tag:blogger.com,1999:blog-61039388940552221852024-03-05T06:16:09.494-08:00ECONOMEXUnknownnoreply@blogger.comBlogger253125tag:blogger.com,1999:blog-6103938894055222185.post-80120350091665363792016-05-02T08:47:00.003-07:002016-05-02T08:49:50.415-07:00Accounting matters...<div dir="ltr" style="text-align: left;" trbidi="on">
Food for thought, from a study on US companies' accounting practices cited by Gretchen Morgenson in the New York Times:<br />
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"Among 380 companies that were in existence both last year and in 2009, the study showed, non-GAAP net income was up 6.6 percent in 2015 compared with the previous year. Under generally accepted accounting principles, net income at the same 380 companies in 2015 actually declined almost 11 percent from 2014."<br />
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<span style="font-size: xx-small;">http://www.nytimes.com/2016/04/24/business/fantasy-math-is-helping-companies-spin-losses-into-profits.html?rref=collection%2Fcolumn%2FFair%20Game&action=click&contentCollection=Business%20Day&module=Collection&region=Marginalia&src=me&version=column&pgtype=article</span><br />
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Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-34352784028429917952016-02-05T08:02:00.002-08:002016-02-05T08:03:19.149-08:00The peso's been on a steep uphill climb for the last year and an half...<div dir="ltr" style="text-align: left;" trbidi="on">
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Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-2944961543669262152016-02-05T07:54:00.000-08:002016-02-05T08:04:00.993-08:00Capital flows to emerging markets...<div dir="ltr" style="text-align: left;" trbidi="on">
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The graph below (from the Institute of International Finance, via the New York Times) illustrates why one shouldn't be surprised by the weakening of the peso, underway since the summer of 2014.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgResL2fCTxjKpgW7DWYM2Q90POswKkV5ggZX_J_TTT8x_ZsBj_fYkhCGYrEW9Kcaf3YpyggzEsAUXkOZqj5FoxurUYT8N_NMIVBUqCgYBrHinkYhu1Pi_riUeshzLFj8UDXNWG5fZB9JQ/s1600/Screen+Shot+2016-02-05+at+7.46.49+AM.png" imageanchor="1"><img border="0" height="331" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgResL2fCTxjKpgW7DWYM2Q90POswKkV5ggZX_J_TTT8x_ZsBj_fYkhCGYrEW9Kcaf3YpyggzEsAUXkOZqj5FoxurUYT8N_NMIVBUqCgYBrHinkYhu1Pi_riUeshzLFj8UDXNWG5fZB9JQ/s400/Screen+Shot+2016-02-05+at+7.46.49+AM.png" width="400" /></a></div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-707063364789638992015-12-11T08:19:00.004-08:002015-12-11T08:19:46.106-08:00Class in the US... the fifth conclusion<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="selectionShareable" style="border: 0px; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 1.6em; line-height: 28.799999237060547px; margin-bottom: 1.25em; padding: 0px; vertical-align: baseline;">
<big class="honkin-number" id="number-5" style="border: 0px; color: #ec9f2e; float: left; font-family: franklin-gothic-urw, Verdana, Geneva, sans-serif; font-size: 2.5em; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px 0.4em 0px 0px; padding: 0.2em 0px 0px; vertical-align: baseline;">5</big><strong style="border: 0px; font-family: franklin-gothic-urw, Verdana, Geneva, sans-serif; font-size: 20px; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Over the years, certain</strong> <strong style="border: 0px; font-family: franklin-gothic-urw, Verdana, Geneva, sans-serif; font-size: 20px; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">demographic groups have fared better than others in moving up the economic ladder. </strong>Since 1971, older Americans (ages 65 and older) and African Americans have <a href="http://www.pewsocialtrends.org/2015/12/09/2-changes-in-income-status-vary-across-demographic-groups/" style="border: 0px; color: #bc7b2b; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">made notable progress</a> in moving up the income tiers. But overall, both groups are still overrepresented in the lower-income tier. Married adults also made significant progress over this 44-year period, and women overall made greater economic gains than men.</div>
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Americans without a college degree stand out as experiencing a substantial loss in economic status since 1971, as do young adults ages 18 to 29. Hispanics overall are also more likely to be in lower-income households than in 1971, a change driven by the increasing share of immigrants in the Hispanic population in the past four decades.</div>
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http://www.pewresearch.org/fact-tank/2015/12/10/5-takeaways-about-the-american-middle-class/</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-58906786489409128122015-12-11T08:19:00.001-08:002015-12-11T08:19:08.722-08:00Class in the US... the fourth conclusion<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="selectionShareable" style="border: 0px; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 1.6em; line-height: 28.799999237060547px; margin-bottom: 1.25em; padding: 0px; vertical-align: baseline;">
<big class="honkin-number" id="number-4" style="border: 0px; color: #ec9f2e; float: left; font-family: franklin-gothic-urw, Verdana, Geneva, sans-serif; font-size: 2.5em; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px 0.4em 0px 0px; padding: 0.2em 0px 0px; vertical-align: baseline;">4</big><strong style="border: 0px; font-family: franklin-gothic-urw, Verdana, Geneva, sans-serif; font-size: 20px; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">The <em style="border: 0px; font-family: inherit; font-size: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">share</em> of U.S. aggregate household income held by middle-income households has plunged,</strong> from 62% in 1970 to 43% in 2014. Meanwhile, the share held by upper-income households increased from 29% to 49%. <a href="http://www.pewsocialtrends.org/2015/12/09/4-middle-class-incomes-fall-further-behind-upper-tier-incomes/#distribution-of-u-s-aggregate-household-income" style="border: 0px; color: #bc7b2b; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">This shift</a> is driven both by the growing size of the upper-income tier and more rapid gains in income at the top.</div>
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There is also a growing <a href="http://www.pewsocialtrends.org/2015/12/09/5-wealth-gap-between-middle-income-and-upper-income-families-reaches-record-high/" style="border: 0px; color: #bc7b2b; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">disparity in the median wealth</a> (assets minus debts) of these income tiers. Upper-income families, who had three times as much wealth as middle-income families in 1983, <a href="http://www.pewresearch.org/fact-tank/2014/12/17/wealth-gap-upper-middle-income/" style="border: 0px; color: #bc7b2b; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">more than doubled the wealth gap</a> to seven times as much in 2013.</div>
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<span style="font-size: x-small;">http://www.pewresearch.org/fact-tank/2015/12/10/5-takeaways-about-the-american-middle-class/</span></div>
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Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-28713177847089799732015-12-11T08:18:00.000-08:002015-12-11T08:21:14.146-08:00Class in the US... the third conclusion<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="selectionShareable" style="border: 0px; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 1.6em; line-height: 28.799999237060547px; margin-bottom: 1.25em; padding: 0px; vertical-align: baseline;">
<big class="honkin-number" id="number-3" style="border: 0px; color: #ec9f2e; float: left; font-family: franklin-gothic-urw, Verdana, Geneva, sans-serif; font-size: 2.5em; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px 0.4em 0px 0px; padding: 0.2em 0px 0px; vertical-align: baseline;">3</big><a href="http://www.pewsocialtrends.org/2015/12/09/4-middle-class-incomes-fall-further-behind-upper-tier-incomes/#trends-in-the-income-of-lower-middle-and-upper-income-households" rel="attachment wp-att-275754" style="border: 0px; color: #bc7b2b; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"><img alt="Income has grown fastest among America's 'upper' households" class="alignright wp-image-275754 size-full" src="http://www.pewresearch.org/files/2015/12/FT_15.12.14_Middle-Income-Blog_2.png" height="469" style="border: 0px; clear: right; float: right; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; height: auto; line-height: inherit; margin: 5px 0px 15px 15px; max-width: 100%; padding: 0px; vertical-align: baseline;" width="310" /></a><strong style="border: 0px; font-family: franklin-gothic-urw, Verdana, Geneva, sans-serif; font-size: 20px; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Over the long haul, America’s middle-income households have seen their income grow.</strong> <a href="http://www.pewsocialtrends.org/2015/12/09/4-middle-class-incomes-fall-further-behind-upper-tier-incomes/#trends-in-the-income-of-lower-middle-and-upper-income-households" style="border: 0px; color: #bc7b2b; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">From 1970 to 2014</a>, these households’ median income increased from $54,682 to $73,392 (in 2014 dollars), a gain of 34%. Lower-income household incomes have grown, too, but not as much: 28% over the same 44-year period. Upper-income household incomes have grown most, up 47% over this period.<br />
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However, the nation’s economic progress over the past several decades masks financial setbacks since 2000. Because of the recession in 2001 and the Great Recession of 2007-09, overall household incomes fell from 2000 to 2014. The greatest loss was felt by lower-income households, whose median income fell 9% over this period; the median for middle-income households fell 4%, and that for upper-income households fell 3%.</div>
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http://www.pewresearch.org/fact-tank/2015/12/10/5-takeaways-about-the-american-middle-class/</div>
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Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-32469187595486374312015-12-11T08:17:00.002-08:002015-12-11T08:17:21.186-08:00Class in the US... the second conclusion<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="selectionShareable" style="border: 0px; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 1.6em; line-height: 28.799999237060547px; margin-bottom: 1.25em; padding: 0px; vertical-align: baseline;">
<big class="honkin-number" id="number-2" style="border: 0px; color: #ec9f2e; float: left; font-family: franklin-gothic-urw, Verdana, Geneva, sans-serif; font-size: 2.5em; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px 0.4em 0px 0px; padding: 0.2em 0px 0px; vertical-align: baseline;">2</big><strong style="border: 0px; font-family: franklin-gothic-urw, Verdana, Geneva, sans-serif; font-size: 20px; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">The decline in the middle represents both economic progress and polarization. </strong>The shift shows progress in the sense that a larger share of Americans now live in upper-income households. Fully 21% of American adults in 2015 were upper income, compared with 14% in 1971, a 7-percentage-point increase. The increase in the share of upper-income adults was greater than the change in the opposite direction. Some 29% of U.S. adults were low income in 2015, compared with 25% in 1971.</div>
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But the data also show increasing economic polarization: As the distribution of adults thins in the middle, it is bulking up most at the extreme ends of the income distribution, the lowest and highest tiers.</div>
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<span style="font-size: x-small;">http://www.pewresearch.org/fact-tank/2015/12/10/5-takeaways-about-the-american-middle-class/</span></div>
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Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-49512385495062900542015-12-11T08:16:00.000-08:002015-12-11T08:16:01.762-08:00Class in the US...<div dir="ltr" style="text-align: left;" trbidi="on">
The first of five major conclusions from a fascinating study by the respected Pew Foundation...<br />
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<div class="selectionShareable" style="border: 0px; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 1.6em; line-height: 28.799999237060547px; margin-bottom: 1.25em; padding: 0px; vertical-align: baseline;">
<big class="honkin-number" id="number-1" style="border: 0px; color: #ec9f2e; float: left; font-family: franklin-gothic-urw, Verdana, Geneva, sans-serif; font-size: 2.5em; font-style: inherit; font-variant: inherit; font-weight: 700; line-height: inherit; margin: 0px 0.4em 0px 0px; padding: 0.2em 0px 0px; vertical-align: baseline;">1</big><strong style="border: 0px; font-family: franklin-gothic-urw, Verdana, Geneva, sans-serif; font-size: 20px; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Middle-income Americans are no longer the nation’s economic majority. </strong>In early 2015, there were 120.8 million adults in middle-income households, matched in number by the 121.3 million adults who were in lower- and upper-income households combined.</div>
<div class="selectionShareable" style="border: 0px; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 1.6em; line-height: 28.799999237060547px; margin-bottom: 1.25em; padding: 0px; vertical-align: baseline;">
This is the <a href="http://www.pewsocialtrends.org/2015/12/09/1-the-hollowing-of-the-american-middle-class/#how-many-adults-are-middle-income" style="border: 0px; color: #bc7b2b; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">culmination of a long slide</a> in which the share of adults in middle-income households has fallen from 61% in 1971 to 50% in 2015.</div>
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<span style="font-size: x-small;">http://www.pewresearch.org/fact-tank/2015/12/10/5-takeaways-about-the-american-middle-class/</span></div>
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Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-91788812362801856972015-11-03T14:21:00.000-08:002015-11-03T14:35:42.295-08:00Mexico's oil trade surplus: going, going, gone...<div dir="ltr" style="text-align: left;" trbidi="on">
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Mexico’s oil trade surplus has vanished. It maxed out at
US$19.4 billion in 2006, falling into single digits in 2013 for the first
time in eleven years. The decline became a rout last year when the oil surplus
plunged to just US$1.1 billion. In the first nine months of this year, the
surplus turned into a US$7.0 billion deficit. It’s the first deficit in central bank's oil trade balance series that begins in 1993.<o:p></o:p></div>
</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-63121470411678303802015-10-29T07:29:00.002-07:002015-10-29T07:29:22.313-07:00Where's the risk in the international financial system?<div dir="ltr" style="text-align: left;" trbidi="on">
Per former Fed Chairman Ben Bernanke (quoted in the October 28 New York Times), the risk to financial stability today comes from emerging markets. In a talk at the London School of Economics, Bernanke highlighted emerging markets and how they react to higher interest rates in the US as a "risk area". The magnitude and nature of that risk is hard to know, he cautioned.<br />
<br /></div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-17381679696787147882015-09-03T07:13:00.002-07:002015-09-03T07:13:30.583-07:00What an independent member of Pemex's Board of Directors has to say...<div dir="ltr" style="text-align: left;" trbidi="on">
Here's the conclusion, roughly translated from the Spanish:<br />
<br />
"The blame for the risk Pemex face today are decades of corruption and bad administration, from the inefficiencies of a monopoly and the wasteful spending of the oil bonanza by federal, state and local governments. The Energy Reform gives us the opportunity to tackle the drop in oil prices. It will require an enormous effort by everyone. It's an effort that can't be postponed."<br />
<br />
Carlos Elizondo's article is well worth the read. Here's the link:<br />
http://www.excelsior.com.mx/opinion/carlos-elizondo-mayer-serra/2015/09/03/1043729<br />
<br /></div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-75333160840026592842015-08-28T15:57:00.002-07:002015-08-28T15:57:31.121-07:00Surprised the peso has been devaluing?<div dir="ltr" style="text-align: left;" trbidi="on">
After looking at the numbers on portfolio investment in Mexican money market instruments in the first six months of this year, you won't be. Foreign investment in money market instruments came to a barely discernible US$0.9 billion, down from US$10.8 billion in the first six months of 2014. Portfolio investment in money market instruments in each of the first two quarters of this year was the lowest it’s been in any quarter since 2009.<br />
<br />
Any bets on what the numbers will look like for the third quarter?</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-76721473090352350892015-08-27T11:37:00.002-07:002015-08-27T11:42:53.266-07:00A slow motion devaluation...<div dir="ltr" style="text-align: left;" trbidi="on">
The following graph charts the average monthly exchange rate as well as the minimum and maximum rates in each month since January 2007. The picture speaks for itself...<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiE3-8HA6Ku6rTHyEZ3G_XEvtEqj9tljocMPhIYoruS3_tGhyhr30LM6A2kK3T5YYG4jCum4-1eCuB0kCaSLY1pJD-rVk1Jik5Pmoq6HtGs1BUq4OQk_le0EsJCBgpqeAWsBA7XWWK9aG0/s1600/Captura+de+pantalla+2015-08-27+a+las+13.33.08.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="278" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiE3-8HA6Ku6rTHyEZ3G_XEvtEqj9tljocMPhIYoruS3_tGhyhr30LM6A2kK3T5YYG4jCum4-1eCuB0kCaSLY1pJD-rVk1Jik5Pmoq6HtGs1BUq4OQk_le0EsJCBgpqeAWsBA7XWWK9aG0/s400/Captura+de+pantalla+2015-08-27+a+las+13.33.08.png" width="400" /></a></div>
<br />
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Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-78498482852586632962015-08-13T11:24:00.003-07:002015-08-13T11:24:37.294-07:00What will it take to boost Mexico's growth rate?<div dir="ltr" style="text-align: left;" trbidi="on">
Mexico's central bank, <i>Banco de Mexico</i> (<i>Banxico</i>) had something to say about that it in its most recent Quarterly Report on Inflation, released yesterday. <i>Banxico</i>'s reduction in this year's projected growth to 1.7% - 2.5% (down from 2.0% - 3.0% three months ago) captured the headlines. But it's the final paragraph of its two page summary of the report that is what's really important. Roughly translated, <i>Banxico</i>'s Governors warn:<br />
<br />
"... Mexico must undertake additional efforts to strengthen its institutions and the rule of law since, for example, <u>the lack of public security</u> has negative effects on confidence, inhibits the efficient allocation of resources in the economy and complicates economic growth. To the extent that Mexico moves in this direction, it will be possible to detonate the economy's potential growth rate in a context of low inflation and financial stability." (underlining mine)<br />
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<br />
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Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-44840717240628904792015-08-06T10:25:00.003-07:002015-08-06T10:25:57.037-07:00The drop in the peso...<div dir="ltr" style="text-align: left;" trbidi="on">
The average monthly cost of a dollar has risen each month for over a year. In July 2014, the fix rate averaged $12.98. In the first six days of August of this year, it's averaged $16.24. That's a 20% jump in the cost of a dollar.<br />
<br />
There hasn't been a panic, testimony to the effectiveness of a flexible exchange rate regime.</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-6933176771369211302015-08-06T10:14:00.001-07:002015-08-06T10:14:08.331-07:00Some facts about income in Mexico...<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-US" style="mso-ansi-language: EN-US;">The average Mexican household’s monthly income was just Ps$13’240 last year (US$995 at the average
2014 fix exchange rate). The average obscures wide disparities: the income of
the bottom 10% of households averaged Ps$2’572 a month (US$193) while that of the
top 10% averaged Ps$46’928 (US$3,527). <o:p></o:p></span></div>
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<span lang="EN-US" style="mso-ansi-language: EN-US;">Just over
half – 51% -- of income went to the top fifth of households last year. The
bottom 50% of households (deciles I – V) received just over a fifth (20.8%) of
income. The sixth, seventh and eighth deciles received 28% of income.<o:p></o:p></span></div>
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Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-19882071006144916172015-07-19T20:50:00.002-07:002015-07-19T20:50:25.291-07:00Wage growth and productivity: the US experience<div dir="ltr" style="text-align: left;" trbidi="on">
Increasing productivity is the key to raising wages -- at least, it's supposed to be. A very informative graph published in the July 17 New York Times (see the link: http://www.nytimes.com/2015/07/15/business/sizing-up-hillary-clintons-plans-to-help-the-middle-class.html?ref=international) suggests that the longstanding relationship has fallen by the wayside. Since the 1970's, wages have stagnated in spite of rising productivity.<br />
<br />
At the same time, economic research comparing what happens when a state raises the minimum wage and its neighbor doesn't has demonstrated that raising the minimum wage doesn't have to mean fewer jobs. It appears that the direct effect of higher labor costs is offset by better morale, reduced turnover and increased productivity...<br />
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Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-91121893508371636092015-02-22T08:29:00.001-08:002015-02-22T08:29:09.320-08:00When can a central bank stand against the markets?<div dir="ltr" style="text-align: left;" trbidi="on">
What central bank can hope to fight off successfully a run against its currency? Maybe the Chinese central bank: the country's US$3.8 trillion in reserves gives it a fighting chance at beating off an attack. To put the number in perspective, that's more than three times Mexico's GDP. It's also a sixth of total world reserves.<br />
<br />
While Chinese exporters would be happy with a weaker renminbi, Chinese companies and banks have borrowed an estimated US$1 trillion over the last five years, mostly dollar-denominated, short-term loans. They certainly aren't happy with a depreciating renminbi.<br />
<br />
Mexico has run sizable capital account surpluses in recent years, which the peso's movements have reflected. In 2013, US$64 billion of capital flowed (net) into Mexico; in the first nine months of 2014, net capital inflows were US$40 billion. Capital flows are a different order of magnitude in China. In the fourth quarter of 2014, capital outflows from China were US$96 billion!<br />
<br />
The same is true of the two countries' tourism position. Last year, Mexico posted a record US$6.6 billion surplus in the tourism account. In the fourth quarter of 2014, China ran a US$36.4 billion deficit in its tourism account.<br />
<br /></div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-57447165108966792472015-02-19T15:49:00.004-08:002015-02-19T15:50:23.661-08:00Not only did Banco de Mexico reduce its growth forecast...<div dir="ltr" style="text-align: left;" trbidi="on">
Yesterday, Mexico's central bank cut its projection for this year by half a percentage point, to 2.5% - 3.5%.<br />
<br />
More telling was the concluding paragraph of the summary of the bank's quarterly analysis, which baldly stated that macroeconomic stability isn't enough to improve societal well-being. "Adequate implementation of structural reforms is indispensable" if Mexico is to be more competitive and productive and the domestic economy, a more important motor of growth.<br />
<br />
The eye-opener was the Bank's ringing endorsement of the rule of law: "It is of the greatest importance to work on the institutional transformation of the country, in order to build a more solid rule of law and create greater judicial certainty for society." </div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-9828888727352739852015-02-02T09:52:00.000-08:002015-02-02T09:52:00.304-08:00What's middle class?<div dir="ltr" style="text-align: left;" trbidi="on">
Income isn't the only way to define "middle class". Education is another. Aspirations are as well. Last week's blog took a look at the evolution of the US middle class -- defined as a household earning between US$35,000 and US$100,000 a year.<br />
<br />
I thought it would be interesting to see to which income decile a Mexican household with that income would fall. Here are the numbers for 2012, the most recent year available from INEGI.<br />
<br />
Households earning US$32,037 a year were in the top 70% of the income distribution in Mexico. Household income of US$40,857 were in the top 80% while US$56,329 were in the top 90%. Household income for the top 10% averaged US$123,587.</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-79321206836990887592015-01-27T09:11:00.002-08:002015-01-27T09:11:46.770-08:00The American middle class...<div dir="ltr" style="text-align: left;" trbidi="on">
A fascinating look (in graphs) at the composition of the middle class in the US between 1967 and 2013... Until 2000, the middle class declined because people were moving into the upper class. Since 2000, movement into the lower class drove the shrinkage of the middle class. See:<br />
<br />
http://www.nytimes.com/interactive/2015/01/25/upshot/shrinking-middle-class.html?abt=0002&abg=1</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-50066119210860018852014-12-09T17:43:00.001-08:002014-12-09T17:43:07.971-08:00What's going on with the peso?<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-US" style="mso-ansi-language: EN-US;">The fix
rate surpassed $14 on December 2 for the first time in thirty months. On Monday,
December 8, the cost of a dollar had jumped to $14.40. That same day, the
Exchange Commission announced it is reviving the auction mechanism it devised
in October 2008 as a “preventative measure”. If the exchange rate moves more
than 1.5% in the course of a single trading day, <i style="mso-bidi-font-style: normal;">Banco de México</i> (<i style="mso-bidi-font-style: normal;">Banxico</i>)
will sell up to US$200 million dollars into the exchange markets. Today, the 9<sup>th</sup>,
the fix rate retreated three centavos, the first drop in the cost of a dollar
since mid-November.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-ansi-language: EN-US;">A couple of
hundred million dollars isn’t enough money to stop a run on the peso. In the
past, though, it’s proven to be enough to prevent a panic from spreading. When
trading volumes are low, a few transactions can send the exchange rate soaring.
The idea behind the auctioning of options to buy dollars is simple: since a large,
abrupt jump in the cost of a dollar can cause investors to sell pesos first and
ask questions later, make some more dollars available to give investors time to
see if the problem is more than one of thin markets. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-ansi-language: EN-US;">The
fundamental question is why the peso has been steadily weakening since May. The
strength of the dollar is an explanation that highlights the fact that
developments outside of Mexico are behind the weakening of the peso and that
the peso isn’t alone: the currencies of other emerging markets have weakened
along with the Euro. That’s not the only story, though.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-ansi-language: EN-US;">Portfolio
investment flows are another face of the same coin. Those depend on the
attractiveness of peso-denominated investments compared to investments in other
currencies and the fluctuations in investors’ appetite for risk and search for
returns.<span style="mso-spacerun: yes;"> </span>The magnitude of
portfolio investment flows can swing wildly from quarter to quarter. This year
provides a good example. In the first nine months of 2014, portfolio investment
totaled US$19.9 billion. Of that, US$4.9 billion entered in Q1 and US$13.4
billion, in Q2. Inflows in Q3 plunged to US$1.7 billion, their lowest level
since the financial crisis with the exception of the “taper tantrum” in Q2 2013
sparked by the announcement that, at some point, the Fed would begin to dial
down asset purchases. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-ansi-language: EN-US;">Will the
peso strengthen or will it continue to depreciate? In 2011 and 2012 – not so
very long ago – we saw steeper jumps in the cost of a dollar, ones followed by
a recovery of the peso. In July 2011, the cost of a dollar averaged $11.67.
Five months later, a dollar cost, on average, $13.76. Two months after that, in
February 2012, the cost of a dollar averaged $12.78, only to bounce back to
$13.92 in September. Over the course of fourteen months, the fix exchange rate
traded in a $2.25 range (monthly averages), ending the period $1.27 higher than
it began. By those standards, the peso’s variations over the last fourteen
months have been relatively mild. In October 2013, the fix rate averaged
$13.26. Assuming, for a moment, that the rates we’ve seen in the first <span style="color: red;">six </span>trading days of December hold for the rest of the
month, the range will be less than a peso. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-ansi-language: EN-US;">Don’t
expect the peso to appreciate much before Christmas: between holiday travel
plans and normal quarter and year-end business transactions, there’s typically
a seasonal increase in the demand for dollars. We don’t expect investors to
redeploy money to emerging markets towards the end of the year, as they often
do once they’ve locked in their annual bonuses. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US" style="mso-ansi-language: EN-US;">The peso
could well appreciate at the very end of the year. Then again, it might not.
Relative returns, confidence, oil prices, and perceptions of the strength of
the world economy will all play a role in determining capital flows. But,
foreign investment flows don’t depend on just exogenous events. The reforms
approved during this Administration piqued interest in Mexico’s future. While
investors in money market obligations may focus most on how returns today
compare to returns in other countries, equity investors will be very interested
in how the reforms passed during this Administration are implemented. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
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Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-72990151833458972882014-10-17T11:28:00.001-07:002014-10-17T11:28:25.729-07:00Oil...<div dir="ltr" style="text-align: left;" trbidi="on">
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<br />
<div class="MsoNormal" style="mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">
<span lang="EN-US" style="color: windowtext; font-size: 12.0pt; font-weight: normal; mso-bidi-font-family: Verdana; mso-bidi-font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: Cambria; mso-fareast-language: ES-TRAD;">When
Hacienda sent the Administration’s budget proposal to Congress on September 5,
US$82 for a barrel of Mexican export crude seemed extremely conservative. Five weeks later, it doesn’t look quite so unlikely: on October 16, Mexican export
crude sold for US$76.70. The “puts” Hacienda purchases each year to protect the
budget from a sharp drop in oil prices may be in the money in 2015. (With an
exercise price of US$80, the puts are well worth their US$450 million estimated
cost.) </span></div>
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<span lang="EN-US" style="color: windowtext; font-size: 12.0pt; font-weight: normal; mso-bidi-font-family: Verdana; mso-bidi-font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: Cambria; mso-fareast-language: ES-TRAD;"><br /></span></div>
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<span lang="EN-US" style="color: windowtext; font-size: 12.0pt; font-weight: normal; mso-bidi-font-family: Verdana; mso-bidi-font-size: 14.0pt; mso-bidi-font-weight: bold; mso-fareast-font-family: Cambria; mso-fareast-language: ES-TRAD;">Lower oil prices mean larger trade and current account deficits. A
larger current account deficit requires larger capital inflows to finance it –
at a time when capital flows to emerging markets are declining. Bad luck for Mexico...<o:p></o:p></span></div>
<!--EndFragment--></div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-17387007625984460692014-09-29T16:33:00.002-07:002014-09-29T16:33:35.250-07:00Ouch: the peso returns to beginning of year highs...<div dir="ltr" style="text-align: left;" trbidi="on">
The fix rate peso jumped to $13.49 today, matching its January 24 high for the year. The monthly fix rate averaged $13.23 with just a day left in September, in line with its first quarter average. Just two months ago, in July, the fix rate averaged $12.98. What's going on?<br />
<br />
The explanation undoubtedly lies in portfolio investment flows and the impact of a stronger dollar on the attractiveness of carry trade investments. The carry trade entails borrowing in a strong currency (like the dollar) and investing the proceeds of the loan in bonds in a weaker currency (like the peso) that pay a higher interest rate than that charged on the dollar loan. So long as the dollar doesn't strengthen (or, the flip side, the peso doesn't weaken), investors reap the yield differential. If the dollar weakens (or the peso strengthens), the currency losses can swamp the gains from the interest rate differential.<br />
<br />
The size of the carry trade in emerging markets isn't really known. However, one estimate puts it at a very hefty US$2 trillion. The Bank for International Settlements indicates that foreign ownership of emerging markets' debt rose from 8% in 2007 to 17% in 2012.<br />
<br />
Mexico was an early beneficiary of carry trade inflows. The relative size and depth of its bond markets mean that peso-denominated bonds remain an important destination for foreign investors. In Mexico, along with Poland, Hungary and Indonesia, foreign investors hold 35% or more of government bonds.<br />
<br />
The strength of the dollar translates into weaker currencies around the world, including the peso. Today's <u>Financial Times</u> presents three reasons why the dollar will remain strong: the recovery of the US economy, the end of QE, and the ECB's adherence to a more dovish monetary policy. (See the complete article at http://www.ft.com/intl/cms/s/0/27a516d8-47e4-11e4-be7b-00144feab7de.html#axzz3EjWzUWOC)<br />
<br />
Unless peso interest rates rise or the peso strengthens, portfolio investment is not likely to flow into Mexico in the massive quantities we saw in 2011 and 2012.</div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6103938894055222185.post-48825712667036564802014-09-15T19:27:00.000-07:002014-09-15T19:27:02.365-07:00Mexico exports terrorists?<div dir="ltr" style="text-align: left;" trbidi="on">
There are people in the US who believe that ISIS (or ISIL, aka Islamic State) terrorists are about to or have infiltrated the US from Mexico, amongst them Texas Governor Rick Perry. The Department of Homeland Security isn't amongst them.<br />
<br />
For the story, see http://www.nytimes.com/2014/09/16/us/us-pushes-back-against-warnings-that-isis-plans-to-enter-from-mexico.html?emc=edit_tnt_20140915&nlid=20064986&tntemail0=y&_r=0</div>
Unknownnoreply@blogger.com0