Diary of a Financier

Top Newsstuffs (June 8-14)

In Bookshelf on Sun 14 Jun 2015 at 15:25

Top reads from the week that was…

Macro

Retail sales (May 2015) | US Government Census
Growth rebounds as expected; this is maybe the most important macro report ytd, and finally evidence of “consumer stimulus” from lower energy prices is starting to manifest, but the velocity of growth in yoy data is still underwhelming:Retail sales (% change yoy, 2015.05)
Headline: +1.8pp @ +2.7% yoy, +1.2% mom (miss +1.3e); miss due to prior month’s upward revision (+0.2pp @ +0.2% mom)
Core (ex-autos): +1.3pp @ +1.3% yoy, +1.0% mom (beat +0.8e); prior month unrevised
#Neutral

Sentiment

Retail investor sentiment survey (2015.06.10) | American Association of Individual Investors (AAII)
Sentiment crashes, sending an even bigger buy signal; neutral cohort still outsized, now a significant indication of healthy uncertainty:
Bull/Bear ratio: -50bp wow @ 0.61 (below both 1.28 historical average & 1.80 extreme high)
Bullish: -7.3pp @ 20.0% (under both 38.9 avg & 45 extreme high)
Bearish: +8.0pp @ 32.6% (above both 30.4 avg & 25 extreme low)
Neutral: -0.7pp @ 47.4% (over 30.7 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 11/2015).
[Previously: Retail allocations bullish & Fund manager allocations neutral]
#Bullish! #Contrarian

Interests

Presentation: “Summer Insects” multiasset class outlook (2015q2) | Jeffrey Gundlach (DoubleLine Funds)
Bonds: bullish
    i. Sovereign supply: Sovereign bonds- global supply (net issuance, 1980-2015)global net issuance will be negative for first time ever in 2015 (including central bank QEs)
 Nominal GDP vs 10y yield (1947-2015)   ii. Rates: 10y yield ($TNX) will peak @ 2.50-60%, but will be ~2.2% at YE15; however, yields have bottomed for this cycle, as TNX historically correlates with nominal GDP & is currently lagging
    iii. Yield curve: historically flattens during Fed tightening cycles; “the day the Fed tightens, sell high yield bonds & buy Treasuries”
Fed Funds Rate: “The odds of them raising rates [tightening] by December is less than 50%,” but it’s totally dependent on wages
Credit: “Not predicting a crash in 2015,” but worried about LT crisis
    i. Low underwriting standards: covenant-lite loansHigh yield bonds & loan maturities (2015-25)
    ii. Energy sector: revolvers & debtloads at capacity
    iii. Roll risk: $400B+ maturities in each 2020/21
Currencies (FX): USD will probably consolidate for rest of 2015, but he’s LT bullish as “secular FX bulls tend to last 10 years”
[Previously: Tsy bull market to continue in 2015]
$AGG $HYG $BKLN $TLT

–Romeo

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