Thoughts and links - 21/09/2010

It took the NBER a year to tell us that the US was in recession and now, in September 2010, they tell us that the recession ended in June 2009. We know that recession timing by their method is an art not a science but is this really relevant. was it really a sustainable catalyst for equities to rally and risk to go on overnight. Given all the data we have seen since june 2009 and the growing debate about the potential for a double dip we think not, but its a great excuse for short term moves.

Here is a link to the WSJ which "compare the just-ended recession to previous downturns in GDP, private payrolls and retail sales" The market is a voting machine at the moment but for those interested in the longer term these are instructive. http://blogs.wsj.com/economics/2010/09/20/chartbook-the-depth-of-the-downturn/?mod=e2tw

Here is FT Alphavilles view on taking stock of the recession. As a sneak preview they say " The recovery since June 2009 could be called the “Great Disappointment”. After both the 1973-75 and 1981-82 recessions, output took only three quarters to exceed its previous peak. After four quarters this time it is still 1.3 per cent below its level at the end of 2007." Similar to the charts above but with words. http://www.ft.com/cms/s/0/e1fea3ce-c4ed-11df-9134-00144feab49a.html?ftcamp=rss

The AUD looks really goods at the moment. Yesterday we noted that we can forget Parity and aim at 1.10 on the USD but significantly higher on EUR, CHF and CHF. RBA Governor Stevens speech yesterday on top of Phil Llowes longer term bullish speech last week tells us the RBA is really bullish on Australian growth and interest rates are still biased higher. Currencies are an ugly sister contest but the AUD and the Australian economy is truly beautiful. Add to this everyone things AUD should go down and we reckon the risk is up. Heres the link to Stevens speech http://www.rba.gov.au/speeches/2010/sp-gov-200910.html

Here's the currency counter argument. PPP again as per yesterday. http://www.abc.net.au/news/stories/2010/09/20/3016864.htm

if its not currency wars its competitive QE. The Economist's Buttonwood Blog has a look at what's going on in the world of quantative easing.
http://www.economist.com/blogs/buttonwood/2010/09/currencies_monetary_policy_and_economy