Diary of a Financier

Top Newsstuffs (February 3-9)

In Bookshelf on Sun 9 Feb 2014 at 05:47

I tapped the Rockies…

Video speech: “A new equation for intelligence” | Alex Wissner-Gross (TED Talks)
Establishes an intelligence equation as the foundation for AI applications across manufacturing, finance, healthcare, agriculture, etc.:
Optimal intelligence tries to maximize future freedom of action by keeping as many options available as possible (i.e. “long term entropy”). For example, human preferences like symmetry & balance accomplish this optimized equilibrium.
Developed computer software, Entropica, running a program based solely on this fundamental equation & it autonomously accomplished tasks like balancing a ball atop a pole without any additional instructions.
#Artificial intelligence

Long term charts: American capital markets since independence (1776-2013) | Tyler Durden (ZeroHedge)
240 years of US securities & futures markets prices, including: stocks, interest rates, commodity, gold, crude oil & US Dollar.
[ZH’s takeaway is that $USD’s reserve currency status is ending, following the precedent of prior regimes (1400-present): Portugal, Spain, Netherlands, France & Britain.]
$DJIA $TNX $DBC $GC_F $CL_F $DXY

Rail traffic weekly: Winter weather strikes again | Association of American Railroads (AAR)
Weekly traffic -1.2% y/y; growth slips down to +0.8% ytd.
2 of 10 carload groups posted gains: grain +22.5%, petroleum +0.8; minerals -8.8.
[Winter storms nationwide mean weather had an effect again.]
$DBA $USO $XME

ECB will have to loosen in coming months | Sober Look
5 reasons they’ll have to ease rates or increase LTRO:
1. Liquidity– since 2012, ECB balance sheet -28% & excess reserves -80%
2. Credit– private lending hasn’t stopped falling, -2.3% in 2013 despite prior year’s low base
3. Money supply– M3 -1% in 2013
4. Disinflation– inflation still <1% & falling (including Germany’s)
5. Emerging market contagion– 6/2015 $EURIBOR futures have spiked
#Contrarian #Bullish $FEZ $EURUSD

Purchasing Managers Index (January 2014): Worldwide expansion barely slows, led lower by US | Business Insider
Global Manufacturing PMI (-0.1 @ 52.9) still expanding at slightly slower pace:
– Australia (-0.9 @ 46.7) still slipping after YE13 crash
– Japan (+1.4 @ 56.6) rallies to alltime high
– China’s official PMI (-0.5 @ 50.5) dropped again & unofficial (-1 @ 49.5) plummeted loudly into contraction [N.B. Lunar New Year effects]
– The rest of Asia’s unanimously expanding, including South Korea (+0.1 @ 50.9), Taiwan (+0.3 @ 55.5) & Vietnam (+0.3 @ 52.1)
– Eurozone (+1.3 @ 54) comeback keeps accelerating, with Germany (+1.2 @ 56.5) and Italy (-0.2 @ 53.1) just off 2-1/2 year highs, Spain (+1.4 @ 52.2) recovering, even France (+2.3 @ 49.3) starting to retrace its collapse
– UK (-0.5 @ 56.7) still expanding
Brazil (+0.3 @ 50.8) rallied for 5th straight month
– US ISM (-5.2 @ 51.3 v 56 exp) crashes from highs with new orders (-13.2 @ 51.2) crashing as expected, production (-6.9 @ 54.8), inventories (-3 @ 44), deliveries (+0.6 @ 54.3), exports (-0.5 @ 54.5) &  employment (-4.6 @ 52.3)
[You can legitimately blame the weather for US’s plunge. See also: US ISM Non-manufacturing (Services) somehow beats (+1 @ 54 v 53.7 exp)]
#Brown noise

Senior loan officer survey (1q14): Credit demand flat & lending standards eased again | Federal Reserve (Fed)
C&I: demand increasing nicely; lending standards still as loose as on record and credit spreads still extremely tight; small business loan approval rates rose to alltime high 17.4% (+50% y/y)
CRE: demand finds new alltime highs; lending standards right near record lows
Residential mortgages: demand weakened for all comers, plummeting from Q4’s highs; standards tightening; subprime is still being hit hardest, but prime & Alt-A feeling the squeeze now too after big q/q spikes
Consumer loans: demand is still modest for all categories; standards are moderately tight; auto loans/credit cards/other all similar
Special question: 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 syndicated/institutional leveraged loans, but all other loan categories expect improvement
[Regarding leveraged loans: cognitive biases are a pitfall of surveys, like the #Framing effect that leads respondents to give answers they think those asking want to hear or plain #Cognitive dissonance — because objective leveraged loan data for 2013 tells another story.]
#Credit cycle $BKLN

Picture of the week:

Cross country skiiers exhausted at finish line | Winter Olympics (Sochi, Russia)

Cross country skiiers exhausted at finish line | Winter Olympics (Sochi, Russia)

–Romeo

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  1. […] strike against the asset class, cognitive dissonance shared among investors, underwriters, and even debtors seems to be driving this latest leg.  As […]

  2. […] me, it will be enough"; in reaction, Spanish 5y fell to 1.74% vs US $FVX @ 1.69%.  Previously: ECB has to ease with balance sheet shrinking & Euro strength] $EURUSD $FEZ […]

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