Diary of a Financier

Top Newsstuffs (January 4-10)

In Bookshelf on Sun 10 Jan 2016 at 07:12

Top reads from the week that was…

Macro

Rail traffic monthly (December 2015) | Association of American Railroads (AAR)
Railroads continue to indicate a collapse in economic activity, led lower by energy & materials — attributable to China/commodities supercycle bust:Railtraffic monthly 2015.12
Monthly traffic: -2.9pp @ -8.9% yoy
Growth rate: -0.7pp @ -2.5% ytd
Carload groups: 4 of 20 posted gains for the month yoy
In particular, the secular decline of coal volumes (~40% of carloads makes it the largest category) is negatively skewing the data.
#Bearish #Irrelevant? $IYT $XLB $XLE $DBC

Purchasing Managers Index (December 2015) | Markit Economics
Global growth resumes deceleration, with mixed internals; however, China’s deterioration continues to overshadow both Europe’s new leadership position, and EM leading indicators (Korea & Taiwan) accelerating into expansion:
Global PMI (Composite): -0.7 @ 52.9 (below 53.9 LT average)
Global PMI (Services): -0.8 @ 53.1
Global PMI (Manufacturing): -0.3 @ 50.9US ISM PMI Composite 2015.12
US ISM (Composite): -0.6 @ 54.4
– US ISM (Services): -0.6 @ 55.3 (miss 56.5e); still a healthy expansion, but another deceleration with weak internals; corresponds to +2.8% real GDP (annualized)
    New orders: +0.7 @ 58.2
    Deliveries: -4.5 @ 48.5
    Backlog: -1.5 @ 50.0
    Inventories: -1.5 @ 53.0
US ISM (Manufacturing): -0.4 @ 48.2 (miss 49.2e); another surprisingly weak report with disappointing internals; corresponds to +1.6% real GDP (annualized)
    Inventories: +0.5 @ 43.5
    Backlog: -2.0 @ 41.0
    Employment: -3.2 @ 48.1
Eurozone (Composite): +0.1 @ 54.3 (beat 54.0e); corresponds to +0.4% real GDP (annualized)
Eurozone (Services): unch @ 54.2 (beat 53.9e)
Eurozone (Manufacturing): +0.4 @ 53.2 (beat 53.1e); led by Italy’s 57-month high & Greece’s rise into expansion
UK: -0.6 @ 51.9
Japan: unch @ 52.6; highest in 20 months
China: official +0.1 @ 49.7 (meet 49.7e); unofficial -0.4 @ 48.2 (miss 49.0e)
India: -1.2 @ 49.1
South Korea: +1.6 @ 50.7
Taiwan: +1.2 @ 51.7
Brazil: +1.8 @ 45.6; off an 80-month low
#Neutral #Green shoots

Sentiment

Retail investor sentiment survey (2015.01.06) | American Association of Individual Investors (AAII)
An extreme buy signal as sentiment collapses procyclically amidst global market turmoil; spike in bears shifted from a once swollen neutral cohort…
Bull/Bear ratio: -50bp wow @ 0.58 (below 1.00 extreme & 1.30 historical average)AAII retail investor sentiment survey- bulls/bears 2015.01.06
Bullish: -2.9pp @ 22.2% (below 30 extreme & 39 avg)
Bearish: +14.6pp @ 38.3% (above 30 avg)
Neutral: -11.7pp @ 39.6% (above 31 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 6/2016).
[Previously: Institutional allocations neutral & Strategist sentiment still a buy signal]
#Bullish #Contrarian

Asset allocation survey (December 2015) | American Association of Individual Investors (AAII)
Allocations mostly unchanged, maintaining neutral signal:
– Stocks: -0.2pp @ 65.3% (between 60% average & 70% extreme high); rises from 26-month low
Bonds: +0.4pp @ 17.1% (above 16% avg & 10% extreme low); an 11-month high
Cash: +0.1pp @ 17.7% (below 24% avg; above 15% extreme low); below avg for 47th-consecutive month
#Neutral #Contrarian $SPY $AGG

Technicals

Technical study: S&P 500 long term regression & standard deviation (December 2015) | Doug Short (dshort)
During the postcrisis bull market, SPX has persistently remained over 2 sigmas from its LT trend — price levels which have historically marked a top:
– Mean: +1.78% average annual real returnSPX long term regression & standard deviation (2015.11)
Standard deviation (σ): ±40.6%
Variances:
    Currently: +4pp mom @ +89%
    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

Interests

Global sovereign debt maturities (2016) | Bloomberg
In aggregate, the value of global sovereign bonds maturing in 2016 remains consistent with the postcrisis average…Global sovereign bond maturities ($T, 2012-16e)
– Global (aggregate): +14% yoy @ $7.1T redemptions (below $7.35T postcrisis avg)
– US (Treasuries): +14% yoy @ $3.45T
– Eurozone: -14% yoy @ $859B (Germany/France/Italy)
– Japan (JGBs): -10% yoy @ $1.87T
– China: +41% yoy @ $254B
#Neutral #Non-event #Debt roll #Refinancing #Issuance $BWX $TLT

–Romeo

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