Diary of a Financier

Top Newsstuffs (August 11-17)

In Bookshelf on Sun 17 Aug 2014 at 05:25

Great Lakes of New Hampshire…

Macro

Retail sales (July 2014) | US Government Census
Sales miss expectations, mean reverting after a strong Q2, but trend growth still good with trailing 3 months +6.2% annualized:
Headline: +3.7% yoy, unch mom vs +0.2e  (prior month unrevised)
Core (ex-autos): +3.1 yoy, +0.1 mom vs +0.4e (prior month unrevised)
#Neutral $XLY $XLP

Rail traffic weekly | Association of American Railroads (AAR)
Unheralded rally continues, suggesting economy is healthier than most people think; this week’s deceleration is likely the start of moderation in trend growth after Q2’s pent-up demand surge; coal (38% of total volume) still weighing on overall performance:
Weekly traffic: -1.9pp @ +3.9% yoy
Growth ytd: unch @ +4.7%
Carload groups: 8 of 10 posted gains for the week yoy
    Petroleum: +32.1%
    Grain: +26.5
    Minerals: +9.6
    Motor vehicles/parts: +7.0
    Coal: -2.6
    Farm/food: -1.3
#Bullish $XLE $USO $DBA $XLI $XME

Japanese Gross Domestic Product (2014q2) | The Wall Street Journal (WSJ)
Massive contraction mean reverts after Q1’s +6.1% surge, all due to well-broadcast sales tax increase (VAT from 5% to 8%); economy is expected to recover in Q3, but will be a major drag on global growth in the interim:
Real GDP: Q2 -6.8% vs -7.1e; 1H -0.7% 
    Consumption: -18.7
    Residential investment: -35.3
    Business investment: -9.7
    Exports: -1.8
    Inventories: +4pp to GDP growth rate
    Personal savings rate: +5.3
Real GDP (Q1): revised from -2.9% to -2.1%
Real GDP (2011-13): revised from +2.2% to +2.0%
[Previously: Japan’s growth strategy & Japan quantitatively/technically bullish]
#Neutral $EWJ $DXJ $JPY $FXY

Credit

US household debt & credit report (2014q2) | Federal Reserve Bank of New York (NY Fed)Household debt: Total debt balances & Delinquencies by loan type (2014q2)
Trend credit expansion maintained despite pause in releveraging after 3-straight quarterly increases; private sector deleveraging has bottomed:
Total consumer indebtedness: +4.3% yoy, -0.2% qoq @ $11.63T; -8.3% from $12.68T record in 2008q3
Mortgages: +3.0% yoy, -0.8% qoq @ $8.10T
     Originations: -13.8% qoq @ $286B; lowest since 2000
Non-housing debt: +3.0% yoy,+1.9% qoq @ $8.10T
    Auto loans: +11.2% yoy, +3.4% qoq @ $1.12T; highest since 2006
Delinquencies (90+ days): -0.3pp qoq @ 4.5%; elevated student loan impairments are the only class not at pre-crisis levels, although they continue to recede
[Previously: Senior loan officer survey shows household releveraging, corporate deleveraging & Renewed subprime bubble in car loans]
#Bullish

Quant/Fundamental

S&P 500 relative valuation metrics (2014.07.31) | Bank of America Merrill Lynch (BAML)
SPX valuation metrics 2014.07.31SPX current vs average valuation metrics say the market is still generally cheap relative to historical multiples:
#Bullish

S&P 500 revenue growth | Ed Yardeni (Dr. Ed’s Blog)
Both economic & stock market revenues are finally accelerating, although the globalized corporate sector will need global growth to avert a slowdown and maintain the sales growth trend:
Total business sales: +4.7% yoy in June
SPX revenue/share: +5.8% yoy in Q2; highest rate & level since the recovery normalized
SPX forward revenue/share (consensus): +3.9% FY14, +4.2% ntm, +4.2% FY15; all accelerate for the first time in 2014
[Previously: Revenue growth is coming]
#Bullish $SPX $SPY $IWV #GDP

Macro theme: Weaker Euro beneficiaries basket | Morgan Stanley
MS strategists & analysts have a 1.20 12m price target (-10%) on $EUR, so they’ve compiled a basket of stocks that historically show high inverse correlation to EUR.
The basket has sharply decoupled from EUR so far ytd, but PEs relative to the broad market are nearing 6-year lows, and EPS +4% for every -10% EUR.
[See also: Technical double bottoms across EU countries & German investor confidence plunges]
$EZU $FEZ $HEDJ

Sentiment

Global fund manager allocation survey (August 2014) | Bank of America Merrill Lynch (BAML)
While bonds & cash are already there, equity allocations are still only approaching extremes.
Net portfolio positioning of global PMs (60/30/10 benchmark):
Equity: +9pp @ +48% net; nearing +55% extreme
Bonds: -7 @ -62; breached -60 extreme
Cash: +0.5 @ +5.1; near 4.5 extreme, but highest since 6/2012
US: +4 @ +10
Europe: -22 @ +13; crashes from near a postcrisis record
Japan: +14 @ +21; massive increase
EM: @ +5; highest since 4/2013
#Neutral

Investor sentiment survey (2014.08.13) | American Association of Individual Investors (AAII)
Sentiment sends neutral signals; abnormally volatile weekly swings continue:
Bull/Bear ratio: +67bps @ 1.47 vs 1.28 historical average
Bullish: +8.9pp wow @ 39.8% vs 39.0 avg & 45 extreme high
Bearish: -11.3pp @ 27.0 vs 30.5 avg & 25 extreme low
Neutral: +2.3pp @ 33.2 vs 30.5 avg
Measures respondents’ expectation for equity performance over next 6 months (through 2/2015).
#Neutral #Contrarian

Interests

Money Market Funds: The SEC’s new regulations | Blackrock/iShares (ETF Trends)
New regulatory rules:
1. Floating NAVs: Mark-to-market now applies to institutional prime & tax-exempt funds; not applicable to retail or government funds
2. Liquidity fees & gates: Funds can impose fees on and temporarily suspend redemptions; prohibited for government funds
3. Increased transparency: New disclosure requirements include daily asset, flow & valuation reporting
4. Tax accounting: Normal capital gains accounting will not apply so as to simplify cash management
[Previously: Hank Paulson says markets need structural repairs & Fed/Treasury innovations are subtle regulations]
#MMF #Cash alternatives #Shadow banking system #Break-the-buck

Documentary video: The Islamic State of Iraq & Syria | VICE News
Filmmaker follows ISIS, the hardline Sunni jihadist group cast-away from al Qaeda for being “too extreme”:
Their goal is to reestablish the caliphate, led by shadowy Abu Bakr al-Baghdadi, killing all of the world’s infidels en route to reinstituting global sharia.
Their tactics are reminiscent of the Nazi’s power-grab, indoctrinating young children (9 years old!) and forcing dissenters to choose between execution or cooperation.
#Terrorism #Middle East #Arab Spring

–Romeo

Advertisements
  1. […] debit; a new record again, which crushes prior records from 2000, 2007 & 2011 [Previously: US household debt/credit report, Senior loan officer survey & Renewed subprime bubble in auto loans] #Bearish #Latent […]

  2. […] recovers from a record low, but still crushes prior records from 2000, 2007 & 2011 [Previously: US household debt/credit report, Senior loan officer survey & Renewed subprime bubble in auto loans] #Bearish #Latent […]

  3. […] by a decline in rates that should revert in the Q2 report, although Q2’s yoy comp is off an easy base – Non-housing debt: +7.1% yoy, +0.7% qoq @ $3.17T     Auto loans: +10.2% yoy, +2.1% qoq @ […]

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