Diary of a Financier

Top Newsstuffs (July 27 – August 2)

In Bookshelf on Sun 2 Aug 2015 at 07:18

Top reads from the week that was…

Macro

Manufacturers’ durable & capital goods (June 2015) | US Department of Commerce
Report beats consensus comfortably, but ytd deceleration continues as we progress further into difficult yoy comps from last year’s pent-up demand recovery; prior month data revised slightly downward:
Core durable goods (ex-transportation)Core durable goods & capex (% change yoy, 2015.06)
    Orders: -0.5pp @ -1.8% ytd, +0.8% mom (beats +0.5e)
    Shipments: -0.3pp @ +0.4% ytd, unch mom
Core capex (nondefense, ex-aircraft capital goods)
    Orders: -0.8pp @ -3.4% ytd, +0.9% mom
    Shipments: -0.2pp @ +1.1% ytd, -0.1% mom
Inventory (ex-transportation)
    Inventories: -1.1pp @ +2.7% ytd, +0.3% mom; headline SA & NSA renew alltime highs
#Neutral #Deceleration

Gross Domestic Product: Advanced estimate (2015q2) | Bureau of Economic Analysis (BEA)
Q2 growth rebounded, albeit far less than expected; Q1 revised upward into expansion — a far cry from the initial print amidst record snowfalls in the Northeast, California port shutdowns & the dollar’s spike.
Drag from government expenditures & net exports unwound, particularly as $DXY reverted a bit.
Consumption finally started to net-out the energy crash’s drag, but I’d expect future PCE downward revisions since this estimate doesn’t sync w higher-frequency Retail Sales & Durable Goods data:
Real GDP (Q2): +2.3% qoq saar (miss +2.9e)
    Inflation: Core +1.1%; Headline +1.4%
    Consumption (PCE): +2.9%
    Investment: +0.3%; Residential +6.6%; IP +5.5%; Equipment -4.1%
    Government spending: +0.8%; Federal -1.1%; State & local +2.0%
    Exports: +5.3%
    Imports: +3.5%
    Inventories: -0.08pp detraction from GDP growth rate
Real GDP per capita (Q2): -1.4%; 9.9% below LT regression trend
Real GDP (Q1): revised +0.8pp @ +0.6% qoq saar
Real GDP (FY14): unrevised @ +2.4% yoy
Real GDP (FY13): revised -0.7pp @ +1.5% yoy
Real GDP (FY12): revised -0.1pp @ +2.2% yoy
Having had a string of perfect, bad-is-good reports (i.e. not recessionary threats, but weak enough data to defer Fed rate hikes), this is a nightmare report: troublingly weak, but not bad enough to sway a Fed that seems committed to raising rates in September regardless.
[Previously: The economic deceleration is real this time, “I’m approaching the Fed’s rate hike with indifference. After all, the Fed has waited all these years to raise policy rates from ZIRP so as to do so in the least-disruptive way.”]
#Neutral #Nightmare?

Credit

Loans & leases in bank credit, all commercial banks (2015.07.15) | St. Louis Federal Reserve (FRED)
Lending growth remains at healthy trend, slightly above historical average:Loans & leases in bank credit, all commercial banks 2015.07.15
Weekly loan growth: +7.8% yoy
Expect continued expansion due to household & corporate balance sheets being most deleveraged since 1970s.
[Previously: Total consumer indebtedness sends neutral signal]
#Bullish #Releveraging $XLF $KBE $KRE

Sentiment

Retail investor sentiment survey (2015.07.29) | American Association of Individual Investors (AAII)
Sentiment plummets to extreme lows indicative of a buy signal with a volatile, procyclical swing; neutral cohort stays outsized — an indication of healthy uncertainty:AAII investor sentiment survey- bulls/bears/neutral (%respondents, 2009-15)
Bull/Bear ratio: -75bp wow @ 0.52 (below both 1.30 historical average & 1.80 extreme high)
Bullish: -11.4pp @ 21.1% (under both 39.0 avg & 45 extreme high); near postcrisis low
Bearish: +15.1pp @ 40.7% (above both 25 extreme low & 30.0 avg)
Neutral: -3.7pp @ 38.2% (above 31.0 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 12/2015).
[Previously: Retail allocations neutral, Fund manager allocations neutral & Strategist allocations are bullish signal]
#Bullish! #Contrarian

Interests

European earnings about to accelerate | Barclays
With all the Grexit noise, sentiment has deteriorated despite Eurozone fundamentals’ upward momentum; while consensus has been upwardly revised, it’s still lagging Barclays’ model:
1. Revenue acceleration: sales growth should accelerate from 1.2% in Q1 to 8% by Q4e (assuming constant FX)Eurozone growth (Revenue & EPS, %yoy, 2003-2016e)
2. Earnings acceleration: EPS growth should accelerate from 13.1%e to 26% in FY15; from 12.2%e to 26% in FY16
3. Consensus upgrades lagging: every sector’s FY15e consensus Revenue & EPS growth have already been upwardly revised by 1-7% since QE was announced 1/2015, but they’re still lagging recent momentum
4. Economic growth upgrades: FY15e consensus GDP growth has been upwardly revised from 1.1% to 1.5%, and revenue growth upward revisions should follow
[Previously: European equities can lead 2015 global rally]
#Bullish #Perception v Reality $HEDJ $FEZ $EFA $EURUSD

–Romeo

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