Diary of a Financier

Top Newsstuffs (August 24-30)

In Bookshelf on Sun 30 Aug 2015 at 06:10

Top reads from the week that was…

Macro

Manufacturers’ durable & capital goods (July 2015) | US Department of Commerce
Report beats consensus significantly, with the good report redoubled by both massive upward revisions to prior month data (core orders revised +2.3pp @ +1.4% mom) and contraction in inventories; nevertheless, ytd deceleration remains as we’re comping off a high base (until October) from last year’s pent-up demand recovery:
Core durable goods (ex-transportation)Core durable goods & capex (% change yoy, 2015.07)
    Orders: -0.2pp @ -2.0% ytd, +0.6% mom (beats +0.3e)
    Shipments: -0.3pp @ +0.1% ytd, +0.2% mom
Core capex (nondefense, ex-aircraft capital goods)
    Orders: unch @ -3.4% ytd, +2.2% mom
    Shipments: +0.1pp @ +1.2% ytd, +0.6% mom
Inventory (ex-transportation)
    Inventories: -0.9pp @ +1.8% ytd, unch mom highs
#Neutral #Deceleration

Gross Domestic Product: Second estimate (2015q2) | Bureau of Economic Analysis (BEA)
Major upward revisions to consumption & investment increase Q2 growth far more than expected, with ytd expansion now looking solid — despite scares from initial datas amidst record snowfalls in the Northeast, California port shutdowns & the $USD’s spike.
Consumption is notable as it finally started to net-out the energy crash’s drag (albeit hard to resolve w weak Retail Sales & Durable Goods data):
Real GDP (Q2): +1.4pp @ +3.7% qoq saar (beat +3.2e)
    Inflation: Core +0.1pp @ +1.2%; Headline +0.1pp @ +1.5%
    Consumption (PCE): +0.2pp @ +3.1%
    Investment: +4.9pp @ +5.2%; Residential +1.2pp @ +7.8%; IP +3.1pp @ +8.6%
    Government spending: +1.8pp @ +2.6%; Federal +1.1% @ unch; State & local +2.3pp @ +4.3%
    Exports: -0.1pp @ +5.2%
    Imports: -0.6pp @ +2.8%
    Inventories: -0.08pp detraction from GDP growth rate
Real GDP per capita (Q2): -1.4%; 9.9% below LT regression trend
Real GDP (Q1): unrevised @ +0.6% qoq saar
Real GDP (FY14): unch@ +2.4% yoy
Real GDP (FY13): unch @ +1.5% yoy
Real GDP (FY12): unch @ +2.2% yoy
[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.”]
#Bullish

Sentiment

Retail investor sentiment survey (2015.08.26) | American Association of Individual Investors (AAII)
Sentiment remains a buy signal at extreme lows despite rare  conviction amidst market turmoil; neutral cohort returns to normal, having spent all of 2015 ytd at extreme highs — formerly an indication of healthy uncertainty:AAII retail investor sentiment survey- bullish/bearish/netural 2015.08.19
Bull/Bear ratio: +31bp wow @ 1.11 (below both 1.30 historical average & 1.80 extreme high)
Bullish: +5.7pp @ 32.5% (under both 39.0 avg & 45 extreme high); near postcrisis low
Bearish: +4.9pp @ 38.3% (above both 30.0 avg & 25 extreme low)
Neutral: -10.6pp @ 29.2% (under 31.0 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 1/2016).
[Previously: Retail allocations neutral, Institutional allocations neutral & Strategist allocations are bullish signal]
#Bullish #Contrarian

Technicals

Quant study: Selling in market corrections vs holding-on ($SPX, 1980-2015) | FiveThirtyEight
Historical backtest compares performance of buy & holding vs. selling-the-dip.
“Whatever you do, don’t sell”:Selling vs. holding the dips (SPX, 1980-2015)
1. Buy & hold = 1,863.5% cumulative return
2. Capitulation = 1,061.3% cumulative return (sell when SPX -5% in a week; buy back after +3% recovery)
Ignores slippage & total return like dividends, taxes, fees, etc.
#Passive

–Romeo

Advertisements
  1. […] thesis now.  Yes, the US economy is still healthy on both a trailing & forward basis (see Q2 GDP & August PMIs).  Yes, direct exposure to China is de minimis (~5% of SPX sales).  Yes, the […]

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