Macro Minute

Updating ‘Avalanche Patrol’ by Mark Dow (Behavioral Macro)

Global macro investor Mark Dow updates his framework for how and why the Fed should will and should be conducting monetary policy. Quick, and worthwhile. [Link]

The Macro Effects of the Recent Swing in Financial Conditions by Marco Del Negro, Marc Giannoni, and Micah Smith (NYFed Liberty Street Economics)

An overview of how the FRBNY’s Dynamic Stochastic General Equilibrium econometric model assessed the impact of tightening financial conditions in the US late in 2015. [Link]

Corruption

How Brazil’s electoral system led the country into political crisis by Ryan Lloyd and Carlos Oliveira (WaPo)

An overview of the perverse incentives built into the structure of the Brazilian legislature. [Link]

How Hungary’s Central Banker Funneled Funds to Friends, Family by Zoltan Simon (Bloomberg)

The head of Hungary’s central bank has been tied to illicit payments of about a billion dollars in a shocking wave of corruption revelations. [Link]

Monetary Matters

In Financial Terms, Bank Reserves Are Arpanet by Jeffrey Snider (Real Clear Markets)

An interesting essay drawing analogies between the guts of the international monetary system and the protocols which dictate internet traffic. We don’t necessarily agree with this analysis but it’s a thought-provoking one. [Link]

Lessons From The Euro From Early American Monetary and Financial History by Jeffrey Frieden (Bruegel Essay and Lecture Series)

There’s a common perception that the bolting together of numerous diverse economies within the Eurozone is the first experiment in monetary union. But early American history provides an interesting parallel. [Link, 40 page PDF]

Neoliberalism: Oversold? by Jonathan D. Ostry, Prakash Loungani, and Davide Furceri (IMF)

A look at the prevailing orthodoxy of the 1980s, 1990s, and 2000s that dictated sharp shifts in internal balances and floating exchange rates in response to economic growth crises. [Link, 4 page PDF]

Figuring Finance

It’s no fun when Amex throws your startup a Curve ball by Kadhim Shubber (FT Alphaville)

A case study in the challenges facing “fintech” startups which can rely on tenuous arbitrage opportunities which, once discovered, are easy for others to close. [Link, registration required]

BCG Recommends Greater Research Price Transparency For Banks by Sanford Bragg (Integrity Research)

Amidst changing business models for the sell-side (brought on by regulation, a decline in active management, and other factors), can research distributed by investment banks remain free? [Link]

Hulk Hogan, Peter Thiel, and A Gossip Blog Walk Into A Bar…

Peter Thiel, Tech Billionaire, Reveals Secret War With Gawker by Andrew Ross Sorkin (NYT DealBook)

Is it strange enough that a former professional wrestler was granted a nine figure settlement against a blog who published his sex tape? In 2016, of course not. There had to be clandestine funding from a personally motivated founder of PayPal. [Link]

Punting on the Good Life: Notes on Peter Thiel, Zero to One (Leptokurtic)

A part-book review, part-musing over Peter Thiel’s book ‘Zero To One’ which basically concludes that technocratic specialists are the how, not the why. [Link]

Superheroes

Disney v. Warner: How Captain America Beat Batman and Superman by James B. Stewart (NYT)

An overview of what drove Captain America and the Avengers past Batman and Superman: the deeply human nuance of the former and the disappointingly adversarial nature of the latter. [Link, soft paywall]

How I Dealt With Failure by Michael Batnick (The Irrelevant Investor)

Ritholtz Wealth Management’s head of research distills the pain of his early mistakes and misfortunes into a focused lesson on the power of failure. [Link]

Ancient History

Aristotle’s Tomb Found? by Matt Ford (The Atlantic)

While still largely speculative, it appears that the tomb of Alexander The Great’s tutor and the last Great Classical Greek thinker has been found. [Link]

Solving a Century-Old Typographical Mystery by Jacob Harris (The Atlantic)

ASCII art is commonplace these days, with algorithms able to align typesets into pictures. But where did this practice orginate? [Link]

China

Wilbur Ross’s Bad Bad Debt Idea by Christopher Langer (Bloomberg Gadfly)

An overview of the prospects for bad debt purchases from Chinese ‘asset managers’ which have already recorded massive losses on the debt. [Link]

A Rare Look Inside China’s Central Bank Shows Slackening Resolve to Revamp Yuan by Lingling Wei (WSJ)

New reports emerging from inside the PBOC suggest that the bank has given up on efforts to make the yuan’s value sensitive to market pressures; this would represent a significant shift and helps explain the less volatile yuan in 2016 as well as a slowdown in capital outflows. [Link, paywall]

Modern Maladies

Do YOU have ‘low battery anxiety’? 90% of us panic about losing power on our phones by Ellie Zolfagharifard (Daily Mail)

Ever skipped the gym in preference of a full battery? You’re not alone. [Link]

OCS vs. Wall Street by Nathaniel J. Hiatt (The Crimson)

Harvard has something of a queue-jumping problem. Talented candidates have begun striking bilateral deals with recruiters ahead of the school’s formal on-campus recruiting process, taking slots from students who follow normal procedures. [Link]

Notorious NYC Train Thief Arrested in Greyhound Bus Heist by Jonathan Dienst (NBC New York)

A Tristate man has been detained after struggling to control one of the stranger afflictions we’ve ever come across. [Link, auto-playing video]

Wrongdoing

The downfall of NYC’s hottest vegan by Dana Schuster and Georgett Roberts (NY Post)

A sordid tale of fraud and romance for the owner of what was once NYC’s hottest raw food destination. [Link]

Machine Bias by Julia Angwin, Jeff Larson, Surya Mattu and Lauren Kirchner (ProPublica)

In a wide-ranging investigation, this investigative effort shows a significant racial bias is present in quantitative “risk assessments” which can have major impacts on the amount of time convicted criminals spend in prison. [Link]

Women Say Kay Swapped Their Diamond For A Stone Of Worse Quality After A Repair by Stephanie McNeal (Buzzfeed)

A series of brides are claiming that the diamonds set in their rings are either not genuine or have been swapped out by the retailer they were purchased from. [Link]

Oil Impact

Auto, Mortgage Delinquencies Climb in Energy Regions by Josh Zumbrun (WSJ)

As oil prices fell and employment in extraction-related industries fell, delinquencies and defaults on consumer loans climbed in counties with oil-dependent economies. [Link, paywall]

‘They’re here for therapy’: Houston’s ‘rage room’ a smash as economy struggles by Tom Dart (The Guardian)

Cathartic venting is being monetized via a new trend that offers clients a chance to reduce their worldly stresses by destroying things. [Link]

Rate Hikes:  Today, Federal Reserve Chairwoman Janet Yellen spoke at a panel discussion at the Radcliffe Institute for Advanced Study at Harvard University.  Ms. Yellen reiterated that a rate increase would be appropriate “probably in the coming months” provided that the economy and labor market continue to strengthen.  Within the past few days, other rate-setting committee members had similar comments, foreseeing two or three rate hikes this year.

Survey Says: Yesterday’s article demonstrated that consumers are highly in-tuned to changes in gas prices.  Today, we see that consumers are highly in-tuned to interest rate changes as well.  Back in December 2015 during the Federal Reserve’s last rate increase, consumer expectations for interest rates one year from now were at series highs (3.71).  At the end of March 2016, Ms. Yellen’s speech to the Economic Club of New York indicated that uncertainty in the global economy called for a slower path of interest rate increases.  In April, our survey displayed that consumer expectations for higher interest rates one year from now dropped marginally from the previous month (3.59 in March to 3.53 in April), as the Fed showed that it would push off rate hikes to a later date and consumers were able to take a breath.  That brings us to today.  Follow our Consumer Pulse survey to see how consumers will react to Janet Yellen’s most recent rate increase comments and the release of the April FOMC meeting minutes released on 5/18.

You can purchase our Consumer Pulse survey analysis for just $365/year or $39.99/month (including a 30-day free trial).  We have said it before, but we’ll say it again:  The value in the Bespoke Consumer Pulse offering is tremendous.  We strongly encourage you to give our Consumer Pulse subscription a try!

Click here to learn more about the Consumer Pulse offering, or go ahead and start a 30-day free trial using one of the checkout links below.

Annual — Bespoke Consumer Pulse — $365/Year w/ 1-Month Free Trial

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Bloomberg’s IPO Index is a cap-weighted index made up of companies that have gone public within the last year.  Below is a chart highlighting the performance of the Bloomberg IPO index versus the S&P 500 since the S&P’s bull market began on March 9th, 2009.  After performing in-line with the S&P over the first two years of the current bull, the IPO index weakened significantly from early 2011 through mid-2012.  From 2013 through late 2014, IPOs knocked it out of the park, and the IPO index nearly caught up to the S&P by October 2014.  Ever since that October 2014 peak, however, it has been all downhill for IPOs.  From its high in 2014 to its low on February 11th of this year, the IPO index fell 42.7%.  Over that same time period, the S&P 500 only fell 10%.

Since both the S&P 500 and the Bloomberg IPO index made their 2016 lows on February 11th, the IPO index has surged 37%, while the S&P is up 15%.  Even after this massive outperformance over the last 3+ months, however, the S&P is up 88 percentage points more than the IPO index during the current bull market.  As shown below, the IPO index is up 122% since 3/9/09, while the S&P is up 210%.  Needless to say, IPOs have a lot of catching up to do.

There are currently just under 90 stocks in the Bloomberg IPO index, and their average performance versus their IPO price is a decline of 2.83%.  That means the average stock that has IPOd over the last year is down versus its IPO price.  No wonder there have been so few IPOs recently!

While the average IPO has fallen versus its IPO price, obviously some have done well.  We highlight them below.  These recent IPOs have gained more than 10% versus their IPO price.  For each stock, we include its sector, current market cap, current price, year-to-date change (where applicable), IPO date, % change since its IPO price, and % change since the price it opened at on the secondary market.  One thing you’ll notice is that while these stocks are all up 10%+ versus their IPO prices, all of them are not up versus the price they opened at on secondary markets.

Leading the way to the upside is Aqua Metals (AQMS) with a gain of 123.6% from its IPO price.  While AQMS is an Industrial sector stock, the next seven best performers are all Health Care/Biotech names.

If you have some time, we recommend looking through each of these names using whatever tools you like to use just to stay on top of the type of companies that have done well since recently going public.