Settling into the summer groove back in the city I call home; all my love to Eva & George…
Performance update: Major asset classes, styles, countries & regions (2q2013) | Bespoke Investment Group
Major ETFs’ wtd/mtd/ytd returns:
Except US equities ($SPY) & Japan ($EWJ), now all of the world is surprisingly deep in the red, including the entire bond complex ($AGG) & Commodities ($DBC).
[Impossible environment for global macro managers.]
How to Write a Business Plan | Small Business Association (SBA)
Rail traffic weekly: Camping out just under 1% growth | Association of American Railroads (AAR)
Weekly traffic +1.6% y/y; ytd volume remains at +0.9% y/y.
5 of 10 carload groups posted gains: Petroleum products +36.6% & nonmetallic minerals +11.6; motor vehicles/parts -13.8%.
[Big drop in autoparts due to high base in 2012.]
Google Chromebook defied PC market with growth | Bloomberg
$GOOG has captured 20-25% of the US laptop market by selling its Chromebook for $200-300. It has no built-in software, just a Chrome-based OS & access to the cloud, which drives ad revenue back to $GOOG.
[Say g’night $DELL.]
The fraud of the Prince of Poyais | Global Financial Data
Cautionary tale of Gregor McGregor, a con-artist to rival any Ponzi scheme:
In London 1820, he started spreading the rumor that he was the Cazique of a principality of Poyais, near the Bay of Honduras in South America, with “untapped gold & silver mines, fertile soil, and other ample resources from which settlers could profit. The country had a civil service, a bank, an army, a democratic government, and natives eager to work for their British masters.”
In reality, the land was an uninhabitable jungle, but he raised £200k from bond issues & sold land to the poor.
In 1822, he led a convoy of 240 settlers to Poyais; only 60 survived.
He continued raising capital in 1831/34/37 & died without retribution for his swindle.
The Chairman clarifies: NBER speech and Q&A (2013.07.10) | Ben Bernanke (Federal Reserve)
Rates (ZIRP) will remain low for a long time, long after 6.5% unemployment goal (not trigger) is reached, because:
1. U3 probably understates the weakness in the U.S. labor market
2. Inflation is far below the Fed target
[See also: FOMC June minutes; Previously]
Study: A history of stock corrections in bull & bear markets (1929-2013) | Ed Yardeni (Dr. Ed’s Blog)
Surprisingly few equity corrections occur during bull markets…
2009-pres: 3 corrections
2002-07: only 1
1982-87: only 1
1982-2013: 3 bear markets
[Correction= 10% drawdown; Bear market= 20%]
The US job market is finally heating up: From jobless to “job-full” recovery | Paul Dales (Capital Economics)
As record high margins can attest, businesses have made all the efficiency gains possible by cutting to the bone (e.g. layoffs). So, with productivity (output/labor) maxed out, even slow growth in aggregate demand must be met by more hiring & lower unemployment.
[The question is: do companies foresee higher future demand/orders?]
Charts: $SPX 1994 analogue | Market Anthropology
1994 daily analogue warns of an immediate correction, as this recent bounce was a bull trap.
2q13 earnings preview: Low expectations are a huge positive | The Reformed Broker
Rich Bernstein: “The market doesn’t care about ‘Good or Bad’; only ‘Better or Worse’ than expectations.”
Josh Brown: “Stocks form tops when everyone expects greatness & is disappointed.”
After more negative guidance, consensus is down to +0.8% Q2 EPS growth (y/y).
Includes SPX EPS & revenue expectations by sector.
World Health Organization calls second ever emergency meeting | Business Insider
WHO convening via conference call to discuss Middle Eastern Respiratory Syndrome Coronavirus (MERS CoV), which first emerged in Saudi Arabia 09/2012, killing 45 of 80 inflicted to date.
They’ll decide whether to label this an “international health emergency” (i.e. pandemic).
[WHO’s 1st emergency meeting was for 2009’s H1N1 bird flu.]
Demographics: Why the future belongs to the US | Societe Generale (SocGen)
Charts shows an index of working age population (1950-2050):
Only the US is forecast to have an increase to workforce in the forseeable future; UK & France labor growth will be relatively stagnant; Germany & Japan’s will continue declines that began in 1995 & 2000 (respectively).
Street analysts boost S&P 500 target by 11% throughout 2013, but reduce earnings growth estimates | Bloomberg
Consensus for $SPX YE13 target has risen 11% since December from 1608 to 1777, despite continually lowering the bar with downward EPS revisions.
The rationale: “There’s a tight relationship between confidence and multiples… and confidence is clearly rising [off low levels].”
[Funny to me how sell-side analysts look elsewhere to rationalize bullishness when the fundamentals abandon them.]
#Perception vs Reality #Multiple Expansion #Thrill
Linn Energy: The first of many ponzi-like MLP blowups | Seeking Alpha
It was never feasible that an E&P company like $LINN could sustain high, steady dividend payouts (5-6% vs 0.3-2% peers) with all its profitability ratios sub-par.
SEC is investigating LINN for misreporting a popular industry-specific metric, Distributable Cash Flow (DCF), from which management excluded the cost of hedging. The resulting, inflated share price allowed LINN to repeatedly acquire cheaper competitors to stave-off its assets’ depletion rates.