Economy: Are The Markets Irrational?

(Drivebycuriosity) - Last week the fluctuations on the international financial markets continued.  According to Bloomberg we experienced "one of the most volatile five days for stocks since the financial crisis ended" (bloomberg). The decline of the US stock market started around September 19th. Then some traders began to dump anything which seemed risky, causing others to sell too, which lead to a snowball effect of more and more selling. The result were downward spiraling stock prices and culminated in steep declines last Wednesday morning. The S&P 500, the gauge for the US stock market, dropped in this period almost 10% from its peak in September and interest rates for short term US government bonds, the benchmark for the bond market, fell below 2%.

If we believe the media the sell off was caused by fears that the global economy will fall into a deflation, that the Fed will lift their interest rates too fast (which is contrary to the deflation fears) and the Ebola hysteria.

This fears are at odds with the fundamental data: Last weekend China reported rising exports (plus 15.3% in September from the year-ago period), a signal for a solid global economy, in the US the weekly jobless claims dropped onto a 14 years low while industrial production rose 1%. Oil and other commodities got significantly cheaper, which is a boost for the global economy because of the saved costs (Citibank sees savings of 1 trillion dollar for the world economy), and interest rates are on record lows. "You’d be hard-pressed to find a 5-year period in US history where the economic trajectory was more stable", reports the blog csen (csen). Panic attacks, as seen last Wednesday, in such a solid economic environment don´t make sense. Are the markets irrational?

The hectic swings we saw in the recent days are caused by herding behavior. Hedge funds and other speculators typically buy and sell the same stocks, at the same time, and track each other's investment strategies. In the recent days they were again guided by fear and ignorance, as they were in August 2011. Since its start in spring 2009 this economic upswing - and the accompanying stock market rally - is dismissed by the majority. There seems to be a permanent climate of fright and ignorance of any positive news. For instance the overdue popping of the oil price bubble (driveby) is misinterpreted as sign of deflation.

I think this irrational fear - being obsessed with negative news while blinding out positive facts - is an occasion for investors with good nerves and long time horizon.

Economy: Why China Will Benefit Most From The Oil Price Drop

(Drivebycuriosity) - The oil price is falling. Brent Crude, the future for oil on the international markets, dropped to $85 from $114 this summer. Other commodities are also getting cheaper, partly because cheaper energy reduces the cost for producing and transporting them.

I believe that China will benefit most form the oil price drop. The country doesn`t have oil, nor natural gas and lacks most of the other important commodities (corn, wheat, iron). Therefore the gigantic country has to spend a lot of its national income to import oil and other commodities. Cheaper oil (by more than 20% then summer) & and other commodities translate into reduced expenditures. This should boost the Chinese economy. The Chinese have now more money to spend for consumer goods, houses & services and Chinese companies, for instance railways, have less energy costs.

Lower costs for oil and other commodities also translate into lower inflation rates. This is also good news for the world´s second largest economy. The government in Beijing has been very inflation  sensitive and has keeping money tight and expensive to constrain price rises. Now they can loosen their monetary policy and reduce interest rates which should boost the  Chinese economy.

Falling oil prices also could foster China`s export because consumers worldwide have now more money in their wallets which could be used for buying electronics, toys, textiles and other goods from China.

Contemporary Art New York: Impressions From The Lower East Side Gallery Scene, October 2014

(Drivebycuriosity) - It seems New York`Lower East Side (LES) has become one of the centers of the modern art world. Recently I reported about a group of interesting exhibitions (driveby). Since then 2 other shows caught my eyes.

Fitzroy Gallery (195 Chrystie Street between Stanton and Rivington Street fitzroygallery) shows the work of 4 artists (through October 26, 2014). My favorites are the paintings by Cassandra MacLeod. Most of them are just called "Untited" and are silkscreen and spray paint or acrylic on canvas (from the top of this post). Directly above the column is a wall with paintings by Patrick Brennan.

I also enjoyed the works by Samuel T. Adams. Above this column you can see his paintings "Scaffold" (acrylic and carborundum on -re-stretched canvas, wood structures) and "Untitled" (silkscreen on fabric).


                                                       Behind The Curtain

Mark Miller Gallery (92 Orchard Street markmiller) has a group exhibition called "Behind The Curtain". They show the works by 32 artists who are working or have worked as assistants for famous artists like Jeff Koons, Eric Fischl and others. "Many are now hired for their extraordinary talent to complete entire works of art, and they are often working behind the scene without acknowledgement of the tremendous craftsmanship they lend to a final product", reports the gallery catalogue.

 I like the funny sculpture "Walk" by Chie Shimizu.

I am fascinated by the drawing "Swing Set" (Charcoal and white chaulk on Paper) by James Adelman, which I first confused with a photography. Here you can see more works by the excellent Brookyn based artist (understanding).

There are more interesting paintings of course, as you can see above.

I am looking forward to the upcoming exhibitions in the LES area. Enjoy.

Economy/Media: Turning Good News Into Bad News

(Drivebycuriosity) - Today the S&P 500, the gauge for the US stock market, tanked temporarily 3%. "Stocks plummeted early as data showed retail sales in the U.S. dropped 0.3 percent in September, more than economists forecast", explained Bloomberg (bloomberg).

Really? Where the numbers really so shocking? "Sales were up 4.3% from September 2013", reported the blog Calculated Risk (calculated). "Retail sales ex-gasoline increased by 5.2% on a YoY basis", added the blog.

Is a growth rate of 5.2% really so bad? Apparently the seemingly bad retail numbers are caused by weak gasoline sales, which are still an important part of the retail sales. The falling gasoline sales are caused by dropping gasoline prices (bespoke). This is good news because consumers have more money to spend for other goods. I reckon that the gasoline price drop will continue, following the crash of the oil market futures, which should be a boost for the coming holiday shopping season.

But the media - and some hedge funds who are betting on falling stock prices (short sellers) - are turning good news into bad news to spook the market.

Economy: What We Could Learn From The Oil Price Chart

(Drivebycuriosity) - Above you can see the chart of the oil prices since 2005 (source:econbrowser ). The red line shows the price of Brent Crude. This is the international oil price, which is paid outside the US. The blue line shows the price of WTI (West Texas Intermediate, also known as Texas light sweet wikipedia), the American type of oil.

1. We can see that oil is still expensive. Brent and Crude cost around 2-times we had to pay in 2005. The doubling of the energy costs created headwinds for the global economy. The oil price jump - from $40 to a range between $80 and $120 - worked  like a tax hike and reduced the amounts consumers worldwide could spend for other goods. Higher energy costs also meant higher production costs for the companies. The high oil prices since 2011 are partly the reason for the slow recovery of the global economy.

2. In the recent years Brent has been more expensive than WTI. Therefore Europe had higher energy costs than the US, which is - besides the strict austerity policy -  the reason for the weak European economy.

3. Since 2011 there seems to be a cap on the price of WTI and since 2012 on the price of Brent. These caps could be (partly) explained by the climbing US oil production which lead to rising US exports onto the world market.

The recent drop of the oil prices - Brent went down more than 20% since last summer - reduced the headwinds for the global economy. Cheaper energy, especially in Europe, should foster global growth and support the recovery of Europe`s economy.

Movies: Gone Girl

 

(Drivebycuriosity) - Marriage is a gamble, claims Yoko Ono. Maybe this quote from John Lennon`s widow characterizes the movie "Gone Girl" best, maybe not. Basic idea: A man is questioned by the cops because his wife had disappeared. Maybe the film is a thriller, maybe not.

Anyway, I consider "Gone Girl" as a dark comedy. This husband-wife dialogue may give you an impression: Husband: "You fucking cunt!"  Wife: "I'm the cunt you married! The only time you liked yourself was when you were trying to be someone this cunt might like. I'm not a quitter... I'm that cunt." (imdb).

Anyway, I had much fun watching "Gone Girl", in whatever category it may belong (this is a spoiler free blog). I really indulged in this roller coaster of feints & surprises and enjoyed how the movie dealt with various topics like romantics, adultery, deception, obsession and how they made fun of cable TV and the phenomena of mass hysteria. Maybe "Gone Girl" is a critical study about today´s society.

The leading actors, Rosamund Pike & Ben Affleck, as wife & husband, did really a good job. I am not sure which character I disliked more which is part of the fun.

It seems that "Gone Girl" is a blockbuster, the movie is on the top of the US box office chart for the second week. I think this success could boost the career of director David Fincher and we can expect to see more by this great movie maker ("The Social Network", "The Girl with the Dragoon Tattoo" , "Zodiac", "Se7en", "Alien3" and more).

Street Art New York: The Return Of The Houston Street Mural

(Drivebycuriosity) - New York City is a mecca for connoisseurs of street art. One of their shrines was on East Houston Street, which divides Manhattan`s East Village from the Lower East Side. There have been frequently changing huge murals by a variety of artists.  This summer the murals disappeared because  Goldman Properties, the owner of the wall, started construction for a new building.

Last week the mural wall reappeared. Now you can see a mural by the Brazil twins Otavio and Gustavo Pandolfo, known as Os Gemeos (Portuguese: the twins ), from the year 2009. In this year, after the mural`s temporary run, a stud wall had been placed over the mural in order to provide a stable canvas for the next artist. Last week Goldman Properties removed this wall temporary.

The recovered mural finds a lot of attention in the media and by passengers. It is also one of my favorite street art images now.

I shot the pictures from different distances and angles to show some of the funny details.


                                                                        Bruegel Meets Disney

                                                                  Just A Short Time

I like the funny composition and the droll figures, which remind me of the paintings by the Dutch master Pieter Bruegel the Elder, who had lived in the 16th century. There also might be influences from Disney movies. 

The mural is supposed to stay around one month and should then be replaced by another street art work. I will miss it then.

Enjoy it while it lasts.