FPS’ Friday Fiver

 

Bookmaking and bezzies

Every now and again I take a trip to the online bookmaker. Winning is fun, losing is not. I try to stick to more obscure sports like athletics where there is some chance I know more about the likely outcomes than those setting the odds. However, for the most part I rely on knowledgeable friends for tips and advice on whether KJ Choi is up to the task of winning the US Masters or whether Mon Mome has another Grand National left in him.

Professional investors aren’t so different when it comes to picking a stock or perhaps more importantly a company or a nation’s bond debt.

While I rely on tips from friends, professional bond investors look to credit rating agencies for a steer on the likely risk associated with their investment. These agencies are supposed to tell you whether the company or government you are lending to can afford to pay you back, but as Phillip Stephens points out in an excellent piece in today’s Financial Times, these agencies aren’t always right.

Whether investors need to find some better informed “friends” is a big question but what is not in doubt is the huge significance of these agencies views on European sovereign debt in 2012.

How soon is now?

An interesting development this week for those of you interested in ‘nowcasting’ (No? No one at all?).

On Monday (16th Jan 2012) the Spanish bank, BBVA, announced it was teaming up with Google to provide improved real-time economic forecasts for its clients. BBVA will apply its research team’s forecast models to Google’s search engine data in an attempt to provide more accurate and timely economic indicators. The first iteration of this will see BBVA and Google measure current and future demand in the Spanish tourism industry.

http://news.bbc.co.uk/olmedia/145000/images/_146120_weather_map_300.jpg

The Financial Times reported this story as the latest attempt to try and use Google search engine data to provide ‘nowcasts’.  For those who don’t know, ‘nowcasting’is the prediction of the present, very recent past and very recent future (we’re talking hours and days rather than weeks). It is a meteorological term that has been increasingly applied to economics in recent years, particularly since the financial crisis. The idea that drives nowcasting use in economics is that so much economic data, particularly official data, is out-of-date before it is even collected and released. Economic conditions change so quickly that it’s not much use knowing what happened last quarter when you’re trying to make policy decision today. To put it in the meteorological context, it’s like trying to decide what to wear today based on what the weather was like 3 months ago.

What’s particularly interesting about nowcasting (no? still just me?) is the role that businesses can play in helping create new economic indicators. Central banks, investors and traders want to know what’s happening in the economy today and what better source of information is there than the businesses who themselves find they are capturing more and more data about consumer and business activity.

Google have been quick to realise that the search engine data they capture can provide unique insights into the economy. The Bank of England has already realised the power of this data as highlighted in this FT Alphaville article from last year. Tim Harford also wrote a very interesting article on this in the FT back in 2010.

This desire for more accurate data from different sources presents a great PR opportunity for many businesses; an opportunity many have yet to capitalise on. Using a business’s data for PR purposes is not a new idea. However, where this often falls down is in trying to turn the data in to something that tells a wider economic story, rather than a story about the business itself.  There must, however, be a huge number of companies with interesting data of their own that can be turned into economic indicators. The data of haulage companies, payments systems and mobile phone companies in particular, spring to mind. The key to success is in creating credible indicators which is why partnering with economics consultancies helps. This requires investment but if a company can create something that is used by media, investors and even central banks, then the PR and stakeholder relations benefits will surely outweigh the costs.  

A second PR opportunity lies in the co-opting of the term ‘nowcasting’ into a business environment. As mentioned, it has already moved from meteorology to economics but being able to know what is happening today, rather than last month, is as relevant to businesses leaders as it is to economists. Any company that works in providing management information or using big data may want to look at how building a proposition around ‘nowcasting’ could differentiate themselves from their competitors.

 

Bread is getting cheaper (sort of)

The monthly inflation figures rolled around again this week and finally gave Sir Mervyn a chance to let out the top button on this shirt – both CPI and RPI inflation dropped below the magical (by which we mean ‘hideous’) 5% rate at which it had been stuck for several months.

Good news all round then? Well, not really. For one thing, at 4.2% CPI is still double the official target set by the Bank of England, meaning Merv’s fountain pen won’t be getting a rest any time soon. For another, inflation is still way above wage increases, meaning we’re all battling against dwindling real incomes. And for another, despite the Government keeping interest rates at practically zero (thus encouraging, in part, high inflation), economic growth is unlikely to rise above a rasping cough when Q4 figures are published next week. We’re trying to be positive, we really are. But it’s still looking far from rosy.

The Labour party: Time to cut its losses

Despite UK unemployment reaching a 17-year high this week, Labour leader Ed Miliband was still unable to land a clean hit on David Cameron during this week’s PMQs. Instead, the Prime Minster cleverly navigated Ed’s questions, even landing some of his own punches when he sneaked in a few sound bites about Ed not even being able to do a U-turn, relating to his apparent support of Government cuts,  that were sure to lead news coverage of the session. When the Opposition leader doesn’t score when unemployment is as high as it is, alarm bells should be ringing.

Furthermore, he has faced criticism from allies: Lord Glasman, who was previously seen as a committed supporter of Ed. Glasman wrote an article for the New Statesman that appeared to question his leadership which the media lapped up, whilst more recently he has been on the end of union bosses’ wrath for supporting the Government’s public sector pay freeze. Clearly there is discontent in the Labour ranks, even if it isn’t at the core of the party yet.

As Matthew d’Ancona wrote in the Evening Standard last week, Government ministers are praying for Ed Miliband to remain as Labour leader as he currently seems incapable of steering the Labour ship back to recovery. The media appears to know this, as do the electorate, so why is Labour allowing the elephant in the room to remain?  

To say that Labour missed a trick by not selecting Ed’s charismatic and believable brother David as leader last year, is a significant understatement.  Ed Miliband has had a poor start to the year leaving his and Labour’s future unclear. Sometimes you need to cut your losses when something is not working, this should be a growing thought for the Labour party and its incumbent leader.

A perspective on the Concordia disaster

Last week 11 people died and 24 are currently still missing in a tragic incident that has captured the attention of the world. A seemingly self-inflicted disaster of this magnitude is unusual and as all involved, including the media, struggle for clarity on how events unfolded, speculation has been rife.

The last week has seen press coverage that poses serious questions about the safety of modern cruise ships, tales of heroism but also a lot of wild conjecture, some of which has been in poor taste.

The role of the captain has been the focus for much of the media and below we have selected a number of articles which highlight the breadth of ways in which the disaster has been covered in the information vacuum that followed. Without clear communication from those involved we will know little about the truth of the matter until the inevitable enquiry begins.

Where was the captain?

Costa Concordia captain ‘was greeting friend ashore’

Drinking in the bar

Dining with a mystery woman

 That’s it for this week. Thanks to Matt Battersby, Dave Chambers, Ross Gillam and Sallie Bale for their contributions.

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