Comparison of ECB and Fed Balance Sheets

Many Keynesian Monetarists would likely argue that a primary reason that the US economy is faring better than Europe’s is that the ECB stayed tighter for longer than the Fed.  Empirically, it’s tough to argue with such thinking.  Now that the ECB has undergone two separate LTRO operations though, the ECB’s balance sheet has quickly caught back up to the size of the Fed’s.

For now the expansion has had a limited effect on the European economy, but it may have had a greater effect on the currency than most are noticing.  The increase in the size of the ECB’s balance sheet may be an alternative explanation for the recent struggles of the Euro vs. the Dollar.  The chart below compares the relative size of the Fed’s balance sheet and the ECB’s.  It shows that since 2009 major trading patterns in the Euro have tracked the relative expansion of the ECB’s balance sheet relative to the US.  In times that the Fed’s balance sheet expanded faster than the ECB’s (the red line moves higher) The Euro strengthened relative to the dollar.  In the past five months the ECB’s balance sheet has grown much faster than the Fed’s and the Euro has weakened.  Of course, prior to 2009 this relationship moved in the opposite direction, but prior to then the monetary environment was a little more stable than it is today.

US vs. Eurozone GDP Per Capita Comparison

Below is a comparison of GDP per capita growth and levels in a selection of European countries vs. the US and Japan.  It’s probably surprising to most that Spain has grown GDP per capita faster than the 6 other countries in this sample since 1980.  It’s probably even more surprising that Japan has grown this metric (which is a more accurate measurement of individual well being than aggregate GDP) faster than the US or Germany.  

Average Number of News Conferences by Presidency

There was a comment on CNBC this morning about a “rare” press conference being held by president Obama, which sparked this post.  Below is a chart of the average number of press conferences held per year by 20th century presidents.  GW Bush was often criticized for not holding enough press conferences but compared to Nixon and Reagan he was ubiquitous.  Compared to Coolidge, Hoover and Roosevelt though he was less than accessible.  Obama has held press conferences with roughly the same frequency as Bush, although Obama supporters may point out that more of Obama’s press conferences have been solo rather than tandem with another political leader.  Either way, there’s not necessarily a correlation between quantity and quality.  It’s safe to assume there is a high amount of fluff in any presidential press conference.

S&P 500 Performance Q2 after Top Q1s

It may seem like a distant memory by now, but you may recall that 1Q12 was one of the best quarters of all time for the S&P 500.  While Q2 has started off on bad footing, there is still a little over a month left for the index to recover.  In fact, if the quarter closed now, it would be somewhat anomalous as a 2Q followup to a great Q1.  The most the index fell in Q2 after a double digit Q1 was 1.1%.  Currently we are down 6.8%.

2006 vs. 2012 Updated

So far this year I’ve had a couple of posts comparing 2012 to 2006.  In January, I mentioned that 2009-2011 had unfolded in a very similar pattern to 2003-2005.  Then again in April I mentioned that if this relationship were going to maintain itself then we would have to have a steep correction on the S&P.  Well, correct we have, and so here’s an updated version of the 2006 vs. 2012 chart.

It may be coincidence or it may be a manifestation of an economic cycle, but either way it seems noteworthy that the 2003-2005 pattern continues to match the pattern of this bull market so closely.  We find ourselves basically at the exact same level at the exact same time of year as we did in 2006.

How the Best and Worst Stocks of 2011 are Faring in 2012

While last week’s alphabet post was tongue in cheek, below is a chart of the year’s S&P 500 grouped by a factor that is slightly more relevant to forward returns.  The chart compares the 2012 performance of the best and worst performing stocks of last year.  It is broken down by quintile; 1 represents 2011’s worst performers, while 5 is the group of best performing stocks.  The chart shows that so far the winners keep on winning in 2012.  The best stocks of 2011 continue to outperform the index in 2012.

S&P 500 Performance by Letter of the Alphabet

Since it’s Friday, here’s an offbeat post for the day.  Below is the YTD performance of equal weighted portfolios consisting of stocks that begin with a given letter.  Looks like the T portfolio has been the big winner so far this year, outperforming the S&P 500 by almost 4%.  The J portfolio, powered by JNPR, JPM, JCP and JEC has gotten crushed though, down by 8% this year.  

When is somebody going to create an index and ETF so investment managers can benchmark themselves against these portfolios?  I would argue that weighting a portfolio by market cap (the S&P 500) is ultimately just as arbitrary as doing it by letter of the alphabet.

Intrade Obama Contract Volume

Intrade has become a popular source as a prediction engine for setting the odds of a future event happening. The total volume traded in the site’s most popular contract (the Obama-chances-of-being-reelected contract) is still pretty minimal though.  Since December of 2010, there has been a total of $1.4m exchanged in this contract or ~$2,600 per day.  Even in the OTC market, there are very few stocks that have such low volume.