Friday, May 20, 2005

Asset prices and consumption in Germany

This paper by the BBK looks at the relationship between the wealth-consumption ratio and asset prices in Germany and finds that, contrary to the experience of similar studies in the US, there is no effect of asset prices on consumption. Consumption in Germany is much more a function of changes in permanent income. This could be one explanation for the weakness of consumer spending relative to that seen in the US and the UK. Permanent income is likely to have declined with the structural adjustments taking place in Germany and with demographic and fiscal policy issues for the future. In the US and UK, while similar fiscal and demographic issues exist, the increase in private housing assets may have temporarily boosted consumption above its long run trend.

Tuesday, May 17, 2005

Work and Leisure in the U.S. and Europe

Another angle on the US-European divide. This suggests that the labour practices in declining European industries explain much of the difference in work and lesiure between the US and Europe. It is argued that there are increased returns to lesiure - it becomes more valuable as more people enjoy it.

SSRN-Work and Leisure in the U.S. and Europe: Why so Different? by Alberto Alesina, Edward Glaeser, Bruce Sacerdote

Monday, May 16, 2005

Renminbi/Hong Kong

FT (subscription required) on the effect of rinminbi speculation on Hong Kong. / Lex - Lex live: Renminbi/Hong Kong: "The capitalist enclave is awash with hot money betting on currency appreciation across the border. That creates inflationary pressure against which Hong Kong � having effectively handed monetary policy to the US via its currency peg � has scant defence. Hong Kong�s de facto central bank has raised the warning flag on inflation and taken unprecedented steps � including, reportedly, intervening in the swaps market. It is now pondering (minor) technical adjustments to the peg."

Friday, May 06, 2005

GM arb

Hedge fund guy looks at the ideas behind an investment in GM. Sounds rather similar to Rover (though without the financial arm).

Mahalanobis: "Kerkorian sees the arb. Buy managing interest in GM. Sell GMAC. Spit out a special dividend with GM's cash, which would otherwise only be subsidizing a losing operation. GM would then go bankrupt rather quickly. GMAC plus cash dividend should exceed the current value of GM be a bit. It may seem cruel, but it is only accelerating the inevitable, and it is never in society's best interest to subsidize a money-losing operation with no growth prospects, as this merely means that you are encouraging value destruction. "

Sunday, May 01, 2005

Berkshire large short USD

Berkshire Loses Currency Bet: "Omaha-based Berkshire's stake in foreign currency contracts total 'a little more than $21 billion,' compared with $21.4 billion spread among 12 currencies at year end, Buffett said."