Diary of a Financier

Top Newsstuffs (June 29 – July 5)

In Bookshelf on Sun 5 Jul 2015 at 06:56

Top reads from the week that was…

Macro

Rail traffic weekly (Week 25, 2015) | Association of American Railroads (AAR)
Contraction still accelerating to the downside; 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: -0.4pp @ -2.8% yoy
Growth rate: -0.1pp @ -0.9% ytd
Carload groups: 2 of 10 posted gains for the week yoy
    Grain: +5.9%
    Motor vehicles/parts: +2.9Railtraffic 2015 week 25
    Chemicals: -0.2
    Farm: -0.6
    Other: -1.7
    Minerals: -3.5
    Forestry: -5.8
    Metals: -7.5
    Petroleum: -13.4
    Coal: -19.2; still heavily skewing data, even off weak yoy comp base
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

Purchasing Managers Index (June 2015) | Markit Economics
Global expansion stays strong, but emerging Asia’s contractions deepen — a troubling leading indicator for stagnating China; US deceleration settles into a comfortable velocity; European recovery stays strong despite Grexit:
Global PMI (Composite): -0.5 @ 53.1 (miss 53.9 LT average)
Global PMI (Services): -0.5 @ 53.5
Global PMI (Manufacturing): -0.3 @ 51.0; lowest since 2013h1 with a pickup “depending on the extent of any inventory drag”
– US ISM (Services): +0.3 @ 56.0 (meet 56.0e); “corresponds to a 3.0% increase in GDP”
US ISM (Manufacturing): +0.7 @ 53.5 (beat 53.2e); troubling to see the divergence between contracting deliveries & mounting inventories:
    New orders: +0.2 @ 56.0ISM- PMI Manufacturing & Services 2015.06
    Production: -0.5 @ 54.0
    Inventories: +1.5 @ 53.0
    Deliveries: -1.9 @ 48.8
    Employment: +3.8 @ 55.5
Eurozone (Composite): +0.6 @ 54.2 (beat 54.1e); “Greek turmoil has so far had little discernible impact… GDP rising 0.4% in Q2”
Eurozone (Services): +0.6 @ 54.4 (meet 54.4e)
Eurozone (Manufacturing): +0.3 @ 52.5 (meets 52.5e)
    Germany: +0.8 @ 51.9
    Netherlands: +0.7 @ 56.2
    Italy: -0.7 @ 54.1; down from a 49-month high
    France: +1.3 @ 50.7; ends 12-month contraction
    Spain: -1.3 @ 54.5
    Greece: -1.1 @ 46.9; amidst sovereign bankruptcy
Japan: -0.8 @ 50.1; off an 11-month low
China: official +0.1 @ 50.2 (meet 50.2e); unofficial +0.2 @ 49.4 (miss 49.6e)
India: -1.3 @ 51.3
South Korea: -1.7 @ 46.1
Taiwan: -3.0 @ 46.3; 33-month low (attributable to Chinese slowdown?)
UK: -0.5 @ 51.4; 26-month low
Australia: -8.1 @ 44.2; plunge back into multiyear contraction, attributed to “progressive closure of local automotive assembly, which has been underway for some time”
Brazil: +0.6 @ 46.5; “end of the downturn is not yet in sight”
#Neutral

Credit

NYSE margin debt & balances (May 2015) | Doug Short (dshort.com)
All measures reach new records, spiking higher into extreme levels; stark juxtaposition to neutral investor sentiment surveys (see below); next month’s data should show signs of abatement due to Fed’s explicit intent to raise rates:NYSE margin debt vs SPX (real gross & net, 2015.05)
Nominal margin debt: +13.8% yoy, -1.6% mom @ $499.1B; down from record high
Real margin debt: -2.08% mom; down from record high, but still far above prior highs from 3/2000 & 7/2007′s before those bear markets
Net margin balances (“buying power”): +3.6% mom @ -$219.18B debit; recovers from record low, but still crushes prior records from 2000, 2007 & 2011)
[See also: Margin debt isn’t that bearish (it’s stayed as a constant % of NYSE market cap since 2007)]
#Bearish #Leverage #Latent indicator

Fundamentals

Tech companies’ earnings aren’t as good as meets the eye | Barrons
Since most prefer non-GAAP financial reporting, “earnings of a dozen big technology companies will be overstated by > $16B” because they don’t expense stock-based compensation.Compensation treatments- MS vs GOOG
[N.B. While analysts’ fundamental models (i.e. growth forecasts) focus on non-GAAP growth, valuations and Street consensus price targets account for fully-diluted EPS.]
[Previously: Seth Klarman’s Margin of Safety & Ritholtz’s bubble indicators #3 “tortured rationalizations”]
$XLK $QQQ #Accounting #RSU

Sentiment

Retail investor sentiment survey (2015.07.01) | American Association of Individual Investors (AAII)
Sentiment crashes back into a bull signal, unwinding last week’s noisy spike amidst Greek default negotiations; neutral cohort remains outsized & an indication of healthy uncertainty:
Bull/Bear ratio: -100bp wow @ 0.64 (under both 1.28 historical average & 1.80 extreme high)
Bullish: -12.9pp @ 22.6% (under both 38.9 avg & 45 extreme high)
Bearish: +13.4pp @ 35.1% (over both 30.4 avg & 25 extreme low)
Neutral: -0.5pp @ 42.3% (over 30.7 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 12/2015).
[Previously: Retail allocations bullish & Fund manager allocations neutral]
#Bullish #Contrarian

Interests

Counterfactual: Barack Obama is officially one of the most consequential presidents in American history | Vox
Contrary to dismal approval ratings and public consensus, Barack Obama “will be a particularly towering figure in the history of American progressivism,” due to:
1. First black president
2. Universal healthcare:
while Obamacare (Affordable Care Act) has many flaws, it’s a landmark deal to “establish the expectation in the public’s mind that access to basic health care is a right… FDR failed, Truman failed, Nixon failed, Carter failed, Clinton failed — and Obama succeeded in the one big remaining gap in the American welfare state”
3. Economic stimulus: revived an economy on the brink of depression
4. Financial re-regulation: Dodd-Frank Act
5. Gay rights: including a Supreme Court ruling on same-sex marriage
6. Environmental regulation: curbing greenhouse gas emissions
7. Iran WMDs: tentative deal to deweaponize Iran’s nuclear programs
8. Labor rights: modernized labor laws to the benefit of women & minorities
9. Cuban relations
[I’d agree, but while his domestic impact has been profound, his international & diplomatic policies have been less-so.]
#Perception vs Reality

–Romeo

Advertisements
  1. […] -1.6 @ 51.1 (miss 52.8e); ytd corresponds to +2.9% annualized GDP; continued inventory drawdown (as expected) sets-up a strong 2H outlook; commentary indicates net benefits of energy/commodity price […]

Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s