Diary of a Financier

Top Newsstuffs (February 2-8)

In Bookshelf on Sun 8 Feb 2015 at 05:29

Top reads from the week that was…

Macro

Rail traffic weekly (Week 4, 2015) | Association of American Railroads (AAR)
Another nice acceleration out of the year’s slow start, as growth moves above GDP trend amidst easy yoy comps (that’re getting easier due to 2014q1’s severe winter weather):Weekly railtraffic 2015 week 4
Weekly traffic: +1.8pp @ +5.9% yoy
Growth rate: +0.9pp @ +3.4% ytd
Carload groups: 9 of 10 posted gains for the week yoy
    Minerals: +18.4
    Petroleum: +17.0, big bounce after multiyear boom succumbed to law-of-large-numbers amidst oil price crash
    Motor vehicles/parts: +11.0
    Coal: +10.5
    Metals: +8.7
#Bullish #Latent indicator $XLE $USO $XLB $KOL $XME $XLI

Purchasing Managers Index (January 2015) | Markit Economics
Global expansion persists despite continued deceleration in US, which nevertheless remains firmly in expansion; China unexpectedly dipped into contraction, but Europe was the counterbalance, with its sovereign QE seeming to asymmetrically benefit periphery over core:
Global PMI (Composite): +0.4 @ 52.8 (below 53.9 LT average), recovers from 14-month low
Global PMI (Services): +0.6 @ 52.9, finally stems a 6-month slide
Global PMI (Manufacturing): +0.2 @ 51.7, recovers from 16-month low, and remains in expansion for 26th straight month
– US ISM (Services): +0.2 @ 56.7 (beat 56.5e); “corresponds to a 3.4% increase in GDP”
US ISM (Manufacturing): -1.6 @ 54.1 (miss 54.5e); “Sales have stayed very strong even with the dip in oil prices… Chinese New Year, West Coast port dock slowdowns, coupled with railroad embargo are all creating logistical challenges and increased backlog of orders… corresponds to a 3.3% increase in GDP”:
    New orders: -4.9 @ 52.9
    Production: -1.2 @ 56.5
    Inventories: +5.5 @ 51.0
    Deliveries: -5.7 @ 52.9
    Exports: -2.5 @ 49.5
    Employment: -1.9 @ 54.1
Australia: +2.0 @ 49.0, still trying to recover from YE13 crash amidst commodity crash
Japan: +0.2 @ 52.2
China: official -0.3 @ 49.8 (miss 50.2e); unofficial +0.1 @ 49.7
Rest of Asia: positive
    India: -1.6 @ 52.9, reverts from 2-year high
    South Korea: +1.2 @ 51.1, still expect another BoK policy rate cut in 2015q1 (last was 10/15)
    Taiwan: +1.7 @ 51.7, proves last month’s decline was “one-off due to weak economic data in many export markets”
Eurozone (Services): +1.4 @ 52.6 (beat 52.2e)
Eurozone (Manufacturing): +0.4 @ 51.0 (meet 51.0e), “pockets of robust growth”
    Germany: -0.3 @ 50.9, “stagnating”
    Netherlands: +0.6 @ 54.1
    Italy: +1.5 @ 49.9, recovers from 19-month low
    France: +1.7 @ 49.2
    Spain: +0.9 @ 54.7, another post-crisis high
    Greece: -1.1 @ 48.3
UK: +0.3 @ 53.0
Brazil: +0.5 @ 50.7
#Bullish

Credit

NYSE margin debt & balances (December 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 2014.12
Nominal margin debt: +2.55% yoy, -0.18% mom @ $456.3B; falls further from alltime high ($465.7B in 2/2014)
Real margin debt: +0.4% mom; rises to 2.0% below 2/2014 alltime high, but still far above prior highs in 3/2000 & 7/2007′s before those bear markets
Net margin balances (“buying power”): +3.0% @ -164.90B debit; resumes 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

Sentiment

Investor sentiment survey (2015.02.04) | American Association of Individual Investors (AAII)
Big plummet brings sentiment under historical averages for first time since early 2014; 2015 has started with volatile swings in sentiment after the alarming complacency seen in 2014, when continued “buying-the-dip” mentality persisted through multiple market events (e.g. 2 internal corrections & energy bear market):
Bull/Bear ratio: -88bps wow @ 1.09 (under 1.28 historical average & 1.8 extreme high)
Bullish: -8.7 @ 35.5% (under 39.0 avg & 45 extreme high)
Bearish: +10.0 @ 32.4% (over 30.5 avg & 25 extreme low)
Neutral: -1.4 @ 32.1% (over 30.5 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 6/2015).
[Previously: Strategist sentiment remains a bullish signal & Recent volatility increases retail’s willingness to buy]
#Bullish #Noisy

Asset allocation survey (January 2015) | American Association of Individual Investors (AAII)
Asset class allocations remain at neutral levels:
– Stocks: -1.3pp @ 67.2% (between 60% average & 70% extreme high); remains above average for 22nd consecutive month (longest post-crisis streak)
Bonds: +0.7 @ 17.5% (above 16 avg & 10 extreme low); 6th consecutive month back above average
Cash: +0.5 @ 15.3% (below 24 avg, above 15 extreme low); below avg for 38th consecutive month
#Neutral $AGG #QE tapering

Hedge fund sentiment survey (2015.02) | Societe Generale
Shows hedge fund managers’ conviction by asset class, as measured in standard deviations from historical average.
Positive/bullish:
1. NASDAQ ($QQQ)
2. Volatility ($VIX)Hedge fund sentiment by asset class (2015.02)
3. S&P 500 ($SPY)
4. Gold ($GLD)
Negative/bearish:
1. Euro ($EURUSD)
2. Copper ($JJC)
3. Fed Funds ($SHV $SHY)
4. British Pound ($GBPUSD)
5. Russell 2000 ($IWM)
6. Treasury 10-year bond ($IEF)
7. Natural Gas ($UNG)
8. Japanese Yen ($JPYUSD)
#Contrarian

Interests

Slack is everywhere, growing fast, and still works great; here’s how they did it | Quartz (qz.com)
Tells the story of the workflow/collaboration app’s rise, specifically how the founders pivoted and grew their user base by listening to feedback and being very responsive:
1. Distribution as marketing: Slack started by distributing their product to a small group of friends & family (alpha-testers), repeatedly retweeting/reposting good press to spread the word, which helped them capitalize on initial traction by opening the product to new users who submitted invitation requests
2. Feedback/iterations: they directly solicited feedback from users via Twitter, a bottom-up approach that led to a lot of high-frequency iterations and customer loyalty as they progressed through beta
3. Education as sales-pitch: Slack is a complicated product, so their salesforce started teaching users why they needed it
4. Product development:We don’t cut corners, and we try to focus on the few things that are most important to our product vision... If you do a few things incredibly well, the rest doesn’t really matter”; Slack focused on the following core competencies:
    i. Search: helping people find what they’re looking for quickly, so they don’t have to worry about labeling or storing it
    ii. Synchronization: multidevice, cross-platform syncing makes it easy for anyone to pick up exactly where they left off
    iii. Sharing: shortcuts & intuitive UI that makes file-sharing and collaboration as easy as possible
#Startup #Enterprise #Case study

Twitternomics: How the company found its [money] mojo (Part 1) | Medium
“While the headlines about Twitter describe a company in crisis, the business end of the company has been nailing its targets, and its revenue team is the envy of the industry.
“Twitter sold the wrong thing to investors — it sold the user story… but revenue is doing what it should.”
Ev Williams about monetization:
“No one has ever built a consumer Internet thing that reached scale that they couldn’t earn money on.”
Here’s their path to monetization:
1. Partnerships: started by striking deals to share a “firehouse of data” with giant stalwarts like Google & Microsoft
2. Advertising: Promoted Tweets were a breakthrough, placing ads in the stream as opposed to banner or sidebar; instead of leaving it to clients’ “self-serving,” they worked closely with a few to help them tailor ads for free (e.g. Best Buy, Bravo, Red Bull, Sony, Starbucks & Virgin)
3. Promoted trends: premium ad placement in “Trending” stream costing ~$200k for 24-hours
4. Pay-per-engagement: bundles of engagements auctioned to ad buyers for $0.50 to 4.00 (i.e. retweets, favorites, replies, or link clicks)
5. Tailored audiences: use big data in predictive algorithms to place ad campaigns with optimal users
6. Off-Twitter: since engagements with logged-out MAUs were growing at twice the rate of registered, they struck partnership deals to share embedded Twitter card ad revenue with content providers like ESPN, Flipboard & Yahoo Japan
7. Fabric SDK: further extending their Off-Twitter reach, this toolkit helps developers integrate Twitter into their apps/websites to increase their own user engagement (i.e. sharing) & monetization (i.e. ads)
8. Big data sales: mounds of data crunched with proprietary tools were organized & sold to corporations
9. eCommerce: integrated a “buy now button” that makes purchasing easy, especially when combine with targeted algorithms
With the exception of #6 & 7, I’m surprised that none of this is actually all that innovative — they’re iterations of the same old internet business plan, just under a different name.
[Previously: Focus on the end user & the money will follow; See also: Part 2 & Twitter renews deal with Google to provide real time search results]
$TWTR #Case study

Video: Tom Brady stars in Ted 2 movie commercial | Universal Pictures
Marky Mark Wahlberg and Best Super Bowl commercial ever?  Idk, but they played it in the 4th quarter of the Patriots Super Bowl XLIX comeback against the Seahawks.
#TV

–Romeo

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  1. […] pigs — a loyal community of evangelists who support their mission.  That’s the exact experience of the Slack founders, who so carefully recruited and collaborated with their early users that their […]

  2. […] expectation for equity performance over next 6 months (through 8/2015). [Previously: Retail asset allocations neutral, Fund managers extremely bullish US equities & Strategist sentiment remains a bullish signal] […]

  3. […] only auto (+0.4pp @ 3.5%) & student loan (+0.2pp @ 11.3%) impairments worsened [Previously: Senior loan officer survey bullish & Renewed subprime bubble in car loans] #Bullish #Releveraging #Private […]

  4. […] expectation for equity performance over next 6 months (through 8/2015). [Previously: Retail asset allocations neutral, Fund manager sentiment extremely bullish US equities & Strategist sentiment remains a bullish […]

  5. […] expectation for equity performance over next 6 months (through 8/2015). [Previously: Fund manager sentiment extremely bullish US equities & Strategist sentiment remains a bullish signal] #Bullish […]

  6. […] performance over next 6 months (through 8/2015). [Previously: Retail allocations are neutral, Fund manager sentiment extremely bullish US equities & Strategist sentiment remains a bullish signal] #Bullish […]

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