Diary of a Financier

Bookshelf Update: Top Newsstuffs (Weeks of December 19 & 26)

In Bookshelf on Sun 1 Jan 2012 at 03:22

Last newsstuffs of the year that was, 2011:

The “€100 Bill” or How The European Bailout REALLY ‘Works’ | ZeroHedge

The Fixer-Upper Trade | The Reformed Broker

Josh Brown nails this thematic investment: the remodeling/ronnovating/home improvement trade is a terrific trend to ride.

What Deleveraging? | Jim Bianco

Charting debt trends actually shows private delevering and government leveraging, but total nominal debt is at alltime highs, total debt/GDP on par with 2007 levels.

Former Ron Paul staffer on Newsletters, Anti-Semitism | Right Wing News

“If Ron Paul should be slammed for anything, it’s not some silly remarks he’s made in the past in his Newsletters. It’s over his simply outrageously horrendous views on foreign policy, Israel, and national security for the United States. His near No vote on Afghanistan. That is the big scandal.”

Understanding China’s Property Bust | Pragmatic Capitalism

On the Real Estate correction, capital constraints and social unrest.

How the tides have turned for U.S. financials & Europe | Seeking Alpha

U.S. financial firms taking advantage of the Eurozone’s debt crisis by picking up assets owned by cash-strapped regional Euro banks. European financial institutions may shed as much as $3T in assets over the next 18 months. Deals are likely to spike ahead of June deadline for European banks to raise more than €114B in new capital.

An “Austrian View” Approach To Equity Prices | Erste Group

“We come to the conclusion that it makes sense for equity investors to track monetary and, especially, debt developments closely… Historic data shows that accelerating money and credit growth drives equity prices.” Obvious, but true. Don’t fight the Fed, et al., but be cognizant of monetary intervention’s marginally decaying half-life.

€40B Footnote To The ECB’s LTRO Announcement | Peter Tchir

A little footnote to the LTRO announcement, 40 billion of the collateral received by the ECB was newly issued, newly guaranteed Italian debt.

This Is Where The LTRO Money Went: ECB Deposit Facility | ZeroHedge

Half of the net LTRO proceeds (€84B), “the worst possible case as it simply recycles ECB cash from on pocket into another without any incremental velocity.” The same happened in the US, and while it didn’t help the economy, it kept the system solvent. Plus, what do you expect on T+1, a sudden spike in loan activity?

The Return of Lee Munson | The Reformed Broker

Wall Street wants you to go into your Schwab Broker and ask, “What are you doing to diversify my portfolio?” Your broker will then pull out a handy pie chart showing how he’s putting 10% of money into emerging markets and another 25% into some bond ETF that started trading last week. But diversification is not return, it’s a vehicle to add more and more products with higher and higher fees that go back into the broker’s pocket. Focus on risk. Keep risk in your portfolio constant and forget about the lie of the pie.

The 2012 Earnings Outlook | Zacks

Great rundown of SPX 2009-11 reported data & 2012 forecasts. My opinion: at first this looks very heartening for US markets. However, it all suffers from a bit of time bias, since a 2009 starting point provides a low base for sequential growth (after the collapse). Also, I notice the charts at the bottom, which display explosive Net Income growth, but tame Total Revenue growth. Neither I nor Zacks can picture continued margin growth, and real revenue growth from a 2006-07 base looks negative when you include inflation…
Not so “heartening” after all. The big question: can companies restock inventories for a third time since 2009? That’s been the recipe margin expansion>inventory build>margin expansion>etc).

A boom in shale gas? Credit the feds | The Washington Post

ECB’s balance sheet ($3.2T) is not only far greater than the Fed ($2.9T), but at 30x leverage it has the same risk as Lehman. However, major distinction is that the Fed has been forced transparent, while the ECB is fully opaque about asset quality.

PwC: Shale Gas Will Generate Billions Of Dollars Of Savings And Create Over A Million Jobs

“There was a roughly $6.5 trillion synthetic (duration mismatch) USD short as of 4 years ago, as we reported at the time. That short has gotten substantially larger following a 4 year regime of the USD as a funding currency courtesy of ZIRP. Which means that any time the liquidity shortage threatens to collapse the system, the first thing to go stratospheric will be the USD as the global financial system scrambles to cover its short. It also means that anything the Fed and/or ECB can do from a pure printing standpoint will be peanuts compared to the utter carnage unless the dollar short is not preserved.”




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