Diary of a Financier

Top Newsstuffs (October 19-25)

In Bookshelf on Sun 25 Oct 2015 at 06:26

Top reads from the week that was…

Macro

Housing permits, starts & completions (September 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 2015.09
Monthly housing starts:  +0.9pp @ +17.5% yoy, +6.5% mom @ 1.206M saar (beat 1.147M exp); prior months revised lower
Growth rate:  +0.7pp @ +12.0% ytd
#Bullish #Green shoots

Credit

NYSE margin debt & balances (September 2015) | Doug Short (dshort.com)
All measures continue precipitous retracement from extremes in coordination with market correction; expect more of the same with Fed rate hikes nearing:NYSE margin debt vs SPX (real gross & net, 2015.09)
Nominal margin debt: -2.2% yoy, -4.1% mom @ $454B
Real margin debt: -4.1% mom; 11% off record high (4/2015), but still above prior highs from 3/2000 & 7/2007′s before those bear markets
Net margin balances (“buying power”): +8.5% mom @ -$172B debit; continues recovery from record low, but still crushes prior records from 2000, 2007 & 2011
[See also: Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007]
#Bearish #Leverage #Latent indicator

Loans & leases in bank credit, all commercial banks (2015.10.07) | St. Louis Federal Reserve (FRED)
Lending growth accelerates a bit, maintaining its healthy trend:Loans & leases in bank credit, all commercial banks (weekly, %yoy) 2015.10.07
Weekly loan growth: +0.4pp @ +8.0% yoy (beat 7.3% historical average)
This is a key indicator, as I’d expect continued expansion due to household & corporate balance sheets being most deleveraged as any point since the 1970s, but the private sector may be suffering from post-traumatic strike — a hangover from the crisis (like “Depression Babies”).
[Previously: Total consumer indebtedness remains neutral]
#Bullish #Releveraging $XLF $KBE $KRE

Sentiment

Retail investor sentiment survey (2015.10.21) | American Association of Individual Investors (AAII)
Insignificant retracement after last week’s sentiment spike, with all cohorts remaining pretty average:AAII retail investor sentiment survey- bulls/bears 2015.10.21
Bull/Bear ratio: +19bp wow @ 1.45 (above 1.30 historical average)
Bullish: +0.7pp @ 34.8% (between 30 extreme low & 39 avg); continues rally up from near postcrisis lows
Bearish: -3.1pp @ 24.0% (below 25 extreme low & 30 avg); continues slide from extreme highs
Neutral: +2.4pp @ 41.2% (above 31 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 4/2016).
[Previously: Retail allocations neutral & Strategist sentiment is bullish]
#Neutral #Contrarian

Global fund manager allocation survey (October 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: +9pp @ +26% OW (between +15% to +50% extremes); still OW highest beta/cyclical sectors
Bonds: +9pp @ -41% UW (above -60 extreme low)BAML fund manager allocation survey- equity/fixed income/cash/sectors 2015.10
Cash: -0.4pp @ +5.1 OW (above +4.5 extreme high); falls fm highest level since 12/2008
Commodities: +9pp @ -23% UW; rises fm 28-month low (-1.9σ)
Regions:
    US: -4pp @ -10% UW
    Europe: +9pp @ +54% OW; extreme high (+1.3σ)
    Japan: +1pp @ +23% OW
    Emerging Markets: +6pp @ -28% UW; rises fm 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 $XLF $XLY $XPH #Cash
#Neutral: $ACWI $AGG $EWJ
#Bullish: $EEM $XLU $XLI $XLE $DBC

CFTC weekly equity futures sentiment indicator | Goldman Sachs
$SPX futures positioning is at extreme lows (net short), a “highly statistically significant” contrarian bullish signal:SPX index vs futures sentiment indicator
SPX futures sentiment indicator: 10% (meets 10% extreme low); 7th-straight week in extreme bearishness
#Bullish #Contrarian $ES_F $SP_F

Interests

Tail risk rises to highest level ever | CNBC
The black swan index set a record last week:SKEW (1990-2015)
$SKEW: +30% mtd, +10% dod @ 148.92; new alltime record
SKEW measures the prices of far out-of-the-money options on $SPX to determine tail risk or the “risk of outlier returns two or more standard deviations below the mean.”
#Bullish? #Contrarian? #BlackSwan

–Romeo

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