Diary of a Financier

Top Newsstuffs (March 3-9)

In Bookshelf on Sun 9 Mar 2014 at 06:25

The National(s)…

Rail traffic weekly: Churning higher | Association of American Railroads (AAR)
Weekly traffic +2.3% y/y; growth +0.3pp @ +0.4% ytd.
4 of 10 carload groups posted gains: grain +14.3, minerals +11.5; metals -5.2, petroleum -3.8.
[Law-of-large-numbers seems to have finally caught-up to oil/gas shipments, stay tuned]

Followup: Enriched by junk issuance, banks resist US regulators’ warning | Bloomberg
In 11/2013, the Fed & OCC sent written notice to certain commercial & investment banks, asking them to reduce junk/LBO loan underwriting and submit plans for tightening standards.
While some banks have ignored the crack-down, most debtors have simply moved their business to those banks that weren’t warned.
[Previously: Bank loans reach Neverland]
#Credit cycle $BKLN $JNK

Quant study: Buying at alltime highs | Barry Ritholtz (The Big Picture)
Conventionally, pundits say “buy low & sell high,” but the data say to buy at alltime highs since they’re indicative of secular bull markets:
“[Given the huge number of $DJIA alltime closing highs made in the last 2 years, 2013 & 2014] look much more like a secular bull market than the prior secular bear [2000-09]. We usually cannot tell until after the fact, but it is beginning to look like a new long-term bull market is underway.”
[Previously: Overbought/oversold stochastics]
#Bullish #Momentum #Contrarian #Negativity bias #Probability neglect #Observational selection bias

Quant study: The history of geopolitical shocks on the US stock market | S&P Capital IQ
Shows historical data on $SPX’s ephemeral reactions to exogenous/systemic events, including:
Pearl Harbor, Cuban missile crisis, JFK assassination, OPEC oil embargo, Nixon resignation, Crash of 1987, Iraqi invasion of Kuwait, LTCM collapse, 9/11 terrorism, Madrid bombing, Lehman bankruptcy, flash crash & Japanese tsunami (Fukushima)
– Average (median) one-day decline = -2.4%
– Average (median) drawdown = -5.3% over 6 days, recovered over 14 days
[re: Russia’s military invasion & ultimatum unto Ukraine]
#Transitory #Buy the dip

NYSE margin debt & balances: Consecutive records across-the-board (January 2014) | Doug Short (dshort.com)
– Gross nominal margin debt kept rising, +1.4% to another alltime high ($451B)
– Real margin debt also increased to a second-consecutive alltime high in excess of 7/2007’s prior record
– Net margin balances (-$159.4B debit) still reaching alltime lows, shattering even the Tech Bubble’s former record (-$123B) and crushing 2007 & 2011 pre-correction lows
[Despite January/February 7%+ drawdown.]
#Bearish #Euphoria

Sell side consensus indicator: Analyst sentiment still a buy signal (December 31, 2013) | Bank of America Merrill Lynch (BAML)
Wall Street analysts’ sentiment nearing neutral (unch @ 54.1 vs 60.3% LT avg)–still barely indicative of consensus bearishness (a contrarian “buy” signal when pessimism <54.5 & ”sell” when optimism >66.2).
Alltime low was 43.9% in July 2012, but we’re still below the March 2009 lows.
[Indicator measures “average recommended equity allocation of Wall Street strategists as of the last business day of each month.”  See also: AAII investor sentiment survey mean reverts (#Neutral)]

The chart that debt alarmists don’t want you to see: “The fake debt crisis” | Capital in the Twenty-First Century (Thomas Piketty)
Charts US government’s public assets (>120%) vs. public debt (~100%) as percent of GDP, with the former always exceeding the latter.
Fiscal hawks & conservatives bemoaned the US’s trade & budget deficits, but they always use the Debt/GDP metric; what household or business gets analyzed on a total debt/revenue basis?
[There’s some apples-to-oranges issues with the dataset, and soverign currency issuer isn’t a household… but the point works nonetheless.]

Photos: The most incredible images of outer space you’ve ever seen | NASA
Images of earth, other planets, spaceships, satellites & astronauts.

Purchasing Managers Index (February 2014): Global expansion at fastest pace in almost 3-years | Business Insider
Global Manufacturing PMI (+0.3 @ 53.3) rises to 34-month high despite pan-Asian dip into contraction:
– Australia (+1.9 @ 48.6) rebounding after YE13 crash, but exports collapsed (-8.3@ 25.8)
– Japan (-1.1 @ 55.5) just off last month’s alltime high, but job creation & price inflation at postcrisis highs
– China’s official PMI (-0.3 @ 50.2) fell again & unofficial (-1 @ 48.5) collapsed again
– The rest of Asia’s dipping too, including South Korea (-2.4 @ 48.5), Taiwan (-0.8 @ 54.7) & Vietnam (-1.1 @ 51)
– Eurozone (-0.8 @ 53.2) expansion continues, with a slight deceleration led by Germany (+1.2 @ 56.5) & Italy (-0.8 @ 52.3), despite broad gains elsewhere like Spain (+0.3 @ 52.5) & France (+0.4 @ 49.7) recovering
– UK (-0.3 @ 56.9) still a global leader
Brazil (+0.3 @ 50.8) rallied for 5th straight month
– US ISM (+1.9 @ 53.2 v 52.3e) beats nicely with new orders (+3.3 @ 54.5) normalizing after recent volatility, production (-6.6 @ 48.2) continuing a massive slide, inventories (+8.5 @ 52.5), deliveries (+4.2 @ 58.5), exports (-1 @ 53.5) &  employment (unch @ 52.3)
[Effects of extreme winter weather being worked-out. See also: US ISM Non-manufacturing (Services) surprises in deceleration (-2.4 @ 51.6 v 53.6e)]


  1. […] sector now has releverage, taking the handoff from an overleveraged corporate sector.  Previously: Banks ignore regulators' warnings & Bank loans reach Neverland] #Bearish #Credit […]

  2. […] in pent-up demand if we were to return to trend growth, and recent data (e.g. railtraffic & PMIs) have started to affirm that […]

  3. […] Momentum Contrary to conventional memes, buying at alltime highs like today’s has historically been a good strategy, because the frequency of new closing highs since 2013 is a signal of a secular bull market a la 1952-65 and 1983-99. […]

  4. […] sector credit may not materially releverage, since corporations seem to have engorged themselves on corporate debt during ZIRP, with their mean reversion likely offsetting any expansion in individuals’ balance […]


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