It doesn’t get nearly as many pixels as the gross domestic product figures or the trade balance, but America’s statisticians also capture detailed industry-level data on sales, labour costs, taxes, profits, and other input costs. We’ve started exploring these tables and thought we’d share some of what we’ve found so far.
First, here’s a chart showing earnings before interest, tax, depreciation, and amortisation as a share of total revenues by industry sector, as well as corporate tax paid as a share of Ebitda:
Today in sentences about China you might want to pay attention to, from Macquarie:
In our view, the real level of margin finance leverage in China’s markets is actually already much higher than all the historical examples that we can find (ie, for which the data is available to us).
The pseudonymous Jesse Livermore returns to his mission of demolishing favourite bear arguments, hollow reasoning he thinks has served too long as an excuse to avoid investing.
The latest forray is on the subject of US margins, which for the last decade appear to have been much higher than during the half century that preceded it. Inevitable reversion to the mean, means corporate profitability must (one day) fall, say the pessimists. Read more
Matt Yglesias at Slate has been on a quixotic campaign to stop the total devaluation of disruption as a term. Thank Steve Jobs for that magic cloak of respectability.
Still, in the perfectly rational world of tech acquisitions, the term has power. Matt quotes arch-magician biographer Walter Isaacson:
Isaacson also pointed out that Nest co-founder and CEO Tony Fadell will be joining Google as part of this deal. “Fadell was one of the team that created the iPod. He was very deep into the Apple culture … when Apple was so innovative.”
Matt makes the case for execution over true innovation. We think though that the tech world’s focus on disruptive innovation may have more to do with fear than hope. Parts of tech are wildly profitable, something that leads to what Andrew Smithers would call a bout of stockbroker economics when it comes to assessing the long term prospects of tech companies. Read more
Good old self-help: saviour of earnings, wellspring of hope. After a while, however, it really would be useful if economic growth would lend a hand.
Case in point, Volvo, where the analysts at Deutsche Bank have decided that five sets of disappointing earnings is enough. On to the sell list it goes. Read more
A tale of Reliance. Or of cracks. Or of regulation. Take your pick but this is simply pointing out that global refining margins are still in the doldrums (with recent GRMs low even by post-2008 standards) and that Europe’s refiners are likely to take the biggest kicking. Read more
In case you hadn’t noticed, European stocks are no longer cheap. Word reaches us from Morgan Stanley this morning that valuations are starting to look “somewhat full”.
Indeed, the median stock in Europe trades on 14.5x forward PE and 18% above the 5-year average – which is the top of the last 20 years range.
A survey of financial market participants most likely to be negatively affected by new regulations on uncleared swap trades revealed that they don’t like this new-fangled way of doing things at all. No, no, they really don’t.
The completely predictable result was published in an article in Risk on Wednesday: Read more
ECB papers are rarely the most riveting of reads but sometimes one crops up which is more attention-grabbing than usual…
This particular case, a paper by Biais, Heider and Hoerova, may be of interest as it at first glance appears to confirms what many already suspect — that hedging, while aimed at sharing risk, can lead to more risk taking. But it isn’t in the way that you would think. The additional risk-taking isn’t on the part of the hedger (they don’t actually model that), it’s on the part of the entity that sold the hedge. Read more
Dressing up a pig as a princess, doesn’t make the pig a princess, and concentrating all the counterparty risk in the financial system into one place, doesn’t make it vanish. It’s still there. For the most part.
Given that you haven’t done anything with the risk other than shift it, the logical conclusion is that regulators have to be ready to either backstop or wind-down a central counterparty (CCP) in order to prevent some potentially rather cataclysmic disruption to markets. Read more
Meanwhile in Europe … Money markets are also moving.
Recent bidding patterns at the European Central Bank’s seven-day funding operation below: Read more
Breaking pre-market news on Tuesday,
- Microsoft close to deal to buy Skype — report. Read more
There was a really interesting column penned by Matthew Lynn on Tuesday.
In a nutshell it argued that investors should be mindful of investing in a company known for its shrewdness when it comes to market-timing. Read more
We promised some comment on the silver backwardation story we did earlier, and now we have some.
The story continues with Friday’s LBMA silver forward rates (SIFO) settling in at negative as far out as 12 months for the second day in a row. So far, everyone in the market we’ve spoken to agrees this is all unprecedented. Read more
Last week’s US Treasury sell-off; deficit despair or recovery-related optimism?
What about a not-so-secret stimulus encouraged by Fed chairman Ben Bernanke? Read more
Here’s something to ponder after what seems to have so far been an unproductive meeting of European finance ministers in Brussels.
Deutsche Bank’s Gilles Moec is putting the ‘Plan B’ in the ECB — with a suggestion for a shiny new eurozone liquidity mechanism. Read more
That’s the share price of Swiss oil refiner Petroplus holding on Monday. Read more
More bedtime reading for the UK’s Independent Banking Commission; this time from research house Autonomous.
The report was referenced in Tuesday’s Wall Street Journal as a curtain raiser to the publication on Friday of the IBC’s ‘Issues Paper’. But it is well worth revisiting because it highlights just how fast margins on mortgage lending have risen in the UK. Read more