Another weekend marred by politicos…
Video documentary: Exit through the Gift Shop | Banksy & Thierry Guetta
By splendid coincidence, the film follows anonymous, renown street artist Banksy (pseudonym), whose profound, subversive graffiti exhibits are the new modern art–walking the controversial line between vandalism & expressionism. But, the camera ultimately turns on the filmmaker himself, who evolves into a comically infamous artist known as Mr. Brainwash (MBW).
Also featuring Space Invader & Shepard Fairey.
The price of paying attention | Barry Ritholtz (The Big Picture)
Tune out what’s unimportant; lose the news; watch the signals, not the noise; focus on what you can control (not binary/indeterminable events):
“While the market’s up/down, back and forth make it appear over the short term that these things are oh so important, the simple reality is they are utterly meaningless. There is always going to be some crisis, some news event, some ‘most important thing in the world right now,’ and always has… all of these ‘earth shattering events’ each end up being ‘tears in the rain’—a momentary emotional blip of little consequence… gossip, with next to no significance to the overall global economy, filler… Remember, the end of the world bet has been a money loser since the beginning of time.”
Rail traffic weekly: Strong trend growth firming-up | Association of American Railroads (AAR)
Weekly traffic +2.1% y/y; ytd growth remains +1.2%.
7 of 10 carload groups posted gains: motor vehicles/parts +12.3, ores/metals +10.1; coal -11.4%.
[11th consecutive week of growth firms-up ~3% trend growth.]
Heads or tails: The statistical significance of global demographics to economics & capital markets | Niels Jensen (Absolute Return Partners)
Complete guide to demographic dynamics:
Equity returns peak when populations are concentrated in a large 50-54 year old age group (+1% marginal return for every 1% increase in the cohort); trough when concentration is in 70+ age group (-2% for every 1% increase).
Fixed Income optimized for 0-4 & 45-49 year old concentrations (+50bps); worst for 15-19 year old (-50bps).
GDP growth is parabolically shaped, best with 30-34 year old concentrations (+0.15pp); worst for 70+ (-0.3pp).
FRBSF study predicts $SPX PE multiple compression until 2020, when it’ll bottom at 8-9x; found that 60% of the change in equity valuations is explained by the ratio of middle-aged to old-aged cohorts (“M/O ratio”).
IMF study finds that demographic shifts weaken monetary policy, requiring bolder/unconventional central bank mechanisms.
$EEM #Bullish; $EFA #Bearish
Shadow housing inventory reaches 5-year low | World Property Channel
Shadow inventory -22% y/y in July to 1.9mm homes, -38% since 2010 high.
Completed foreclosures -34% y/y in August to 48k.
Foreclosure backlog -33% y/y to 939k homes.
Household Debt/Income ratio, USA vs Canada (1990-2013) | BCA
When the US entered its housing crisis, consumers deleveraged to the tune of -30pp (from a debt/income high of ~130%), but Canadians keep accumulating debt (debt/income now >160%):
“This chart does give one pause… There are many reasons why Canada’s boom did not bust — their laws require mortgage insurance, minimum down payments and actual credit checks; they have a well regulated banking system less given towards spams of insanity. Economically, energy and minerals are still hot; and there are enormous numbers of Chinese buying up condos in Vancouver and Toronto and elsewhere as a way to get cash out of the country and create an emergency life raft in case China implodes.”
[Previously: The rise of Canadian subprime, Canada’s real estate bubble & How Canadian regulation avoids crises]
Checklist: Focus on the 5 things that really matter | Barry Ritholtz (The Big Picture)
The only significant indicators needed for finding the market’s signal through the noise:
1. Valuation– How are stocks valued? Are they cheap or are they expensive? (Keeping in mind that cheap stocks can get MUCH cheaper, and expensive stocks can get MUCH dearer)
2. Trend– What is the economy doing in sum? Is it expanding or contracting? What is the market doing — rising, falling or range-bound?
3. Inflation– What is the overall trend in inflation? Are prices rising or falling or stable — and how rapidly?
4. Earnings– Are companies able to grow their top and bottom lines?
5. Credit– What is the cost and availability of credit?
White paper: The Superinvestors of Graham-and-Doddsville (1984) | Warren E. Buffett
#Active management #Value investor/style