Diary of a Financier

Top Newsstuffs (April 21-27)

In Bookshelf on Sun 27 Apr 2014 at 05:28


Trixies: We’re in the downswing of another momentum boom-bust | The Fly (iBankCoin)
“There isn’t any historical precedence for success when investing in companies that are losing money…
“I [tried] to find a company that went from large operating losses, in hyper growth phase, to making money, conforming with traditional valuation metrics, with its share price outperforming the markets… [I could only find] $EQIX $DDD $TSLA $SPWR.”
[Really, should companies ever IPO before turning an operating profit?  Even if a valuation cookie presents a window for founders to cash-out, the Street is very myopic, quarter-to-quarter, so it can turn against investors quickly.  Who falls for this; who buys a hand-grenade with the pin already withdrawn? See also: Bearish $QQQ technical setup; Previously: Nothing but the very best (tech) & Q2 earnings a momo barometer]
#Momo #Tech 2.0 $IBB #Capitulation

Investor sentiment survey: Big bounce back (April 23, 2014) | American Association of Individual Investors (AAII)
Surveys sentiment for equity performance over next 6 months (through 10/2014):
– Bulls +7.3pp w/w @ 34.5% vs 39.0 historical avg & 60.6 high in January (45% considered extremely high); lowest since 4/2013 (12 months)
– Bears -8.2pp @ 26 vs 30.5 historical avg & 18.5 postcrisis low in January (25% extremely low); highest since 6/2013 (10 months)
– Bull/Bear ratio @ 1.33x vs 1.28x avg (4x alltime record 1/2014)
[Massive w/w swing back up to normalcy after retail investors puked-out stock during the momo drawdown. See also: Discount brokers report 30% y/y growth in retail trading volumes ($ETFC $AMTD)]

Checklist: How to spot a bubble in real time | Barry Ritholtz (The Big Picture)
Indicators for objectively identifying exuberance/euphoria before the crash:
1. Extreme valuations- traditional valuation metrics (PE/PS/PCF/etc.) rise 2 or 3 standard deviations (sigmas) above historical mean
2. Abnormal returns- repeated, unsustainable growth rates
3. Tortured rationalizations- absurd explanations or new valuation metrics to justify a new paradigm (e.g. “permanantly high plateau,” price compression/extrapolation, EBITDA, price-to-clicks, “Dow 36k,” “new normal,” ¿”energy renaissance”?)
4. Low volatility ($VIX)
5. Trading/transaction volumes spike
6. Excess leverage- for rampant speculation
7. Credit expansion- the investing public (households & individuals) is invited to overleverage
8. Tight credit spreads- high yield spreads ($HYG)
9. Low & falling lending standards
10. Low default rates- excess liquidity creates a false sense of security
11. Financial product innovation- new products encourage bubble inflation (e.g. derivatives, ¿ETFs & MLPs?)
12. Misincentives
13. Unintended consequences- ripple effects from reformed laws/legislation/(de)regulation
14. Concentrated employment boom- an asymmetric spike in particular jobs or professions (e.g. daytraders, real estate brokers, ¿computer programmers?)
[Previously: Didier Sornette’s dragon kings & The only 5 indicators for finding the market’s signal through the noise]

Rail traffic weekly: Rally continues | Association of American Railroads (AAR)
Weekly traffic: +6.3% y/y
Growth ytd: +0.2pp @ +3.3%
Carload groups: 6 of 10 posted gains, including grain +36.9%, petroleum +12.4, coal +6.6; metals -8.9, motor vehicles/parts -3.7
[Pent-up demand persists for 6th straight week; watch to see if weekly growth deceleration continues & mean reverts all the way back to trend.]
#Bullish $DBA $XLE $USO $UNG $XME $XLI

List: 10 breakthrough technologies of 2014 | MIT Technology Review
Most innovative developments with a real chance to survive & change the world:
1. Agricultural drones
2. Ultraprivate smart phones
3. Brain mapping
4. Neuromorphic chips- microprocessors confirgured anthropomorphically so computers can sense changes in their surrounding environment
5. Genome editing
6. Microscaled 3D printing
7. Mobile collaboration
8. Oculus Rift ($FB)- virtual reality immersion for widespread, everyday use
9. Agile robots
10. Smart wind & solar power- big data & artificial intelligence (AI) integration improve forecasts for more reliable renewable energy generation

Manufacturers’ durable goods shipments, inventories & orders: Beats across-the-board (March 2014) | US Department of Commerce
– Orders:
    Core durable goods (ex-transportation)
+2.0% m/m (beat +0.6e), +2.3% y/y
    Core capex (nondefense, ex-aircraft capital goods) +2.2 (beat +1.5e), +1.9
– Shipments:
ore durables +0.9, +3.2
    Core capex +1.0, +2.1
– Inventory:
nventories +0.5 @ $394.1B, another nominal record
[Pent-up demand from bad Q1 weather; if shipments’ momentum continues accelerating into Q2, it’ll be a big contribution to GDP growth, but inventory oversupply keeps piling-up — still working-off the hangover from Q3′s spike in orders — which has risked borrowing from the future. Previously: Watch for oversupply]

List: 22 positive habits of happy people | Hungry For Change
“Many spend their lives waiting to be happy… but you can work on yourself… to be happy right now”:
1. Let go of grudges
2. Treat everyone with kindness
3. Treat your problems as challenges
5. Dream big
6. Don’t sweat the small stuff- most of it will be irrelevant or funny in the future anyway
8. No excuses- take responsibility & don’t blame others (#Accountability)
9. Live in the present- don’t dwell on the past or worry about the future
10. Wake up at the same time every morning- regulate your circadian rhythm
11. Don’t compare yourself to others- there are no perfect analogues to peers (e.g. luck), so don’t compete when it’s detrimental to  focusing on your own progress
12. Surround yourself with positive people- misery loves company (#Positive energy)
13. Don’t seek others’ approval- seek opinions, not validation
16. Meditate
19. Live minimally- clutter is chaos;  have enough that you still own your possessions, don’t let your possessions own you
21. Establish personal control- synergies of freedom come from dictating your own life — from your schedule to your job to recreations
22. Distinguish between what you can & cannot controlif you can’t change something, move on

Blockchain: The revolutionary payments innovation hidden within Bitcoin | Business Insider
Still anonymous, Bitcoin’s founder, Satoshi Nakamoto, discovered something at the heart of BTC that could start an eCommerce, payments & banking renaissance:
He unknowingly solved the double-spend paradox (“Byzantine General’s problem”), which is the challenge of sending & receiving money online without the need for a trusted third-party/intermediary to ensure that digital credits being exchanged aren’t simultaneously spent twice (i.e. rehypothecated).
Known as “Blockchain,” an encrypted, universal ledger available to everyone automatically tracks & verifies every one if the peer-to-peer (P2P) transfers in their chronological sequence, using serial numbers to identify the individual units/denominations of cryptocurrency being exchanged.
$BTC  #PayPal #Proof of Existence

Video: Apple’s new mission statement | Apple.com
On $AAPL’s homepage, CEO Tim Cook narrates a video that reveals the company’s top-down mission statement — the most explicit intimation of purpose in the post-Steve Jobs era:
“We want to leave the world better than we found it,” which revolves around environmental consciousness & a clean, green, renewable policy.
[At the forefront of the modern, #socially responsible corporate movement.  Previously: Whither the American way]
#Existential #Defining moment #Carbon footprint $TAN

Picture of the week:

Photo: Iguazu Falls (Argentina/Brazil/Paraguay) | Airpano One of the 7 New Wonders of the World, taken as part of a Russian photographer's panoramic project

Photo: Iguazu Falls (Argentina/Brazil/Paraguay) | Airpano
One of the 7 New Wonders of the World, taken as part of a Russian photographer’s panoramic project


  1. […] another great checklist Barry Ritholtz (The Big Picture) likes to utilize.  Barry tracks 14 bubble indicators to objectively identify exuberance/euphoria before a market crash.  To wit, I thought I’d quickly […]

  2. […] licenses to file attachments to track and control fungible data’s circulation. [Previously: The revolutionary innovation within Bitcoin] $BTC #P2P […]

  3. […] another great checklist Barry Ritholtz (The Big Picture) likes to utilize.  Barry tracks 14 bubble indicators to objectively identify exuberance/euphoria before a market crash.  To wit, I thought I’d quickly […]


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