Diary of a Financier

Top Newsstuffs (March 30 – April 5)

In Bookshelf on Sun 5 Apr 2015 at 06:23

Top reads from the week that was…

Macro

Rail traffic weekly (Week 12, 2015) | Association of American Railroads (AAR)
Relative collapse cements ytd weakness when we should be seeing a faster snap-back as evidence of pent-up demand; given the secular decline of coal volumes (the largest category), traffic doesn’t seem able to stand on its own without the tailwind of energy boom:
Weekly traffic: -2.6pp @ -0.7% yoyRailtraffic 2015 week 12
Growth rate: +0.2pp @ +0.3% ytd
Carload groups: 2 of 10 posted gains for the week yoy
    Grain: +3.5
    Farm: +2.3
    Motor vehicles/parts: -0.4
    Minerals: -1.2
    Chemicals: -1.8
    Forestry: -9.0
    Coal: -9.1
    Petroleum: -10.9
    Metals: -12.6
2014 & 2015 both share the hindrance of record snowfalls (2014 being nationwide & 2015 limited to the Northeast), and 2015 added the dislocation of California port closures — all of which have now been resolved.
#Bearish $IYT

Purchasing Managers Index (March 2015) | Markit Economics
Global expansion accelerates despite continued deceleration in the US; China remains stagnant with the rest of Asia really struggling, but Europe continues to be an overwhelming counterbalance, with its sovereign QE  asymmetrically benefiting periphery over core:
Global PMI (Composite): +0.9 @ 54.8 (beats 53.9 LT average)
Global PMI (Services): +1.0 @ 55.1
Global PMI (Manufacturing): -0.1 @ 51.8; remains in expansion for 27th straight month
– US ISM (Services): last @ 56.5 (miss 56.7e); “corresponds to a 3.5% increase in GDP”
US ISM (Manufacturing): -1.4 @ 51.5 (miss 52.5e); “continuing challenges from the West Coast port issue, lower oil prices having both positive & negative impacts, residual effects of the harsh winter, higher costs of healthcare premiums, and challenges associated with the stronger dollar”:
    New orders: -0.7 @ 51.8ISM- PMI Manufacturing & Services 2015.03
    Production: +0.1 @ 53.8
    Inventories: -1.0 @ 51.5
    Deliveries: -3.8 @ 50.5
    Exports: -1.0 @ 47.5
    Employment: -1.4 @ 50.0
Australia: +0.9 @ 46.3
Japan: -1.3 @ 50.3
China: official +0.2 @ 50.1 (beat 49.8e); unofficial -1.1 @ 49.6 (beat 50.1e)
Rest of Asia:
    India: +0.9 @ 52.1
    South Korea: -1.9 @ 49.2
    Taiwan: -1.1 @ 51.1
Eurozone (Services): +1.0 @ 53.7 (miss 53.9e)
Eurozone (Manufacturing): +1.2 @ 52.2 (beats 51.9e); “economy is reviving”
    Germany: +1.7 @ 52.8
    Netherlands: +0.3 @ 52.5
    Italy: +1.4 @ 53.3
    France: +1.2 @ 48.8; “only country seeing a steepening downturn”
    Spain: +0.1 @ 54.3
    Greece: +0.5 @ 48.9
UK: +0.4 @ 54.4
Brazil: -3.4 @ 46.2; “aggravated by difficult economic conditions at home, strong inflation rates and a depreciating currency”
#Bullish

Credit

NYSE margin debt & balances (February 2015) | Doug Short (dshort.com)
Having started a trend of healthy contraction over the past few months, all measures spike back to extreme levels; I have to worry about this margin bubble inflating more the longer the Fed defers rising rates):NYSE net margin balances vs SPX (inverted) 2015.02
Nominal margin debt: -0.17% yoy, +4.52% mom @ $464.9B; nestles up just below alltime high from a year ago($465.7B in 2/2014)
Real margin debt: +4.07% mom; only 0.14% below alltime high (2/2014) & still far above prior highs in 3/2000 & 7/2007′s before those bear markets
Net margin balances (“buying power”): -14.8% @ -$181.29B debit; also right near a record low & still crushing 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: Margin debt growth rate decelerating & Household debt/credit is healthy]
#Bearish #Leverage #Latent indicator

Technicals

Technical study: S&P 500 long term regression & standard deviation (inflation-adjusted, 1871-2015) | Doug Short (dshort)
SPX trading over 2 sigmas from its LT trend, which has historically marked a top — a sign of excess where bull markets turn into bears:SPX long term regression & standard deviation (1870-2015)
– Mean: +1.77% (average annual real return)
Standard deviation (σ): ±40.6%
Variances:
    Currently: -3pp @ +93%, reversion to trend is -50% @ 1076
    Panic of 1907: +85%
    Great Depression: +81%
    Tech Bubble: +149%
    Great Recession: +88%
#Bearish #Mean reversion #Secular

Sentiment

Investor sentiment survey (2015.04.01) | American Association of Individual Investors (AAII)
Sentiment reverts back below averages — a contrarian bullish signal after last week’s outlier spike; neutral respondents are crossing into the bearish cohort:
Bull/Bear ratio: -46bps wow @ 1.11 (below both 1.28 historical average & 1.8 extreme high)
Bullish: -3.0pp @ 35.4% (under both 39.0 avg & 45 extreme high)
Bearish: +7.6 @ 32.0% (under both 30.5 avg & 25 extreme low)
Neutral: -4.5 @ 32.6% (over 30.5 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 10/2015).
[Previously: Retail allocations are neutral & Strategist sentiment remains a bullish signal]
#Bullish #Contrarian

Asset allocation survey (March 2015) | American Association of Individual Investors (AAII)
Asset class allocations remain at neutral levels:
– Stocks: +0.3pp @ 68.6% (between 60% average & 70% extreme high); remains above average for 24th consecutive month (longest post-crisis streak)
Bonds: -0.1 @ 16.5% (above 16% avg & 10% extreme low); 8th consecutive month back above average
Cash: -0.4 @ 14.9% (below 24% avg, above 15% extreme low); below avg for 40th consecutive month
#Neutral $AGG #QE tapering

–Romeo

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  1. […] (+): With the exception of exuberant margin debt, both corporate & household balance sheets are materially deleveraged and are now actually […]

  2. […] expectation for equity performance over next 6 months (through 10/2015). [Previously: Retail allocations stay neutral, Fund manager allocations bullish for US equities & Strategist sentiment remains a bullish […]

  3. […] expectation for equity performance over next 6 months (through 10/2015). [Previously: Retail allocations stay neutral, Fund manager allocations bullish for US equities & Strategist sentiment remains a bullish […]

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