And so the summer ends…
Complete guide to peer-to-peer lending | Business Insider
Everything you need to know about p2p lending, a form of micro-finance. Having grown rapidly across the globe for years, the US finally has some penetration, with Lending Club & Prosper the two major firms.
#Shadow banking system #Bypass Wall Street
Rail traffic weekly: Moderate pace | Association of American Railroads (AAR)
Weekly traffic +0.7% y/y; ytd remains +0.9% y/y.
6 of 10 carload groups posted gains: petroleum products +15.3%; grain -15.3.
[5th consecutive week of gains, albeit a deceleration w/w.]
Video interview: Jeff Gundlach (DoubeLine) discusses rising rates | CNBC
The bond market is now subject to “fear & loathing,” meaning investors don’t care about fixed incomes’ value because they’re too afraid of unstoppable rising rates (deep ST principal losses).
10y yield- Due to this fear, he expects $TNX to overshoot & hit 3.10 by YE13–a higher/faster rise would hurt risk assets [Previously: 10y high of 2.4% before ending year @ 1.7%]
Emerging Markets- EM currencies are good leading indicators for US rates, as EM central banks have been selling foreign reserves (e.g. USTs/Agencies) to support their domestic currencies; Russia & maybe China are good relative value
Closed-end bond funds- CEFs at 10% discounts to NAV are good opportunities, although they say a lot about investors’ psychology
Monetary policy- The Fed cannot untaper once they’ve tapered QE, so the market’s right to worry about the economy stumbling; “What’s making me nervous about the world today is this idea that the fed is omniscient and can do things perfectly… the true bubble… is central planning and central banking, and what we have is this idea that we can get away from these extraordinary and experimental policies”
Housing- Rising rates will stunt growth & everyone’s overestimating GDP’s momentum
Taper- the Fed can’t untaper because QE essentially financed the budget deficit, which is waning.
[QE doesn’t finance the deficit; Congress establishes the budget ahead of time, the Treasury auctions bonds to finance government spending, then the Fed buys POMO bonds on secondary market–from the private sector in an asset swap (bonds for cash). The Fed can & will do whatever it wants, even if that means cornering a bigger share of the Treasury market or just increasing MBS purchases to stabilize housing.]
$IEF $EMB $EEM $RSX $FXI
Analogue: Gold 1976 v 2013 | Tom Fitzpatrick (Citi FX Technicals)
$GC_F will reach $3500 (+150%) by 2015, as today’s similar to 1976 in the wake of 1974’s equity bear market bottom.
“We are back into that track where gold is the hard currency of choice, and we expect for this trend to accelerate going forward.”
[Citi’s metals analyst has bearish targets on gold.]
China widens anti-graft drive as PetroChina ousts 4 senior managers | Bloomberg
Xi Jinping’s Communist Party has continued campaigning against corporate corruption, forcing executives’ resignations at a major Chinese telecom, the railway ministry & now multiple energy companies.
This picks-up where their predecessors left off (i.e. the trial of Politburo member Bo Xilai).
[Good start for this 12th National People’s Congress.]
Ford says European car market may take years to recover | Reuters
The automaker’s European CEO says they estimate that a recovery in Euro auto demand is still 5-6 years away.
#Bearish #Null hypothesis #Durable goods
Video: Housing’s latest irrational exuberance | Robert Shiller (via CNBC)
After June’s Case-Shiller Home Price Index (headline 20-city +12.07% y/y) showed a 4th straight month of double-digit annual gains, he weighs-in with this sobering comment:
Housing goes through “big cycles… None of this is real, the housing market has gotten very speculative… driven by irrational exuberance.”
[The 2011-13 housing recovery closest resembles 1990-94 analogue, which means we’ve merely reached a pause at halftime (1992) en route to a 4.8x return in housing-related stocks like builders & suppliers.]
“Distributed generation”: Why the US power grid’s days are numbered | Bloomberg Businessweek
Today, regulated utilities burn fossil fuels to feed our electrical grid, but within a decade, consumers will have migrated to decentralized, homegrown, green energy (e.g. rooftop solar panels). So, utilities now have to worry about obsolescence–like the airlines & telecommunications industries after 1978’s deregulation.
$XLU $XLE $TAN
NYSE margin debt & balances (July 2013) | Doug Short (dshort.com)
Stemming a 3-month slide, gross nominal margin debt ticked back up, now only -1% below April’s alltime high (down from $384B to $382B); real debt climbed too, remaining above 2000′s high but shy of 2007′s record.
Net margin balances (-$99B debit) still far exceeded 2007/11 pre-correction lows & again nearing Tech Bubble’s record low.
[That’s not shocking, as the market was up in July, but these high margin levels probably precipitated $SPX’s -5% drawdown so far in August; now that summer’s over, we’ll need higher cash volumes to lead us higher. I wish this data were higher frequency/lower latency, because it’d be a lot more significant.]
Valuation multiples expansion at fastest pace since Tech Bubble, as bull market ages | Bloomberg
Now at 16x EPS, the $SPX ttm PE ratio is +14% y/y, comparable only to 1999’s +19% increase & 1987’s +43%.
Fed governors deny pleas for global coordination as FOMC plans to exit QE (Jackson Hole) | Bloomberg
“Federal Reserve officials rebuffed international calls to take the threat of fallout in emerging markets into account when tapering U.S. monetary stimulus…
“Such selloffs aren’t an issue for Fed officials who said their sole focus is the U.S. economy as they consider when to start [tapering].”
[Disgusting; these are the same hypocrites who called for “global, coordinated central bank interventions” when it was their ass on the line during the 2008-09 crisis.]
#Moral hazard $EEM $EMB
The confidential “End Game” memo: How the US Treasury conspired with banksters to deregulate finance (and blow-up the world) | Greg Palast (Vice)
A 1997 memo from Tim Geithner to Larry Summers explicitly reveals a cunning, calculating conspiracy among politicians, regulators & CEOs:
When Summers pushed for the repeal of Glass-Stegall, he also advised Wall Street to lobby the World Trade Organization (WTO) to adopt a global Financial Services Agreement (FSA), which unilaterally forbade sovereign nations to embargo derivatives.
Helping it avert the 2008-09 crisis, Brazil was the only country (out of 156) that refused to sign the accord, but the EU tried to boycott Brazilian exports as a consequence.
[Ladies & gentlemen, your next Fed Chairman.]
Video documentary: Religulous | Bill Mahr
Critique of religion, along with its dissonance, corruption, violence & worst of all, hypocrisy.