Diary of a Financier

Top Newsstuffs (February 16-22)

In Bookshelf on Sun 22 Feb 2015 at 06:25

Top reads from the week that was…

Macro

Rail traffic weekly (Week 6, 2015) | Association of American Railroads (AAR)
Modest bump after last week’s big deceleration broke a bit of a rally; growth remains above GDP trend amidst easy yoy comps (that’re getting easier due to 2014q1’s severe winter weather), but record snowfall in the Northeast still denting the data:Weekly railtraffic 2015 week 6
Weekly traffic: +2.7pp @ +3.5% yoy
Growth rate: +0.1pp @ +3.0% ytd
Carload groups: 10 of 10 posted gains for the week yoy
    Grain: +21.5
    Minerals: +17.9
    Chemicals: +9.3
    Forestry: +8.7
    Farming: +7.1
    Metals: +5.0
    Petroleum: +3.7
    Motor vehicles/parts: +2.0
    Coal: +1.8
#Bullish $IYT

US consumers just aren’t spending their energy savings as expected | Morgan Stanley
The “consumer stimulus” from lower pump prices hasn’t materialized, with spending decelerating so far in 2015q1; although the Northeast has been by record snowfall ytd, growth has easy yoy comps due to 2014q1’s horrendous nationwide winter weather:Real PCE 2013-15
Gas prices: -40% since 9/2014
Consumer savings: $60B estimated
Real Personal Consumption Expenditures (PCE): 2015q1e @ 3.2%, deceleration from Q4 @ 4.3%
Consumer surveys have expressed doubt that low gas prices will persist, so households have redirected that savings to deleveraging instead — paying down debt.
[Previously: Retail sales disappoint again]
$XLY $XLE #GDP #Deleveraging #Savings

Credit

US household debt & credit report (2014q4) | Federal Reserve Bank of New York (NY Fed)
Healthy credit expansion continues with delinquencies steady in aggregate, yet troubling surges in auto & student loans continue unabated, with “Student loan delinquencies and repayment problems appear to be reducing borrowers’ ability to form their own households”:Household debt & credit- composition & delinquency status 2014q4
Total consumer indebtedness: +2.7% yoy, +1.0% qoq @ $11.83T; 6.7% below alltime record ($12.68T in 2008q3)
Mortgages: +2.9% yoy, +0.5% qoq @ $8.17T
    Originations: +5.3% qoq @ $355B; aided by decline in rates since Q2 marked lowest activity since 2000
Non-housing debt: +7.1% yoy, +2.6% qoq @ $3.15T
    Auto loans: +10.5% yoy, +1.7% qoq @ $0.95T; record high
    Credit cards: +2.9% yoy, +2.9% qoq @ $0.70T
    Student loans: +7.4% yoy, +0.7% qoq @ $1.16T; record high
Delinquencies (90+ days): unch qoq @ 4.3%; 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 sector

Sentiment

Investor sentiment survey (2015.02.18) | American Association of Individual Investors (AAII)
Sentiment somehow spikes higher into exuberant extremes:AAII sentiment survey- bullish & bearish 2015.02.19
Bull/Bear ratio: +66bps wow @ 2.63 (over 1.28 historical average & 1.8 extreme high)
Bullish: +7.0 @ 47.0% (beat 39.0 avg & 45 extreme high)
Bearish: -2.4 @ 17.9% (under 30.5 avg & 25 extreme low)
Neutral: -2.4 @ 35.1% (over 30.5 avg)
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)
Measures respondents’ 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 signal]
#Bearish! #Exuberance #Noisy

Global fund manager allocation survey (February 2015) | Bank of America Merrill Lynch (BAML)
Equity allocations rise higher into OW extremes, chasing performance out of US into International; bonds remain at extreme UW:
Equity: +6.0pp @ +57.0% OW (over +50% extreme); OW highest beta sectors too
Bonds: -2.0 @ -55.0 UW (over -60 extreme)BAML fund manager allocation survey- equityfixed incomecash (2015.02)
Cash: +0.2 @ +4.7 OW (over +4.5 extreme)
Commodities: -1.5 @ -20.0 UW
Regions:
    US: -18.0 @ +6.0 OW
    Europe: @ +56.0 OW; new postcrisis record completes roundtrip after July’s crash from 35.0
    Japan: unch @ +35.0 OW
    Emerging Markets: +12.0 @ -1.0 UW
In 2014, contrarian sell signals in July/September/November/December were honored by the subsequent priceaction, as were buy signals in August/October.
Surveys a sample of 200+ PMs with $700B+ in AUM, asking for portfolio positioning (overweight/underweight) relative to 60/30/10 benchmark.
[Previously: Retail asset allocations neutral, Fund manager sentiment extremely bullish US equities & Strategist sentiment remains a bullish signal]
#Bearish #Contrarian $ACWI $AGG $IWV $EFA $EWJ $EEM $DBC

Interests

The “V2MOM” method: Five questions to ask before every big decision | Mark Benioff (Salesforce.com)
Salesforce never really had organizational charts or key performance indicators — instead, it has relied mostly on its V2MOM exercise, an acronym for the following evaluation & decision-making steps:Salesforce's V2MOM 1999.04.12
1. Vision: What do you want to do?
2. Values: What’s most important about that vision?
3. Methods: How do you get the job done?
4. Obstacles: What challenges, problems, and issues might stand in the way?
5. Measures: How will you know when you’ve succeeded?
#Management #Strategy

–Romeo

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