And to finish off the calendar “summer,” our trip to the Cape’s Islands…
Brazil increases foreign exchange interventions from $45B to $60B to stem Real’s slide | Bloomberg
They’ll auction-off $1B in $USD loans every Friday & $500M in FX swaps every other day of the week.
Brings FY13 scheduled FX interventions to $100B, as the central bank only has $373.74B in foreign reserves.
Regulators want to stabilize inflation, which fell to 6.15% in August, under the government’s 6.5% target, but not enough to stop $BRL’s devaluation–the world’s worst performing currency ytd.
Rail traffic weekly: Back up to slow growth! | Association of American Railroads (AAR)
Weekly traffic +2.0% y/y; ytd remains +0.9% y/y.
4 of 10 carload groups posted gains: petroleum products +19.6%; grain -8.
[Fourth consecutive week of meaningful gains is a significant trend; instead of worrying about contraction, we can start complaining about slow growth again.]
The Venture Capitalist’s conceit: “A vicious circle of truthiness” | Rohit Sharma
“The only thing worse than VCs wanting certainty is founders pitching certainty.”
There is no certainty; an array of stats, facts & extrapolations should do nothing to manufacture courage in startup investing.
All that matters is:
1. The idea- will it change how adjacent technologies/products/markets behave?
2. The market- is it big enough that it will contort itself to pay for the idea?
3. The founder- will the idea die without him & does he have the conviction to do everything in his power to see it succeed?
The “Hype Cycle” for emerging technologies | Gartner
Provides “an assessment of the maturity, business benefit, and future direction of more than 2,000 technologies, grouped into 98 areas”:
Charts the progress of today’s most revolutionary products & services, including each’s progress along its life cycle (in order, from innovation, peak expectations, trough of disillusionment, enlightenment & plateau of productivity); also estimates time in years before full productivity is reached.
Mentions: 3D printing, augmented/virtual reality, big data, biosciences, cloud computing, holographic/volumetric displays, quantum computing, robotics, speech/gesture recognition, wearable devices, etc.
[This idea speaks to the theory of our current "technology revelation," which I recently discussed.]
July FOMC minutes: Fed contemplates creating “overnight reverse repo facility” | Sober Look
Key takeaway buried within the minutes:
Fed has prepared to implement another monetary policy tool, the “full-allotment overnight reverse repurchase agreement facility,” which provides risk-free deposit accounts for non-bank entities.
[Remember, institutional depositors are basically unsecured bank creditors, since FDIC insurance only covers the first $250k. This is important development, allowing the Fed to soak-up & sterilize excess liquidity from the real economy for the first time ever; policy heretofore was always conducted via the financial system. In a crisis, I wonder if this kind of risk-free deposit alternative will engender bank runs?]
Spanish bad loans re-spike to highest level since 1962 | Zero Hedge
Despite 2 months of European bond & stock market rallies, Spain’s loan delinquencies hit alltime highs (11.61%).
[Darkest before the storm or blood in the streets?]
$EWP $EZU $FEZ
Public funds taking control of assets, dodging Wall Street | The New York Times (NYT)
Some of the world’s largest institutional investors (pension & sovereign wealth funds) are transitioning their portfolio allocations towards passive indexing, like ETF indices.
[This is interesting to me because it's a cycle: More & more active managers chase alpha, alpha opportunities thin-out, investors pile into beta strategies, correlation increases, active managers go out of business, correlation drops, so on. Previously: How the stock market resembles the heart beat of a dying patient]
#Hedge fund fad
Investors euphoric as US margin debt reaches dangerous levels | Ambrose Evans-Pritchard (UK Telegraph)
Raises my null hypothesis: What if Fed is prematurely tightening not because it sees growth on the near horizon, but because it sees signs of “irrational exuberance” in credit markets/NYSE margin levels?
[If a correction were to occur due to the taper, wouldn't the Fed redouble QE? Is such reliance blind faith?]
A look at earnings multiples | The Big Picture
Asks if stocks are cheap or expensive?
Based on PE ratios, valuations all depends on future EPS… and nobody know what the future holds: “It is a deeply unsatisfying answer to most people… who cling to the illusion of clarity.”
[Or, as I like to say, every economist, analyst & money manager puts his pants on the same way as I, so they know nothing more about the future than I.]