David Chandler's Journal of Java Web and Mobile Development

  • David M. Chandler

    Web app developer since 1994 and Google Cloud Platform Instructor now residing in Colorado. Besides tech, I enjoy landscape photography and share my work at ColoradoPhoto.gallery.

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  • Sleepless Nights…

    October 2008
    S M T W T F S
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Archive for October, 2008

Graphing the Economy

Posted by David Chandler on October 29, 2008

I was poking around on the Federal Reserve’s very useful collection of data, and came across these interesting graphs:

This one I’m guessing is the total reserves of Fed member banks. I wonder where all the money in the stock market went?

This one is roughly equivalent to the money supply. Inflation? What inflation?

Ooh. Ooh. Found another one. Total borrowings of banks from the Fed.
Liquidity problem? What liquidity problem?

Now, I’ve seen the line at the right of all these graphs somewhere before. Oh yes, electrical engineering, control systems theory. It’s an impulse function, the theoretical input to a feedback loop. Expect some economic oscillation ahead…


Posted in Economics | Comments Off on Graphing the Economy

whole lot of minus signs

Posted by David Chandler on October 14, 2008

Once upon a time, I subscribed to Business Week with about-to-expire FF miles. The best thing in it was the figures page, now available online for free:

Click to access 0842_figs.pdf

Minus signs everywhere, even the best-performing mutual funds in the last month earned negative returns. I’m sorry, but I think it’s funny that almost every number on the page is negative, even when it’s my money 🙂

I note that the S&P trailing P/E ratio is 19, hardly cheap by historical standards, and certainly not bear market standards. Forward P/E is supposedly 10, which I find really hard to believe, as that assumes company earnings almost doubling in the next year!

Curiously, trailing P/E was about the same a year ago, which means company earnings must have already fallen a lot in the last year since stocks are a lot lower today. This possibly helps explain why we see long valuation waves. At the top of a peak, earnings have already begun to decline, but the market’s momentum carries it to ever higher P/E ratios. At the bottom, the denominator (earnings) has already begun to recover, but market momentum is still negative, so you get P/Es in the single digits.

Here’s the scary part: even if earnings coming out of the recession are equivalent to today’s earnings, single-digit P/Es imply much lower prices ahead. Assuming anyone cares about fundamentals, that is, which I’m not sure they do 🙂

By the way, if you want to see what recedes in a recession, check out the Fed’s economic data at http://research.stlouisfed.org/fred2/. Most charts have the recessions clearly marked.


Posted in Economics | Comments Off on whole lot of minus signs

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