Diary of a Financier

Top Newsstuffs (January 18-24)

In Bookshelf on Sun 24 Jan 2016 at 07:12

Top reads from the week that was…


Real incomes (December 2015) | Bureau of Labor Statistics (BLS)
Personal income growth remains decent, albeit sufficient to aid consumption’s acceleration (buoying the economy) in 2016 amidst a strong dollar, low energy prices & deleveraged household balance sheets…Real income- avg hourly earnings (%change mom, 2015.11)
Real hourly earnings (for all employees): -0.6pp @ +1.8% yoy, +0.1% mom
Earnings reflect average hours, inflation-adjusted, for all private, nonfarm employees (wages & salaries).
[Previously: A new generation of Depression Babies?]

Housing permits, starts & completions (December 2015) | US Government Census
Housing remains macro’s lonely sign of pent-up demand with this better-than-meets-the-eye report, considering prior months’ upward revisions & trend velocity maintained…Housing starts 2015.12
Monthly housing starts:  -10.1pp @ +6.4% yoy, -2.5% mom @ 1.149M saar (misses 1.198M exp); prior months revised slightly higher
Growth rate:  -0.2pp @ +10.8% ytd
[Previously: The future is still so bright; See also: BAML says housing starts will accelerate & return to historical average in 2016/17]
#Bullish #Green shoots

Inflation: Consumer Price Index (December 2015) | Bureau of Labor Statistics (BLS)
Core inflation finally exceeds the Fed’s 2% target, as headline’s headwind from the energy price crash is abating:Core inflation- PCE, CPI, Median CPI, trimmed mean CPI 2015.12
Headline CPI: +0.2pp @ +0.7% ttm, -0.1% mom (miss unch exp)
    Energy: +2.1pp @ -12.6% ttm, -2.4% mom; sequential drag is ending, as yoy comps are lapping their high base
Core CPI (ex food & energy): +0.1pp @ +2.1% ttm, +0.1% mom (miss +0.2e)


Loans & leases in bank credit, all commercial banks (2016.01.06) | 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: +0.3pp @ +8.4% 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 (i.e. “Depression Babies”).
#Bullish #Releveraging $XLF $KBE $KRE


Commitment of Traders (COT): S&P 500 net speculative positioning (2016.01.22) | Commodity Futures Trading Commission (CFTC)
Extreme short positioning continues procyclical plummet amidst market correction, wading deeper into short-covering range…SPX futures- net speculative positions (non-commercial longs less shorts) 2016.01.22
Net speculative positioning: -26.2k wow @ -188.5k contracts short; nearing 10/2014’s lows (-278.2k)
Measures difference between non-commercial longs & shorts in SPX futures (# contracts).
#Bullish $ES_F $SP_F


Retail investor sentiment survey (2016.01.20) | American Association of Individual Investors (AAII)
The extreme buy signal persists as sentiment continues procyclical collapse amidst global market turmoil, after last week’s optimism hit its lowest level since 2005 & 1993…
Bull/Bear ratio: +5bp wow @ 0.44 (below 1.00 extreme & 1.30 historical average)AAII retail investor sentiment survey- bulls & bears 2015.01.20
Bullish: +3.6pp @ 21.5% (below 30 extreme & 39 avg); off lowest level since 2005
Bearish: +3.2pp @ 48.7% (above 30 avg); highest since 4/2013
Neutral: -6.8pp @ 29.8% (below 31 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 6/2016).
[Previously: Retail allocations neutral, Institutional allocations neutral, Net short speculators positions a buy signal & Strategist sentiment still a buy signal]
#Bullish! #Contrarian

Global fund manager allocation survey (January 2016) | Bank of America Merrill Lynch (BAML)
Risk allocations procyclically plummet to the low end of neutral signal, with cash at crisis levels (on par with Lehman & Grexit); expectations for global economic growth have eroded to flat:
Equity: -21pp @ +21% OW (between +15% to +50% extremes); still OW highest beta/cyclical sectors
Bonds: +17pp @ -47% UW (back inside -60 extreme low)BAML fund manager allocation survey- equityfixed incomecashsectors 2016.01
Cash: +0.2pp @ +5.4% OW (beyond +4.5 extreme high)
Commodities: -1pp @ -30% UW (-1.8σ)
    US: +4pp @ -15% UW; off an 8-year low
    Europe: -4pp @ +51% OW (beyond extreme high, +1.5σ)
    Japan: -6pp @ +31% OW
    Emerging Markets: -6pp @ -33% UW; 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 (risk) #Contrarian
#Bearish: $XLY #Cash $EZU $XLF $DXY
#Neutral: $XPH $XLK $EWJ $AGG $ACWI $SPY
#Bullish:  $XLB $XLE $EEM $EUR $DBC $XLI


Quant study: S&P 500’s average annual returns & drawdowns (1928-2015) | The Irrelevant Investor
Studies SPX’s average annual performance, maximum annual drawdowns, and recoveries, including probability of each occurrence…
Annual drawdown: -16.4% averageSPX annual perfomance & drawdowns (1971-2015)
Corrections (probability): 64% of years
    Recovery rallies: 57% of corrections finished the year in the black; 36% of all years had both a correction & a positive YE return
Bear markets (probability): 26% of years
    Recovery rallies: 22% of bear markets finished the year in the black
[Previously: The complete guide to corrections & bear markets]




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