Diary of a Financier

Top Newsstuffs (October 28-November 3)

In Bookshelf on Sun 3 Nov 2013 at 05:19

Chili season… perfect for post-Red Sox parade…

Documentary video: Four Horsemen- How the world really works | Renegade Economist
Critique of neo-classical economics discusses a new, more perfect paradigm, calling for a bloodless revolution:
1. Restore true democracy- Monied lobbyists dilute equal voting rights
2. Close wealth gaps/income inequality- Cancel most debts, but maintain ownership of real assets (a la 1953’s German External Debt cancellation)
3. End the reign of corporations- Businesses should be employee owned & run (partnerships)
4. Reinstitute monetary discipline- End fiat & back currency with hard assets
5. Revert from globalization back to local economies
6. Refocus on social wellbeing, rather than material wealth- Transition to value-added tax (VAT) on consumption, rather than income
“23 international thinkers, government advisers & Wall Streeters break their silence & explain how to establish a moral & just society.”
[Radically progressive, but thought provoking; I like how it talks as much about solutions as the problems. Previously]
#Plutocracy #Oligarchy #Gold bugs #The usual suspects

Renewable energy storage solution | Business Insider
Solar Grid Storage has developed a solar & wind energy storage system:
Old shipping containers house an inverter & a transformer, which convert excess power & tap the grid, charging & discharging its battery cells as necessary, when the sun doesn’t shine or the wind doesn’t blow.
[Previously: Homegrown energy threatens the grid/utility with obsolescence]
$TAN

How General Motors was really saved: The untold story of the most important bankruptcy in US history | Forbes
The true story of the $GM bailout, which plan (“NewCo/OldCo”) was hatched by consultants & GM itself (“Team Auto”)–not politicians, who preferred an unrealistic, prepackaged bankruptcy.
They saved the brand by segregating & spinning-out its valuable assets under Bankruptcy Code Section 363; the US Treasury was the majority shareholder providing NewCo’s fresh equity, along with Canadian government, UAW & crammed-down bondholders. The Bush Administration had promised government capital even before Obama.
[Ignores the disregard for contract law, like unsecured liabilities of UAW given preferential treatment over senior, secured bondholders–without negotiating material union concessions. Previously: Motor city revived]
#Moral hazard

The future’s still so bright: FY14 outlook | Bill McBride (Calculate Risk)
2014 economic growth (GDP) will be better than 2013 due to:
1. Housing recovery continues
2. Household balance sheets healthy after deleveraging
3. State & local government austerity reversing (in aggregate)
4. Federal austerity reversing as fiscal drag waning
5. Population demographics improving with baby boom’s echo coming-of-age
[Counterpoint]
#Bullish

Chart: The collapse in US infrastructure spending | BCA Research
Including federal, state & local governments, non-defense investments in structures has declined -3.3% since 2007 & -2.4% since 2002 (annualized).
[Previously]
$VMI $JXI #American Recovery & Reinvestment Act (ARRA)?

Purchasing Managers Index (October 2013): Worldwide recovery hits 29-month high | Business Insider
Global PMI keeps growing (51.8 to 52.1) for 12th consecutive month:
Australia’s recovery keeps accelerating (51.7 to 53.2).
Japan’s expansion continues (52.5 to 54.2).
China’s official PMI floats higher (51.1 to 51.4), as does unofficial (50.2 to 50.9) after July’s low.
The rest of Asia’s expanding too, including South Korea (49.7 to 50.2),Taiwan (52 to 53), Vietnam (51.5 unch) & Indonesia (50.2 to 50.9).
Eurozone comeback resumes (51.1 to 51.3), with a nice pickup in Germany & Spain, but an unexpected decline in France (49.8 to 49.1).
UK remains a leader despite a second straight month of deceleration (56.3 to 56).
US ISM beats big again (56.2 to 56.4 v 55.0 exp), with employment returning to slower growth (55.4 to 53.2); new orders (60.5 to 60.6) & production (62.6 to 60.8) remain strong–both at lofty levels indicative of strong manufacturing activity.
#Bullish

Rail traffic weekly: Acceleration moves the needle | Association of American Railroads (AAR)
Weekly traffic +3.4% y/y; ytd growth remains +1.3%.
8 of 10 carload groups posted gains: grain +29.6, petroleum +20.1%; farm/food -3.9%.
[13th consecutive week of growth with a nice uptick; grain volumes rebounding off of low 2012 y/y base; nice, unexpected surge from petroleum.]
#Bullish $CL_F $XLE $XOP $DBA $MOO

Interview: Russ Bubley’s complete guide to social impact bonds | Portfolio Probe
Q&A discusses SIBs–the hot, new investment raising capital for public sector initiatives:
Essentially, governments hire private consultants/contractors with a payment-by-results contract (aka “pay for success”), which makes payments contingent on achievement of a desired outcome, as opposed to unconditional service agreements.  An investor fronts the working capital for the service provider, thereby assuming the project risk, which capital is returned when/if the SIB is fulfilled, triggering a government funding.
[AKA Pay on Performance (POPs) or Social Benefit Bond (SBB).]

The only NYSE margin debt chart that matters | Philisophical Economics
Charts NYSE margin debt/Total market capitalization (1960-2013), which shows the ratio rising from 0.5% in 1970 to 1.6% currently–above prior highs ~1.4% from 1987 & 2000, but below 1.8% alltime record in 2009.
[This paints the same picture as real margin debt (i.e. inflation adjusted), but somehow rationalizes it as a bullish indicator by using a contorted narrative. Counterpoint: NYSE margin debt releveraging to new highs]

Photos: Earth’s rich tapestry from space | Twisted Sifter
18 satellite images from the European Space Agency (ESA) show our planet’s gorgeous landscape.

–Romeo

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  2. […] you can’t even identify it in advance.  In this case, that would be something to break our economic momentum such that GDP actually contracts. In those two examples, the Fed squarely addresses a couple grey […]

  3. […] growth should expand in 2014 at the fastest rate since the Clinton-era, as the fiscal drag wanes, state & […]

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