Diary of a Financier

Top Newsstuffs (May 4-10)

In Bookshelf on Sun 10 May 2015 at 06:11

Top reads from the week that was…

Macro

Rail traffic weekly (Week 17, 2015) | Association of American Railroads (AAR)
Remains flat ytd, with 2015’s weakness feeling even worse since we should be seeing a faster snap-back as evidence of pent-up demand; this report reaffirms my thesis that we won’t see that Q2 recovery in 2015:
Weekly traffic: +1.8pp @ +0.2% yoyRailtraffic 2015 week 17
Growth rate: unch @ unch ytd
Carload groups: 6 of 10 posted gains for the week yoy
    Farm: +2.6
    Chemicals: +2.1
    Motor vehicles/parts: +1.4
    Metals: +0.5
    Forestry: +0.3
    Petroleum: -3.2
    Coal: -5.1; a heavy drag on data
    Minerals: -6.6
    Grain: -12.6; crash continues
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 (~40% 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

Technicals

Technical study: S&P 500 long term regression & standard deviation (May 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:
– Mean: +1.77% (average annual real return)
Standard deviation (σ): ±40.6%SPX long term regression & standard deviation (1871-2015)
Variances:
    Currently: unch @ +93%, reversion to trend is -50% @ 1086
    Panic of 1907: +85%
    Great Depression: +81%
    Tech Bubble: +149%
    Great Recession: +88%
Uses $SPX real (inflation-adjusted) prices with exponential regression starting in 1871.
#Bearish #Mean reversion #Secular

Sentiment

Investor sentiment survey (2015.05.06) | 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: -39bps wow @ 1.01 (below both 1.28 historical average & 1.80 extreme high)
Bullish: -3.8pp @ 27.1% (under both 38.9 avg & 45 extreme high)
Bearish: +4.9pp @ 26.8% (under 30.4 avg, but above 25 extreme low)
Neutral: -1.1pp @ 46.1% (over 30.7 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 11/2015).
[Previously: Fund manager allocations bullish for US equities & Strategist sentiment remains a bullish signal]
#Bullish! #Contrarian

Asset allocation survey (April 2015) | American Association of Individual Investors (AAII)
Asset class allocations remain at neutral levels:
– Stocks: -0.7pp @ 67.9% (between 60% average & 70% extreme high); remains above average for 25th consecutive month (longest post-crisis streak)
Bonds: -0.3 @ 16.2% (above 16% avg & 10% extreme low); 9th consecutive month back above average
Cash: +1.0 @ 15.9% (below 24% avg, above 15% extreme low); below avg for 41st consecutive month
#Neutral $SPY $AGG

–Romeo

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