Diary of a Financier

Top Newsstuffs (October 27 – November 2)

In Bookshelf on Sun 2 Nov 2014 at 05:32

Top reads from the week that was…

Macro

Rail traffic weekly (Week 43, 2014) | Association of American Railroads (AAR)
Nice acceleration relieves my fear that the increasingly erratic sequential data in September were sending an aggregate sign of weakness; growth remains well above trend GDP:Rail traffic weekly 2014.10.30
Weekly traffic: +2.1pp @ +5.0% yoy
Growth rate: +0.1pp @ +4.5% ytd
Carload groups: 7 of 10 posted gains for the week yoy
    Petroleum: +20%
    Minerals: +8.9
    Metals: +6.3
    Coal: +3.7
    Motor vehicles/parts: -4.4
    Grain: -10.5
#Bullish #Latent indicator $XLE $USO $XLB $KOL $XME $XLI

Gross Domestic Product: Advanced estimate (2014q3) | Bureau of Economic Analysis (BEA)
Great report beats expectations, led by a surprising spike in government spending (+0.83pp); expect downward revisions in residential investment (+1.8%) which doesn’t check-out per monthly construction data (-10%); inventories unfortunately remain a major contributor, but investment in structures is a welcomed highlight:
Real GDP (Q3): +3.5% (beats +3.0e)
    Inflation: Headline +1.3%; Core +1.5%
    Consumption (PCE): +1.8 (beat +1.4e)
    Government spending: +4.6; Federal +10; State & local +1.3
    Fixed investment: +4.7; Equipment +7.2
    Residential investment: +1.8
    Private inventories: +1.42pp (+0.03) vs -1.16pp Q1
    Exports: +7.8
    Imports: -1.7
    Personal savings rate: +5.5
Real GDP per capita (Q3): +3.49% (unch); 9.8% below regression trend
[Previously: 2nd 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.”]
#Bullish!

Manufacturers’ durable & capital goods (September 2014) | US Department of Commerce
Sequential data disappoints with negative prints & misses, but yoy comps increase to remain well above trend GDP growth, and NSA inventories drawn-down; insignificant revisions for August:
Core durable goods (ex-transportation)
    Orders: +0.4pp @ 5.4% ytd, -0.2% mom (misses +0.5e)
    Shipments: +0.2pp @ 5.3% ytd, unch mom
Core capex (nondefense, ex-aircraft capital goods)
    Orders: +0.4pp @ 5.0% ytd, -1.7 mom
    Shipments: +0.5pp @ 4.9% ytd, -0.2 mom
Inventory
    Inventories: -0.3pp @ +6.0% ytd, +0.4 mom @ $404.8B SA (SA at record high, but NSA -$3B)
#Bullish?

Credit

NYSE margin debt & balances (September 2014) | Doug Short (dshort.com)
At or near record levels for all categories, which is astounding given the small cap “internal correction” & energy selloff; this margin bubble will pop as we come closer to rising Fed Funds Rates (est. 2015q3); 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 margin debt_net margin balances 2014.09
Nominal margin debt: +15.6% yoy, +0.2% mom @ $463.9B; higher trend re-entrenched after March to May’s declines; only 0.4% below February’s alltime high @ $465.7B
Real margin debt: +0.2% mom; only 0.4% 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”): +3.3% @ -$177.0B debit; recovers from a record low, but still crushes prior records from 2000, 2007 & 2011
[Previously: US household debt/credit report, Senior loan officer survey & Renewed subprime bubble in auto loans]
#Bearish #Latent indicator

Sentiment

Investor sentiment survey (2014.10.29) | American Association of Individual Investors (AAII)
Sentiment remains at exuberant extreme after last week’s spike; surprisingly countercyclical confidence in the face of the market correction has me worried that retail investors are getting too complacent with their buy-the-dip mentality:
Bull/Bear ratio: +13bps wow @ 2.34 (above 1.28 historical average & 1.8 extreme high)
Bullish: -0.3 @ 49.4% (over 39.0 avg & 45 extreme high)
Bearish: -1.4 @ 21.1 (under 30.5 avg & 25 extreme low)
Neutral: +1.7 @ 29.6 (under 30.5 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 4/2015).
[See also: Recent volatility increases retail’s willingness to buy & Retail allocations are average]
#Bearish! #Contrarian

Interests

Coordinated interventions: Bank of Japan increases monetary stimulus & Government Pension Investment Fund reallocates (2014.10.31) | Business Insider
A pair of dovish announcements out of Japan:
1. BOJ increases QE & mix:
+10T @ ¥80T ($720B) per annum
Equity purchases triple (ETFs & J-REITs)
Maturity targets increase from 6-8y to 7-10y
2. GPIF increases equity allocation:
Japanese stocks +13pp to 25%
Foreign stocks to 25%
Japanese bonds -25pp to 35%
Foreign bonds to 15%
[Previously: Japan’s plan for economic & fiscal reform & The complete guide to Abenomics]
$DXJ +7% $USDJPY +2.7%

–Romeo

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  1. […] traffic weekly (Week 44, 2014) | Association of American Railroads (AAR) Growth remains well above GDP ytd trend (+2%): – Weekly traffic: +0.1pp @ +5.1% yoy – Growth rate: unch @ +4.5% ytd – Carload groups: […]

  2. […] weekly (Week 45, 2014) | Association of American Railroads (AAR) Sequential growth plummets under GDP’s ytd trend (+2%), although it’s comping off a high yoy base that started the YE13 rally: – Weekly […]

  3. […] (AAR) Soft sequential growth after last week’s big deceleration keeps Q4 volumes under GDP’s ytd trend (+2%), although it’s still comping off a high yoy base that started the YE13 rally: – […]

  4. […] – Real GDP per capita (Q3): +3.1% (-0.4pp); 9.3% below LT regression trend [Previously: Advanced estimate & CPI inflation @ 1.8% core] […]

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