Diary of a Financier

Top Newsstuffs (February 23 – March 1)

In Bookshelf on Sun 1 Mar 2015 at 06:42

Top reads from the week that was…

Macro

Rail traffic weekly (Week 7, 2015) | Association of American Railroads (AAR)
Collapse plunges growth below GDP trend, with record snowfall in the Northeast & California port closures still denting the data, but expect a snap-back next week as both issues are being resolved; easy yoy comps are starting to roll-off, since pent-up demand started to manifest in March data (after 2014q1’s severe winter weather):
Weekly traffic: -15.0pp @ -11.5% yoy Weekly railtraffic 2015 week 7
Growth rate: -1.2pp @ +0.8% ytd
Carload groups: 1 of 10 posted gains for the week yoy
    Grain: +4.0
    Chemicals: -0.4
    Farming: -2.3
    Forestry: -6.7
    Minerals: -9.0
    Metals: -9.2
    Coal: -12.0
    Motor vehicles/parts: -12.2
#Bearish $IYT

Gross Domestic Product: Second estimate (2014q4) | Bureau of Economic Analysis (BEA)
Growth revisions beat expectations; could be the perfect report, forcing Fed to delay rate hikes due to moderate growth & sneaking deflation; inventory revision softens the blow that still could drag a bit in 2015; Q1’s benefit of easy yoy comps seems unlikely, due to record snowfalls in the Northeast & California port shutdowns:
Real GDP (Q4): revised -0.4pp @ +2.2% (beats +2.1e)
     Inflation: -0.2pp @ -0.1% (headline)
    Consumption (PCE): -0.1 @ +4.2
    Government spending: +0.4 @ -1.8%; Federal unch @ -7.5%; State & local +0.7 @ +2.0%
    Investment: -2.3 @ +5.1%; Intellectual property +3.8 @ +10.9%
    Exports: +0.4 @ 3.2%
    Imports: +1.2 @ 10.1%
    Private inventories: -68bps @ +0.12pp contribution to GDP growth rate
Real GDP per capita (Q4): -0.4pp @ +1.4%; 9.1% below LT regression trend
Real GDP (FY14): +0.2pp yoy @ 2.4%
    Inflation (FY14): +0.1pp yoy @ 1.4% (headline)
[Previously: 2014FY & Q4 GDP (first estimate); See also: Relax about Q4 GDP & investment, “There are legitimate concerns about a strong dollar, and weak economic activity overseas, impacting U.S. exports and GDP growth… However, overall, the Q4 GDP report was solid.”]
#Neutral #Perfect?

Inflation: Consumer Price Index (January 2015) | Bureau of Labor Statistics (BLS)
Core slips further away from Fed’s 2.0% target, but meets expectations; still important to focus on core measures, as energy price collapse is weighing on headline, which slipped into deflation:
Headline CPI: -0.9pp @ -0.1% yoy, -0.7 mom (misses -0.6e)Core inflation- PCE, CPI, Median CPI, trimmed mean CPI
    Energy: -10.6% yoy, -9.7% mom; drag worsens
    Food: +3.2% yoy, unch mom
Core CPI (ex food & energy): unch @ +1.6% yoy, +0.2% mom (meets +0.1e)
$AGG sold-off, $TNX higher, $SPX unch, as the market perhaps worried that the Fed will hike rates too soon.
#Neutral #Deflation $TNX

Manufacturers’ durable & capital goods (January 2015) | US Department of Commerce
Headline beats, but core missed again, continuing a deceleration in yoy comps, as ytd growth rates still dip below trend GDP; these data have a low hurdle with easy yoy comps from 2014’s extreme winter:
Core durable goods (ex-transportation)
    Orders: -3.7pp @ +1.5% ytd, +0.3% mom (misses +0.5e)
    Shipments: -3.2pp @ +2.1% ytd, -0.8% mom
Core capex (nondefense, ex-aircraft capital goods)
    Orders: -3.5pp @ +0.3% ytd, +0.6% mom (beats +0.3e)
    Shipments: -1.4pp @ +3.6% ytd, -0.3% mom
Inventory
    Inventories: +0.1pp @ +6.1% ytd, +0.4% mom @ $411.3B SA (SA & NSA set record highs again)
Prior month revisions weren’t noteworthy.
#Neutral #Deceleration

Technicals

The US Dollar is the most crowded trade in the world | David Rosenberg (Gluskin Sheff)
$USD is overvalued, since its appreciation has outrun fundamentals:DXY- USD fundamentals & technicals 2015.02
1. Trade-weighted dollar: spike since 2014q3 has decoupled from fundamentals
2. Net speculative positions: net longs has reached record extremes
[Previously: I’m a USD bear & Euro selloff has overshot downside]
$DXY $UUP $EUR $FXE #Contrarian

Sentiment

Investor sentiment survey (2015.02.25) | American Association of Individual Investors (AAII)
Sentiment remains well above exuberant extremes, but a large neutral cohort is still indicative of healthy uncertainty:
Bull/Bear ratio: -39bps wow @ 2.24 (over 1.28 historical average & 1.8 extreme high)
Bullish: -1.6 @ 45.4 (over 39.0 avg & 45 extreme high)
Bearish: +2.4 @ 20.3% (under 30.5 avg & 25 extreme low)
Neutral: -0.8 @ 34.3% (over 30.5 avg)
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]
#Neutral #Exuberance #Noisy

–Romeo

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  1. […] +0.2pp yoy @ 2.4%     Inflation (FY14): Headline unrevised, +0.1pp yoy @ 1.4% [Previously: 2014FY & Q4 GDP (second estimate); See also: Relax about Q4 GDP & investment, “There are legitimate concerns about a strong […]

  2. […] reached a record high, even despite the multiweek bounce from a 1.05 low up to 1.10. [Previously: Long USD is the most crowded trade in the world] […]

  3. […] neutral analysis: an upside risk that deferring a rate hike in June catalyzes a revaluing of the severely overbought $DXY and severely oversold […]

  4. […] forcing Fed to delay rate hikes due to sub-optimal growth & sneaking deflation. [Previously: FY14 & Q1 GDP (third estimate); See also: The economic deceleration is real this time] #Bearish #Perfect? $XLE […]

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