Diary of a Financier

Top Newsstuffs (April 27 – May 3)

In Bookshelf on Sun 3 May 2015 at 05:17

Top reads from the week that was…

Macro

Rail traffic weekly (Week 16, 2015) | Association of American Railroads (AAR)
Essentially flat ytd, 2015’s weakness feels even worse since we should be seeing a faster snap-back as evidence of pent-up demand; this report clinches my thesis that we won’t see that Q2 recovery in 2015:
Weekly traffic: -2.8pp @ -1.6% yoyRailtraffic 2015 week 16
Growth rate: -0.1pp @ unch ytd
Carload groups: 1 of 10 posted gains for the week yoy
    Motor vehicles/parts: +1.0
    Forestry: -1.6
    Petroleum: -1.8
    Farm: -2.0
    Minerals: -5.4
    Chemicals: -6.0
    Metals: -7.7
    Grain: -8.6; keeps crashing after months of gains
    Coal: -13.3; a heavy drag on data
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.
Given the secular decline of coal volumes (~38% of carloads makes it the largest category), traffic doesn’t seem able to stand on its own without the tailwind of energy boom
#Bearish $IYT

Purchasing Managers Index (April 2015) | Markit Economics
Global expansion remains strong; US deceleration takes a pause, but China’s stagnation leaks into contraction along with the rest of Asia; Europe’s still the marginal contributor to this expansion’s 2nd wind:
Global PMI (Composite): -0.6 @ 54.2 (beats 53.9 LT average)
Global PMI (Services): -0.4 @ 54.9
Global PMI (Manufacturing): -0.7 @ 51.0; a 21-month low as surplus inventory will require a demand pickup in coming months
– US ISM (Services): +1.3 @ 57.8 (beats 56.2e); “corresponds to a 3.9% increase in GDP”
US ISM (Manufacturing): unch @ 51.5 (miss 52.0e); “slowly rising demand… customers [think commodity] prices have bottomed-out so are now releasing orders… automotive industry is still very strong”:
    New orders: +1.7 @ 53.5ISM- PMI Manufacturing & Services 2015.04
    Production: +2.2 @ 56.0
    Inventories: -2.0 @ 49.5; echos durable goods, leaving some slack for coming months
    Deliveries: -0.4 @ 50.1
    Exports: +4.0 @ 51.5; USD revaluation helps
    Employment: -1.7 @ 48.3; continues slide into contraction
Eurozone (Composite): -0.1 @ 53.9 (beat 53.5e); “consistent with euro area GDP rising at a quarterly rate of 0.4%… the region remains on a steady recovery trend”
Eurozone (Services): -0.1 @ 54.1 (beat 53.7e)
Eurozone (Manufacturing): -0.2 @ 52.0 (beats 51.9e)
    Germany: -0.7 @ 52.1; off 11-month high
    Netherlands: +1.5 @ 54.0
    Italy: +0.5 @ 53.8
    France: -0.8 @ 48.0; only core country in contraction
    Spain: -0.1 @ 54.2
    Greece: -2.4 @ 46.5; plummets to 22-month low
Japan: -0.4 @ 49.9; 11-month low
China: official unch @ 50.1 (beat 50.0e); unofficial -0.7 @ 48.9 (miss 49.2e)
Rest of Asia:
    India: -0.8 @ 51.3
    South Korea: -0.4 @ 48.8
    Taiwan: -0.8 @ 49.2
UK: -2.1 @ 51.9; 7-month low
Australia: +1.8 @ 48.0
Brazil: -0.2 @ 46.0; “appears to be diving into recession… with job shedding among the strongest in 4 years”
#Bullish

Gross Domestic Product: Advanced estimate (2015q1) | Bureau of Economic Analysis (BEA)
Growth misses expectations by a lot, grinding to a halt amidst record snowfalls in the Northeast, California port shutdowns & the dollar’s spike.
Energy crash was somewhat netted-out by consumption, but strong USD crushed net exports; intellectual property investment is booming — perhaps too much (+5.5, +8.8, +10.3, +7.8 sequentially ttm):
Real GDP (Q1): +0.2% qoq saar (misses +1.0e)
    Inflation: Core +0.3%; Headline -1.5%
    Consumption (PCE): +1.9%
    Government spending: -0.8%; Federal +0.3; State & local -1.5
    Investment: +2.0%; Intellectual property +7.8%
    Exports: -7.2%
    Imports: +1.8%
    Inventories: +0.74pp contribution to GDP growth rate
Real GDP per capita (Q1): -2.0pp @ -0.6%; 9.7% below LT regression trend
Real GDP (FY14): unrevised @ +2.4% yoy
    Inflation (FY14): Headline unrevised @ 1.4% yoy
Market reaction suggests this may be another perfect report, 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 $DXY

Credit

NYSE margin debt & balances (March 2015) | Doug Short (dshort.com)
All measures reach new records, spiking higher into extreme levels; stark juxtaposition to neutral investor sentiment surveys (see below); I’m worried about this margin bubble inflating more the longer the Fed defers rising rates:NYSE margin debt vs SPX (real gross & net, 2015.03)
Nominal margin debt: +5.8% yoy, +2.5% mom @ $476.4B; crushes prior alltime high from 2/2014
Real margin debt: +1.9% mom; record high far above prior highs in 3/2000 & 7/2007′s before those bear markets
Net margin balances (“buying power”): -5.2% @ -$190.76B debit; also a record low & still crushing prior records from 2000, 2007 & 2011
#Bearish #Leverage #Latent indicator

Sentiment

Investor sentiment survey (2015.04.29) | American Association of Individual Investors (AAII)
Sentiment remains in neutral territory, hardly budging again; neutral cohort keeps swelling in a sign of healthy uncertainty:
Bull/Bear ratio: +4bps wow @ 1.4 (above 1.28 historical average, but below 1.80 extreme high)
Bullish: -0.6pp @ 30.8% (under both 38.9 avg & 45 extreme high)
Bearish: -1.2pp @ 22.0% (under both 30.4 avg & 25 extreme low)
Neutral: +1.9 @ 47.2% (over 30.7 avg)
Measures respondents’ 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 signal]
#Bullish #Contrarian

–Romeo

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  1. […] @ 8.38%) but remain below LT average; student loans finally repair (-26bps @ 11.06%) [Previously: Margin debt at exuberant extremes again & Loan growth healthy] #Neutral #Releveraging #Private […]

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