Diary of a Financier

Top Newsstuffs (May 25-31)

In Bookshelf on Sun 31 May 2015 at 06:46

Top reads from the week that was…

Macro

Rail traffic weekly (Week 20, 2015) | Association of American Railroads (AAR)
Volumes remain in contraction; this feels even worse since we should be seeing a snap-back as evidence of pent-up demand; again affirms my thesis that we won’t see that Q2 recovery in 2015:
Weekly traffic: +0.2pp @ -2.7% yoyRailtraffic 2015 week 20
Growth rate: -0.1pp @ -0.4% ytd
Carload groups: 3 of 10 posted gains for the week yoy
    Other: +10.4%
    Motor vehicles/parts: +3.3%
    Petroleum: +1.5
    Chemicals: -1.3
    Farm: -2.6
    Forestry: -2.6
    Grain: -3.8
    Minerals: -8.8
    Coal: -16.5; heavily skewing data, even off weak yoy comp base
    Metals: -17.3; epic collapse
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 energy boom’s counterbalance; I considered that the fuel price collapse might’ve reallocated some traffic to trucking, but volumes there are declining too.
#Bearish $IYT

Manufacturers’ durable & capital goods (April 2015) | US Department of Commerce
Core data beats consensus with prior month’s insignificant upward revisions offset by February’s downwards; deceleration in yoy comps continues; ytd growth rates still dip further below trend GDP:
Core durable goods (ex-transportation)Core durable goods & capex (% change yoy, 2015.04)
    Orders: unch @ -0.7% ytd, +0.5% mom (beats +0.3e)
    Shipments: +0.2pp @ +1.4% ytd, +0.1% mom
Core capex (nondefense, ex-aircraft capital goods)
    Orders: -0.7pp @ -2.5% ytd, +1.0% mom (beats +0.3e)
    Shipments: -0.9pp @ +1.8% ytd, +0.8% mom
Inventory
    Inventories: -0.1pp @ +4.8% ytd, +0.2% mom @ $401.5B SA (SA & NSA set record highs again)
We’re now well into difficult yoy comps from 2014q2’s pent-up demand recovery.
#Neutral #Deceleration

Gross Domestic Product: Second estimate (2015q1) | Bureau of Economic Analysis (BEA)
Revised growth turns negative 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; investment in structures collapsed:
Real GDP (Q1): -0.9pp @ -0.7% qoq saar (beats -0.9e)
    Inflation: Core -0.1 @ +0.2%; Headline -0.1 @ -1.6%
    Consumption (PCE): -0.1 @ +1.8%
    Government spending: -0.3 @ -1.1%; Federal -0.2 @ +0.1%; State & local -0.3 @ -1.8%
    Investment: -1.3 @ +0.7%; Structures +2.3 @ -20.8%
    Exports: -0.4 @ -7.6%
    Imports: +3.8 @ +5.6%
    Inventories: +0.33pp contribution to GDP growth rate
Real GDP per capita (Q1): -1.4%; 9.9% below LT regression trend
Real GDP (FY14): unrevised @ +2.4% yoy
    Inflation (FY14): Headline unrevised @ 1.4% yoy
This would’ve been the perfect “bad is good” report, but the Fed seems committed to raising rates in September.
[Previously: The economic deceleration is real this time]
#Bearish #Perfect? $XLE $DXY

Sentiment

Retail investor sentiment survey (2015.05.20) | American Association of Individual Investors (AAII)
Sentiment remains a buy signal; neutral cohort still outsized, now a significant indication of healthy uncertainty:
Bull/Bear ratio: +0.7bp wow @ 1.08 (below both 1.28 historical average & 1.80 extreme high)
Bullish: +1.8pp @ 27.0% (under both 38.9 avg & 45 extreme high)
Bearish: +0.1pp @ 25.1% (meets 25 extreme low & under 30.4 avg)
Neutral: -1.9pp @ 47.9% (over 30.7 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 11/2015).
[Previously: Retail allocations are neutral, Fund manager allocations neutral & Strategist sentiment remains a bullish signal]
#Bullish #Contrarian

–Romeo

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