Diary of a Financier

Top Newsstuffs (January 12-18)

In Bookshelf on Sun 18 Jan 2015 at 05:52

Top reads from the week that was…

Macro

Rail traffic weekly (Week 1, 2015) | Association of American Railroads (AAR)
Despite slight sequential deceleration, continues year-end rally as we enter period of easy yoy comps due to 2014q1’s severe winter weather:Weekly railtraffic 2015 week 1
Weekly traffic: -2.7pp @ +4.9% yoy
Growth rate: +0.4pp @ +4.9% ytd
Carload groups: 8 of 10 posted gains for the week yoy
    Minerals: +22.0%
    Metals: +17.6
    Petroleum: +11.2, nice bounce after multiyear boom busted amidst oil price crash
    Motor vehicles/parts: +8.6, mean reversion after YE spike
    Grain: +7.7
    Coal: +4.2
    Farm/food: -1.7
#Bullish #Latent indicator $XLE $USO $XLB $KOL $XME $XLI

Retail sales (December 2014) | US Government Census
Bad report with sales missing expectations and decelerating, despite downward revisions to prior months & alleged “consumer stimulus” from lower energy prices; may be buying opportunity for $XLY $XLP (-1.5% on open, having already underperformed since Q3):Retail sales, ex-gasoline (2014.12, yoy)
Headline: +3.2% yoy, -0.9 mom (beat +0.4e); prior month revised down (-0.3pp @ +0.4% mom)
Core (ex-autos): +1.9 yoy, -1.0 mom (meets -0.1e); prior month revised down (-0.4pp @ +0.1% mom)
#Bearish

Inflation: Consumer Price Index (December 2014) | Bureau of Labor Statistics (BLS)
Core inflation underwhelms again, slipping further from Fed’s 2.0% target in a new bout with deflation; still important to focus on core measures, as energy price collapse is weighing on headline:
Headline CPI: -0.5pp @ +0.8% yoy, -0.4 mom (meets -0.4e)
    Energy: -10.6% yoy, -4.7% mom; drag worsens
    Food: +3.4% yoy, +0.3% mom
Core CPI (ex food & energy): -0.1pp @ +1.6 yoy, unch mom (misses +0.1e)
#Bearish #Deflation

Credit

Should we be worried about margin debt: Another way to look at the NYSE’s data | Technical Strategist, Bank of America Merrill Lynch (BAML)
Overlaying measures of margin debt with SPX, BAML looks for signals in divergences:SPX vs margin debt (nominal & 12-month rate of change, 1995-2015)
Conclusion: SPX’s nominal higher-highs have not been confirmed by either margin debt’s 12-month rate-of-change (ROC) or nominal levels, which both negatively diverged 2/2014
[Previously: NYSE margin debt still bearish (November 2014)]
#Neutralizing #Myth buster #Unconventional wisdom #Tortured rationalization?

Sentiment

Investor sentiment survey (2015.01.14) | American Association of Individual Investors (AAII)
Sharp recovery back up to exuberant levels after last week’s plummet; continued “buying-the-dip” to start 2015 shows alarming complacency and uncharacteristic countercyclicality that persisted through multiple market events in 2014 (e.g. 2 internal corrections & energy bear market):
Bull/Bear ratio: +66bps wow @ 2.14 (over 1.28 historical average & 1.8 extreme high)
Bullish: +5.1pp @ 46.1% (over 39.0 avg & 45 extreme high)
Bearish: -6.2 @ 21.5% (under 30.5 avg & 25 extreme low)
Neutral: +1.1 @ 32.4% (over 30.5 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 6/2015).
[Previously: Retail asset allocations neutral with equities nearing extremes, Fund managers report average risk exposures, Strategist sentiment remains a bullish signal & Recent volatility increases retail’s willingness to buy]
#Bearish #Contrarian

Interests

Presentation: “V” FY2015 multiasset class outlook (2015q1) | Jeffrey Gundlach (DoubleLine Funds)
Energy: oil crash is net positive for economy (i.e. consumer spending), implying 3% global GDP by Oil vs global GDP (18mo lag, 1990-2014)historical standards, but that needs context since byproducts of lower capex & employment are coming after “all of the [postcrisis] job growth and 35% of SPX capex attributable to energy sector”
Currencies (FX): even though stronger USD is consensus, crowded trade, he expects more upside since “fundamentals are strong… and Fed will raise rates after a few more months of strong payroll gains”*
Equities: bull case is labor market; SPX historical winning streaks (annual, 1874-2014)bear cases are margin debt, SPX has never rallied 7-straight years, QE/Fed balance sheet highly correlated with SPX, and HYG divergence from SPX
*I’m now a USD bear due to: unanimous consensus to the contrary; the Fed’s raising rates to end ZIRP is almost DXY vs trade-weighted USD (2012-15)priced-in (see DXY +17% since 2h14 & flattening yield curve); further DXY upside would inhibit GDP (lower exports), and ECB sovereign QE will actually strengthen EUR, as stimulus has historically welcomed capital back to EZ throughout the Eurocrisis; nobody seems to acknowledge that there’s no true arbitrage in Bund/Tsy spread, since the delta is currency risk!
[Previously: “This time it’s different” (2014q4) & Tsy bull market to continue in 2015]
#Bearish (equities) #Bullish (bonds) $XLE $USO $DXY

On product/market fit for startups | Marc Andreessen (via LinkedIn)
“The only thing that matters [for startups] is getting to product/market fit… Do whatever is required to get [there]…
“In a great market — a market with lots of real potential customers — the market pulls product out of the startup… in a terrible market, you can have the best product in the world and an absolutely killer team, and it doesn’t matter — you’re going to fail.”
Three major things contribute to a new business’ success or failure, but only the target market can determine the outcome all on its own:
1. Market
2. Team
3. Product
Disruptive products can create new markets that didn’t previously exist (e.g. $VMW), and although that’s rare, an iterative process can get product/market fit right.
[Previously: “Poor distribution is the #1 cause of failure“; Remove all roadblocks to get the job done; The five principles of disruptive technologies for successful managers]

The seed bubble has not popped: A matter of categorization | Mattermark (via TechCrunch)
Both deal volume & dollars invested in seed rounds declined in FY2014 yoy & 2014q4 qoq, but average seed capital raised increased; declines could be attributable to structural shifts, with definitions of “angel,” “seed,” and “Series A” all changing:Seed capital- deal volume & dollars raised (2005-2014)
Seed-round: deal volume spiked in 2010 (due to QE/ZIRP?) but quickly mean reverted in 2014; dollars raised only slightly declinedStartup deal volume- seed through private equity (quarterly, 2005-14)
Series A through Private Equity: volumes remain robust
[See also: Marc Andreessen’s counterfactual for Larry Summers’ secular stagnation theory, “Oversupply of capital means that any investible project can get funded”]
#More than meets the eye #Startup #Venture capital #VC #Angel #PE

Video documentary: “eDreams: The rise & fall of Kozmo.com” | Wonsuk Chin (via YouTube)
Follows co-founders Joe Park & Yong Kang as their 1990s tech startup goes through hyper-growth all the way to an IPO filing just before everything unravels in the dot.com bust.
Failure due to:
1. Expanded too quickly: once their proof-of-concept tested well in NY, they spent irresponsibly on geographic expansions, which left them in too many unprofitable markets (like hilly LA or expansive ATL) for their model of internet-enabled, same-day, urban bike-courier delivery
2. No business plan: No contingency plans for funding or revenue, and an unsustainably capital intensive, low margin, high overhead operation
Not even joint ventures with Starbucks & Amazon could save them from NASDAQ’s crash.
[Previously: The hard thing about hard things]
#Tech bubble #Startup #VC #IPO #JV $AMZN $SBUX

–Romeo

Advertisements
  1. […] @ 2.4% yoy – Inflation (FY14): Headline +0.1pp @ 1.4% yoy [Previously: 2014q3 GDP & December CPI @ 1.6% core; See also: Relax about Q4 GDP & investment, “There are legitimate concerns about a strong […]

  2. […] alludes to Marc Andreessen’s “product/market fit,” and Peter Thiel’s “poor distribution—not product—is the number one cause of […]

  3. […] as I’ll note in my Top Newsstuffs this […]

  4. […] from fundamentals 2. Net speculative positions: net longs has reached record extremes [Previously: I’m a USD bear & Euro selloff has overshot downside] $DXY $UUP $EUR $FXE […]

  5. […] margin debt peaked in 2000 & 07, at which time margin levels had already receded. [Previously: Margin debt growth rate decelerating & Household debt/credit is healthy] #Bearish #Improving #Latent […]

  6. […] Andreessen on product/market fit; Avoid the product […]

  7. […] margin debt peaked in 2000 & 07, at which time margin levels had already receded. [Previously: Margin debt growth rate decelerating & Household debt/credit is healthy] #Bearish #Leverage #Latent […]

Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s