I love when football and baseball air at the same time; add PGA Chanmpionship #Perfection…
Charts: Bank Index vs Gold Miners analogue | Market Anthropology
Tight fitting comparison between daily $BKX 2008-9 & $GDX 2012-13.
[$GDX daily tilted H&S bottom w 2x bull divergence; bullish weekly & monthly fractals.]
$GDXJ #Watch list
Rail traffic weekly: Head of steam | Association of American Railroads (AAR)
Weekly traffic +2.0% y/y; ytd remains +0.8% y/y.
7 of 10 carload groups posted gains: petroleum products +19%; grain -10.9.
[Second straight week of nice gains.]
Quant study: Relationship between research & development and equity returns | Goldman Sachs
Data includes 8y CAGRs for NASDAQ 100 stocks (2004-12):
R&D correlation to sales growth 75%, to stock price 71%.
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.”
$1.2T total loans
$1T federal loans
$89B defaults (7M borrowers)
The Eurocrisis ain’t over: Is a perfect storm brewing? | Bridgewater Associates
Ray Dalio’s group notes the EMU’s progression from Troika bailouts (Ireland) to private sector bail-ins (Cyprus).
5 risks Europe’s facing:
1. Portugal’s debt roll- €300B in maturities include bailout loans, €75B of which is bail-in-able; may start contagion if haircuts administered
2. Framework for intervening with troubled sovereigns/banks- unveiling could lead to panic (concerns of depositor bail-ins)
3. Bank stress tests- upcoming results could reveal residual weaknesses, compounded by Basel III transition; Italian & Spanish banks will need €75B additional capital
4. France’s debtload- still growing, could rouse vigilantes
5. International attention- can exacerbate all these issues
[Note that these are all #Grey Swans, which means their probability weightings are already reflected in Europe’s underperforming markets; since everything is priced-in, predicting the outcome is a sucker’s game–nothing more than an educated guess.]
Hedge funds crowded into the Oil trade | Deutsche Bank
Last week, speculators reduced WTI crude net longs from $38.7B to $37.4B, but the net position (19.75% of open interest) remains an alltime record. Such extremes risk a brutal selloff.
$CL_F #Commitment of Traders
Senior loan officer survey (2q13): Credit demand increased & lending standards mostly relaxed | Federal Reserve (Fed)
C&I demand rallied again with lending standards still loosening; small business loan approval rates rose to alltime high 17.4% (+50% y/y).
CRE demand increased at highest level since 1998 with lending standards near 2005 lows.
Prime residential mortgage demand showed big increase; subprime demand spiked massively higher despite corresponding tightening standards.
Consumer loan demand still steadily strong, with auto loans leading the way.
[Early signs of froth? CRE looking a bit like wild west with record demand increases unchecked by lending standards seems bubbly; subprime demand explosion unabated by tightening–perhaps a sign of low/middle-income consumer stress. See also: Big banks warming up to small businesses | Washington Post (WaPo)]
#Bullish #Credit cycle #Credit bubble
Analogue: 10 year US Treasury yields (2004 v 2013) | Market Anthropology
Compares today’s $TNX to 2004’s, when the Fed last began a Fed Funds rate tightening cycle.
Tight fitting relationship suggests rates will decline after FOMC September meeting.
[See also: Putting the recent bond selloff into historical context: Comparable to 1994 & 2003 | New York Fed (FRBNY)]
China to end “One Child Policy” | Bank of America Merrill Lynch
Plan proposes to ease restrictions by YE13 or 1H14, allowing families to have two children if at least one parent is from a one-child family.
Enacted in 1978, the population control prevented 400M births between 1979-2011 & still applies to 35.9% of Chinese citizens.
GDP formula revision makes Great Recession & recovery look a lot better | Moneybeat (WSJ)
Data revisions increase 2007-09 GDP from -3.2% to -2.9 (annualized) & subsequent recovery from +2.1 to +2.3.
BEA changed the components in its official GDP calculation to include intellectual property (R&D and software) and pension distributions (rather than cash contributions).
Ready to spend, Toyota’s $37B cash pile may give Abenomics a second wind | Bloomberg
Conservative by nature, most Japanese companies have reached cash targets they set after one/two punch of the financial crisis & earthquake, with corporate cash now ¥225T.
$TM plans on spending, increasing CapEx by 10%, dividends by 33% & bonuses.
From Apollo to Fortress to Carlyle: ‘Now is the time to sell everything’ | Bloomberg
Private equity likes to buy low/sell high too & with recent LBOs reaching 9x EBITDA vs 8x historical average, valuations are rich.
Said Leon Black in April: “It’s almost biblical: there is a time to reap and there’s a time to sow… We think it’s a fabulous environment to be selling. We’re selling everything that’s not nailed down in our portfolio.”
Carlyle CEO on 2q13 earnings call: “Increased competition from entities outside of P-E along with easy access to cash is making it tough to find good deals.”
$APO $BX $CG $FIG $SPX #Bearish