Sunday, 12 July 2015

Stories we should be thinking about

A few finance and related stories we need to be thinking about before Monday morning:


Macro matters:

**awaiting the latest from the various European meetings on Greece of course but before then...**

I liked this on Greece - and agree with the need for a debt restructuring (as I discussed at length in the last few Financial Orbit Speaks):

'some combination of debt forgiveness and real depreciation is going to occur, whether we like it or not.And the sooner it happens, the better it will be for everyone'

If you want a feel for why a deal is needed...this graph makes a good point about the magnitude of the current downturn...and the longer a deal takes the worse it will get.


I liked this too on the bond markets which I remain cautious towards:

'The 25/75 barbell portfolio of stocks and cash can quite plausibly replace the bond portfolio. If stocks fall 50%, your barbell would lose a quarter of that, or 12.5%. Whereas, a move in ten year yields from, 2.3% to 4% would cause the same loss of value. Consider for a moment which is more likely'

Puerto Rico apparently now has outstanding debt of over US$100bn.  I would agree with the sentiments here (learning from the Greek experience): 

'The now retired judge who handled what is largely a recovery story in the Detroit bankruptcy says Puerto Rico needs this option to flourish, as he says “kicking the can down the road” is an option that is “no longer available.”

Reasonable to anticipate a lack of correlation between the stock market and economic growth According to this study in the emerging markets that is the very conclusion you should be making:


Talking about China the Peterson Institute compared the current stock market fall with previous ones.  Interesting viewing...

7

This is smart and insightful on stockpicking (link here):

'Humans are hard wired to be impressed and persuaded by an interesting story or narrative. I just read this week that emotionally-driven advertising campaigns work better than rational, data-driven ads by a factor of 2 to 1, and that number seems low to me. One of the reasons value stocks fall out of favor it that glamour stocks usually have a much more appealing story'.

Company-related observations:

Huge agreement this piece on the upcoming earnings season which concluded:

'Greece and China of the last few weeks are like the Ukraine and Ebola from October, ’14...Focus on the fundamentals – ignore the headlines'

Don't forget the 'usual earnings shuffle' beating lowered expectations occurs:


Tobacco very much remains an emerging market growth business:

Interesting on the banks from Jim Cramer...and some important dates to watch out in the upcoming week: 

Despite not having the margins Cramer hoped for, the valuations that Wall Street has put on the banking sector are low enough to outweigh the margin shortcomings. Cramer then posited that investors must understand that if interest rates don't go higher on the ten-year, you're not going to hear the guide up's, and that you'll get easy comparisons beginning Q4. Wells Fargo will report earnings on Tuesday July 14th along with JP Morgan Chase (JPM). Bank of America (BAC) reports earnings on Wednesday July 15th with BlackRock (BLK), US Bancorp, Citigroup (C), First Republic (FRC) and Goldman Sachs (GS) reporting the day after. HSBC (HSBC) reports on August 3rd.

At least in Europe the performance of the insurance sector has been poor recently.  Financials one to watch this week: 

Just look at the growth in US mobile ad revenue...


And finally...

What a great list of productivity enhancing tips here.  If only I could do this one (not sure it is going to work however in my preferred line of business - but most of the rest I would totally agree with!):

No News

Someone asked me a few weeks ago to comment on “the situation in Greece.” I guess they are going to default on their debt. So what? This gives TV people something to argue about. I’m happy for them.

People are wired to notice lions much faster than they notice apple trees. That’s why we are alive.
Since there’s no more lions chasing us down Main Street, the news tries to find other ways to trigger that fight or flight reflex.

No TV. No news. No web surfing. No books about current events. No talking to people about current events. No conferences about what’s going on in the world. I don’t need to fight or flight in order to improve competence, improve relationships with people, or improve my freedom.


Have a good week

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