Diary of a Financier

Top Newsstuffs (June 18-24)

In Bookshelf on Sun 24 Jun 2012 at 05:27

Noticing the pickup in rail traffic lately.  Railroad stocks had been strengthening too–before the FOMC’s OT2-lite announcement underwhelmed the broad market and a class action collusion suit derailed the sector.  The bullish slant of railroads opposes the sequential decline in trucking activity, although both are posting gains y/y.

That’s strong medicine heading into next week.  This past week was fraught with headline risk, “D-Day” [week], as I called it.  The coming week will provide the reaction, and the charts show an SPX at the doorstep of the Fates.  Equities await their order: higher off this right shoulder of an inverted H&S bottom (~1300), or lower to final support (1254)?

Enjoy the Top Newsstuffs from “D-Day” [week]…


Spain’s Banks Will Have to Force a “Bail-In” Rather Than Government Bailout | ZeroHedge
Spanish have reached debt-saturation point where government/taxpayers can’t afford more debt, so they’ll have to cram-up bondholders with a forced debt-for-equity swap like Citi did in 2009.  This is not a bankruptcy:
“Converting into equity 100% of the €88 billion of subordinated liabilities, and 40% of the €160 billion of senior unsecured debt, would generate more than €150 billion of loss-absorbing equity for the Spanish banking system. Together with the estimated €25 billion in expected operating profits for 2012, before loss provisions, that would yield about €175 billion in new bank equity, without increasing the debt burden of the Spanish taxpayer or requiring a loan from Brussels.”

Monthly Trucking Index: “The Economy Has Slowed” | American Trucking Association (ATA)
Index -0.7% m/m in May to 117.8, after -1.1% in April. Still +4.1% y/y with FY2012 growth expected +3.0-3.9%.

Rail Traffic Weekly: Still Mixed, but Continued Improvement | Association of American Railroads (AAR)
Carloads -2.5% and Intermodal +5.2%. 12 of 20 segments posted gains y/y. Cumulative ytd volume -3% y/y:
Petroleum products +50.3%, Motor Vehicles/Parts +22.6, Coke +11.1; Metallic Ore -18.5, Nonmetallic Minerals -15.2, Iront/Steel Scrap -12.6.

Long Term Crude Oil: 150 Years of Nominal & Real Prices (1860-2011) | BP
Real oil prices (2011 terms) during the Civil War were just as expensive as today.

Economic Crosscurrents: An Assessment of US Economic Status | The Big Picture

TCW Buying World’s Highest Yields As Belize Restructures | Bloomberg
Belize restructuring >$500b in USD debt for 2nd time since 2007, and yields have risen to 19.4% (2029 maturity) since announcement 1/31/12. TCW thinks they’ll seek to lower coupon & extend maturities.

Technical Analysis: Chart Pattern Failures Remind Traders to Be Flexible | Peter Brandt
“Charts morph. A large chart pattern is comprised of many shorter-term chart patterns… That a chart pattern fails means nothing. Over a period of time the failure of many shorter-term patterns produces a longer-term pattern that is mature and ready to declare the next trend.”
Be flexible and resist your biases.

Natural Gas: Where Endless Money Went to Die | Wolf Richter
NG rig count down from 1600 high to 562; reassigned to oil. Even hedged producers can’t last much longer at NG $2.50 spot, which is far from $5 production cost ($8 for higher depletion wells).

Chart: 2000 Years of Global GDP, Country by Country | Mark Perry (University of Michigan)

Legg Mason Stress Tests PMs & Portfolios for Greek Exit, Draw Lesson From Lehman | Bloomberg
4 years after Lehman bankruptcy, asset managers from Legg Mason to State Street Corp. (STT) to Vanguard are drawing from lessons learned to prepare for a worst-case scenario in Europe.

QE3/OT2 Q&A: What to Expect from FOMC Meeting and the Coming Intervention | Goldman Sachs
Expect $50-75b in monthly QE3 “flow” purchases focused in MBS. Alternative is $500-600b in QE3 “stock” commitment over 6-9 mos. With only $200b ST assets left, Operation Twist 2 is unlikely.

US States’ Public Retirement & Healthcare Benefits Underfunding Rises to Record $1.38 Trillion | Pew Center
Total underfunding gap rose by $120b from the prior year’s $1.26t deficit to a record $1.38t. Consists of $757b pension shortfall ($3.07t liabilities v $2.31t assets); $627b retiree healthcare shortfall ($660b liabilities v $33b assets).

Complete European Calendar (June & July 2012) | Deutsche Bank
Includes summits, meetings & bond auctions.


  1. […] data showed a deceleration through much of 2q12. Then, in the weeks of June 18-26, I observed: Noticing the pickup in rail traffic lately. Railroad stocks had been strengthening too–before […]


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