Diary of a Financier

Top Newsstuffs (November 11-17)

In Bookshelf on Sun 17 Nov 2013 at 04:42

Ski & Snowboard Expo this weekend–this year’s official winter kickoff…

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]

Solar power backed bonds get approval | The New York Times (NYT)
SolarCity approved to sell securitized solar energy leases from its residential & commercial customers.
First offering is $54.4mm @ 4.8%, 13y, BBB+ rating.
[Previously & See also: Google & KKR teaming up on big solar deals (PV & thermal)]
$SCTY $TAN #ABS

Janet Yellen Senate confirmation hearing | The Wall Street Journal (WSJ)
Five key points on stock market & QE tapering:
1. ‘Stocks are not in a bubble’ due to equity risk premiums (ERP) still remaining positive
2. The benefits of LSAPs still outweight the risks
3. Despite meaningful economic progress, FOMC needs to be sure there’s enough momentum to sustain the trend, particularly in labor markets (unemployment)
4. There is “no set time” for tapering
5. QE will not continue forever (QEternity)
[Where’s/when’s the call for fiscal stimulus!? Previously: The Fed Model is misleading]
#Bullish #Euphoria #To the moon Alice!

Rail traffic weekly: Acceleration continues | Association of American Railroads (AAR)
Weekly traffic +5.6% y/y; ytd growth jumps higher to +1.6%.
8 of 10 carload groups posted gains: petroleum +25%, grain +21.3, motor vehicles/parts +20.5; coal -0.6%.
[Nice acceleration without much aid from a low 2012 base (Hurricane Sandy), which didn’t leave railroads with much of a hangover at this point in the y/y comps.]
#Bullish $CL_F $XLE $XOP $DBA $KOL

US household debt & credit report (3q13) | Federal Reserve Bank of New York (NY Fed)
Positive signs that private sector deleveraging is ending:
Total consumer indebtedness +1.1% q/q to $11.28T (+$127B in the biggest increase since 1q08) vs $12.68T record in 3q08.
[Good data, but a bit more nuanced meets the eye: student loan delinquencies & personal bankruptcies keep rising, both undoubtedly hurt by rising rates. Previously: Signs of consumer stress]
#Bullish

Calm down, the European recovery’s not dead yet | Barry Ritholtz (The Big Picture)
“The headlines this morning are all agog about Europe… Often when data series bottom and reverse, there is a surge, which subsequently subsides… This is the simple reality about post-credit crisis recoveries: They are slow and often halting.”
$EZU $HEDJ

QE was just a big bank bailout, as told by an insider | Andrew Huszar (The Wall Street Journal)
Hunszar managed the Fed’s MBS POMOs from 2009-10:
The Fed’s most optimistic calculations say QE added 1-3pp to US GDP in aggregate between 2009-13.
PIMCO says $4T in QE yielded +$40B in output (+0.25% GDP).
“Because QE was relentlessly pumping money into the financial markets during the past five years, it killed the urgency for Washington to confront a real crisis: that of a structurally unsound U.S. economy.”
[Disregards the banking system’s systemic importance to the economy, with Wall Street as the oil to Main Street’s engine; but I’d agree about asymmetric benefits accrued to #TBTFs & #Moral Hazard. Counterpoint]
#Wool over their eyes, thumbs up their asses

US cracks-down on junk loan & LBO excesses | Bloomberg
In an annual government review of bank loans, the Fed/OCC/FDIC “criticized” 42% of leveraged loans for some sort of underwriting deficiency.
Banks were given 30 days to submit plans for tightening lending standards.
[What can regulators do about the shadow banking system, which I can tell you first hand is taking the handoff whenever traditional banks or sponsors balk? Previously]
#Bearish #Credit Cycle $BKLN $HYG

Treasury announces first Floating Rate Note auction | MarketWatch
UST will hold its first ever FRN auction on 1/29/2014, with a $10-15B 2y issue.
Also considering a new, 5y TIPS offering.
[Previously]
$FLTY $IRX $TIP

Iron Ore rallying as cargoes to China reach record | Bloomberg
Continuing the bull market started in July, Chinese September iron ore imports reached a record with prices back at 2-month highs.
With 25mm ton demand excess right now, Australian production capacity increases will return supplies to a 49mm ton surplus by 2h14.
2014 global trade expected to increase +7.1% to 1.27B tons; Chinese imports forecasted +9.5% to 865mm, as stockpiles are -12.6% y/y to 74.4mm tons.
$CLF $XME $BALDRY $GXC $FXI $EWA

Picture of the week:

Return of the Cranes: Miami (2013.11) | Bill Harrison (Calculated Risk)

Return of the Cranes: Miami (2013.11) | Bill Harrison (Calculated Risk)

#Bearish $XHB #Signs of a bubble (again) #Observational selection bias?

–Romeo

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  1. […] Regulators are clamping-down on excesses by explicitly asking banks to tighten lending standards (I & II) […]

  2. […] along the mean–they always trend with high variance, over & undershooting equilibrium. Counterpoint & See also: Credit & consumer […]

  3. […] monthly payments will triple for some, so watch 90-day delinquencies & defaults. [Previously: Fed's household credit report] #Bearish #Black […]

  4. […] recency bias, but I hope the pang helps these players avoid a similar fate.  In fact, regulators called-out the leveraged loan market last year, talking it down off a cliff of deteriorating underwriting […]

  5. […] Top Newsstuffs (November 11-17) […]

  6. […] answers indicate that banks unanimously tightened standards for leveraged loans in response to regulators’ first warning in 3/2013; banks expect “little change” in 2014 delinquencies & chargeoffs for […]

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