Sunday, May 20, 2012
Tuesday, February 28, 2012
GET Individual Portfolios
During
this quarter, the Global Economics Team has started a portfolio competition
between the members of the team. The
object was simple: each person is allotted $50,000 dollars of stocks via Yahoo
Finance (Simulation Money) that would allow the person to create a portfolio
shadow the stock market. As we progress
through the year, certain markers will allow for rewards for the person with
the highest valued portfolio at the time.
As of right now, all 5 of the members of GET have put together their
portfolio. Here is a look at the
starting values of each portfolio:
Evan Amano
Elizabeth Hope
Jon Weiland
Brett Boran
*Evan
Amano and Brett Boran’s Portfolios were established on February 12, 2012, and
the remaining set their portfolios on February 19, 2012.
I hope
all of our viewers of the blog enjoy the updates that we will be giving
relating to why we have chosen specific stocks, and background to what is going
on with our individual portfolios.
Wednesday, February 22, 2012
Cautiously Optimistic: Global Markets and Uncertainty
A recent article in The Economist from February 11 entitled “Not quite party time” discusses financial markets and recent optimism amidst signs of recovery. The article points out that MSCI index of global stocks is up by more than 7% since the start of the year. MSCI are indices that “provide exhaustive equity market coverage for over 70 countries (msci.com).” However, the article writes about “strangely little nervousness” in the atmosphere despite the threat of a Greek sovereign default. Nonetheless, some of the signs of recovery mentioned in the article are bond yields in in Spain and Italy, much mentioned in the Euro Crisis, having fallen to their lowest levels in three months.
Some of other the better than expected news was US unemployment for January coming in lower than predicted. Also the manufacturing and service sectors are beginning to rise. Across the Atlantic, the European Central Bank introduced a massive provision of three year liquidity to the region’s bank which calmed fears a collapse of a big Euro bank or failed bond auction. There has also been much applaud from the market to the action of central bankers who have “doubled down their commitment to cheap money.” In the US the Fed announced it was not going to raise interest rates while the Bank of England is presumed to continue bond buying. However, the article emphasize some caution, citing how least year there were expectations of accelerated growth for the US which instead went into a slump, in part because oil price spikes, the Arab spring and the Japanese earthquake.
Despite positives signs, I agree with the article that it is too soon to celebrate. The US is at the center of some potentially disruptive news. At the end of February politicians will have to decide whether to extend payroll-tax cuts and unemployment insurance with the consequence of dampening growth if they fail to reach an agreement. Further down the road, the Bush tax cuts expire December 31st which calls for automatic spending cuts. The combined effects of both these acts “would amount to fiscal tightening of almost 4% GDP, more than enough to drag the economy down again.” And as always the need to address the budget deficit looms over head.
There will also be presidential election this year and politicians are generally unwilling to implement any type of monetary or fiscal tightening in the lead up to an election. Most famously Richard Nixon was willing to go as far as abandoning the gold standard with the dollar to prevent the domestic adjustments necessary for maintain a fixed exchange rate, in order to defeat JFK in the 1972 presidential election. For this reason I would expect something to get passed on extending unemployment benefits, which helps politicians build support, but nothing substantive with regard to budget deficits or the Bush tax cuts.
Not to be ignored, the ECB’s success at calming worries of a recession has “reinforced Germany’s conviction that its preferred solution to solving the single currency’s underlying problems—namely, a hefty dose of austerity for all—is the right one.” The Germans see the Euro crisis as a morality play. They worked hard, saved and acted responsibly while countries on the periphery acted profligate. At the same time Germany is one of the most ardent supports of the EU and won’t let it fail, but that doesn’t mean those on the periphery won’t feel pain. The problem with austerity is that it hurts growth at a time when growth is what Europe needs.
Even unemployment figures in the US can be misleading with discouraged workers leaving the labor force and unemployment still much higher for minorities, which can signal still more domestic unrest. Even in Europe, I worry that if Germany gets its way we may see more stagnant growth. The Iran situation has the potential to become an Iran problem which could have repercussions for oil prices. In time of temporary optimism I wonder if shorting stocks makes sense.
Much of the optimism is based on US politicians and their ability to choose the right policies. Central bankers have down their part and now the ball is the court of policy makers. However, I find US politics to be unstable and the prospects of a democratic president, assuming Obama is re-elected, and republic congress make it less likely anything of substance will be enacted. Anyone who wants to start celebrating that we are almost out of the woods may want to keep the champagne on ice for a little longer.
References:
http://www.economist.com/node/21547242
Jonathan Weiland
International Business and Economics Club
University of Oregon
Some of other the better than expected news was US unemployment for January coming in lower than predicted. Also the manufacturing and service sectors are beginning to rise. Across the Atlantic, the European Central Bank introduced a massive provision of three year liquidity to the region’s bank which calmed fears a collapse of a big Euro bank or failed bond auction. There has also been much applaud from the market to the action of central bankers who have “doubled down their commitment to cheap money.” In the US the Fed announced it was not going to raise interest rates while the Bank of England is presumed to continue bond buying. However, the article emphasize some caution, citing how least year there were expectations of accelerated growth for the US which instead went into a slump, in part because oil price spikes, the Arab spring and the Japanese earthquake.
Despite positives signs, I agree with the article that it is too soon to celebrate. The US is at the center of some potentially disruptive news. At the end of February politicians will have to decide whether to extend payroll-tax cuts and unemployment insurance with the consequence of dampening growth if they fail to reach an agreement. Further down the road, the Bush tax cuts expire December 31st which calls for automatic spending cuts. The combined effects of both these acts “would amount to fiscal tightening of almost 4% GDP, more than enough to drag the economy down again.” And as always the need to address the budget deficit looms over head.
There will also be presidential election this year and politicians are generally unwilling to implement any type of monetary or fiscal tightening in the lead up to an election. Most famously Richard Nixon was willing to go as far as abandoning the gold standard with the dollar to prevent the domestic adjustments necessary for maintain a fixed exchange rate, in order to defeat JFK in the 1972 presidential election. For this reason I would expect something to get passed on extending unemployment benefits, which helps politicians build support, but nothing substantive with regard to budget deficits or the Bush tax cuts.
Not to be ignored, the ECB’s success at calming worries of a recession has “reinforced Germany’s conviction that its preferred solution to solving the single currency’s underlying problems—namely, a hefty dose of austerity for all—is the right one.” The Germans see the Euro crisis as a morality play. They worked hard, saved and acted responsibly while countries on the periphery acted profligate. At the same time Germany is one of the most ardent supports of the EU and won’t let it fail, but that doesn’t mean those on the periphery won’t feel pain. The problem with austerity is that it hurts growth at a time when growth is what Europe needs.
Even unemployment figures in the US can be misleading with discouraged workers leaving the labor force and unemployment still much higher for minorities, which can signal still more domestic unrest. Even in Europe, I worry that if Germany gets its way we may see more stagnant growth. The Iran situation has the potential to become an Iran problem which could have repercussions for oil prices. In time of temporary optimism I wonder if shorting stocks makes sense.
Much of the optimism is based on US politicians and their ability to choose the right policies. Central bankers have down their part and now the ball is the court of policy makers. However, I find US politics to be unstable and the prospects of a democratic president, assuming Obama is re-elected, and republic congress make it less likely anything of substance will be enacted. Anyone who wants to start celebrating that we are almost out of the woods may want to keep the champagne on ice for a little longer.
References:
http://www.economist.com/node/21547242
Jonathan Weiland
International Business and Economics Club
University of Oregon
Thursday, February 2, 2012
Facebook's IPO... and the Effects
An Economic Mindset writes about the effects that Facebook's emergence into the public market may have on consumers and investors in America. But what are some of the effects that the IPO of Facebook may cause to the global economy?
Facebook has become a giant in the social networking world, but the corporation hasn't stopped there. With games, news, and shopping available on the site, Facebook has become a place to locate around one's entire Internet experience. Below, there is map that shows the dominant social network in each country. Facebook, to say the least, has done well.
A map depicting social network dominance. Facebook is anything blue or light blue. Need we say who is controlling the world's social network? (The Economist)
Facebook has become a giant in the social networking world, but the corporation hasn't stopped there. With games, news, and shopping available on the site, Facebook has become a place to locate around one's entire Internet experience. Below, there is map that shows the dominant social network in each country. Facebook, to say the least, has done well.
A map depicting social network dominance. Facebook is anything blue or light blue. Need we say who is controlling the world's social network? (The Economist)
Now, let's try and imagine the growth potential that Facebook has worldwide. The biggest opportunity for growth is in China, which Founder Mark Zuckerberg is actively seeking a joint venture to gain entry into a country that could potentially double the amount of users on Facebook.
What should Facebook do to ensure further market growth? Is Facebook going public good for the global economy?
References:
- Amano, Evan. "Facebook's IPO and the Market". An Economic Mindset. http://aneconomicmindset.blogspot.com/2012/02/facebooks-ipo-and-market.html
- "Floating Facebook: The Value of Friendship". The Economist. http://www.economist.com/node/21546020
Tuesday, January 31, 2012
Consumer Confidence and the Effect on the Economy
Today, I wrote on my personal blog, An Economic Mindset, the recent release of the lowered consumer confidence rating. I discuss the effects that can be seen in the US economy, but what about the global economy?
The initial thought that comes to mind is the progress made by the EU to establish a more fiscal policy to help with the Eurozone crisis. But will the same problems within the United States eventually find their way to the EU?
We see the three major problems in the United States for the drop in consumer confidence: job creation, fuel prices, and the housing market. With each of these three factors, the Eurozone can be seen to be struggling with all of them at this time. I believe that the EU is going to have to struggle in similar matters to the United States with its development to control and growth in the European economy.
References:
The initial thought that comes to mind is the progress made by the EU to establish a more fiscal policy to help with the Eurozone crisis. But will the same problems within the United States eventually find their way to the EU?
We see the three major problems in the United States for the drop in consumer confidence: job creation, fuel prices, and the housing market. With each of these three factors, the Eurozone can be seen to be struggling with all of them at this time. I believe that the EU is going to have to struggle in similar matters to the United States with its development to control and growth in the European economy.
References:
- Amano, Evan. "Consumer confidence and the Effect on the Economy". An Economic Mindset. http://aneconomicmindset.blogspot.com/2012/01/consumer-confidence-and-effect-on.html
Saturday, January 28, 2012
Cisco's Chambers Backing Romney for President
A large corporation has spoken out about the opinion towards the 2012 presidential election. CEO John Chambers of Cisco Systems has openly supported presidential candidate Mitt Romney because of his plans to lower the current 33% corporate tax (as stated in the most recent debates, Romney hopes for 15%). Chambers explains how much cheaper running a business in other countries, including China, Russia, UK, and Canada.
The belief that cutting corporate tax will bring jobs and corporations back to the United States is bold, and seems highly unlikely even with lowered rates. Countries including China and Russia hold far lower wage levels that even if the corporate tax were to be cut in half, there would be so much uncertainty surrounding whether there would be a financial benefit to bringing companies back. The United States would surely benefit from job creation, but the bigger question would remain to what would happen to funding of the government in the long run.
As stated in the last post, the percentage of money being put into the education system in America is at a low. The best way to build on our human capital is giving Americans the best opportunity to succeed and innovate. This is where economists need to push the realization that the costs of cutting tax money will ultimately harm the economy and the citizens of the US. This election could effect greatly the outcome of the United States over the long run.
Again, we fall back to the dispersion of wealth in the United States. We need to recognize that the rich are getting richer, while the lower and middle class are being left in the dust. If these levels of income inequality continue to occur, there will be major problems for the country as a whole. I truly understand where people believe that having corporations return to the United States could benefit our country, but if only 1% are reaping the benefits of the economic growth, will there be sustainability in the US economy?
The belief that cutting corporate tax will bring jobs and corporations back to the United States is bold, and seems highly unlikely even with lowered rates. Countries including China and Russia hold far lower wage levels that even if the corporate tax were to be cut in half, there would be so much uncertainty surrounding whether there would be a financial benefit to bringing companies back. The United States would surely benefit from job creation, but the bigger question would remain to what would happen to funding of the government in the long run.
As stated in the last post, the percentage of money being put into the education system in America is at a low. The best way to build on our human capital is giving Americans the best opportunity to succeed and innovate. This is where economists need to push the realization that the costs of cutting tax money will ultimately harm the economy and the citizens of the US. This election could effect greatly the outcome of the United States over the long run.
Again, we fall back to the dispersion of wealth in the United States. We need to recognize that the rich are getting richer, while the lower and middle class are being left in the dust. If these levels of income inequality continue to occur, there will be major problems for the country as a whole. I truly understand where people believe that having corporations return to the United States could benefit our country, but if only 1% are reaping the benefits of the economic growth, will there be sustainability in the US economy?
Reference:
Smith, Aaron. "Cisco's Chambers Backs Romney for President". CNN Money. http://money.cnn.com/2012/01/26/news/economy/davos_chambers_romney/index.htm?iid=SF_E_River
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