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Five Things You Need to Know: When the Going Gets Tough, the Tough Get Redefined; Also, Need More Liquidity, Need Less Liquidity, Can I Super Size That?, Fish in a Barrel


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


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

1. When the Going Gets Tough, the Going Gets Redefined

According to the Wall Street Journal, the Bureau of Labor Statistics is contemplating a change in the widely followed consumer-price index.

  • To determine what is called the Consumer Price Index, the BLS surveys prices for about 80,000 items in 200 categories and converts the result to an index number.
  • Component indexes are combined into a variety of aggregates, which is what the "core index" really is; an aggregate index.
  • According to the Journal, a white paper by Elliot Williams of the BLS shows that the process for rounding the CPI numbers, both the percentage changes in the index and the indexes themselves, can make the figures misleading.
  • As a result, the Department of Labor is considering publishing the CPI and its subindexes to three decimal places instead of one.
  • The CPI for July is next slated to be reported on August 16 at 8:30 a.m.
  • The change to "greater precision," if approved, would likely take effect early next year.

2. Need... Less... Liquidity

Figures coming out of Europe this morning are showing the strongest euro zone growth since 2000.

  • Euro zone GDP rose a provisional 0.9 pct in the second quarter from the first, and was up 2.4 pct from a year earlier, EU statistics office Eurostat said.
  • German 2Q real GDP accelerated at a 3.7% annual rate, the strongest in five years.
  • France's GDP was also at a five-year year best in the second quarter.
  • Spain came in at a four-year high.
  • This should be quite enough to keep the ECB on track for two more tightenings into year-end.

3. Need... More... Liquidity

While the majority of the world's largest central banks are tightening liquidity, there are exceptions. Among those countries running against the tightening grain is India.

  • India will convert non-tradable bonds worth more than $4.9 billion held by some state-run banks into liquid tradable bonds in the next 12 months, a finance ministry official said, according to Reuters.
  • The move would have to be approved by the cabinet committee on economic affairs.
  • Indian bankers said allowing the bonds to be traded may inject more liquidity into the debt market, which would help banks sustain high loan growth.
  • Loans are growing at an annual rate of about 30 percent while deposit growth is lagging at about 20 percent.
  • Key, however, is whether the non-tradable securities are converted into bonds that qualify for statutory liquidity ratio (SLR) status.
  • SLR is the 25 percent of commercial banks' deposits that must by law be held in government bonds.
  • A conversion into SLR bonds would therefore be a significant increase in liquidity.
  • A decision should come sometime next week.

4. Can I Super Size That?

According to, casual dining chains are seeing their worst slump since 1991.

  • Sharp same-store sales declines among some of the biggest players in the $331 billion restaurant industry have analysts and marketers worrying whether the slide is a long-term trend or a short-term hit due to less disposable income, according to
  • Reading between the data lines, the answer seems rather obvious: Casual-dining chains reported a 0.2% decline in same-store sales during the second quarter, while fast food or "quick-service" chains reported a 1.8% gain.
  • Although restaurants represent only 4% to 6% of consumer disposable income, restaurant spending is viewed by many as a leading economic indicator.
  • While restaurant traffic has been declining for years, actual sales declined for the first time in two and a half years the week of July 28, according to NPD Group.
  • Meanwhile, other evidence points to increasing pressure on consumers, especially those in the vulnerable sub-prime segment.
  • First Cash Financial Services last month announced record-setting second quarter revenues, same-store sales increases, net income, earnings per share and store openings for the three months ended June 30, 2006.

5. Fish in a Barrel

I hesitate to point this out because it's a bit like shooting fish in a barrel, but Iranian President Mahmoud Ahmadinejad apparently joined the blogosphere this weekend, according to the BBC.

  • The blog is in four languages, including Farsi, Arabic, French and English.
  • Mr Ahmadinejad's first posting, entitled autobiography, tells of his childhood, Iran's Islamic revolution, and the country's war with Iraq.
  • Checking in at more than 2,000 words, the President promised to make future posts "shorter and simpler."
  • The blog includes a poll asking if users think the US and Israel are trying to trigger a new world war.
  • The poll, which has a margin for error of approximately 100%, right now shows "Yes" voters with a slight 97% margin over "No" voters, all of whom were immediately jailed for voting in the Online poll since blogging is illegal in Iran.
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