Diary of a Financier

Top Newsstuffs (November 16-22)

In Bookshelf on Sun 22 Nov 2015 at 07:10

Top reads from the week that was…

Macro

Housing permits, starts & completions (October 2015) | US Government Census
A negative print breaks the strong trend, due to weakness in the volatile multi-family segment; nevertheless, ytd growth remains macro’s lonely sign of pent-up demand:Housing starts 2015.10
Monthly housing starts:  -19.3pp @ -1.8% yoy, -11.0% mom @ 1.060M saar (misses 1.162M exp); prior months revised lower
Growth rate:  -1.8pp @ +10.2% ytd
#Neutral #Green shoots

Inflation: Consumer Price Index (October 2015) | Bureau of Labor Statistics (BLS)
Core inflation nestles-up right below the Fed’s 2% target, and headline’s headwind from the energy price crash is over; this qualifies as “price stability” per the Fed’s dual mandate, supportive of a policy rate hike:Core inflation- PCE, CPI, Median CPI, trimmed mean CPI 2015.10
Headline CPI: +0.2pp @ +0.2% ttm, +0.2% mom (meets +0.2e)
    Energy: +1.3pp @ -17.1% ttm, +0.3% mom; sequential drag ends, as yoy comps have now lapped their low base
Core CPI (ex food & energy): unch @ +1.9% ttm, +0.2% mom (meets +0.2e)
#Bullish #Fed Funds #Rate hike #ZIRP

Credit

Loans & leases in bank credit, all commercial banks (2015.11) | St. Louis Federal Reserve (FRED)
Lending growth accelerates a bit more, maintaining its healthy trend:Loans & leases in bank credit, all commercial banks (weekly, %yoy) 2015.10.07
Weekly loan growth: +0.1pp @ +8.1% 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”).
#Bullish #Releveraging $XLF $KBE $KRE

US household debt & credit report (2015q3) | Federal Reserve Bank of New York (NY Fed)
Credit expansion increases to meet trend GDP growth:
Total consumer indebtedness: +1.2pp @ +3.0% yoy, +1.8% qoq @ $12.07T; only 4.8% below alltime record high ($12.68T in 2008q3)
Mortgages: +1.6% yoy, +1.8% qoq @ $8.26THousehold debt & credit- composition & delinquency status 2015q3
Non-housing debt: +8.1% yoy, +2.2% qoq @ $2.96T
    Auto loans: +11.8% yoy, +3.9% qoq @ $1.20T; record high
    Credit cards: +5.0% yoy, +1.6% qoq @ $0.71T
    Student loans: +6.9% yoy, +1.1 qoq @ $1.20T; record high
Delinquencies:
Total:
-4bps qoq @ 5.6% (vs 7.2% LT average)
90+ days:
-20bps qoq @ 3.8%
#Bullish #Private sector

Sentiment

Retail investor sentiment survey (2015.11.18) | American Association of Individual Investors (AAII)
Sentiment plummets to 7-week low, sending a fresh buy signal:
Bull/Bear ratio: -48bp wow @ 1.01 (below 1.30 historical average)AAII retail investor sentiment survey- bulls/bears 2015.11.18
Bullish: -3.5pp @ 30.8% (below 39 avg)
Bearish: +7.5pp @ 30.5% (above 30 avg & 25 extreme low)
Neutral: -4.0pp @ 38.7% (above 31 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 5/2016).
[Previously: Retail allocations neutral, Institutional allocations neutral & Strategist sentiment extremely bearish]
#Bullish #Contrarian

Global fund manager allocation survey (November 2015) | Bank of America Merrill Lynch (BAML)
Risk allocations remain a neutral signal in aggregate, but $EZU returns to exuberance & $USD positioning has reverted back down to neutral:
Equity: +17pp @ +43% OW (between +15% to +50% extremes); still OW highest beta/cyclical sectors
Bonds: -18pp @ -59% UW (near -60 extreme low)BAML fund manager allocation survey- equity/fixed income/cash/sectors 2015.11
Cash: -0.2pp @ +4.9% OW (above +4.5 extreme high)
Commodities: +9pp @ -23% UW; rises fm 28-month low (-1.9σ)
Regions:
    US: +4pp @ -6% UW
    Europe: +4pp @ +58% OW; extreme high (+1.3σ)
    Japan: +4pp @ +28% OW
    Emerging Markets: -3pp @ -31% UW; back near record low (-34% in 9/2015)
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: $XLF $XLK $EZU $XPH #Cash
#Neutral: $ACWI $DXY $EWJ $XLY
#Bullish: $EEM $XLE $XLU $AGG $DBC $XLP $XLI

–Romeo

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