Diary of a Financier

Top Newsstuffs (December 31-January 6)

In Bookshelf on Sun 6 Jan 2013 at 16:06

Brilliant!…

Small business recession continues | Intuit
Looks at small business revenue by sector 2005-12: Real estate, construction & retail are all down since 2008, flat since 2005; scientific & technical sectors are the only that have grown across all periods; the aggregate index is flat since 2008, up modestly from 2005.
[Small, old line businesses just can’t gain access to credit, particularly unsecured or growth capital. I see it every day. The Fed can’t reach them with monetary policy; only fiscal policy can affect Main Street, and the fiscal cliff retrenchment is a step in the wrong direction. Don’t worry though, the S&P 500 is just fine.]
#Bearish #BifurcatedEconomy

President Barack Obama is either a Liberal Republican or a Conservative Democrat | The Big Picture
Barry Ritholtz nails it: As if his management of the 2008/9 crisis didn’t prove it, nor the 2012 election vs. his kissing cousin (Mitt Romney), nor his war policy, Obama is at least a moderate, which fiscal cliff tax resolution affirms.
[In its power struggle, the far right could only nit-pick social issues or blame Obama for the weak economy he inherited, which is a far more structural & implacable phenomenon than anyone knows/cares to acknowledge. He may be right of Clinton. Previously]

Expensive electricity & the aging American electrical grid | Forbes
Since 2006, a glut of cheap Natural Gas has made electron generation really inexpensive for utilities, but consumer prices have risen because distribution costs keep climbing: US electrical infrastructure is old, and utilities will have to replace 1% of assets/year for next 20 years (~$3-6B CapEx/year), after having spent $34B on upgrades from 2009-11.
$XLU $NG/

Rail traffic weekly: Year closes on sour note due to Christmas calendar | Association of American Railroads (AAR)
Carloads -3.1% and Intermodal +3.2 (cumulative ytd volume); -13.8% and -14 respectively (vs. this week last year).
3 of 20 carload groups posted gains: Petroleum products +43.8%, coke +14.1 & motor vehicles +6.7; farm products -30%, grain -24.9 & coal -20.3.
[Precipitous decline due to holiday calendar: Xmas fell on a Sunday in 2011, whereas both Xmas eve & day were weekdays this year, losing an extra day of productivity.]

10 examples of finished products that prove 3D printing will change the world | Geek.com
Xerox (XRX) of the 21st Century? $DDD $SSYS

Complete guide to the new fiscal deal | The New York Times (NYT)
Full details of fiscal cliff mini-deal (i.e. resolution lite), which agreed upon revenue/tax legislation to permanently replace expiring Bush tax cuts and defer the government spending & debt ceiling debates until February/March.
[The tax deal in isolation is far better than Street expectations, trimming only an estimated 1% from 2013 GDP vs. 2.75% worst case projection and 20% less revenue over 10 years.]

Existing homes’ shadow inventory declines 12% y/y (October 2012) | CoreLogic
Housing’s shadow inventory (REO + foreclosures + serious delinquencies) -12% y/y as of October, down from 2.6M to 2.3M units, which is a 7 month supply. Continued steady decline from peak ~3.0M in 2010.
#Bullish

Charts: Long & short term US Treasury yields throughout history (1790-present) | The Big Picture
Updates of historical interest rates, including 30y & 3mo.
$TYX $IRX

The good news after this fiscal cliff resolution: The predictability of wealthy white people remains | Josh Brown (The Reformed Broker)
As in the Eurocrisis, the debt ceiling debate, 30 years of disinflation & 70 years of falling tax rates, the fiscal cliff’s “resolution” was a predictable agreement among rich white guys to maintain a status quo for the oligarchs & aristocrats.
#Psychology #Won’tGetFooledAgain

Swiss National Bank whacked by currency losses | Bruce Krasting
In 4q12, SNB likely lost $16.5B on FX positions, including $5B on an open $40B EURJPY short & $11B on short EURUSD. That’s 33% of their $50B in reserves or 3% of Swiss GDP, which losses get transferred to the Treasury (taxpayer) when realized.
[Point is, global private sectors look calm because central banks have absorbed the risks from capital markets, having quarantined currency/liquidity/credit/duration on the public’s balance sheet. It doesn’t disappear; it just festers.]
$CHF

Healthcare costs are actually decelerating | Peter Orszag (Citi)
Healthcare inflation has actually decelerated consistently from 2005-2012:
The composite index has trended down from 7.5% y/y in 2006 to 5.75% in 2012 (trendline support ~4.5%). All components are lower; the commercial component shows the least decline, but hospitals & professional services are much lower; Medicare has decelerated the most from 7.30% in 2006 to 2.25% in 2012, all below CBO expectations.
These are structural slowdowns that will have a pervasive, positive impact upon our fiscal deficit in the years to come.
[While inflation may be slowing, demographics are still increasing the volume of healthcare spending, so real gross expenditures are still rising.]
$XLV

VIX compression “on”before year end fiscal cliff | ZeroHedge
As rhetoric from the US Senate on Capitol Hill indicates a partial fiscal cliff deal on taxes and a deferral of sequestration until a new February 2013 deadline, spot VIX crashed. Traders closing front month vol longs and rolling them into longer term futures contracts, steepening a curve into contango that was heretofore in backwardation.
#Bearish

–Romeo

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