Diary of a Financier

Top Newsstuffs (May 12-18)

In Bookshelf on Sun 18 May 2014 at 05:00

And so, Wedding Season begins…

Ben Bernanke dropped a hint that nobody picked-up on | Business Insider
As of 2014q1, the former Fed Chairman has cashed-in with $250k fees per speaking engagement.
The big takeaway from his first speech, which included a Q&A and was attended by some big name hedge fund managers:
“Bernanke, 60, does not expect the federal funds rate… to rise back to its long-term average of around 4% in [his] lifetime.”
[10-year Treasury yield has dropped from 3.0% to 2.5% since. Material, non-public, inside information?]
#FFR $IRX $FVX $TNX $TYX $SHM $SHY $IEI $IEF $TLH $TLT

Rail traffic weekly: Another acceleration | Association of American Railroads (AAR)
Weekly traffic: +6.6% y/y
Growth ytd: +0.2pp @ +3.9%
Carload groups: 7 of 10 posted gains, including grain +29.7%, minerals +13.0; chemicals -2.2, metals -4.4
[6th consecutive week prolongs rally after tough winter weather in Q1; still nobody’s talking about the acceleration of this important leading indicator.]
#Bullish! $DBA $XME

US household debt & credit report (2014q1): Releveraging continues at moderate pace | Federal Reserve Bank of New York (NY Fed)
3rd straight quarterly increase in balances suggests private sector deleveraging has reversed:
Total consumer indebtedness: +1.1% q/q @ $11.65T vs $12.68T record in 2008q3; +3.7% y/y
Mortgages: +1.4 q/q @ $8.17T; +3.0 y/y; after 2013q4’s rising rates, originations kept falling -27% q/q @ $332B, lowest since 2011q3
Delinquencies (90+ days): -0.2pp q/q @ 4.8%; have returned to pre-crisis norms, with the exception of elevated student loan impairments, which themselves continued to recede
[Previously: Senior loan officer survey]
#Bullish

Retail sales: Trend growth maintained despite disappointing miss (April 2014) | US Government Census
Headline: +0.1% m/m vs +0.4e; +4.0 y/y (March revised up from 1.2 m/m to 1.5)
Core (ex-autos): unch vs +0.6e; +2.7 y/y
[Actually represents an acceleration in the lesser-watched y/y numbers, which have consistently decelerated from highs ~8% in June/July 2011; despite missing expectations, m/m numbers were decent since they’re coming off a high base after March expressed a lot of pent-up demand due to extreme weather in January/February.]
#Neutral $XLY $XLP

Quant study: Russell 2000 corrections always accompanied by Large Caps (2000-2014) | The Irrelevant Investor
Small Caps ($IWM) have undergone 36 corrections since 2000, but today’s is the 1st time over that span in which it hasn’t been accompanied by a simultaneous large cap correction, with $SPY now +0.12% during the -10% $IWM drawdown — a size divergence earning it the title “internal correction.”
Given multiyear IWM outperformance, valuation may be the reason for recoupling:
“Looking at averages since 2000, small-caps are trading at a 24% premium based on price/sales, and a 42% premium based on EV/EBITDA. Conversely, large-caps are trading at just a 14% premium based on price/sales and are actually at a slight discount based on EV/EBITDA.”
[Lest we forget that the -10% correction threshold is an arbitrary number: there have been 5 material drawdowns in IWM that haven’t been echoed by SPY since 2009 (10/2009, 3/2012, 7/2012, 4/2013 & 5/2014).]
#Confirmation bias  #Expectation bias $RUT

–Romeo

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  1. […] Households: Have only just begun to releverage. […]

  2. […] far in Q2 (inventories are piling up but shipments just increased to +3.9% y/y) – ISM/PMI @ 55.4 – Consumer indebtedness +3.7% (admittedly, household releveraging might be offset by some corporate & public sector […]

  3. […] Households: Have only just begun to releverage. […]

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