Diary of a Financier

Top Newsstuffs (April 14-20)

In Bookshelf on Sun 20 Apr 2014 at 07:53

Patriots Day means Marathon Monday, still my favorite holiday…

24 books you’ve never heard of that will change your life | Ryan Holliday
“When you read the same books as everyone else, you don’t learn anything new… don’t follow well-trod footsteps. Carve a new path.”
#Bookshelf #Reading list

The state of Venture Capital: Tech selloff makes US financiers more cautious | Market Currents (Seeking Alpha)
1q14 saw highest amount of VC investment ($10.1B) since 2001:
“Not a board meeting goes by when at least half the meeting isn’t spent on financial strategy… We all feel like we’re at the top of the cycle.”
#Grey swan #Startup #Entrepreneur $GSVC $SVVC

Investor sentiment survey: Huge buy signal (April 16, 2014) | American Association of Individual Investors (AAII)
Surveys sentiment for equity performance over next 6 months (through 10/2014):
– Bulls -1.3pp w/w @ 27.2% vs 39.0 historical avg & 60.6 high in January (45% considered extremely high); lowest since 4/2013 (12 months)
– Bears +0.1pp @ 34.3 vs 30.5 historical avg & 18.5 postcrisis low in January (25% extremely low); highest since 6/2013 (10 months)
– Bull/Bear ratio @ 0.79x vs 1.28x avg (4x alltime record 1/2014)
[Very bullish to see “bulls” & “bears” overshoot mean reversion during a bull market; retail investors clearly just puked out of stocks at the sight of this most recent, ephemeral drawdown.]
#Bullish! #Contrarian

Rail traffic weekly: Rally maintains incredible velocity | Association of American Railroads (AAR)
Weekly traffic: +8.2% y/y
Growth ytd: +0.4pp @ +3.1%
Carload groups: 8 of 10 posted gains, including grain +21.7%, coal +11.2, minerals +6.6; metals -3.9, forestry -1.5
[Pent-up demand persists for 5th straight week.]
#Bullish! $DBA $XME

Video interview: Hank Paulson on the Chinese economy | Center for Strategic and International Studies (CSIS)
Former US Treasury Secretary says China’s issues are manageable because the central government has massive capacity to preempt a crisis.
Two structural problems need fixing over LT:
1. Break triangle trade– must liberalize the economy to end special treatment among federal government/banks/state-owned-enterprises (SOEs)
2. Municipal reform– change tax code to give local governments the ability to source revenue from places other than real estate, which would reduce housing speculation
[See also: Complete guide to the Chinese steel trade’s implosion]
#Grey Swan $GXC $FXI $CNY $XME

The Mergers & Acquisitions cycle and its poor timing | Societe Generale (SocGen)
We’re entering a growth phase of imprudent M&A mega deals, done to protect pricing power:The M&A cycle
“The low inflation environment means many industrial sectors are facing deflation. When deflation is coupled with very low growth, companies need to 1) reduce pricing pressure and 2) find new ways to grow if they want to deliver the EPS growth expected by the market.”
Includes a list of sector & stock picks with highest probability of activity.
[Previously: The QE taper starts M&A’s last chance dance]
$XLI #Disinflation #ZIRP

Forecasts: Forward 7-year asset class real returns | Grantham Mayo van Otterloo (GMO)
Highlights from their estimates of annualized real returns through 3/2021 include US equities expecting negative performance:
US large cap stocks ($IWB) -1.3%
US small caps ($IWM) -5.0%
International ($EFA) +1.0%
Emerging Markets ($EEM) +4.3%
US Bonds ($AGG) +0.5%
EM Debt ($EMB) +2.5%
Timber +5.4% [no surprise]

Google’s massive bets on robotics are a strategic plan | Business Insider
Part of its “moonshot initiatives,” $GOOG’s recent acquisitions of robotics & drone companies are preparations for the third phase of the internet:
1st- search & advertising
2nd- mobile (Android)
3rd- robots (#Artificial Intelligence & #Machine Learning)
GOOG already accounts for 84% of unique desktop visits (187mm/mo vs 222mm total internet-wide), so material growth can only come from offline users (2/3rds of the world or 4.6B people), to whom its Project Loon & Google Fibre will bring access.
#Titan #Boston Dynamics #DeepMind #Big data

Private money for public projects: More US states doing deals | Reuters
After a decade of government promises deferred, state & local governments are turning to public-private partnerships (“P3s”) to fund infrastructure, with $3.6T in capital expenditures needed nationwide by 2020.
33 states now allow P3s vs. 23 in 2006, and institutional capital raised a record $17.1B for North American projects in 4q13 alone:
“Over the next five years, you could have a lot of deal flow.”
[Previously: The real capital goods sector opportunities]
$AGX $VMI

ECB says further rise in the Euro would require more easing | Market Currents (Seeking Alpha)
Mario Draghi said “continued strengthening of the euro would require further monetary policy accommodation.”
$EUR strength has been central to near deflation with Eurozone CPI @ -0.5%.
[$EURUSD +6% ytd @ 1.3885.  Previously: ECB modeling new QE]
$HEDJ > $FEZ #Draghi put

–Romeo

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  1. […] plan to recapitalize with new revenue sources, having last rescued the fund in 2012. [See also: Private money for public infrastructure projects & 7 reasons to expect a 2014 boom in Capital Expenditures ] #Unintended […]

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