Diary of a Financier

Top Newsstuffs (October 6-12)

In Bookshelf on Sun 12 Oct 2014 at 06:50

Top reads from the week that was…

Macro

Rail traffic weekly (Week 40, 2014) | Association of American Railroads (AAR)
Big bounce-back after last week’s dip, which now appears to have been an anomaly; resumes the +3% trend that’s been settling-in since August; great report considering the renewed concerns of a global economic slowdown:
Weekly traffic: +3.8pp @ +5.6% yoy
Growth rate: +0.1pp @ +4.5% ytd
Carload groups: 10 of 10 posted gains for the week yoy
    Petroleum: +26.9%
    Forestry: +10.9
    Coal: +8.9, recovery gains traction in 2nd week of reversal
    Minerals: +7.7
    Metals: +5.5
    Grain: +4.8
    Motor vehicles/parts: +1.1, after last week’s disappointing collapse
#Bullish #Latent indicator $XLE $USO $XLB $XME $DBA $XLI

Quant study: The shale revolution’s effect on oil & the dollar | Goldman Sachs
Correlation analysis reveals that the US’s energy renaissance has weakened the positive relationship between USD & crude oil prices:Correlation: WTI oil vs Oil trade balance (USD trade-weighted prices)
Oil trade balance: imports -60% since 2008 (12mm to 5mm b/d)
Correlation (DXY/WTI, daily): currently zero vs 0.3979 historical average (inclusive)
[Previously: The effects of USD on assets, economics & policy are surprisingly insignificant]
#Unconventional wisdom $CL_F $USO $XLE $DXY

Fundamental

S&P 500 foreign sales by region (2013) | Goldman Sachs
Divides SPX revenues geographically, according to the country/region of origin:
US: 67%SPX revenues by region (2013)
EMEA: 12%
Asia Pacific: 8%
North America: 5%
South America: 2%
Other: 6%
#Contagion #Global #International $SPY $EFA $ACWI

Sentiment

Investor sentiment survey (2014.10.08) | American Association of Individual Investors (AAII)
Sentiment rebounds to average levels, catching the internal correction’s bottom in surprisingly countercyclical fashion; are retail investors getting too complacent with their buy-the-dip mentality?
Bull/Bear ratio: -13bps @ 1.28 (meets 1.28 historical average & under 1.8 extreme high)
Bullish: +4.5pp wow @ 39.9% (over 39.0 avg & under 45 extreme high)
Bearish: +0.1 @ 31.0 (over 30.5 avg & 25 extreme low)
Neutral: -4.5 @ 29.1 (under 30.5 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 4/2015).
[Previously: Retail allocations are averageFund managers’ exposures around extreme levels & Margin debt back near record extremes]
#Neutral #Contrarian

Interests

FOMC minutes takeaway: stocks explode higher on fears of renewed economic weakness | Josh Brown (The Reformed Broker)
Sounds like a paradox, but that’s exactly what happened on Wednesday, when FOMC minutes were released, showing concern with signs of potential economic weakness that pushed-out the market’s expectations for a rate hike:
“The costs of downside shocks to the economy would be larger than those of upside shocks because, in current circumstances, it would be less problematic to remove accommodation quickly, if doing so becomes necessary, than to add accommodation.”
Notes:
Forward guidance language evolution: “considerable time” language will likely change so as not to misconstrue the Fed as being calendar (as opposed to data) dependent
Strong dollar: monitoring its impact, specifically weaker exports and lower inflation
Inflation: still below 2% long-run target due to fall in energy prices
#Bad is good again #ZIRP #Rising rates #Fed Funds Rate $DXY

Water 4.0: What will replace our cities’ obsolete water systems | VOX
A 4th major water crisis is coming, due to:
1. Aging infrastructure: old pipes & plants at end of their lifespan
2. Overflow: Northeastern US cities are so overpopulated that sewage plants do not have the capacity to withstand large storms
3. Droughts: Southwestern US cities are struggling with undersupply due to global warming
Prior water eras:
1.0 Water transportation: Roman acqueducts bringing water to cities
2.0 Water treatment: Innovations in filtering drinking water stemmed the spread of diseases
3.0 Water disposal: Waste pumped into rivers & lakes caused ecological damage until Congress passed the Clean Water Act in 1972 to federally subsidize sewage treatment plants

The best beer from every state | RateBeer.com
50 states & 50 ales/lagers from some of the top breweries in the US.
[I’m surprised at how many of these I agree with, but I’d still like to dispute some.  Love how many India Pale Ales (IPAs) & Russian Imperial Stouts (RISs) are on there too.]
#BucketList

–Romeo

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  1. […] spending in an overall net positive to economic growth; most importantly, the US is still a net energy importer. Compares Oil prices to Energy capex spending (lagged 2-quarters): – Correlation: 0.71 […]

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