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Five Things You Need to Know: It's Trichet; Carry On; Credit Where Credit Due; Maxed Out; I (Heart) NY

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What you need to know (and what it means)!

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Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. It's Trichet

It's a relatively slow day on the economic front ahead of tomorrow morning's non-farm payrolls, so making headlines this morning is European Central Bank President Jean-Claude Trichet.

  • As was widely anticipated, the European Central Bank (ECB) raised its benchmark interest rate by 25 basis points today, to 3.75%.
  • The ECB also raised its economic growth forecasts for 2007 and 2008 to 2.5% and 2.4% from 2.2% and 2.3% and said inflation this year may cool to around 1.8% from 2%.
  • While the ECB typically adopts a neutral tone following rate hikes and then becomes more hawkish as data flows in, the comments today from Trichet were somewhat unusually hawkish.
  • Trichet this morning said monetary policy in the European Union "continues to be on the accommodative side," suggesting the bias in the ECB is for continued rate hikes.
  • On an unrelated note, according to MarketWatch, when asked about recent comments by the anonymous former U.S. Federal Reserve Chairman Alan Greenspan on the possibility of a recession in the U.S., Trichet said, "Alan Greenspan is no longer a member of the Federal Reserve."
  • The comments came after he said he would leave it to the U.S. Federal Reserve to judge the direction of the U.S. economy.

    It's Trichet to rock a rhyme,
    to rock a rhyme that's right on time,
    it's Trichet

2. Carry On

We ran across an interesting article and interview with George Soros in today's Financial Times.

  • The wide ranging interview (see the transcript here) covers topics from the recent "market turbulence" to the upcoming U.S. presidential election, which is not really upcoming since it's more than a year-and-a-half away, but still.
  • The thing we want to focus on from the interview is Soros' view on the carry trade, which he says is one of several important factors influencing global markets.
  • "[V]ery important, is the carry trade, the fact that the yen is basically interest free and a lot of money is coming from borrowing and a lot of Japanese money going abroad. And the yen was weakening so a lot of people got into that trade and there's a little bit of a shake-up going on."
  • Soros added that if we do see further appreciation of the yen it would lead to a further unwinding of the carry trade, "but I don't think it's going to get out of hand right now."
  • Also worth noting is his view that we are only about halfway through the total effects of the slowdown in housing, which is in sharp contrast to the anonymous Alan Greenspan's comments yesterday to Bloomberg that the decline in U.S. home sales had reached a bottom.
  • "So will [the effects of the housing slowdown] actually result in a significant slowdown in consumer spending? That is yet to be seen because you have had mortgage equity withdrawals of nearly $900bn a year. Now it has fallen to $300bn and it basically will disappear. And that will affect consumer spending."
  • The potential effects of the housing slowdown on consumer spending leads us to today's Number Three...

3. Credit Where Credit Due

Engine room... more... steam!!!!

  • Debt-fueled consumption, the engine of the American economy, took a slight blow yesterday afternoon as the Federal Reserve reported that consumer credit-card debt slowed in January to an annual rate of 1.1%.
  • Overall consumer credit expanded by $6.4 billion in January, below consensus of $7 billion.
  • Meanwhile, December consumer credit was revised downward to $5 billion from $6 billion previously estimated.
  • The Fed's consumer credit report doesn't include mortgages or other real estate-related loans... thankfully.
  • So, consumer credit is slowing, but it's still positive. Is the jig up?
  • Below is a chart showing revolving consumer credit in dollar terms and in year-over-year percentage change going back to 1996.
  • It's an interesting picture of consumer access to revolving credit.

  • This picture of consumer debt leads us to today's Number Four...

4. Maxed Out

Remember last March when we looked at the pending debut of an exciting new movie about... credit card debt?

5. I (Heart) NY

New York City's tourism office is launching its first major international advertising effort, according to the USA Today.

  • The campaign is part of an ambitious strategy hatched just in the last year to promote New York City around the world.
  • The tourism office, NYC & Company, already has bureaus in places like Dublin, Buenos Aires and London, and plans to open a total of eight offices in 2007, from Toronto to Tokyo.
  • Despite its reputation as a top destination, the city has never before embarked on a global ad campaign, the newspaper said, relying instead on smaller, local efforts in foreign countries.
  • Who can forget the ubiquitous I (Heart) NY icon?
  • In 1977, the New York State Department of Economic Development hired advertising agency Wells Rich Greene to develop a marketing campaign for New York City.
  • The result was the famous I (Heart) NY icon created by graphic designer Milton Glaser.
  • So what does the future of NYC tourism advertising hold?
  • Below is a sneak preview of some of the new promotional icons the city hopes will cross language and cultural barriers in attracting foreign visitors.


China

Germany

Ireland

Saudi Arabia

France

No positions in stocks mentioned.

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