Diary of a Financier

Top Newsstuffs (November 26-December 2)

In Bookshelf on Sun 2 Dec 2012 at 06:50
Who owns the stock market? | Goldman Sachs
GS breaks down the US equity market according to different categories of retail/institutional buyers’ share: Households 35%, mutual funds 20, pensions 9, government retirement funds 8, international investors 13, ETFs 4 & hedge funds 3.

Jeff Gundlach (DoubleLine) says buys stocks, sees ‘kaboom’ ahead | Bloomberg
Gundlach has warned of the three phases of financial catastrophe: 27 years of debt accumulation (1980-2007), credit crisis (2008/9) & sovereign defaults (after 2013).  Citing Japan, he says stage 3 may be two years away, but he recommends preparing for inflation now
.Total Return Fund (DLTNX) is holding 17% cash/78% RMBS with low duration since opportunities are thin. Multi-Asset has been selling US equities as valuations are expensive, but maintains exposure in China/EMs, natural gas & gold miners.

Boston’s empty financial district & its opportunities | Boston Review
Downtown Boston’s vacancy rates (14%) are near a 15-year high, attributed to law firms & financials leaving for sexier live/work/play locales like Back Bay or South Boston’s Seaport (at 20% premium prices).
Exercising urban renewal powers, Mayor Kevin White built today’s financial district in 1970s.

Market myths: Individual investors actually aren’t fleeing stocks | Businessweek
If flow of funds reports included ETFs, there’d actually been $28B in net equity fund inflows since March 2009 (+$270B into ETFs v. -$242B from Mutual Funds), although net equity flows are -$9B net in 2013 ytd.

Infographic: A complete guide to the fiscal cliff | Cook & Cook
Using CBO data, analyzes short term effects of various fiscal cliff outcomes on 2013 GDP, employment, and federal budget deficit.

Top 100 books of 2012 | New York Times Book Review (NYT)
Notable fiction, nonfiction & poetry.

Consumer deleveraging continued in 3q12, even as student debt increases | Calculated Risk
From NY Fed’s quarterly consumer credit breakdown*: Total consumer indebtedness shrunk -$74B to $11.31T (-0.7% q/q), led by reductions in mortgage & HELOCs outpacing gains in student loans, credit cards & auto loans.
[Student loan balances have grown from a sliver in 2008 to the largest share of consumer debt, with the exception mortgages. To put things in perspective, the mortgage industry is $8.03T v “only” $956B in student loans, so…]

Student debt bubble officially pops: 90+ day delinquencies go parabolic | ZeroHedge
*Also from NY Fed: Federal student loans rose to $956B in 3q12 (4.6% q/q, biggest increase since 2006).
Delinquencies spiked up to 11%, which “likely understates actual delinquency rates because almost half of these loans are currently in deferment, in grace periods or in forbearance and therefore temporarily not in the repayment cycle… delinquency rates are roughly twice as high.”
[Actual delinquencies ~22%!]

Greece wins easier terms on debt as EU (and Troika) hails rescue formula | Bloomberg
After 3 years of false starts, Europe’s finmins agreed to ease the terms of Greece’s emergency loans, including maturity extensions, a 10-year interest grace period, rate reductions, a debt buyback, and approval of the next €34.4B tranche. Also, the ECB & national CBs will redirect their profits from Greek loans to Greece’s bailout account.

The folly of single variable analysis | Vanguard
Analyzes the correlation of single variable fundamental valuation metrics (like Shiller’s CAPE, Consensus forecasts, Treasury yields, etc.) to 1 & 10 year SPX returns, and the relationship is weak across the board.

Video interview: Hugh Hendry (Eclectica) on the end of mercantilism | The Buttonwood Gathering (The Economist)
“We’re in the death spiral of mercantilism,” but it takes a Lehman to trigger the unravelling…
China’s model of importing others’ incomes & effectively shorting $3T of its own currency (CNY) will implode. He compares the centrally-planned economy’s growth targeting to US stocks trying to beat guidance during the NASDAQ bubble.
Japan is his Lehman, because the effect of PBOC’s Yuan manipulation are crushing Japanese co’s under an increasingly expensive JPY. Japan’s exporters (e.g. Sharp) are toast, and the highly levered economy with them.

S&P 500 E-mini futures speculators are all in | ZeroHedge
ES speculators’ net long positioning has reached 2-sigma [exuberant] highs, which coincided with 2007 crash & 2009’s final leg to March low.
“SPX has averaged a -3.3% performance over the six-months following a 2-sigma net speculative long position such as this–with a 63% historical hit rate.”
[Statistically, the historical data aren’t overwhelmingly significant.] #Bearish

HSBC considering a banker’s oath | Business Insider
Reviving a proposal that was handed off to British policymakers (and promptly buried) in 2010, HSBC may implement a standard of having bankers swear to abide by 8 principles.


  1. […] the IMF should return its focus to trade imbalances instead of fiscal austerity. [Previously: Hugh Hendry on the end of mercantilism] […]

  2. […] White paper: A closer look at the trillion dollar student debtload | US Consumer Financial Protection Bureau (CFPB) Since student loans cannot be discharged in personal bankruptcy, CFPB is worried about high default rates that put a lien on so many debtors’ future earnings. Only 40k borrowers have taken advantage of the new, federal income-based repayment plans, “Pay As You Earn.” Updated data: $1.2T total loans $1T federal loans $214B deferment/forebearance $89B defaults (7M borrowers) [Previously] […]


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