The Trader's Guide to Key Economic Indicators (Bloomberg Financial)
by Richard Yamarone
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Book Summary Information
Author: Richard YamaroneEdition: Hardcover
Audio: English (Unknown); English (Original Language); English (Published)
Published: 2007-11-21
ISBN: 1576603016
Number of pages: 328
Publisher: Bloomberg Press
Book Reviews of The Trader's Guide to Key Economic Indicators (Bloomberg Financial)
Book Review: Good primer on Economic Indicators
Summary: 3 Stars
Dips or rises in the stock market are often attributed to the reaction of traders to economic indicators. The Traders Guide to Key Economic Indicators by Richard Yamarone explains these indicators; what they can say about the economy, and how they can impact the financial markets. While economic theory and terminology can get complicated, the individual investor can apply it practically in order to time the purchase or sale of investments.
The cover quotes a senior correspondent from CNN describing the book as an easy to understand guidebook for investors. While the term is relative, it means that any reasonably intelligent person can understand the book. The target audience is newly minted traders and serious investors, so a would-be reader ought to have some background in economics. Keeping up with the latest financial news is probably a good pre-requisite in that regard. The cover price of $39.95 is along the lines of a college textbook. This primer on economic indicators does not come cheap, unless you can borrow the book from your local library.
From college economics class, you'll recall that the output of a country is its consumption, investment, and government spending, as well as net exports, that is:
Q = C + I + G + X - M
GDP, or capital Q in the formula, is the measure of our economy. Its rate of growth climbs during boom periods, and falls during recessions. If the economy produces a lot of goods during a particular quarter, corporate profits should soar, and so should the dividends that these companies declare. Naturally, the stock market relishes news of a strong GDP. Bond traders fear that rising GDP might portend an overheated economy and rising prices for consumers. Any whiff of inflation drives the bond market into a selling frenzy.
Economic indicators are about measuring GDP - because you can't predict where you're going to be if you don't know where you are - and predicting GDP. Indicators are, therefore, classified into three categories: lagging indicators verify past trends, coincident indicators measure current output, and leading indicators help economists anticipate future GDP. The first two chapters of this book describe GDP and the indices, while the next chapters break down ten specific releases that are important for the reader to know.
They aren't always intuitive. For instance, the Employment Situation Report from the Bureau of Labor Statistics produces a figure on the `Number of Nonfarm Employees on Payroll.' Most textbooks call this a coincident indicator, but here it is classified as a leading indicator. It is more accurate to say that the statistic is a proxy for GDP. Since GDP is released quarterly, many use the Employees on Payroll statistic for the other two months in the quarter, because it is released monthly.
The `Number of Average Hours Worked' on the Employment Situation report is a leading indicator of economic growth, since the fruits of their labor will result in GDP. `Average Weekly Claims for Unemployment' is a slightly lagging indicator, as its apex is reached after the trough of an economic downturn. Duration of unemployment is also a lagging indicator, because the longer people are out of work, the more their frustration grows.
It is difficult to keep these statistics straight, as a statistic about employment can be lagging, leading, or coincident. A book like this can help keep the differences straight, which is often the toughest part about figuring out what these statistics mean.
The Nightly Business Report covers most of the important statistics on its calendar of events, and they usually have a comment about a key statistic, particularly after a day where they move the markets. Financial sections in most newspapers also cover these statistics. They're fairly important for figuring out daily market reactions, which can help in making a decision to buy or sell.
The information imparted by this book is specialized but useful. It's not the first book to recommend for investors, but it is a useful primer on some detailed tricks of the trade. Brokers should find the book useful, as it will enable you to converse more intelligently with your clients about news from the trenches. These indicators, after all, are tested on the Series 7 exam.
Summary of The Trader's Guide to Key Economic Indicators (Bloomberg Financial)
Yamarone, a former trader, academic, and current Wall Street economist, shows readers what to look for in new economic data reports, how to react, and how to use or avoid the popular tricks of Wall Street. This new, fully updated edition covers everything from GDP and employment to consumer confidence and spending, with two new chapters on commodities and fixed-income indicators. Yamarone's clear and concise analysis focuses on the most important economic indicators in today's marketplace.Economics Books
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