Diary of a Financier

Top Newsstuffs (June 2-8)

In Bookshelf on Sun 8 Jun 2014 at 05:30

A weekend off…

Rail traffic weekly: Accelerating rally reaches new highs | Association of American Railroads (AAR)
Weekly traffic: +8.3% y/y
Growth ytd: +0.1pp @ +4.3%
Carload groups: 10 of 10 posted gains, including grain +27.4%, forestry +13.6, motor vehicles +12.2
[8th consecutive week prolongs an accelerating rally after tough Q1; are you not entertained?!]
#Bullish! $DBA

Sell side consensus indicator: Analyst sentiment still a buy signal (May 2014) | Bank of America Merrill Lynch (BAML)
Indicator measures “average recommended equity allocation of Wall Street strategists as of the last business day of each month”:
Average recommended equity allocation: -0.9pp @ 51.3%, still indicative of consensus bearishness & below 3/2009 lows; average @ 60.3; “buy” signal < 54.5; “sell” > 66.2; alltime low @ 43.9 in 7/2012
[Manifestation of the #Recency effect bias, since analysts are still gunshy due to the financial crisis.]
#Bullish #Contrarian

Investor sentiment survey: Neutral cohort still swelling (June 5, 2014) | American Association of Individual Investors (AAII)
Respondents’ expectation for equity performance over next 6 months (through 12/2014):
– Bullish: +3.0pp w/w @ 39.5% vs 39.0 historical avg & 45 extreme high
– Bearish: -1.0pp @ 22.2 vs 30.5 LT avg & 25 extreme low; 18.5 postcrisis low in January
Neutral: -2.1pp @ 38.3 vs 30.5 LT average; remains 1σ above mean
– Bull/Bear ratio: @ 1.78 vs 1.28 avg
[Big rally by the bulls would be more troubling if it reaches extremes, but the persistently large “neutral” cohort still indicates uncertainty.]
#Neutral

Asset allocation survey: More moderation (May 2014) | American Association of Individual Investors (AAII)
– Stock allocations: -1.7pp @ 65.3%, above 60% LT avg for 14th consecutive month (longest post-crisis streak), but below 70% historical extreme
Bonds: -0.1pp @ 15.5%, below 16% avg for only 4th time since 2009 & nowhere near 10% low-end extreme
Cash: +1.8pp @ 19.2%, highest since 9/2013, but below 24% avg for 30 consecutive months & near 15% low-end extreme
#Neutral

Speech: They psychology of human misjudgement | Charlie Munger (Berkshire Hathaway)
“24 Standard Causes of Human Misjudgment” highlights the importance of incentives.
#Behavioral economics

Giving yourself an investing makeover | The Wall Street Journal
Chronicles the transformation of Guy Spier (PM, Aquamarine Fund), who radically overhauled his investment approach & strategy after he won a lunch with Warren Buffett in 2008:
1. Moved his fund to Zurich, Switzerland to remove himself from the “bad influences” of NYC’s environment
2. Turned-off his data terminal & checks holdings’ prices no more than weekly, because “knowing the prices of his holdings would make him want to [overtrade]”
3. Doesn’t disclose his positions, because he wants to remain dispassionate & unbiased
4. Divided his office into a “busy room” and a “library”  — the latter where electronic devices are forbidden so he may read & think
5. New research process prioritizes his own first impression of a company; first he reads filings, then news, conference call transcripts, online commentary, Wall Street analysts
[See also: My investing rules Lessons from Margin of Safety]
#Biases

Purchasing Managers Index (May 2014): Global expansion resumes | Markit Economics
Global Manufacturing PMI (+0.3 @ 52.2) rebounds & remains firmly expansionary
Australia (+4.4 @ 49.2) finally recovers from YE13 crash
Japan (+0.5 @ 49.9) rebounds a bit to the brink of expansion after March’s crash from the sales tax increase
China’s official PMI (+0.4 @ 50.8) edged higher again & unofficial (+1.3 @ 49.4) continues recovery from March collapse
– The rest of Asia’s dipping too, including South Korea (-0.7 @ 49.5) & Taiwan (-0.4 @ 52.3)
Eurozone (-1.2 @ 52.2) decelerates, led lower by Germany (-1.8 @ 52.3) & Italy (-0.8 @ 53.2), with France (-1.8 @ 49.6) dumping into contraction
UK (-0.3 @ 57.0) remains a global leader for unprecedented 14th month
Brazil (-0.5 @ 48.8) falls deeper into contraction
US ISM (+0.5 @ 55.4 v 55.5e) accelerates nicely, with new orders (+1.8 @ 56.9), production (+5.3 @ 61.0), inventories (unch @ 53.0), deliveries (-2.7 @ 53.2), exports (-0.5 @ 56.5) & employment (-1.9 @ 52.8)
[Good US report, especially as an encore to March’s pent-up demand spike. See also: US ISM Non-manufacturing (Services) (+2.1 @ 55.2)]
#Bullish

Picture of the week:

These 60 rare photos will destroy everything you knew about the past | Distractify

These 60 rare photos will destroy everything you knew about the past | Distractify 
Photo of Hachiko before his burial in 1935:
“The Japanese Akita dog was famous for his incredible loyalty. His owner passed away and didn’t come home on his usual train one evening in 1925. Hachiko returned to the station every day and waited for him to come home for 9 years until his own death.”
[“Captures celebrities , revealing relationships you’ve never seen before and capturing the essence of eras that have come and gone.”]

–Romeo

Advertisements
  1. […] annualized so far in Q2 (inventories are piling up but shipments just increased to +3.9% y/y) – ISM/PMI @ 55.4 – Consumer indebtedness +3.7% (admittedly, household releveraging might be offset by some […]

  2. […] Both asset allocations and sentiment are still around historical […]

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