Diary of a Financier

Top Newsstuffs (January 27-February 2)

In Bookshelf on Sun 2 Feb 2014 at 01:10

Back in the Rockies…

NYSE margin debt & balances: Unabated (December 2013) | Doug Short (dshort.com)
Gross nominal margin debt spikes again, +5% to another alltime high ($445B).
Real margin debt data also spikes, now above its prior alltime high from 7/2007.
Net margin balances (-$149.4B debit) reach another alltime low, still shattering even the Tech Bubble’s former record (-$123B) and crushing 2007 & 2011 pre-correction lows.
#Bearish #Euphoria

Rail traffic weekly: Another big week defies weather’s handicap | Association of American Railroads (AAR)
Weekly traffic +4.4% y/y; growth jumps higher again to +1.3% ytd.
7 of 10 carload groups posted gains: grain +24.4%, petroleum +13.1; metallic ores -1.8.
$DBA $USO $XME

Napkin dad | Mashable
Terminally ill father pens 826 napking notes for his daughter’s, Emma’s, future lunches.

Emerging markets of all breeds descending into crisis? | naked capitalism
No matter their economic welfare, EMs are just collateral damage in US experimental monetary policy (i.e. ZIRP/QE), which coaxed a “search for yield”:
Hot money originally sought EM deposit accounts for their high interest rates & appreciating currencies amid DMs’ ZIRP. As the first murmurs of a US QE taper arrived in 2012, that capital fled EMs and was replaced (dollar-for-dollar) by external debt issued by banks & the real economy to maintain liquidity.
Thus, the more liberal the local capital market, the worse the predicament, which is ironic given the “Washington Consensus.”
Given globalization, countries w large FX reserves & domestic savings aren’t safe, as seen w Japan in 1970s (foreign reserves >40% of GDP), Taiwan 1995 (savings 45% GDP) & Malaysia in 90s (savings 40% GDP)–all more than China’s today.
[Previously: Fed’s transparent communications & guidance give EM central banks time to prepare for taper]
$EEM $EMB $EMLC #Unintended consequences

Hank Paulson on the US economy, 5 years later | Business Insider
Former Treasury Secretary said “we’re sowing the seeds for another crisis,” as the government has focused entirely on resurrecting financial markets while neglecting structural repairs:
1. Mortgage market reforms– Fannie & Freddie should be wound-down per Corker-Warner Housing Act then replaced by  Federal Mortgage Insurance Corporation (FMIC)
2. Regulation– 5 US regulators “falling all over themselves, competing with each other, with no clear message” (SEC/CFTC/FINRA/OCC/Fed)
3. Shadow banking– Money Market Funds & Repos
$FNM $FRE #MMF

The history of US stocks during emerging market crises | Ed Yardeni (Dr. Ed’s Blog)
Compared today’s $SPX to 1997’s, amidst the Asian Crisis:
1997- SPX +31% including -9.6% drawdown (Q1)
1998- SPX +19.3 including -19.3 drawdown (Russian Ruble Collapse & LTCM)
[SPX has a lot more international & EM exposure today, but he’s right to point out the US market’s resilience.]
$SPY $EEM $EMB $EMLC $ARGT $TUR $RUB

Video: The Mondragon Corporation & the potential of a worker-owned, cooperative economy | Gar Alperovitz (Real News Network)
Proposes a 30-year transition to a co-op economy, which democratizes ownership & decentralizes planning relative to strong-form feudalism (power concentrated among a few land owners) or capitalism (owners of capital).
As with Spain’s Mondragon, co-ops should be bottom-up, local organizations (national or global when necessary).
For example, a Cleveland neighborhood started a network of co-ops, including a greenhouse & laundromats. Residents, Case Western U & the Cleveland Clinic all use the co-ops, which pay wages then reinvest in the community. Unlike a corporation, there are no retained earnings for warchests or M&A, no dividends to external shareholders, and no disproportionate bonuses/salaries.
[Previously]
#Economic model

–Romeo

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  1. […] EMs' large FX reserves dissappear quickly (hot money) as the tides continue to turn. Previously: EMs descending into crises] $EEM $EMB $EMLC […]

  2. […] QE/ZIRP: Not only has the Fed’s unconventional monetary policy created perverse incentives for domestic entities (see “Tortured rationalizations” and “Misincentives” above), but a somewhat coordinated, developed market, central bank response to the crisis has engendered hot money flows into Emerging Markets. […]

  3. […] Normal capital gains accounting will not apply so as to simplify cash management [Previously: Hank Paulson says markets need structural repairs & Fed/Treasury innovations are subtle regulations] #MMF #Cash alternatives #Shadow banking […]

  4. […] QE/ZIRP: Not only has the Fed’s unconventional monetary policy created perverse incentives for domestic entities (see “Tortured rationalizations” and “Misincentives” above), but a somewhat coordinated, developed market, central bank response to the crisis has engendered hot money flows into Emerging Markets. […]

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