Diary of a Financier

Top Newsstuffs (August 25-31)

In Bookshelf on Sun 31 Aug 2014 at 06:08

Home on the range…


Rail traffic weekly (Week 34, 2014) | Association of American Railroads (AAR)
Unheralded rally continues to wane, settling-in at a 3-4% trend that suggests the economy is slightly healthier than consensus; coal (38% of total volume) still weighing on overall performance:
Weekly traffic: -0.8pp @ +3.2% yoy
Growth rate: -0.1pp @ +4.6% ytd
Carload groups: 8 of 10 posted gains for the week yoy
    Petroleum: +28.4%
    Grain: +17.6
    Minerals: +10.5
    Metals: +8.7
    Motor vehicles/parts: +2.0
    Coal: -3.9
#Bullish $XLE $USO $XME $DBA $XLI

Gross Domestic Product: Second estimate (2014q2) | Bureau of Economic Analysis (BEA)
Upward revision beats expectations after an already huge initial release; inventories were a major contributor, but a downward revision has trimmed their contribution:
Real GDP: +4.2% vs +3.9e (revised +0.2pp)
    Inflation: +1.9% headline (unch); +1.7% core (unch)
    Consumption (PCE): +2.5 (unch)
    Government spending: -0.9 federal (-1.1pp); +2.9 state & local (-0.2pp)
    Fixed investment: +8.1 (+2.6pp)
    Residential investment: +7.2 (-0.3pp)
    Equipment investment: +10.7 (+3.7pp)
    Private inventories: +1.39pp (-0.27) vs -1.16pp Q1
    Exports: +10.1 (+0.6pp) vs -9.2 Q1
    Imports: +11.0 (-0.7pp)
Real GDP per capita: +3.49% (9.2% below regression trend)
[Previously: Advanced estimateThe bond market is wrongQ1 GDP in context, “I don’t like the suggestion that the weak Q1 was synecdoche for a broader trend in the economy.”]

Manufacturers’ durable & capital goods (July 2014) | US Department of Commerce
Great report signals continued economic expansion, with misses due to big upward revisions for June; a healthy flow-through from increased orders to accelerating shipments, but watch rising inventories; headline orders set a record +22.6% mom (beat +7.5e) due to aircrafts:
Core durable goods (ex-transportation)
    Orders: +4.8% yoy, -0.8% mom (miss +0.5e)
    Shipments: +4.9 yoy, +1.4 mom
Core capex (nondefense, ex-aircraft capital goods)
    Orders: +4.3 yoy, -0.5 mom (miss +0.2e)
    Shipments: +4.2 yoy, +1.5 mom (beat +0.7e)
    Inventories: +6.0 yoy, +0.5 mom @ $404.96B SA (NSA at record high)
– Revisions (June)
    Core durable goods: Orders +1.2pp to +3.0% mom; Shipments +1.0pp to +1.1% mom
    Core capital goods: Orders +4.0pp to +5.4% mom; Shipments +1.9pp to +0.9% mom


Investor sentiment survey (2014.08.27) | American Association of Individual Investors (AAII)
Sentiment spikes even higher into extreme levels indicative of exuberance; hard to imagine that bull/bear ratio was 0.80 only 3 weeks ago:
Bull/Bear ratio: +76bps @ 2.70 vs 1.28 historical average & 1.8 extreme high
Bullish: +5.8pp wow @ 51.9% vs 39.0 avg & 45 extreme high
Bearish: -4.4pp @ 19.2 vs 30.5 avg & 25 extreme low
Neutral: -1.4pp @ 28.8 vs 30.5 avg
Measures respondents’ expectation for equity performance over next 6 months (through 3/2015).
[Previously: Fund managers’ exposures nearing extreme levels, Retail asset allocations remain neutral & Margin debt at extreme highs]
#Bearish! #Contrarian #Procyclical

NYSE margin debt & balances (July 2014) | Doug Short (dshort.com)
While gross debt decreased a bit, net balances hit a new alltime low (deficit), which is astounding given the small cap “internal correction” that double-dipped in July and bottomed 8/1; SPX didn’t crash until 3-5 months after real margin debt peaked in 2000 & 07, at which time margin levels had already receded:NYSE net margin balances (credit/debit) 2014.07
Nominal margin debt: -0.9% @ $460.2B; resumes decline that started from March to May; only 1.2% below February’s alltime high @ $465.7B
Real margin debt: -0.8%; only 2.6% below February’s alltime high, but still in excess of prior highs in 3/2000 & 7/2007′s before those bear markets
Net margin balances (“buying power”): -3.5% @ -$182.1B debit; a new record, crushing prior records from 2000, 2007 & 2011
#Bearish #Latent indicator


Congitive biases: The complete guide | Business Insider
Includes 58 traits that show humans are irrational agents:
Affect heuristic, anchoring bias, availability heuristic, bandwagon effect, blind spot bias, choice supportive bias, clustering illusion, confirmation bias, conformity, conservatism bias, curse of knowledge, decoy effect, denomination effect, duration neglect, empathy gap, frequency illusion, fundamental attribution error, galatea effect, halo effect, hard/easy bias, herding, hindsight bias, hyperbolic discounting, ideometer/idea effect, illusion of control, information bias, inter-group bias, irrational escalation, negativity bias, observer-expectancy effect, omission bias, ostrich effect, outcome bias, overconfidence, overoptimism, pessimism, placebo effect, planning fallacy, post-purchase rationalization, priming, pro-innovation bias, procrastination, reactance, recency effect, reciprocity, regression bias, restraint bias, salience, scope insensitivity, seersucher illusion, selective perception, self-enhancing transmission bias, status quo bias, stereotyping, survivorship bias, tragedy of the commons, unit bias, zero risk bias
[Previously: Kahneman’s Thinking, Fast and Slow]
#Behavioral Finance/Economics

White paper: “Fueling Road Spending with Federal Stimulus” | Federal Reserve Bank of San Francisco (FRBSF)
“Highway spending in the United States between 2008 and 2011 was flat, despite the serious need for improvements and the big boost to state highway funds from the Recovery Act of 2009… [due to]  pressures to reduce state highway spending due to plummeting tax revenues.
“In fact, analysis suggests national highway spending would have fallen roughly 20% over this period without federal highway grants from [ARRA]… state highway spending was boosted over these three years even more than dollar-for-dollar with the ARRA highway grants, as initial spending appears to have spurred complimentary investment in subsequent years.
“ARRA contained $48 billion in transportation funding, $27 billion specifically for roads…
“The American Society of Civil Engineers gave the nation’s roads a ‘D’ rating in 2013… the World Economic Forum ranked the United States 18th in the world in terms of road quality in 2013.”
[Previously: Highway Trust Fund is insolvent again & 7 reasons to expect a 2014 boom in Capital Expenditures]
#Multiplier effect


  1. […] next 6 months (through 3/2015). [Previously: Fund managers' exposures nearing extreme levels & Margin debt at extreme highs] #Bearish #Contrarian […]

  2. […] (unch); 9.8% below regression trend – Real GDP (Q1): -2.1 (unch) [Previously: 2nd estimate, The bond market is wrong & Q1 GDP in context, "I don’t like the suggestion that the weak […]

  3. […] rate: +5.5 – Real GDP per capita (Q3): +3.49% (unch); 9.8% below regression trend [Previously: 2nd estimate, The bond market is wrong & Q1 GDP in context, "I don’t like the suggestion that the weak […]


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