Diary of a Financier

Top Newsstuffs (November 24-30)

In Bookshelf on Sun 30 Nov 2014 at 05:53

A vegetarian Thanksgiving dinner with Indians — seems backwards.  Top reads from the week that was…

Macro

Rail traffic weekly (Week 47, 2014) | Association of American Railroads (AAR)
Sequential growth continues to decelerate, although it’s still comping off a high yoy base through next week:
Weekly traffic: -1.2pp @ +0.2% yoy
Growth rate: -0.1pp @ +4.2% ytd
Carload groups: 5 of 10 posted gains for the week yoy
    Petroleum: +11.5%, multiyear boom continues deceleration amidst $CL_F price collapse
    Minerals: +1.9
    Grain: +1.7
    Chemicals: +0.7
    Motor vehicles/parts: -0.2
    Metals: -0.9
    Coal: -2.8
    Farming: -6.4
#Bearish #Latent indicator $XLE $USO $XLB $KOL $XME $XLI

Gross Domestic Product: Second estimate & revisions (2014q3) | Bureau of Economic Analysis (BEA)
Upward revision exceeds expectations again, led by fixed investment; residential investment unexpectedly revised up (+2.7%), despite argument of monthly construction data (-10%):
Real GDP (Q3): +3.9% (revised +0.4pp)
    Inflation: Headline +1.4% (+0.1pp); Core +1.6% (+0.1pp)
    Consumption (PCE): +2.2 (+0.4pp)
    Government spending: +4.2 (-0.4pp); Federal +9.9; State & local +0.8
    Fixed investment: +6.2 (+1.5pp); Equipment +10.7 (+3.5pp)
    Residential investment: +2.7 (+1.9pp)
    Private inventories: +0.12pp (-1.30pp), detracts from growth rate
    Exports: +4.9 (-2.9pp)
    Imports: -0.7 (+1.0pp)
    Personal savings rate: +5.0 (-0.5pp)
Real GDP per capita (Q3): +3.1% (-0.4pp); 9.3% below LT regression trend
[Previously: Advanced estimate & CPI inflation @ 1.8% core]
#Bullish!

Manufacturers’ durable & capital goods (October 2014) | US Department of Commerce
Sequential core data disappoints with negative prints & misses, but yoy comps increase to even healthier growth rates; unanimous upward revisions for September weren’t significant enough to be held responsible for misses:
Core durable goods (ex-transportation)
    Orders: +0.2pp @ 5.6% ytd, -0.9% mom (misses -0.5e)
    Shipments: +0.3pp @ 5.6% ytd, -0.1 mom
Core capex (nondefense, ex-aircraft capital goods)
    Orders: +0.4pp @ 5.4% ytd, -1.3 mom (misses +1.0e)
    Shipments: +0.4pp @ 5.3% ytd, -0.4 mom
Inventory
    Inventories: unch @ +6.0% ytd, +0.5 mom @ $406.8B SA (NSA & SA both at record highs)
#Bullish?

Credit

NYSE margin debt & balances (October 2014) | Doug Short (dshort.com)
Retracing from record levels at a steady, healthy pace, which is astounding given the small cap “internal correction” & energy selloff; hopefully the trend continues so this margin bubble doesn’t 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 2014.10
Nominal margin debt: +10.0% yoy, -2.2% mom @ $453.9B; widens to 2.6% below February’s alltime high ($465.7B)
Real margin debt: -1.8% mom; widens to 2.2% 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”): +5.5% @ -$167.3B debit; continues recovery from a record low, but still crushes prior records from 2000, 2007 & 2011
[Previously: Senior loan officer survey bullish & Renewed subprime bubble in auto loans]
#Bearish #Latent indicator

US household debt & credit report (2014q3) | Federal Reserve Bank of New York (NY Fed)
Healthy credit expansion continues with good progress in delinquencies, but troubling surges in auto & student loans continue unabated:Household debt- Total debt balances by loan type (2014q3)
Total consumer indebtedness: +3.8% yoy, +0.7% qoq @ $11.71T; 7.6% below alltime record ($12.68T in 2008q3)
Mortgages: +2.9% yoy, +0.4% qoq @ $8.13T
    Originations: +17.8% qoq @ $337B; recovery due to decline in rates after Q2 marked lowest activity since 2000
Non-housing debt: +7.7% yoy, +1.7% qoq
    Auto loans: +10.5% yoy, +3.2% qoq @ $934B; record high
    Credit cards: +1.2% yoy, +1.6% qoq @ $680B
    Student loans: +9.6% yoy, +0.7% qoq @ $1.13T; record high
Delinquencies (90+ days): -0.2pp qoq @ 4.3%; elevated student loan impairments (11.1% currently vs. 11.8% high in 2013q3) are the only class that both increased qoq and are not at pre-crisis levels
[Previously: Senior loan officer survey bullish & Renewed subprime bubble in car loans]
#Bullish #Releveraging #Private sector

Sentiment

Investor sentiment survey (2014.11.26) | American Association of Individual Investors (AAII)
Sentiment moderates, but remains at exuberant extremes after surprisingly countercyclical confidence in the face of the September/October’s double-dip internal correction, which has me worried that retail investors are getting too complacent:
Bull/Bear ratio: +44bps wow @ 2.50 (above 1.28 historical average & 1.8 extreme high)
Bullish: +3.0pp @ 52.1% (over 38.9 avg & 45 extreme high)
Bearish: -3.0pp @ 20.8% (under 30.4 avg & 25 extreme low)
Neutral: unch @ 27.1% (under 30.7 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 5/2015).
[Previously: Retail allocations are average, Fund managers report average risk exposures, Strategist sentiment remains a bullish signal & Recent volatility increases retail’s willingness to buy]
#Bearish #Contrarian

Interests

Global population demographics: The vanishing worker (or, no country for young men) | The Economist
Charts the growth of working age population in major countries (US, China, EU, UK & Japan)…
“All else being equal, an 0.5% drop in the growth of the labor force will trim economic growth (GDP) by a similar amount…Global working age population (%growth yoy, by country)
“In the US, the first baby boomers [hit peak consumption & retired] in 2008… this can probably explain about half the drop since then in the share of [prime] working-age population… from 66% to < 63%.”
#Baby Boom #Echo Boom #Millennials

–Romeo (posted retroactively 12/1)

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  1. […] – Real GDP per capita (Q3): +3.1% (-0.4pp); 9.3% below LT regression trend [Previously: Second GDP estimate & CPI inflation @ 1.7% core] […]

  2. […] margin debt peaked in 2000 & 07, at which time margin levels had already receded [Previously: Household debt/credit is healthy, Senior loan officer survey bullish, Leveraged loan market thankfully closed until 2015 & High […]

  3. […] time margin levels had already receded. [Previously: Margin debt growth rate decelerating & Household debt/credit is healthy] #Bearish #Improving #Latent […]

  4. […] time margin levels had already receded. [Previously: Margin debt growth rate decelerating & Household debt/credit is healthy] #Bearish #Leverage #Latent […]

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