Diary of a Financier

Top Newsstuffs (August 5-11)

In Bookshelf on Sun 11 Aug 2013 at 06:15

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.]
#Bullish

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%.
#OpEx $QQQ

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]

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).
[Previously]

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.”
[Previously: Blackstone]
$APO $BX $CG $FIG $SPX #Bearish

–Romeo

Advertisements
  1. […] lending- Recent data show continued increases in credit demand and relaxed lending standards across the universe, from small […]

  2. While others sell, landlord Blackstone makes biggest purchase in 2 years | The Wall Street Journal (WSJ)
    $BX buys 30k rental units from $GE’s remaining $1B stake, completing a deal worth $2.7B in total. Units are located in Dallas, Atlanta & throughout southeast US.
    The investment belongs to a $13.3B global real estate fund BX recently raised, which had previously invested $5.5B in rentals.
    [Since this is contrary to BX’s explicit RE exit plans, Tyler Durden (ZeroHedge) suggests they’re planning on doing higher volume with more leveraged to hit 15-20% IRR targets, given thin Cap Rates & rental yields now available.]
    #Institutional buy-to-rent #Private Equity

    http://www.zerohedge.com/news/2013-08-13/while-others-sell-landlord-blackstone-doubles-down-rentals-biggest-purchase-two-year

  3. […] expect to deploy that cash on new long positions in Brazil ($EWZ), Gold Miners ($GDX), and Europe ($EMU) as well as additions to $IBKR and indices $IWP […]

  4. Updated Charts: Bank Index vs Gold Miners analogue | Market Anthropology
    $BKX $GDX

    http://www.marketanthropology.com/2013/08/the-silver-linings-playbook.html

  5. Updates…

  6. […] comfortable with that approximation, considering traditional bank lending is just starting to thaw.)  More importantly, there’s no empirical evidence manifest in capital markets that a […]

  7. […] increasing competitive advantages.  (That’s why the US government’s BEA justifiably revised the GDP formula to incorporate technology and other intangible expenditures in the calculation.)  […]

  8. […] In terms of mouthfeel, we can quantitatively and anecdotally compare 1998 and 2013.  For example, both exhibit persistently easy monetary policy, which in both cases is manifest in pockets like Commercial Real Estate (CRE) froth. […]

  9. […] Chart analogue: Bank Index vs Gold Miners (update) | Market Anthropology Eric presents a number of analogues for $GC_F–all of which suggest a rally is starting. Most notable is the tight-fitting comparison between $BKX (2010-11) & $GDX (2011-pres) daily fractals. [See also & previously] […]

  10. […] & dividends) instead of investment in future growth; and private equity’s heavy-hitters see little value in the US.  As ever, anxious buyers from fringe PE shops are undertaking nonsensical […]

  11. […] Now, there’s no science to this. This is just math, and human interactions are not strictly governed by data. In other words, housing starts could blast through their historic trend growth and even return to bubble-era highs again. However, this analysis is valuable–particularly from an investor’s standpoint–for a few reasons. First, it dispels the myth that the housing recovery has only just begun. Second, it exposes housing-related theses as having thin margins of safety; since mean reversion has already occurred, the probability of one outcome or another is insignificant. I’ve decided that I have no interest in investing in or around this theme, which happens to be something Wall Street’s sell-side is selling hard right now, while the buy-side is unloading. […]

  12. […] y/y (from $2.1B q/q), expected to fall further in Q4 before stabilizing ~$1.5B throughout 2014. [Previously] […]

  13. […] China loosens decade-old “One Child Policy” | Business Insider To reverse aging population & avoid a Japanese-like demographic cliff, Chinese are now allowed to have 2 kids if the parents were only-children themselves. [$SHGIDX +1.7%, $GXC +4% on news. Previously] […]

  14. […] loans: Crisis seems to be subsiding by virtue of being in the political spotlight (#Grey […]

  15. […] loans: Crisis seems to be subsiding by virtue of being in the political spotlight (#Grey […]

Comment

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 )

Twitter picture

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

Facebook photo

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

Google+ photo

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

Connecting to %s