Diary of a Financier

Top Newsstuffs (August 3-9)

In Bookshelf on Sun 9 Aug 2015 at 06:35

Top reads from the week that was…

Macro

Rail traffic monthly (July 2015) | Association of American Railroads (AAR)
After pent-up demand recovery failed to materialize in Q2, July continues to disappoint:Railtraffic 2015.07
Monthly traffic: -1.8% yoyRailtraffic- groups 2015.07
Growth rate: -1.0% ytd
Carload groups: 6 of 10 posted gains for the month yoy
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

Purchasing Managers Index (July 2015) | Markit Economics
Global expansion stays strong, with emerging Asia’s drag stabilizing; US services has a surprising spike, overwhelming manufacturing’s miss & stemming multimonth deceleration; European recovery stays strong despite record contraction for Greece:
Global PMI (Composite): +0.3 @ 53.4 (miss 53.9 LT average)
Global PMI (Services): +0.3 @ 53.9
Global PMI (Manufacturing): unch @ 51.0; lowest since 2013h1 as “lackluster trend in new order suggests the soft growth patch may continue”
– US ISM (Services): +4.3 @ 60.3 (beat 56.2e); “corresponds to a 3.0% increase in GDP”
US ISM (Manufacturing): +0.7 @ 52.7 (miss 53.7e); pause amidst inventory drawdowns, as expected, but backlog collapsed; August report will need to show delivery spike to sustain strong orders & production:
    New orders: +0.5 @ 56.5ISM- PMI Manufacturing & Services 2015.07
    Production: +2.0 @ 56.0
    Deliveries: +0.1 @ 48.9
    Inventories: -3.5 @ 49.5
    Backlog: -4.5 @ 42.5
    Employment: -2.8 @ 52.7
Eurozone (Composite): -0.3 @ 53.9 (beat 53.7e); “despite record deterioration in Greece… GDP looks set to have risen 0.4% in Q2… set to grow at least 1.5% in FY15”
Eurozone (Services): -0.4 @ 54.0 (beat 53.8e)
Eurozone (Manufacturing): -0.1 @ 52.4 (beat 52.2e)
    Germany: -0.1 @ 51.8
    Netherlands: -0.2 @ 56.0
    Italy: +1.2 @ 55.3; new 51-month high
    France: -1.1 @ 49.6; resumes contraction
    Spain: -0.9 @ 53.6
    Greece: -16.7 @ 30.2; record low amidst sovereign bankruptcy
Japan: +1.1 @ 51.2
China: official -0.2 @ 50.0 (miss 50.2e); unofficial -1.6 @ 47.8 (miss 48.2e)
India: +1.4 @ 52.7
South Korea: +1.5 @ 47.6
Taiwan: +0.8 @ 47.1; off a 33-month low (harbinger of Chinese slowdown?)
UK: +0.5 @ 51.9; off a 26-month low
Australia: +6.2 @ 50.4; “increased residential contruction… [however] progressive closure of local automotive assembly & further declients in mining… continue to drag”
Brazil: +0.8 @ 47.2; “recession showed signs of moderating”
#Bullish

Sentiment

Retail investor sentiment survey (2015.08.05) | American Association of Individual Investors (AAII)
Sentiment remains a buy signal in extreme lows, barely bouncing after last week’s plummet; neutral cohort stays outsized — an indication of healthy uncertainty:AAII investor sentiment survey- bulls/bears/neutral (%respondents, 2015.08.05)
Bull/Bear ratio: +25bp wow @ 0.77 (below both 1.30 historical average & 1.80 extreme high)
Bullish: +3.2pp @ 24.3% (under both 39.0 avg & 45 extreme high); near postcrisis low
Bearish: -9.0pp @ 31.7% (above both 25 extreme low & 30.0 avg)
Neutral: +5.8pp @ 44.0% (above 31.0 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 1/2016).
[Previously: Fund manager allocations neutral & Strategist allocations are bullish signal]
#Bullish! #Contrarian

Asset allocation survey (July 2015) | American Association of Individual Investors (AAII)
Equity allocations largely unchanged, maintaining neutral signal:
– Stocks: +0.2pp @ 67.4% (above 60% average; below 70% extreme high); 28-consecutive months above average (longest post-crisis streak)
Bonds: unch @ 15.5% (below 16% avg; above 10% extreme low)
Cash: -0.1pp @ 17.2% (below 24% avg; above 15% extreme low); below avg for 44th-consecutive month
#Neutral #Contrarian $SPY $AGG

Technicals

Technical study: S&P 500 long term regression & standard deviation (August 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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  1. […] expectation for equity performance over next 6 months (through 1/2016). [Previously: Retail allocations neutral, Institutional allocations neutral & Strategist allocations are bullish signal] #Bullish […]

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