Diary of a Financier

Top Newsstuffs (March 10-16)

In Bookshelf on Sun 16 Mar 2014 at 06:00

How soon ski season has drawn to a close…

The latest startup fad: The internet of smells | Business Insider
Inventors are trying to market olfactory systems to enhance user experiences from web-browsing to movies.
[Undoubtedly the next thing to commercialize, appealing to the nose since scent is the strongest sense tied to memory; you plug speakers into your desktop computer, why not an oPhone… as long as it’s in moderation.]
#Five senses

Rail traffic weekly: Decent growth trend bolstered | Association of American Railroads (AAR)
Weekly traffic +1.2% y/y; growth +0.1pp @ +0.5% ytd.
5 of 10 carload groups posted gains: petroleum +11.3%, grain +6.5; motor vehicles/parts -6.7, farm/food -5.8.
[Good bounce from oil/gas shipments, but keep watching to see if law-of-large-numbers has caught-up after crude carloads were +74% y/y in 2013 (only 1.4% of total volumes).]
$XLE $USO $UNG $DBA

High Yield covenant quality hits alltime low (February 2014) | Moody’s
Junk bonds’ ($HYG) average covenant score reached a record low +0.52pts @ 4.36 (1-5 scale, 5 weakest):
“Deterioration was driven by a surge in covenant-lite underwriting, which accounted for 39% of new issuance in February.”
[The deleveraged household sector now has releverage, taking the handoff from an overleveraged corporate sector.  Previously: Banks ignore regulators’ warnings Bank loans reach Neverland]
#Bearish #Credit cycle

Presentation: “What hath QE wrought?” (1q14 II) | Jeffrey Gundlach (DoubleLine)
– Equities– reversal in record margin debt will cause “double-digit decline”
– Credit- “There’s no way for [$HYG $BKLN] prices to go up at this point… I’m not worried as much about interest rate risk & credit risk, I’m worried more about liquidity risk & naivety… [Junk bonds average $104 with a $103 call, so] if a bond is priced to call, and rates rise, it might not get called… it’ll turn into a 10-year bond instead and roll up the yield curve.”
– Treasuries– $TNX will bottom ~2.5% (-25bps) this year as pensions are reallocating more into bonds, but when rates do rise, they’ll rise “first slowly, then quickly,” because there’s no mass T-bond buyer left as the Fed (70% of Tsy float) is Tapering QE [I think either a buyer will emerge just like Japan & China did previously, or US trade balance will swing to a surplus]
– Fiscal policy– “we’re in the eye-of-the-storm because it seems calmer now [with the federal budged deficit waning due to social security entitlements waning between 2011-14]”
– Monetary policy- need to increase monetary velocity to stimulate inflation, wage growth & GDP
#Credit cycle

–Romeo

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  1. […] Again, the deleveraged household sector can now releverage, taking the handoff from an overleveraged […]

  2. […] Again, the deleveraged household sector can now releverage, taking the handoff from an overleveraged […]

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