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Ivan Kitov

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  • Predicting Gas Prices: August-December 2009 [View article]
    I agree with you and have no doubt that social and political undercurrents did and do influence oil price. The net force of all influences, however, allows the price to behave how it behaves, i.e. to have long-term trends and pednulum-like oscillations. The current turbulence around oil price and new american dream will likely change the link between economic variables, as it was several times in the past. I mean the changes in long-term trends described in our paper. Moreover, we did predicted a new era with a new trend in the end of 2007 just looking into the trend in the difference between core CPI and headline CPI. Believe you or not.

    On Aug 16 04:51 PM BullnBear wrote:

    > I like your reasoning as well as your statistics but I believe that
    > you may need to factor in a human element and that being our current
    > political environment.
    > Many politicians, (who know nothing about the energy markets), have
    > been jumping on the “why is gas so expensive now that oil isn’t 140”
    > bandwagon. This has led to all of the debate around speculation in
    > the oil markets which of course spills into the gasoline pricing
    > markets.
    > I’m under the belief that we are in a new era of politics and while
    > I’m no student of the political arena I can more than tell you that
    > this new era is spilling into all levels of the free market arena
    > and probably forever changing the way that business gets done.<br/>
    > If gasoline prices get much higher then I believe the political circus
    > will come to town and attempt to regulate things. I don’t know that
    > this means instant success for them but I also don’t believe that
    > if this happens that the market will trade like it should.
    Aug 17, 2009. 02:31 AM | 1 Like Like |Link to Comment
  • V-Shaped Revenue Recovery + L-Shaped CapEx Growth = Unstable Economy [View article]
    In the very short-run, the revenue is V-shaped - the growth in 2009 is measured against the fall in 2008. This will stretch into 2010 (likely till April). Then the rate of teh current growth will be decelerating and referred to the fast growth in 2009. It will give an impression and formal realization of fall. So, I would guess that the revenue curve is likely a W-shaped one, if to look at a three year horizon since 2008:
    Aug 13, 2009. 05:55 AM | 2 Likes Like |Link to Comment
  • Economist Consensus: The Recession Is Over [View article]
    Recession as an economic term has a lot of problems with definition. Common sense says that "recession" should be defined as a contraction of real GDP. This straightforward definition results in many problems arising before the NBER recession dating committee. The committee made a mistake in 2001 - the current estimate of real GDP growth rate in 2001 is +1.1% revised from -1.3% announced in 2002. In order to avoid any further criticism, the committee (i.e. most distinguished economists!) has sophisticated the definition to the extent that nobody understands what is called recession. Actually, any random configuration of downward economics curves can be called recession if the NBER saying so.
    Considering the vagueness of the current definition of economic recession any opinion on the current state of the US economy is void. When the rule of thumb definition is implied (two subsequent quarters of negative growth or annual negative figure) one should bear in mind that the BEA regularly revises its estimates. In practice, these revisions are bigger for bigger estimates. Therefore, I would wait until the 2015 comprehensive revision before announcing any end of recession. It might happen that the recession ended in Q2 if relevant growth rate estimate revised to a positive figure. It happened in 2001, why not in 2009?
    There is an alternative proof of a positive economic growth in 2009Q2. The S&5 500 returns are tightly linked to real economic growth. This link says that the GDP in the USA increased in Q2:
    Aug 13, 2009. 04:28 AM | 2 Likes Like |Link to Comment
  • Unemployment: Historical Chart Sends Scary Message [View article]
    Unemployment rate is defined as a share of some changing portion of total working population. People in this portion are called labor force and the portion itself is referred in economics as to labor force participation rate. Unemployed are those people who are currently ready (for example, students are not ready during scholar terms) to occupy any job position but have no opportinity to do that because of the absence of vacancies.
    This tricky definition of unemployment confuse many researchers and broader audience. For example, labor force participation rate in developed countries varies in a wide range and thus the same portion of the total working age population announcing itself as " unemployed" may define quite different "unemployment rates" .

    When applied to one country, the definition misses actual long-term variations in labor force participation rate. However, variation in participation rate are tramendous. As it has been actually observed in the USA since the 1960s. In 1963, the participation rate was below 58.7% , and between 1997 and 2000 it was 67.1%. the latter was the peak and since then the rate has been falling. As a result, people are likely to move first into unemployment and then out of the labor force at all. This is a long-term process with some fluctuations.
    Again, this is an observed (actual) process with some fundamental economic, social, demographic, and etc. forces behind it. In 2006, the rate was 66.2%, i.e. 1 percenatge point less than in 2000. 1% of the participation rate or 1% of the working population is ~2,300,000 people leaving labor force through unemployment.
    As one can see, this effect can not be neglected:
    Aug 12, 2009. 01:48 PM | 3 Likes Like |Link to Comment
  • Why Have Crude and Gasoline Prices Doubled This Year? [View article]
    If to take a look at the evolution of price indices of various goods, services, commodities, and expenditure categories one can distinguish three different types of behavior. The simplest one is associated with medical case and education - relevant price indices just deviating with time from the headline CPI. This means that their realtive pricing power does not change sign with time. Of the same type but opposite in sign are apparel comminication - these price indices have been decreasing with time relative to the CPI - their pricing power is the weakest among all goods and services. As a result, one can easily predict the evolution of all members in this group - just continue trend, which already exists for 40 years or so.
    Second big group is famoust for more or less stochastic behavior. This group includes metals, for example. Because the behavior demonstrated by members of this group is unpredictable it is of low practical importance for us. Just leave it at this point.

    Third group is of the highest interest. Oil, gas, transportation, food, housing, and many others. Corresponding price indices reveal piece-wise linear trends relative to the CPI (and PPI for crude oil). In essence, their pricing power is constant over several years ( 5 to 15) but higher or lower than average (CPI). As a result, the deviation from the CPI (PPI) has linear trends and is predictable at a horizon of several years. (At leas,t this effect was observed between 1980 and 2009.) In practice, one can foresee oil and gas price between 2009 and 2015. The economic forces behind the trends, as always, has been balancing demand and supply in the final price, which evolves through time. So, the "fair" gasoline price is not a constant but has a trend. AFter 2010, oil price will be decreasing untill 2016 to approximately $25-$30 per barrel. So, the fair price will be falling as well. The topic about trends and oil (other goods and commodities as well) price predictability is infinite, but some simple graphs with motor fuel price are available:
    Aug 11, 2009. 03:14 PM | Likes Like |Link to Comment
  • What Really Moves the Stock Markets (And How to Take Advantage) [View article]
    "After bouncing back so strongly from its March lows, the S&P 500 is up 12% so far this year."

    I would say ~50%, from 667 (March 6, 2009) to 1000.

    I also guess that the current rally will stretch into 2010 (likely till May) together with increasing employment and productivity (report due today). S&P 500 should top 1400 on the wave of the growth in real economics. Keep in mind that the current growth will be referenced to that one year ago, i.e. measured relative to the quickly falling 2008 economy. It will give additional attractiveness to the future growth figures.
    Aug 11, 2009. 07:21 AM | 1 Like Like |Link to Comment
  • S&P 500 Holds 1,000: Where to Next? [View article]
    Very impressive analysis. However, there is always a question behind every breakthrough - why? If any answer would be added to that from Finonacci, it would be more safe to invest.

    Unemployment seems to reach the peak and from July starts to drop in absolute number and even faster as a portion of labor force, i.e. the unemployment rate will fall.

    August or (less likely) September will be the first month with an absolute increase in employment, as the current trend shows:

    So, I would expect an increasing over-pressure of good news enhanced by the background of 2008, when the market was accelerating down during the last fall (autumn - sounds not so good for 2008 ).
    Aug 9, 2009. 03:00 PM | Likes Like |Link to Comment
  • July Nonfarm Payrolls: -247K vs. -300K consensus. June revised to -443K from -467K. Unemployment dips down to 9.4% from 9.5%, vs. 9.7% consensus.  [View news story]
    From the household data, the number in labor force lost 422,000 in July. The number of unemployed dropped by 267,000 and the number of employed decreased by 155,000. Therefore, the uneployment rate , as based on the labor force, has dropped slightly. This is a robust trend already, and the unemployment rate will be decreasing due to the fall in labor force and leading fall in the number of unemployed.
    Funny, that analysis and commenters of labor figures do not consider that the labor force is an open system with fluctuating components. there is no mechanical link between increasing labor force and decreasing unemployment and vice versa.

    some numbers from the BLS in 2009
    ## labor force level: 153716(1) 154214 154048 154731 155081 154926 154504
    ## employed : 142099(1) 141748 140887 141007 140570 140196 140041
    ## unemployed : 11616 12467 13161 13724 14511 14729 14462
    Aug 7, 2009. 09:42 AM | Likes Like |Link to Comment
  • CIT: A Turning Point in the Financial Crisis [View article]
    CIT Group is fine as of now and in the near future, but Morgan Stanley is getting a big trouble:
    Jul 21, 2009. 06:44 AM | Likes Like |Link to Comment
  • CIT Rescue Package: A Giant Step in the Wrong Direction [View article]
    CIT has passed through poor times. The recovery has started:
    Jul 21, 2009. 06:41 AM | 1 Like Like |Link to Comment
  • Expect Gold Ore Price Index to Grow at Lower Rate than PPI [View article]
    I would estimates the probability of a much larger peak in July-August as a low one, but still non-zero. Then, the price index should go down in absolute terms oscillating around the new (red in Figure 2) trend. Currently, the price is likely neat its peak of "an overshoot on the upside". For me, it would be natural if the curve will go upwards at an accelerating rate, as one can observe with crude oil.
    This is an assumption, however. If Vuke is right, everything will change at once. Nobody denies that the Universe has its start and end. Why not gold to break old bounds.

    On Jul 17 09:46 AM Maxe Paul wrote:

    > Ivan, so going off the evidence you present it would be fair to say
    > gold will peak over the next several months before starting a longer
    > term bearish downturn?
    > Or would it be appropriate to say the indicators point to a lower
    > price but we are seeing an overshoot on the upside?
    Jul 17, 2009. 09:55 AM | Likes Like |Link to Comment
  • Expect Gold Ore Price Index to Grow at Lower Rate than PPI [View article]
    When all these factors do influence gold ores price, why do we observe sustainable trends in Figure 1? I would assume that the net force behind the price is rather constant than volatile. Although, with some fluctuations.

    On Jul 17 08:58 AM Vuke wrote:

    > The PPI for gold is going to vary wildly, for political, environmental
    > and energy cost reasons. The assumptions, therefore, are unfounded.
    Jul 17, 2009. 09:10 AM | Likes Like |Link to Comment
  • Why Crude Will Reach $100 / Barrel [View article]
    This is second article in a raw. I am going to update the prediction every month, when PPI data are available.
    The first article Crude Will Reach $100 by December 2009 (, also at Seeking Alpha, introduces sustainable trends in PPI differences. It also provides a number of references to publsihed articles and working papers. These sources provide comprehensive description of the period after 1982, when new CPI and PPI were introduced.
    I always have a dilemma - to include or not to include common sections describing model and previous results. This time the reference style is not an appropriate one.

    On Jul 16 11:30 AM Bruce909 wrote:

    > This is a very interesting analysis. Have you been able to back test
    > it?
    > Perhaps taking data prior to 1980 and using it to see how well it
    > tracks actual data from 1981 to 1990?
    Jul 16, 2009. 12:59 PM | Likes Like |Link to Comment
  • Microsoft: A Sleeping Giant Ready to Rise Again? [View article]
    It is interesting that MASF shares can be accurately estimated one month ahead. A simple empirical relationship allows a full description of MSFT share behavior - it looks to go up in the near future.
    A good thing is that one can always find out when it will turn down.
    Jul 16, 2009. 10:50 AM | Likes Like |Link to Comment
  • Predicting New Zealand's Real GDP [View article]
    For the US, the next decade is a decade of an elevated real economic growth:
    Kitov, I., Kitov, O., Dolinskaya, S., (2008). Comprehensive Macro – Model For The US Economy, Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(4(6)_Wint), pp. 405-418.

    So, I am sure Australia will be safe.

    On Jul 15 02:53 PM Maxe Paul wrote:

    > Yes it's probably the large amount of boat people we have living
    > here, i knew those buggers were more than the figures suggest!<br/>
    > By 2012 we may all be homeless and living in the bush given the dire
    > economic outlook we agree on, so a census may well prove frustrating.
    > Anyway thanks for trying.
    Jul 15, 2009. 03:43 PM | Likes Like |Link to Comment