Diary of a Financier

Top Newsstuffs (December 22-28)

In Bookshelf on Sun 28 Dec 2014 at 06:37

Top reads from the week that was…

Macro

Rail traffic weekly (Week 51, 2014) | Association of American Railroads (AAR)
Unprecedented year-end rally continues, led by ytd laggards; although traffic seasonally wanes during YE holidays, yoy comps have a relatively high base from YE13 rally:Rail traffic weekly 2014 week 51
Weekly traffic: +2.0pp @ +6.4% yoy
Growth rate: unch @ +4.4% ytd
Carload groups: 7 of 10 posted gains for the week yoy
    Grain: +19.9%
    Minerals: +18.6
    Metals: +9.2
    Coal: +7.0
    Petroleum: +6.8, multiyear boom resumes deceleration amidst oil price crash
    Motor vehicles/parts: -3.8
    Chemicals: -5.9
    Farm/food: -8.5
#Bullish #Latent indicator $XLE $USO $XLB $KOL $XME $XLI

Gross Domestic Product: Third estimate & revisions (2014q3) | Bureau of Economic Analysis (BEA)
Huge upward revision exceeds expectations again, led by fixed investment; residential investment unexpectedly revised up (+2.7%), despite argument of monthly construction data (-10%); accelerates from Q2’s 4.6% rate, which had the benefit of pent-up demand from Q1 weather-related issues:
Real GDP (Q3): +5.0% (revised +1.1pp, beats 4.3e)
– Inflation: Headline +1.4% (unch); Core +1.6% (unch)
    Consumption (PCE): +3.2 (+1.0pp)
    Government spending: +4.4 (+0.2pp); Federal +9.9; State & local +0.8
    Fixed investment: +7.7 (+1.5pp); Equipment +11.0 (+0.3pp)
    Residential investment: +3.2 (+0.5pp)
    Private inventories: +0.12pp (-1.30pp), detracts from growth rate
    Exports: +4.5 (-0.4pp)
    Imports: -0.9 (-0.2pp)
Real GDP per capita (Q3): +3.1% (-0.4pp); 9.3% below LT regression trend
[Previously: Second GDP estimate & CPI inflation @ 1.7% core]
#Bullish!

Manufacturers’ durable & capital goods (November 2014) | US Department of Commerce
Sequential core data disappoints with negative prints & big misses, starting a deceleration in yoy comps, which still remain in healthy excess of GDP’s ytd growth trend; while miniscule, unanimous downward revisions for October compound the weakness, although the reduction in inventories suggests a pause to draw-down:
Core durable goods (ex-transportation)
    Orders: -0.2pp @ 5.4% ytd, -0.4% mom (misses +1.1e)
    Shipments: -0.2pp @ 5.4% ytd, -0.1 mom
Core capex (nondefense, ex-aircraft capital goods)
    Orders: -0.4pp @ 5.0% ytd, unch mom (misses +1.0e)
    Shipments: -0.2pp @ 5.1% ytd, +0.2 mom
Inventory
    Inventories: -3.2 @ +2.7% ytd, +0.4 mom @ $408.2B SA (NSA & SA set record highs again)
#Bullish?

Credit

NYSE margin debt & balances (November 2014) | Doug Short (dshort.com)
Pause in retracement from record levels; resilience of leverage is astounding given the small cap “internal correction” & energy selloff ytd, but hopefully the steady, healthy moderation continues so this margin bubble doesn’t pop as we come closer to rising Fed Funds Rates (est. 2015q3):NYSE margin debt 2014.11
Nominal margin debt: +7.88% yoy, +0.72% mom @ $457.1B; narrows to 1.8% below February’s alltime high ($465.7B)
Real margin debt: +1.0% mom, but widens to 2.7% 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”): -1.6% @ -$169.97B debit; pause in recovery from a record low, but still crushes prior records from 2000, 2007 & 2011
SPX didn’t crash until 3-5 months after real 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 yield energy sector credit enters correction]
#Bearish #Latent indicator

Quant

Quant study: S&P 500’s monthly price returns (1929-2014) | Bank of America Merrill Lynch (BAML Quant Strategy)
Both January & December are the best performing months in the market, especially after a FY with double-digit returns like 2014; September & February are the worst.
Best:SPX monthly average returns & success rate (1929-2014)
December: +1.8% mean; 75% winners
January: +1.3% mean; 64% winners (+1.8% w 68% winners after a big year)
Worst:
September: -1.1% mean; 44% winners
February: -0.1% mean; 53% winners
Charts SPX’s average monthly returns & success rate.
[Previously: Charting the average year in the stock market (daily) & SPX’s historical 6-month rolling returns]
#Bullish #Seasonality

Sentiment

Investor sentiment survey (2014.12.24) | American Association of Individual Investors (AAII)
An unprecedented spike in sentiment takes us back above exuberant extremes, resuming months’ worth of alarming complacency and uncharacteristic countercyclicality that’s weathered multiple market events ytd (i.e. 2 internal corrections & energy bear market):
Bull/Bear ratio: +125bps wow @ 2.69 (over 1.28 historical average & 1.8 extreme high)
Bullish: +12.2pp @ 50.9% (over 39.0 avg & 45 extreme high)
Bearish: -8.0 @ 18.9% (under 30.5 avg & 25 extreme low)
Neutral: -4.2pp @ 30.2% (under 30.5 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 5/2015).
[Previously: Retail asset allocations remain neutral, Fund managers report average risk exposures, Strategist sentiment remains a bullish signal & Recent volatility increases retail’s willingness to buy]
#Bearish #Contrarian

Interests

Video documentary: How professional designers create logos | Aaron Draplin (DDC)
Milwaukee Brewers_logoFascinating look at a freelance designer’s mind, obsessions, and creative process, in which he draws inspiration from beautiful, minimalist, old school artwork with hidden meanings.
[See also: Aaron Draplin’s short films & TEDx talk]
#Entrepreneur #Inspire #Muse

Bitcoin 2.0 & the “tokenization” of software | TechCrunch
By extracting the nucleus (and true genius) of BTC — its “Blockchain” open source, transparent ledger that’s maintained by third party “miners” — software can enter a new age of decentralized, securely encrypted, peer-to-peer data sharing.
Blockchain solves the Byzantine General’s conundrum:
Credit cards & banks spend a lot on proprietary software to verify electronic transactions. You would think you could assign serial numbers to every unit of cryptocurrency to track spending & thwart counterfeiting, but a user could double-spend the same unit simultaneously. When a user’s payment is confirmed by a recipient’s encryption key, the transaction is recorded in a chronological “block” that interlocks with other system-wide transactions, so that two double-spent coins would appear consecutively, then reject.
Using Blockchain in a broader application, you could embed “tokens” in anything from software licenses to file attachments to track and control fungible data’s circulation — specifically digital property’s.
[Previously: The revolutionary innovation within Bitcoin]
$BTC #P2P #Accounting #Maidsafe #Storj #Factom

–Romeo

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  1. […] content micropayments, spam reduction, public payments/charity fundraising [Previously: Blockchain’s promise for “tokenization” of digital property & The opportunity for mobile payments in unbanked […]

  2. […] GDP (FY14): +0.2pp @ 2.4% yoy – Inflation (FY14): Headline +0.1pp @ 1.4% yoy [Previously: 2014q3 GDP & December CPI @ 1.6% core; See also: Relax about Q4 GDP & investment, “There are […]

  3. […] Trend/Technicals (−): Risk market trends are undeniably bullish. However, chart technicals are bearish, with broad US markets like $IWV in a daily ST H&S top within a larger diamond top formation and 2x bear divergence. In addition, the arrival of May brings strong seasonal headwinds. […]

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