Diary of a Financier

Top Newsstuffs (September 2-8)

In Bookshelf on Sun 8 Sep 2013 at 06:20

Top down, windows up… driving west until I-90 ends or Canada begins…

Poland nationalizes private pension funds | ZeroHedge
Poland confiscated the country’s private pension funds’ bond holdings–half of their assets–to reduce its sovereign debt load by 8%.
[This isn’t a depositor cramdown like the Greek PSI bail-in, which is contractually legal; this is straight-up corrupt.]

White paper: The shadow labor supply & its implications for long term unemployment | Federal Reserve Bank of Kansas City
Examines the long term unemployed & their impact on the economy. These “shadow” job seekers are discouraged workers, those not looking for jobs, who aren’t accounted-for by headline (U3) unemployment rates, but are included in U4-6 series & labor force participation.
As they return to the job market, they’ll statistically raise the unemployment rate +50bps by 2016. Overall, the permanent structural/demographic changes to labor force participation should raise unemployment an additional +1pp by 2016.

Rail traffic weekly: We have a real rally | Association of American Railroads (AAR)
Weekly traffic +3.6% y/y; ytd increases to +1.0% y/y.
6 of 10 carload groups posted gains: petroleum products +22.5%, motor vehicles & parts +12.8; metallic ores & metals -4.4%, grain -0.6.
[6th consecutive week of gains resumes acceleration, enough to filter-through to economic activity/growth.]
#Bullish! $ARII $CLF $F $SMP $USO

Bank of Japan’s Kuroda updates assessment of economy: Recovery back on track | Wall Street Journal (WSJ)
Upbeat outlook suggests PM Shinzo Abe will proceed with sales tax hike from 5-8% to be announced in early-October (effective 4/2014). While the BOJ has limited ability to offset economic impacts of that fiscal policy, it will ease monetary policy (QE) as necessary to achieve its 2% inflation target.
Kuroda cited a rise in income trickling-down to spending (consumption & capital expenditures), exports & corporate profits.

S&P 500 Price/Earnings to VIX ratio (August 9, 2013) | David Bianco (Deutsche Bank)
$SPX’s PE/$VIX ratio at 1.2x says investors are borderline complacent right now:
“While stocks have room to extend their advance since March 2009, increased volatility is likely to accompany any further gains.”
[Ratio is despondent <0.8x & complacent >1.2; SPX topped out at 1.4x in 2000, 1.5x in 2007.]

Complete guide to the student debt crisis | Reuters
Data about student loans is hard to come by, as Congress, the Department of Education & schools have worked hard to suppress the true statistics.
This presents the most complete, accurate information available, thanks to the Consumer Financial Protection Bureau (CFPB)… and default rates are off-the-charts.
#The American Dream?

Sell side consensus indicator: Analysts’ optimism improving, still a buy signal (August 31, 2013) | Bank of America Merrill Lynch
Wall Street analysts’ sentiment is improving, now up to 52.8%–still indicative of consensus bearishness (a contrarian “buy” signal).
Alltime low was 43.9% in July 2012, but we’re still below the March 2009 lows
[Indicator measures “average recommended equity allocation of Wall Street strategists as of the last business day of each month.”]

Revisiting the Eurocrisis: Portugal still ailing | Sober Look
The Troika will revisit Portugal on 9/16 for a regular review (€78B bailout in 2011). They should pass the backward-looking inspection, thanks to loosened standards, but their Finance Ministry’s 2H13 projections for fiscal balance–deteriorating from -6 to -9% budget deficit–warn of a poor future trajectory.
In response, Portuguese CDS spreads are widening again, back >500bps, just under July’s highs during their Constitutional crisis, but shy of 2012’s high ~900bps… while Spanish & Italian CDS have continued to drop.
[The Eurozone has reached the bullish upswing of “Relief” on the Investors Curve of Psychology; for example, see also this broader appraisal: As austerity lifts, so does Europe | MacroBusiness]

Purchasing Managers Index (August 2013): Globe continues expansion by leaps & bounds | Business Insider
Global PMI keeps growing (50.8 to 51.7) for 10th consecutive month with a pan-European recovery & UK/US strength outrunning Australiasia’s deep contraction:
Japan’s expansion resumes after July’s swoon (50.7 to 52.2).
China’s official PMI reversed higher (50.3 to 51), but the unofficial keeps sliding (47.7 to 50.1), back to expansion & a 4-month high after July’s 11-month low.
The rest of Asia was mixed, with South Korea’s slide taking a pause (47.2 to 47.5), but still contracting.
Australia bounced back from the grave (42.0 to 46.4), perhaps given the hope of elections this month.
Eurozone comeback now appears entrenched (50.5 to 51.5).
UK remains a leader with another massive surge (54.8 to 57.2).
US ISM beats big (55.4 to 55.7 v 52.0 exp), with employment growth decelerating a bit (54.4 to 53.3) and new orders (58.3 to 63.2) & production (65 to 62.4) both carrying-the-day.
[Big global risk-on rally ensues, but faded throughout day on US Congressional talk of Syria; still, this hugely positive report affirms many of the narratives I’ve been weaving over the past 2 month. Previously: Inventories, Capital Goods shipments & new orders]


  1. […] the "Durable Goods pent-up demand" thesis I've been riding all year, which railtraffic seems to be affirming as we speak–although exuberant consumer leverage can generate false positives. I am worried about […]

  2. […] on a y/y basis, but Inventory/Sales ratios remain near historic lows.  Strong US (and global) PMIs suggest that new orders and manufacturing are both surging, which followthrough will be reflected […]

  3. […] continues to wane, settling-in at a healthy +3% trend; volumes are comp-ing off a reasonably high base from 2013, which will get more difficult over next 2 weeks, particularly for autoparts, which […]


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