no answers to the above questions and anyone who says they do is most likely talking porkies.
• What I do know is that there are plenty of risks to the downside and headwinds working through the economy. These include: mortgages arrears, income effects of tax and charges changes in Budget 2014, banks rates on existent mortgages; and new mortgages supply and pricing. 
• So far, my gut feeling is that we are still on a sustainable upward trend in Dublin and on moderating negative trend in the rest of the country. 

31/10/2013: Eurocoin: Weak Growth Remains Weak: October 2013

In the previous post (http://trueeconomics.blogspot.com/2013/10/31102013-nairu-or-ndru-euro-area.html?spref=tw) I covered the latest unemployment and inflation stats for the Euro area in the context of economic growth conditions. Now, let's update the data for Euro area leading growth indicator, eurocoin:

Eurocoin rose in October 2013 to 0.20 from 0.12 in September, marking the second consecutive month of the indicator reading above zero. However, eurocoin failed to reach statistically significant levels once again. This implies that the recovery is weak, and subject to serious risks.

In line with the indicator increase, growth forecast also improved from 0.1% for Q3 2013 to 0.18% for the start of Q4 2013.

In relation to inflationary pressure, eurocoin is now signalling expansion that is not sustained by underlying domestic activities:

The above conjecture is supported by analysis of eurocoin core components, showing that the latest improvements came from equity markets indicators (as in September) and also from improved industrial production and exports. Industrial production gains were in turn driven primarily by Germany, while composite PMIs remained generally in the negative territory. Meanwhile, consumer sentiment deteriorated, including in Germany (though it stayed in the positive territory there). 

On ECB move potential see: http://trueeconomics.blogspot.ie/2013/10/31102013-nairu-or-ndru-euro-area.html