Surprise!

I attended a meeting last evening, organised by the Institute of Bankers in Ireland entitled  'Economic Outlook for Ireland in Dangerous Times'. It was addressed by three erudite and informative economists who spoke, generally, positively about Ireland  economic future and I will spare you the details of a full report as it lasted for two hours. What I do want to mention, though, was that two of the speakers made reference to the 'Surprise Index'.
I have to admit this indicator was new to me but apparently it is one that is closely watched my many market participants. Briefly it is a measure of economic forecast v actual data. When the data comes in as expected the value is zero , worse than expected gives a minus figure and better...well you get the idea. Here is an example of how the index correlates to the performance of the S+P.

Whilst not a perfect correlation it is still indicative of  the close relationship between forecasters expectations and market prformance. Apparently the most recent Global Surprise Index is trending above zero, that is, economic data is coming in better than genrally predicted and this is a cause for optimism.
Now I am not here to deride any economic forecasters ( well, maybe Morgan Kelly ). I know how intelligent and hard working many of them are as was indicated by the quality of the presentations at the Istitute of Bankers. But my problem lies in the benign title 'Surpirse' Index. To me it is the ' The Totally Innacurate Forecasts' Index. If the forecasters were generally accurate the graph would show a much flatter curve hovering around the zero. It patently does not.
No economist I know would claim any psychic abilities or special gift for predicting the future and would always be totally honest about their ability to predict any economic outcome. They are human and know their methodologies are flawed.
My problem lies with the wilful abandonment of caveats when these preditions are published. Newspapers print OECD, ERSI, IMF and many others economic forecasts as if they were definates. Politicians then quote and use them to their own ends and markets will follow suit. It is amazing how wildly innacurate most economic predictions about Ireland have been over the last 5/6 years and equally amazing how quickly forgotten this is.
I am not saying ignore the forecasters but to emphasise that they are always 'best guesses' , they cannot possibly be any more than that.
To quote the great economist JK Galbraith ;

"The only function of economic forecasting is to make astrology look respectable"

Pretty Amazing

Ok so this in not totally following the theme of my blog but I came across this yesterday and found it pretty amazing.

It is just a mobile phone and Lego for God's sake and it is doing it faster than the human world record for solving a Rubiks Cube.
I, for one, know which way this is going so I would just like to hail our new lords and masters!

Them

This weekend we saw the 'Occupy Wall Street' protests in New York expanding to all corners of the globe including, Hong Kong, London, Rome and our own dear Dublin amongst many others. As to what they are protesting, well apparently it is the nefarious 'They' that are up to their old, evil tricks again as explained in their collective statement, read here by Keith Olbermann:

As ever, who exactly the 'They' are is, rather annoyingly, never fully fleshed out. If the protesters have 'Their' names they really should let the authorities know as soon as possible.

 I would also be very interested in hearing what practical alternatives they have for running a modern economy. Can dreadlock growing and protest-sign making really replace the jobs lost in the construction industry?

And while these protesters are busily decrying capitalism in Western economies, those other disparagers of liberal free market economies , the Chinese, are busily purchasing assets all over the globe, be they bonds or fire-sale government equity like Athens airport. Is your enemy's enemy really your friend? If the evil  'corporates' are eventually bought out by a Maoist entity will the protesters have their wishes fulfilled ?

I am all ears.

The Grecian Earn

So the Greeks are to get, yet, another €8 billion in aid approved by the Troika. The phrase 'good money after bad' does not do the situation justice as the Greek authorites continue to make Ireland's economic management look positively prudent and wise. Apparently Greece has warranted this assistance by promising to cut the public sector workforce and to increase taxes. But I am led to believe that only 40% of the workforce in Greece actually pays any tax and a good proportion of that number has to be employed in the public sector. On top of this the recession in Greece is apparently worse than expected (by whom?) and the earliest sign of recovery looks like 2013 sometime. So a fewer number of workers in the country are going to pay more tax.  At best, no change there.
With the rubbish piling up on the streets in Greece, as public sector workers go on strike (once again) I cannot help but feel that it is like an enormous halting site with the government indulging in metaphorical welfare fraud on a massive scale. Speaking of metaphors I could not help thinking of the situation when I came across this image.

(click on the picture)

Unemployment Statistics

So, the unemployment rate in the country has fallen in September for the first time since the start of the year which is good news certainly. The only problem I have with it , though, is the lack of depth in the information . Obviously a lot of the reduction could have to do with seasonal factors, like students returning to college or, possibly, claiments emigrating but we don't really know. It is pure speculation unless the CSO gives us an exact breakdown. Still lets be positive 5,400 workers could have retired or emigrated leaving positions to be filled by the unemployed. It does happen.
But in this time of chassis the local media seems to be far more concerned about an election to find which person should shake the hands of sports teams, and visiting dignitaries. If we need somebody to represent the country , without any effective legislative power , then it should be a beauty contest . We really must have somebody in the country more pulchritudinous than the candidates presented. I bet if one of the Corrs got the job we would have a lot more people willing to visit our shores.
And in this time of trouble, when our confidence has be crushed, it is inspiring to witness our rugby team demonstrating just what we can do. Even the Wall Street Journal took notice.
'Ireland Will Hug You To Death'

Goldman Sachs Rules The World!

If you have managed, in the last week, to avoid seeing this viral video of a BBC interview with an independent market trader by the name of Alessio Rastani well done I say! For those of you who missed the three and a half minutes in the company of this slick little charmer here it is:

Now, first of all I would like to say that the lovely Mr Rastani is almost certainly correct in what he says. The fact that he comes across as a clone, spliced from a wart on Gordon Gekko's backside, unfortunately does not make what he says less valid just less palatable. What surprised me, though , was that the reaction online seemed to be shock at the pronouncement that Goldman Sachs ruled the world, not governments. I believe, though, that Mr Rastani was not, just, referring to Godman Sachs but a goup of institutions and hedge funds led by Goldman Sachs that will determine what occurs in the world economy over the next few months. This is not a conspiracy theory, the individuals in these institutions are simply doing what they are paid to do and, that is, to make as much money as possible.
Personally I am believer in the capitalist system but with logical constraints. Too few institutions now have too much power . We need more banks not less, so that no one of them can beome a 'systemic risk' or has excessive influence. But this is all by-the-by for the moment. The institutions I refer to are populated by very smart individuals and they will know not to kill the thing upon which they feed. How this is resolved , I have no idea , I leave predictions to those more qualified or braver than me but for the moment it would appear that ;
" Due to budgetry constaints the light at the end of the tunnel has been turned off until further notice" (anon)