Diary of a Financier

Top Newsstuffs (July 22-28)

In Bookshelf on Sun 28 Jul 2013 at 05:28

Believe it or not, I’m attending my first pool party of the summer this weekend…

Rail traffic weekly: Shifting back into reverse | Association of American Railroads (AAR)
Weekly traffic -0.3% y/y; ytd volume drops to +0.7% y/y.
5 of 10 carload groups posted gains: petroleum products +28%; grain -9.1.
[A couple negative weeks have started a bad trend; I wonder if there’s an undercurrent that’ll be reflected in July PMI (8/1 report date), stay tuned.]

Caution: Institutional investors have been massive net sellers | Bank of America Merrill Lynch (BoA)
Since June, MER’s institutional clients have sold more dollar volume of stock (net -$1B 4wk avg) than any point in last 5 years.
Retail have been net buyers (+$1B).
#Bearish #Sentiment #Smart money #Lambs to slaughter

The party is over for New York tech & startups | Business Insider
The “Series A capital crunch” has happened, as venture capitalists (VCs) & angel investors don’t have followup financing for most (80%) of the startups they seeded in the 2010-12 boom.
A lot of founders are rejoining the workforce in corporate jobs.
#Bearish #Entrepreneurial

Video interview: Jeremy Grantham (GMO) discusses secular global trends & bubbles (July 2013) | Charlie Rose (Bloomberg)
US GDP will never maintain 3% growth; GMO estimates 1% terminal growth rate, attributable to:
1. Women in the workforce (-1.5pp off GDP forecasts)- growth rate of participation peaked in 2000, actually now decelerating
2. Manhours (-0.3pp)- we physically can’t work much longer days at this point
3. GDP formula (-0.2pp)- a flawed representation of economic growth; for example, the extra costs of labor/capital to extract today’s natural resources increases GDP, but it’s not indicative of incremental prosperity, it lowers our standard of living
Bullish- US conglomerates/blue chips, phosphorous/fertilizer, water & alternative energy; the US debt problem is overblown, because we can deleverage without affecting growth, since US total debt/GDP tripled from 125% in 1982-2008 & growth decelerated; the current decline in fertilization rates may save the world from overpopulation
Bearish- In only 7 years (2002-08), the Commodity Supercycle reversed 100 years of cheapening real commodity prices, but now that the bubble has popped, it will resume trend growth because we still have issues with exponential population growth, Chinese demand (consume 45% of global commodities) & accruing environmental problems (carbon emissions)
[He doesn’t even consider the contribution of technological gains to productivity, net of creative destruction. He relies on extrapolated trends; I prefer Jim Rogers’ models, which say a supply shift will meet rising demand for natural resources like food, inciting a transition from financialization back to an Agricultural society.]

Tech is all your portfolio needs: Nothing but the very best stocks | The Fly (iBankCoin)
All you need to own are tech stocks changing the world…
3D printers- $DDD $PRLB $SSYS $XONE; $ONVO says they will be printing human livers within a decade
Mobile phones/devices- $AMBA $IMMR $POWI

The secular problem of global, aggregate surplus capital | Marc to Market
John Hobson (1902): “When productive capacity grew faster than consumer demand, there was very soon an excess of this capacity (relative to consumer demand), and, hence, there were few profitable domestic investment outlets. Foreign investment was the only answer. [Once the] problem existed in every industrialized capitalist country, [we had to turn to emerging markets.]”
The World Wars destroyed much of the globe’s surplus land, labor & capital, but by the 1970s, surpluses had reemerged. So, the Reagan-Thatcher solution ended the Bretton Woods system (gold standard), enabling exports of hot money (portfolio & foreign direct investment) to . The US, UK & Australia had the deepest pockets/markets, so they ended-up absorbing much of the excess capital with trade & current account deficits, then expanded with leverage.
Thus, the world kept producing more than it could consume (supply>demand), employing its surplus capital with the US resorting to leverage to keep absorbing excesses–a feedback loop encouraging the rise of welfare states & disinflation to keep the ball rolling.
Lasting 30 years, the Regan-Thatcher solution was a new regime for the end of the gold standard & now a new solution is needed to restore balance.
[The low capacity utilization post-crisis illustrates this idea; low inventories/sales & low CapEx suggest that there’s an aggregate retrenchment underway, which may pare excesses over the long term. Previously: The mercantilist threat to global rebalancing]
#Globalization #Protectionism

Analogue: Is 2013 a 2007 redux? | Lance Roberts (StreetTalk Advisors)
Compares today’s market to 2007’s cyclical bull top, finding similarities in pricetrends/charts, leverage/margin debt, valuations, earnings & economic growth.

Update: Complete guide to global oil markets (July 2013) | EconMatters
Charts US oil/petroleum product imports, inventories & production:
US imports hit lowest level since 2000 (13 year lows), which has flooded international markets with excess crude, causing the Brent/WTI spread to collapse (has nothing to do with a drop in Cushing inventories).
WTI futures are in backwardation & EIA expects this US surplus plus Chinese slowdown to leave supply in excess of demand through 2015.
$CL_F #Trade balance


  1. […] “smart money” has lagged this entire rally, now severely underweight equity after being net-sellers throughout June; with margin balances receding (especially real/inflation adjusted), there’s […]

  2. […] $AMZN $TSLA $IBB $IWM or any of the names on The Fly’s “very best tech stocks of the future” list.  We still stand to realize massive economic benefits from productivity gains in these industries, […]

  3. […] hand-grenade with the pin already withdrawn? See also: Bearish $QQQ technical setup; Previously: Nothing but the very best (tech) & Q2 earnings a momo barometer] #Momo #Tech 2.0 $IBB […]


Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s