Diary of a Financier

Top Newsstuffs (May 26 – June 1)

In Bookshelf on Sun 1 Jun 2014 at 05:21

Upstating…

NYSE margin debt & balances: Another welcome decline (April 2014) | Doug Short (dshort.com)
– Nominal margin debt (-2.9% @ $437B) dropped again from from February’s alltime high
– Real margin debt relented too, although still in excess of 3/2000 & 7/2007′s highs
– Net margin balances (-$148B debit) also kept ascending from alltime lows, but still shattering even the Tech Bubble’s former record (-$123B) and crushing 2007 & 2011 pre-correction lows
[2nd consecutive monthly decline. Given margin debt’s unfathomable highs and its historical correlation to SPX, this single variable has the market flirting with its first correction since 2011 (-19.4% drawdown), as expected, but May’s data should show more material retracement.]
#Bearish #Lagging indicator

Rail traffic weekly: Really incredible acceleration continues | Association of American Railroads (AAR)
Weekly traffic: +7.6% y/y
Growth ytd: +0.2pp @ +4.2%
Carload groups: 9 of 10 posted gains, including grain +24.4%, minerals +12.7, metals +10.2
[7th consecutive week prolongs an accelerating rally after tough winter weather throughout Q1.]
#Bullish! $DBA $XME

Presentation: The state of technology, the web, internet & apps (2014) | Mary Meeker (Re/code CodeCon conference)
Contents:
1. Key trends– PC/mobile/tablet usage, software/apps, advertising & monetization, cybersecurity
2. Status update– tech stock valuations, online education, healthcare, computing & cloud storage costs declining
3. Re-imagination– messaging, muiltimedia sharing, app unbundling, content delivery (viral distribution), location-based services, same-day delivery, digital money (cryptocurrency), internet of things (IoT), big data, design/user interfaces (UI)
4. Video & the new screens– smart TVs, streaming, remote controls disappear, apps replace channels, crowdsourcing & personalization
5. China’s growth–  remember that the Chinese are now the largest share of global consumption & eyeballs
6.  Magic formula– “Internet trifecta = critical mass of content + community + commerce”
#Disruption #Startup #Entrepreneur #Venture Capital #VC $XLK $QQQ

The Private Equity Limited Partnership Agreement release: The industry’s Snowden moment | Yves Smith (naked capitalism)
Exposing industry-wide scams, Yves posted 12 LPAs — formerly undisclosed “trade secrets” — which are contracts between PE firms & their portfolio companies that loosely characterize the fees/expenses the former can charge the latter.  LPAs are intentionally broad, allowing PE companies to:
1. Extract high fees from companies without disclosing them to investors
2. Dodge taxes by substituting capital gains (15% rate) for management fees (35%)
3. Manipulate valuations
4. Shift investment strategies
5. Ignore conflicts of interest, including investment and co-investment allocations
In response, the SEC has announced it has opened an investigation into PE, which was an unregulated corner of finance.
[Feels like a big denouement for Yves, after she expertly covered the financial crisis on her blog & in Econned.]
$KKR $BX $CG

Manufacturers’ durable goods orders, shipments & inventories: Good report event after upward revisions (April 2014) | US Department of Commerce
– Orders:
    Core durable goods (ex-transportation) +3.3% y/y, +0.1% m/m (beat 0.0e)
    Core capex (nondefense, ex-aircraft capital goods) +3.1, -1.2 (miss -0.2e)
– Shipments:
    Core durables +3.8, +0.1
    Core capex +3.0, -0.4
– Inventory:
    Inventories +4.3 y/y @ $395.9B, another nominal record
[March data all meaningfully revised higher.  Pent-up demand from bad Q1 weather; if shipments’ momentum continues accelerating in Q2, it’ll be a big contribution to GDP growth, but inventory oversupply keeps piling-up. Previously: April PMI/2014q1 GDP & Watch for oversupply]
#Neutral

Volatility is not risk | Josh Brown (The Reformed Broker)
“The greatest trick Wall Street ever pulled was convincing Main Street that Volatility was the same thing as Risk.”
[Permanent loss of principal is the real risk, and those afraid of vol are just myopic & impatient.]
$VIX

Picture of the week:

Photos: 24 haunting images of abandoned places around the world | EpicDash This IM cooling tower is in Monceau, Belgium.

Photos: 24 haunting images of abandoned places around the world | Bored Panda
This IM cooling tower is in Monceau, Belgium.

–Romeo

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  1. […] debt: descending from record levels, but at extremes […]

  2. […] which was cascading lower at a -4% rate through February, but bounced back with +7% prints in May, raising ytd comps from sub-zero to +4% trend.  In […]

  3. […] debt: descending from record levels, but at extremes […]

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