The business economics at work - Thomson Financial Services Inc

Business Economics, Oct, 1998 by Nancy J. Kimelman

Face it: Economics is not a profession known to most high-school students. Like many of my generation, when I was kid I dreamed of becoming a doctor, preferably one who would work in as exciting and action-packed environment as the MASH unit I saw on TV each week. I dutifully took the science and math courses required for a pre-med concentration when I first hit college, and then it hit me. While I loved MASH, I hated the natural sciences, found three-hour labs woefully boring, and got faint at the sight of blood. Luckily, after I picked myself up off the floor, it wasn't long before I realized an intense attraction for markets. Which is how and why I became a financial market economist.

Since I joined Thomson Financial nine years ago, I've been lucky enough to join my craving for the excitement and immediacy of a MASH unit with what has become an intellectual as well as visceral attraction to the financial markets. Thomson Global Markets is a leading provider of optional services that offer real-time economic, technical and fundamental analysis of the fixed-income and foreign exchange markets to clients globally over the Telerate, Bloomberg, Bridge and Reuters networks. As Chief Economist located in our Boston office, I spend my day providing real-time economic analysis that supports traders, salesmen and investors in these markets. This work entails a full range of macroeconomic analysis, from covering Greenspan's Humphrey-Hawkins testimony or the employment report to writing a daily comment that sheds light on a little-known or underappreciated trend in the economy to forecasting interest and exchange rates.

MASH surgeons performed what they called "meatball surgery" at the front, i.e., their aim was to stabilize incoming wounded, often for transfer to an army hospital for considered care. Sometimes those wounded were not seriously ill; their wounds were treated at the MASH facility and the soldiers returned directly back to their units. It seemed that all too often, however, the surgeons had no alternative but to attempt complicated surgery in the less-than-ideal conditions of the mobile unit. You may remember the episode when Charles, a surgeon from Mass General Hospital, took his first turn in the operating room. He was appalled.

"MEATBALL" ECONOMICS

At Thomson, I practice "meatball" economics. At my job, I provide real-time analysis for clients to react sensibly to incoming economic and political news. The key word in that sentence is "react." This is not the stuff dissertations are made of! My initial analysis must be completed within minutes of the news scrolling across the newswires. My "full" analysis of the monthly employment report is finished within thirty minutes of its release.

Often, the economic news is not critical, so the little time and effort I expend to cover the event is all anyone needs to go on with their day. But sometimes economics circumstances conspire to make it seem like the world-or at least a great deal of cash-hangs on my quick analysis. Especially in recessions, bear markets, and times of political unrest, the need for fast, accurate analysis can be overwhelming.

Many academic economists, I suspect, would be appalled if they saw me in action. They needn't be, for the economics I practice is good, sound economics even if it's far removed from the economic analysis that has benefited from intensive research, econometric testing and peer review.

Consensus Building

Thomson provides a critical service to the market with the economist survey we conduct every Friday. About thirty economists in the financial community are polled for their estimates of the next two weeks' numbers. We tabulate the results and post them to our screen services, which are available on Telerate, Bloomberg and Bridge. We also make the survey results available to the press. The Wall Street Journal and Barron's carry the results of our U.S. survey each week. In fact, the three global editions of The Wall Street Journal report consensus figures from the Thomson surveys conducted in the United States, Europe and Asia.

Efficient markets price in information as it becomes available, so my job on the screens is to analyze the "new" news that hits the Street. My write-up of economic data releases will make short shrift of the known trends in the data, therefore, and focus either on new trends that may be in the works or on deviations from existing trends. I think this is one of the reasons why Wall Street economists like myself often sound alarmist; we forget to state the obvious.

Short-term Focus

Not only does the analysis we provide have a very short fuse, it often focuses on the short end of the market. Chairman Greenspan, and Volcker before him, have done a lot to bury the fine art of Fed watching. Nevertheless, participants in the markets always want to know if a piece of news will alter the Fed's thinking or bring it closer to a rate adjustment. The globalization of the financial markets has added another twist to our work. Now the markets also want to know if the news will affect the likelihood of foreign exchange intervention here in the United States or by a foreign central bank.