Diary of a Financier

Top Newsstuffs (January 13-19)

In Bookshelf on Sun 19 Jan 2014 at 06:40

In Brady we trust…

US Appeals Court strikes-down internet neutrality: Big telecomm’s close to winning war again free & open internet | GigaOM
The court ruled in favor of Verizon against the FCC’s plea:
Verdict eliminates “net neutrality,” which liberalized data flow over the internet by prohibiting ISPs from giving preferrential treatment to one midstream company over the other.  In other words, ISPs can now charge useage-based fees, implement data caps, or auction services to the highest bidders amongst deliverers of “last mile web content,” whose costs will likely get passed to consumers.
FCC can still appeal the decision.
[e.g. A big win for big providers like $VZ, but a loss for startups & users like $NFLX, who’s responsible for a lot of internet traffic and whose business model leverages the free infrastructure.  Amazing that VZ’s lobbyists found a way to stop innovation, disruption, and the “cut the cord” shift toward streaming services; only $GOOG has the resources (dark fiber) to combat this. Early on, we made the decision the internet would have low barriers to entry, making ISPs utilities–the healthy profits of which apparently weren’t enough.]
#Oligopoly $CMCSA $T $IYZ #YouTube $FB #Telecommunications #Bureaucracy

“Getting lucky: The role of luck in investing” | Howard Marks (Oaktree Capital)
“I wouldn’t spend my time getting better [at poker]… I’d spend my time finding weak games… Likewise, the easiest way to win at investing is by sticking to inefficient markets…
“35 years ago, the high yield bond market was a classic example of market inefficiency…
“While few markets demonstrate great structural inefficiency today, many exhibit a great deal of cyclical inefficiency from time to time.”
#Seeking alpha

Rail traffic weekly: Bad start to the year continues | Association of American Railroads (AAR)
Weekly traffic -7.5% y/y; growth falls -2.8% ytd.
2 of 10 carload groups posted gains: grain +10.1%; vehicles/parts -22.5, metallic ores -20.3, minerals -16.0.
[Can’t blame the weather for this report.]
$DBA $XME

Five reasons for structurally higher profit margins | Deutsche Bank
SPX net profit margins are at historical highs (10.5%), and while many think they’ll mean revert as always, DB says they’re here to stay because of:
1. Constituent changes (+80bps)– SPX components change ~5% annually
2. Lower taxes (+80bps)– SPX effective tax rates dropped 7%
3. Lower interest expense (+25bps)– ZIRP has lowered interest expense & leverage
4. Foreign operating profits (+45bps)– foreign operating profits have doubled
5. Mix shift (+40bps)– SPX is now overweight sectors with higher margins, like Tech, which has gone from 12 to 20% share since the 90s
[Only a couple of those may remain structural. See also]

State of Alaska joining Liquid Natural Gas export project | Market Currents (Seeking Alpha)
Alaska taking 10% stake in a $45B $NG_F export project with $XOM $BP $COP $TRP.
In addition to pipeline & processing, the liquefaction facility will have capacity to ship 18M metric tons/year.
[See also: US government prohibits hydrocarbon exports]
$GLNG $LNG

No more trash | The Fly (iBankCoin)
“I’m disgusted by what I see: Chinese stock after chinese stock up 50% over the past few weeks. Solar and alternative energy names up double figures in weeks. Biotech hand grenades up triple digits over the past few days. I’ve seen this story before… I am a seller [raising cash].”
[Lol, exactly.]
#Bearish $IBB $TAN #Confirmation bias

The developed world has hit “peak cars” | Unconventional Economist (MacroBusiness)
Charts show registered automobiles per household, per licensed driver & per person (1984-2011): vehicles peaked at 2.05/household in 2001 & 2006, and miles driven have dropped 9% by every measure since the peak too.
[Previously]
#Demographics #Durable goods

Presentation: “Let the race begin in the Year of the Horse (2014 outlook, 1q14) | Jeffrey Gundlach (DoubleLine)
Equities– risk has been fueled by QE, per comparison of $DJIA market cap to Fed balance sheet, which follow the same growth trend (model estimates YE14 Dow target @ 18,000) 
QE taper– expects regular $10B reductions in POMOs until they reach zero [before, he thought QE would never end]
Credit– both $HYG & $LQD are as overvalued as they’ve ever been, but credit risk is still low & “we skipped a default cycle” since companies were able to refinance at low rates
Treasuries– $TNX capped ~3% with 2.5% downside target because pensions will reallocate to bonds as stock market rally gets them fully funded; yield curve will steepen, especially 2s5s ($SHY/$IEI); the risk of $TLH/$TLT “short squeeze” is greater than duration risk, since the Fed’s QE has created a supply squeeze in risk free assets
Gold– expect $GC_F to hit $1350 (+8.5%) this year; bullish $GDX $GDXJ on cheap valuations & maximum pessimism
Opportunistic– Puerto Rico muni debt; $JCP bonds; bond #CEFs at >10% discounts to NAV; 3D printers “most monumentally transformative technology” ($DDD $SSYS)

–Romeo

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  1. Followup…
    FCC will not appeal Verizon’s net neutrality case, but will draft revisions to preexisting rules | Market Currents (Seeking Alpha)
    FCC will just rewrite the rulebook instead of struggling through the courts.
    White House supports net neutrality.
    FCC supports net neutrality with exception of large data consumers like $NFLX paying additional surcharge.

    http://seekingalpha.com/news/1577491-fcc-to-draft-new-net-neutrality-rules-wont-appeal-verizon-case

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