Diary of a Financier

Top Newsstuffs (July 6-12)

In Bookshelf on Sun 12 Jul 2015 at 06:26

Top reads from the week that was…

Macro

Rail traffic weekly (Week 26, 2015) | Association of American Railroads (AAR)
After pent-up demand recovery failed to materialize in Q2, July opens with a meager uptick:
Weekly traffic: +4.5pp @ +1.7% yoy
Growth rate: +0.1pp @ -0.8% ytd
Carload groups: 6 of 10 posted gains for the week yoy
    Other: +6.2
    Minerals: +5.4Railtraffic 2015 week 26
    Farm: +3.7
    Forestry: +2.3
    Motor vehicles/parts: -0.6
    Grain: +1.5%
    Chemicals: +1.4
    Petroleum: -8.5
    Metals: -10.6
    Coal: -18.5; still heavily skewing data, even off weak yoy comp base
China’s economic slowdown is impacting all energy & basic materials; in particular, the secular decline of coal volumes (~40% of carloads makes it the largest category) is negatively skewing the data.
#Bearish $IYT $XLB $XLE

Sentiment

Retail investor sentiment survey (2015.07.08) | 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: +32bp wow @ 0.96 (under both 1.28 historical average & 1.80 extreme high)
Bullish: +5.3 @ 27.9% (under both 38.9 avg & 45 extreme high)
Bearish: -5.9pp @ 29.2% (under 30.4 avg; above 25 extreme low)
Neutral: +0.6pp @ 42.9% (over 30.7 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 12/2015).
[Previously: Fund manager allocations neutral & Strategist allocations are bullish signal]
#Bullish #Contrarian

Asset allocation survey (June 2015) | American Association of Individual Investors (AAII)
Equity allocations unchanged, maintaining neutral signal:
– Stocks: -0.5pp @ 67.2% (above 60% average; below 70% extreme high); 27 consecutive months above average (longest post-crisis streak)
Bonds: unch @ 15.5% (below 16% avg; above 10% extreme low)
Cash: +0.5pp @ 17.3% (below 24% avg; above 15% extreme low); below avg for 43rd consecutive month
#Neutral #Contrarian $SPY $AGG

Technicals

Technical study: S&P 500 long term regression & standard deviation (July 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: +1pp mom @ +94%; reversion to trend is -47.7% @ 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

–Romeo

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