What's the middle class?

Interesting article on the difficulties of defining the middle class. Here is Brazil's according to different sources:

Using 10$ to 50$ PPP income per day here is how they look for different countries:

Margins

James Montier at GMO has an interesting white paper on margins arguing that "what goes up must come down".
Starting from the the equation that income=expenditures and decomposing each side further he comes to the following defintion of profits:

Profits = Investment – Household Savings – Government Savings – Foreign Savings + Dividends
(explanations here)
He then shows that since roughly the peak in the market 2006/2007 the contribution to margins from the rising budget deficit has been substantial.

Watch those margins when budget deficit reduction measures are implemented.

Margins

Hussman has a very interesting chart showing margins and subsquent 5 year earnings growth. Usually the higher the margins the lower the subsequent growth in earnings.

The most recent data show however that earnings have kept growing though margins were already very high. Buttonwood tries to explain why. Normally high margins and profits attract investments and competition and hence lower margins and profits. But currently investment is still low enabling companies to continue to earn unusually high profits. Hence the record high margins.

Here is a chart showing gross domestic investment and gdp indexed to 100 in December 2007. Investment has not yet recovered but it is catching up.


Beware the margin reversal.

Chinese Migration

A nice little video on Chinese migration from the economist.

Ugly Bond Math

A very intersting chart from EconomPic comparing current market yield and 5 year forward returns. With an index duraion of roughly 5 in the us both data sets track each other closely.

Fixed Income Monitor

High Yield:


Emerging Market Debt USD:


Emerging Market Debt LC:

Fuel Prices and Fuel Consumption

Econbrowser highlights this chart from a recent research paper on how to reduce petroleum consumption from transportation.