Diary of a Financier

Top Newsstuffs (September 14-20)

In Bookshelf on Sun 20 Sep 2015 at 05:34

Top reads from the week that was…

Macro

Retail sales (August 2015) | US Government Census
Sales settle-in at tepid velocity, missing consensus due to prior month’s strong upward revisions; below-trend growth remains disappointing, especially given the tailwind of “consumer stimulus” from lower energy prices:Retail sales ($gross & %change yoy, 2015.08)
Headline: -0.4pp @ +2.2% yoy, +0.2% mom (miss +0.3e); prior month revised up (+0.1pp @ +0.7% mom)
Core (ex-autos): -0.3pp @ +1.3% yoy, +0.1% mom (miss +0.4e); prior month revised up (+0.2pp @ +0.6% mom)
#Neutral

Housing permits, starts & completions (August 2015) | US Government Census
Strong trend maintained, even with big prior month upward revisions being reversed; remains macro’s lonely sign of pent-up demand after a weak Q1 & Q2:Housing starts 2015.08
Monthly housing starts:  +6.1pp @ +16.6% yoy, -3.0% mom @ 1.126M saar (miss 1.168M exp); prior months revised lower
Growth rate:  unch @ +11.3% ytd
#Bullish #Green shoots

Inflation: Consumer Price Index (August 2015) | Bureau of Labor Statistics (BLS)
While headline grapples with the energy price crash for the last month (will lap yoy comps next month), core remains just under the Fed’s 2.0% target; this does qualify as “price stability” per the Fed’s mandate, supportive of a policy rate hike:
Headline CPI: unch @ +0.2% ttm, -0.1 mom (meet -0.1e)Core inflation- PCE, CPI, Median CPI, trimmed mean CPI 2015.08
    Energy: -1.0pp @ -15.0% ttm, -2.0% mom; sequential drag continues, but yoy comps should reach lower base in September
Core CPI (ex food & energy): unch @ +1.8% ttm, +0.1% mom (miss +0.2e)
#Neutral

Fundamentals

Quant: Equity relative valuation opportunities | Bank of America Merrill Lynch (BAML)
“Stocks just got much cheaper” due to multiple compression during the SPX correction:S&P 500 sector valuation rankings 2015.08.31
SPX forward PE: +4% premium to LT average (down fm +10% before correction)
Favorite sectors: $IBB $KBE $KIE $IYT
[BAML’s quant team has a multifactor “Industry rotation model” that ranks industries according to momentum, earnings revisions & valuation to distinguish opportunities from value traps.]
#Neutral $XLV $XLF

Sentiment

Retail investor sentiment survey (2015.09.16) | American Association of Individual Investors (AAII)
Sentiment remains a buy signal at extreme lows despite rare optimism amidst market turmoil; neutral cohort re-ascends, having spent all of 2015 ytd at extreme highs — an indication of healthy uncertainty:AAII retail investor sentiment survey- bullish/bearish 2015.09.16
Bull/Bear ratio: -9bp wow @ 1.02 (below both 1.30 historical average & 1.80 extreme high)
Bullish: -1.4pp @ 33.3% (under both 39.0 avg & 45 extreme high); near postcrisis low
Bearish: -5.9pp @ 29.1% (between 30.0 avg & 25 extreme low)
Neutral: +7.3pp @ 37.6% (above 31.0 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 2/2016).
[Previously: Retail allocations neutral, Institutional allocations neutral & Strategist allocations are bullish signal]
#Bullish #Contrarian

Global fund manager allocation survey (September 2015) | Bank of America Merrill Lynch (BAML)
Risk allocations remain a neutral signal after March’s extremes, with non-cyclical/defensive/income assets slowly clawing-back from extreme lows; the record flight of capital out of US into International markets persists:
Equity: -24pp @ +17% OW (between +15% to +50% extremes); still OW highest beta/cyclical sectors
Bonds: +9pp @ -50% UW (above -60 extreme low)BAML fund manager allocation survey- equity/fixed income/cash/sectors 2015.09
Cash: +0.3pp @ +5.5 OW (above +4.5 extreme high); renews highest level since 12/2008
Commodities: -4pp @ -32% UW; a 28-month low (-1.9σ)
Regions:
    US: +8pp @ -6% UW
    Europe: +2pp @ +45% OW; extreme high (+1.3σ)
    Japan: -18pp @ +22% OW
    Emerging Markets: -2pp @ -34% UW; a new alltime low
Surveys a sample of 200+ PMs with $700B+ in AUM, asking for portfolio positioning (overweight/underweight) relative to 60/30/10 benchmark.
#Neutral #Contrarian
#Bearish: $XLK $XPH $XLY $XLF $EZU $EWJ #Cash
#Neutral: $ACWI $AGG $EWJ
#Bullish: $XLE $DBC $XLB $EEM

–Romeo

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