Diary of a Financier

Top Newsstuffs (May 13-19)

In Bookshelf on Sun 19 May 2013 at 01:55

Hailing from Africa this weekend; Heart of Darkness emerging…

Brown Vitter #TBTF Act: Can two senators end ‘too big to fail’? | Barry Ritholtz (Washington Post, The Big Picture)
Sherrod Brown (D, OH) & David Vitter (R, LA) floated non-binding, bipartisan resolution that won unanimous 99-0 support in Senate. They’ve now drafted “Terminating Bailouts for Taxpayer Fairness Act of 2013,” which legislation cracks down on big banks:
1. Higher capital ratios- 15% minimum capital requirement for those with >$500B in assets
2. Capital reserves must be liquid
3. No regulatory reliance on ratings agencies
4. Off balance sheet items are treated as on balance sheet
5. Derivatives [gross notionals] included in consolidated assets
[Terrific first stab at ending megabanks' advantage over community/local/regional competitors, which the IMF & FDIC estimate as 80bps from implicit taxpayer subsidies of $83B for the top 10 largest TBTFs ($64B for the top 5).]

Comparison of the 1976 Gold bull market & today | Jesse’s Café Américain
Analogue between $GC_F 1976 bottom & 2013′s current slide.
#Gold bug

Record profit margins aren’t a result of squeezing workers | Bank of America Merrill Lynch
Almost 2/3rds of the change in $SPX net margins (6.8% average from 1995-2004 to 9.2% in 2012) is attributable to below operating cost line items like interest expense & tax reductions, which BoAML says are sustainable.
[Seems like a bait & switch: 'corporations have raped wages, but a majority of their margin growth is attributable to other stuff, so stagnant incomes aren't that bad.' Keep your eye on the ball & beware the "permanently high plateau" calls a la Irving Fischer.]
#Noise

Rail traffic weekly: Another annual growth uptick keeps trend moving higher | Association of American Railroads (AAR)
Weekly traffic +2.1% (vs. this week last year); total ytd volume to +0.9% y/y.
5 of 10 carload groups posted gains: Petroleum products +50.8%; grains -21.3; food products -10.
[Ytd growth rate adds to gains, despite deceleration in weekly growth.]
#Bullish

Shareholder letter to Sony management | Dan Loeb (Third Point)
Hedge Fund PM proposes restructurings:
1. Spinoff 15-20% of Sony Entertainment- segment represents 40% of overall enterprise value & independent operating can help it achieve peer margins, which wiuld reap 50% EBITDA growth (+¥540/share); spinoff will raise cash to revitalize Electronics unit
2. Focus on growth segments in Electronics unit- image sensor business in particular; TV & semiconductors units are toast
[$SNE +10% on the news.]

Tesla keeps soaring, but earnings quality is low | Herb Greenberg (CNBC)
Despite a meteoric rise & first ever profitable quarter (1q13 net income $11.3mm), $TSLA would’ve lost $93mm (vs -$464mm in 1q12) were it not for accounting profits. For example, reductions in non-cash charges from warranty accruals (COGS) seem unruly given their 8yr/100k mile battery warranty, despite “new technology with unproven reliability.”
#Automobiles/Cars #Alternative energy

Full guide to Fed tightening: The end is where we start from | The Reformed Broker
On the heels of John Hilsenrath’s (WSJ) breaking story “Fed Maps Exit from Stimulus” and Ben Bernanke’s (FOMC) acknowledgement of “reaching for yield and excessive risk taking,” Josh Brown notes that life as we knew it starts anew after we remove the government’s life support.
#Life after QE/ZIRP

–Romeo

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  1. […] 40% to organic growth. Further, net margins are at historically high levels, two-thirds of which ascent is due to reductions in below-operating cost line items like interest expense and […]

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