Diary of a Financier

Top Newsstuffs (May 5-11)

In Bookshelf on Sun 11 May 2014 at 05:20

I don’t sail, but I am sailing…

America’s about to run out of money for roads (again) | Vox
State & local governments may have to halt $47B worth of road/highway/mass-transit projects in August because the federal Highway Trust Fund is insolvent.  It had been fully funded by the 18.4 cent federal gas tax until running a deficit in 2008, after revenues had declined (-30% since 2003) due to lower vehicle miles driven & higher fuel efficiency.
Congress is working on a 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 consequences

Asset allocation survey: Retail investors slowly returning to equities (April 2014) | American Association of Individual Investors (AAII)
– Stock allocations: -0.2pp @ 67.0%, above 60% LT avg for 13 consecutive months (longest post-crisis streak) & barely below 70% historical extreme
Bonds: -0.1pp @ 15.6%, below 16% avg for 3rd time since 2009, but nowhere near 10% low-end extreme
Cash: +0.3pp @ 17.4%, below 24% avg for 29 consecutive months & near 15% low-end extreme
[Indicator is most useful at extremes, which levels all the data are approaching.]

Investor sentiment survey: Expecting a sideways market (May 7, 2014) | American Association of Individual Investors (AAII)
Respondents’ expectation for equity performance over next 6 months (through 11/2014):
– Bullish: -1.4pp w/w @ 28.3% vs 39.0 historical avg & 45% extreme high; lowest since 4/2013 (12 months)
– Bearish: -0.8pp @ 28.7 vs 30.5 LT avg & 18.5 postcrisis low in January (25% extremely low); highest since 6/2013 (10 months)
Neutral: +2.2pp @ 43.0 vs 30.5 LT average; remains 1 standard deviation above mean
– Bull/Bear ratio: @ 0.99x vs 1.28x avg
[Retail investors capitulated during the momo drawdown & now the large “neutral” cohort indicates uncertainty or an expectation of consolidation.]

Rail traffic weekly: Acceleration quietly continues | Association of American Railroads (AAR)
Weekly traffic: +6.6% y/y
Growth ytd: +0.1pp @ +3.7%
Carload groups: 8 of 10 posted gains, including grain +24.8%, minerals +9.2, motor vehicles +7.2; metals -4.4
[5th consecutive week prolongs rally after tough winter weather throughout Q1; nobody’s talking about the acceleration of this important leading indicator.]
#Bullish! $DBA $XLE $USO $UNG

As households releverage, 401k’s have become Americans’ new ATM | Yves Smith (naked capitalism)
Replacing the HELOC’s role in the last crisis, individuals are now borrowing against their retirement accounts using 401k loans, and 4% of households had to pay early withdrawal penalties in 2011.
[Data is stale & biased, since there was considerably more economic stress in 2011 than today — in fact, 2011 saw a y/y decrease in early withdrawal penalties, with 2010 being the high ($5.8B paid by 5.9mm taxpayers).  See also: US household releveraging]
#Confirmation bias

Synopsis: 2014 Ira Sohn Conference | The Reformed Broker
– Mike Novogratz (Fortress Investment Group): $EWZ
– Jeffrey Gundlach (DoubleLine Funds):
Larry Robbins (Glenview Capital): $HUM $MON $WLP #HMOs
Chris Shumway (Shumway Capital): $MCO
Zach Schreiber (PointState Capital): ($CL_F) $BRN_F $MPC $VLO
Jim Grant (Grant’s Interest Rate Observer): $OGZPY
Bill Ackman (Pershing Square): $FMCC $FNMA
Paul Tudor Jones (Tudor Investments): (#Gilts) (#Macro)
Mariko Gordon (Daruma Capital): $EFII $FUL
David Einhorn (Greenlight Capital): ($ATHN)
[See also: Live feed]
#Hedge Funds #Long/short

Senior loan officer survey (2014q2): Lending to real economy strong, but households & CRE reverting to mean | Federal Reserve (Fed)
Commercial & Industrial Loans (C&I): demand still increasing; lending standards remain historically loose; credit spreads still extremely tight; small business loan approval rates rose to alltime high 17.4% (+50% y/y)
Commercial Real Estate (CRE): demand finds another alltime high; lending standards slowly recovering from record lows
Residential mortgages: demand still weakening for all comers, plummeting from 4q13 highs; standards unanimously tightening, especially for Alt-A & Subprime (only slightly for Prime)
Consumer loans: demand is still modest for all categories; standards remain slightly loose
[While credit to the real economy seems healthy, household lending is tepid, and CRE’s pendulum may start swinging the other direction here. See also: Commercial office properties’ illusion of recovery]
#Neutral #Credit cycle

Mesh networks: The internet without connectivity | Fortune
iOS 7 contains a little-known feature (used by AirDrop & FireChat) known as “Multipeer Connectivity Framework,” which allows nearby wireless devices to connect with one-another using wireless signals or Bluetooth — without 3G/4G or WiFi.
Connections are proximity based, but by relaying data among multiple peer-to-peer (P2P) connections like this, you can build a “mesh network” across limitless distances.
[A wonderful loophole to avert wireless telecom providers — an end-around.]


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

  2. […] ranked the United States 18th in the world in terms of road quality in 2013.” [Previously: Highway Trust Fund is insolvent again & 7 reasons to expect a 2014 boom in Capital Expenditures] #Multiplier […]


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