Truckin' - got my chips cashed in
Keep truckin - like the doodah man
Together - more or less in line
Just keep truckin on

-- Grateful Dead, Truckin’

There are many indices to use to gauge economic activity and Coventry League tends to gravitate to proprietary and idiosyncratic ones. 

However, we incorporate established indices as well, including a trucking activity index as a leading indicator: Ceridian-UCLA Pulse of Commerce Index, or PCI. 

Essentially, a unit of Ceridian manages payment cards that trucking companies and drivers use to, say, fill up their tanks with diesel. It measures diesel fuel purchases at 7,000 truck stops nationwide.  The big picture of the index is a measure of the flow of goods to U.S. factories, retailers and consumers.

So, what’s the index suggesting?  Near-term economic sluggishness at best. 

Coventry League may or may not have its chips cashed in…

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"Biographies: Ceridian-UCLA Pulse of Commerce Index." Economic Data | Ceridian-UCLA Pulse of Commerce Index. Web. 15 Sept. 2011. <http://www.ceridianindex.com/about-the-index/biographies/>.Biography of UCLA economics professor, Ed Leamer, who is chief economist for the Ceridian-UCLA Pulse of Commerce Index.

Durden (ZeroHedge), Tyler, and Lee Adler (Wall Street Examiner). "The Pulse of Commerce and The Chicken's Dilemma | ZeroHedge." ZeroHedge | On a Long Enough Timeline the Survival Rate for Everyone Drops to Zero. The Wall Street Examiner, 13 Sept. 2011. Web. 15 Sept. 2011. <http://www.zerohedge.com/contributed/pulse-commerce-and-chickens-dilemma>.

Gross, Daniel. "The 18-Wheeler Recovery: What Trucking Statistics—yes, Trucking—can Tell Us about the Economy." Slate Magazine. 13 May 2010. Web. 15 Sept. 2011. <http://www.slate.com/id/2253823/>.

Maio, Pat. "Trucking Activity Boosted in California by Exports." North County Times - Californian. 13 Sept. 2011. Web. 15 Sept. 2011. <http://www.nctimes.com/business/article_2d91a1dc-10e4-5dca-80c9-06bb5e7fdb28.html>.

Below is an infographic highlighted by Grist.com depicting the cost of eating healthily. This can also be explained from subsidies for junk food (high calorie, low nutrition) that aid and abet the perpetuation of a health care provider complex.

The chart provided by Financial Times yesterday regarding a "AAA Bubble" is mostly self-explanatory, although the article has some good off-links.  And, for those who want a refresher on credit ratings, a good starting point is this Wikipedia article.

If Coventry League starts questioning practices of management or, even worse, is short a company’s securities, then it’s often a harbinger of things to come.  Please reference Coventry League (and its predecessor)’s shorts of Enron and Lehman.  We didn’t even make an effort to buy-to-close, and simply held through bankruptcy and elimination of the securities.

That said, if the following charts prepared by Mary Meeker in the document titled USA, Inc. were attributable to a company, rest assured Coventry League would be heavily short, albeit hedged.  In this case, the charts relate to a sovereign nation, which has unique alternatives versus a corporation – namely the ability to print money and create revenues (taxation).  Using these abilities to any meaningful extent exacerbates the problems, however. 

So, without further ado, please engage yourself with the referenced charts above and in the source file (or at Mish's blog) – but do so while on a ground floor office suite.

“Lend not unto him that is mightier than thyself; for if thou lendest him, count it but lost.”

We saw a comment about this Bible quote on Dealbreaker:

"UBS cites a well-documented case from 377 BC to 373 BC to illustrate how the ancient Greeks learned that sovereign defaults occur in clusters. In that case, 11 of 13 states defaulted on loans from the Temple of Delos…"

The Dealbreaker, in turn, references a post today by The Globe and Mail.  Essentially, the blogs relate to a citation by Costa Vayenas, an emerging markets analyst based in Switzerland at UBS AG, concerning sovereign debt defaults – in that they tend to occur in clusters.

Incidentally, we have negative views on municipal and some other debt generally…and are selective on issues, if any, in which to take action.

Having worked in structured finance in the caverns of Wall Street, it is known that the structured finance market of CDOs and related securities can be explained and understood in a straightforward manner.  The complexity is mostly associated with the detailed mechanics of modeling and assessing risk to counterparties and investors.

Accordingly, included is a fine infographic presented by MortgageRates that helps illustrate the very basics of the CDO market.  Hat tip to Felix Salmon.

Assistant Professor Philip H. Howard of Michigan State University concludes that approximately 89% of beverage options are controlled by three corporations. 

Many people who haven’t been sleeping under the proverbial rock can name at least two of the three corporations.  

For those who cannot, the top three companies of U.S. soft drink sales are segmented as follows:

   (1.)  42.7%: Coca-Cola’s 25 brands and 139 varieties
   (2.)  30.8%: Pepsi’s 18 brands and 163 varieties
   (3.)  15.3%: Dr. Pepper Snapple Group’s 20 brands and 109 varieties

Rounding out the top ten companies by market share (circa 2008) are the following (see beverage digest):

  (4.)   4.7%: Cott Corp.
  (5.)   2.6%: National Beverage
  (6.)   0.8%: Hansen Natural
  (7.)   0.7%: Red Bull
  (8.)   0.4%: Big Red
  (9.)   0.4%: Rockstar
  (10.) 1.6%: Private label and other

The well-presented chart porn highlights the pseudovariety, or the illusion of diversity.

As Econgirl and many economists stress, correlation does not imply causation. 

Sure, our Dear and Loyal Readers might interpret our pontifications as harbingers of things to come and dutifully investigate further. Regardless, just because in March we highlighted more troubling signs concerning Moody’s Corporation (NYSE: MCO), doesn’t imply that said revelations caused the stock to plummet by 28%, from $30.23 (March 30) to $21.76 (May 11).  

We merely mentioned the behavior of savvy investors such as hedge fund manager David Einhorn at Greenlight Capital with respect to the investment attractiveness, or lack thereof, regarding MCO. Accordingly, the relationship between our revelations and the plummeting stock price is spurious at best.

Nevertheless, some investors got a wake-up call after reading MCO’s 10-Q filed May 7, or by reading more recent posts by Zero Hedge, published May 8 and May 11, and EconomicPolicyJournal.com that the SEC is investigating MCO.  Here is an extract from its 10-Q (bottom of page 20):


“On March 18, 2010, MIS received a ‘Wells Notice’ from the Staff of the SEC stating that the Staff is considering recommending that the Commission institute administrative and cease-and-desist proceedings against MIS…”


Why MCO waited nearly two months to share this material information while Buffett was dumping shares is worthy of another blog post. Incidentally, didn’t another of Buffett’s investees, Goldman Sachs, also delay revealing its own ‘Wells Notice’ and other material information?

The opinion at Coventry League and elsewhere is Moody’s may have difficulties as a going concern if the SEC enforces a cease-and-desist from being a ratings agency. In that case, some might want to paraphrase Friedrich Nietzsche: “Moody’s is Dead.”

__________________________

Note: MIS is an acronym for Moody’s Investors Service, a reportable segment of MCO.

Given health care reform has been a major topic among citizens and elected representatives over the past year, it seems appropriate to post a few links to thought provoking graphics and articles.  There are several countries for leaders to benchmark regarding implementing or reforming a health care plan.

Below is a scatter-plot presented by the blog FiveThirtyEight depicting health care spending and life expectancy (click to enlarge).

For a different perspective, National Geographic Magazine presented a linear graphic of health care expenditures and life expectancy (below):

And, lastly, the Organization of Economic Co-Operation and Development (OECD) presents an overview and offers an interactive visual related to health care expenditures and effectiveness, and Wikipedia includes several charts and resources for further research, including a revealing chart of U.S. health care expenditures as a percentage of GDP (below).