Diary of a Financier

Top Newsstuffs (February 22-28)

In Bookshelf on Sun 28 Feb 2016 at 05:50

Top reads from the week that was…

Macro

Manufacturers’ durable & capital goods (January 2016) | US Department of Commerce
Everyone’s celebrating beats across-the-board in sequential data, a difficult feat considering unanimous, upward revisions to prior months and inventory drawdowns repairing excess stockpiles; however, yoy comps show a continuation of the contractionary trend in manufacturing…
Core durable goods (ex-transportation)Core durable goods & capex (% change yoy, 2016.01)
    Orders: +0.7pp @ -2.5% ytd, +1.8% mom (beat +0.2e)
    Shipments: -1.7pp @ -2.8% ytd, +0.2 mom
Core capex (capital goods, ex-defense & aircraft)
    Orders: -0.5pp @ -4.4% ytd, +3.9% mom (miss -0.2e)
    Shipments: -3.0pp @ -3.3% ytd, -0.4% mom
Core inventory (ex-transportation)
    Inventories: -1.0pp @ -2.5% ytd, -0.4% mom
#Neutral #Contraction $USD $DXY $UUP

Consumer confidence survey (February 2016) | Conference Board
After a good run, sentiment misses with an unexpected plunge; having resisted the market correction’s undertow, this procyclical, neutral signal puts us at the lowest level since 7/2015…Consumer confidence vs GDP 2016.02
Consumer confidence index: -5.6 mom @ 92.2 (misses 97.2e); 45th percentile of historical data; prior month revised down (-0.3 @ 97.8)
[Previously: Retail sales bullish, Wage growth remains neutral & A new generation of Depression Babies?]
#Neutral $XLY

Gross Domestic Product: Second estimate (2015q4) | Bureau of Economic Analysis (BEA)
Upward revision to growth beats expectations by a lot, with decent consumption & investment showing good internals…
Real GDP (Q3): +0.3pp @ +1.0% qoq saar (beats +0.4e)Real GDP components 2015q4.ii
    Inflation: Core +1.1%; Headline +0.9%
    Consumption (PCE): -0.2pp @ +2.0%
    Investment: +1.8pp @ -0.7%; Residential +8.0%; Nonresidential -1.9%; Intellectual property +1.3%
    Government spending: -0.8pp @ -0.1%; Federal +2.2%; State & local -1.4%
    Exports: -0.2pp @ -2.7%
    Imports: -1.7pp @ -0.6%
    Inventories: -45bps detraction fm GDP growth rate
Real GDP per capita (Q4): +1.1% yoy, +0.16% qoq; -10.1% below LT regression trend
Real GDP (FY15): unch @ +2.4% yoy
Real GDP (FY14): unch @ +2.4% yoy
Real GDP (FY13): unch @ +1.5% yoy
#Neutral

Credit

Loans & leases in bank credit, all commercial banks (2016.02.10) | St. Louis Federal Reserve (FRED)
Lending growth accelerates a bit more, maintaining its healthy trend; allays concerns that credit cycle may be turning lower…Loans & leases in bank credit, all commercial banks (weekly, %yoy) 2016.02.10
Weekly loan growth: +0.1pp @ +8.5% 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”).
[Previously: Consumer indebtedness remains neutral & Loan officer survey sends bearish signal]
#Bullish #Releveraging $XLF $KBE $KRE

NYSE margin debt & balances (January 2016) | Doug Short (dshort.com)
While measures remain at elevated levels, massive sequential normalization continues deleveraging at a healthy pace, as expected amidst Fed tightening…NYSE margin debt vs SPX (real gross & net, 2015.12)
Nominal margin debt: -2.4% mom, +1.1% yoy @ $461B
Real margin debt: -2.4% mom; -9.0% fm record high (4/2015), but still above prior highs from 3/2000 & 7/2007′s before those bear markets
Net margin balances (“buying power”): +4.8% mom, -10.2% yoy @ -$182B debit; biggest sequential move to date in its recovery from record lows, but still doubles prior records from 2000, 2007 & 2011
[See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007 & Margin debt/SPX ratio constant since 2007]
#Neutral #Leverage #Latent indicator

Technicals

Commitment of Traders (COT): S&P 500 net speculative positioning (2016.02.26) | Commodity Futures Trading Commission (CFTC)
Despite the market’s recovery, shorts return to extreme levels, setting-up another potential short-covering rally; back near January lows & 10/2014’s panic low (-278.2k)…SPX futures- net speculative positions (non-commercial longs less shorts) 2016.02.19
Net speculative positioning: -49.3k wow @ -208.1k contracts short
Measures difference between non-commercial longs & shorts in SPX futures (# contracts).
#Bullish! $ES_F $SP_F

Sentiment

Retail investor sentiment survey (2016.02.25) | American Association of Individual Investors (AAII)
Sentiment continues recovery from near historic lows, but barely maintains an extreme buy signal — procyclical amidst global market turmoil…
Bull/Bear ratio: +26bp wow @ 0.99 (below 1.00 extreme & 1.30 historical average)Retail investor sentiment survey- bulls & bears 2016.02.17
Bullish: +3.6pp @ 31.2% (below 39 avg, but back above 30 extreme)
Bearish: -6.4pp @ 31.4% (above 30 avg); lowest level ytd
Neutral: +2.8pp @ 37.4% (above 31 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 7/2016).
[Previously: Retail allocations remain neutral, Institutional allocations send bullish signal & Strategist sentiment still a buy signal]
#Bullish #Contrarian

Interests

Quant study: Market performance after intra-month drawdown & recovery | The Irrelevant Investor
Historically, the Dow underperforms its control group across all time periods subsequent to both a -5.8% drawdown & recovery intramonth, especially over the LT timeframe (i.e. 12-month); it’s a less significant sell-signal over the ST, with high standard deviations for 1, 3 & 6-month forward performance, of which >50% end with positive returns…
Criteria: $DJIA, intramonth, both -5.8% drawdown and full recovery
Occurrences: 43 times ($DJIA, 1926-2016)DJIA performance after -5.8% drawdown & comeback in a month
Subsequent performance:
    1-month: -1.2% mean average (-180bps underperformance vs control)
    3-months: -3.1% (-490bps)
    6-months: -0.6% (-420bps)
    12-months: -1.5% (-900bps)
Seems like another vote to reallocate SMid cap exposure into credit (e.g. $HYG & $BKLN).
#Bearish $DIA

Chinese consumer confidence survey (February 2016) | Westpac/MNI
China’s consumer sentiment collapsed to crisis levels, although an overlay witChinese consumer sentiment- annotated (2016.02)h $SHGIDX shows that this indicator is highly correlated & procyclical — usually provoking monetary/fiscal stimulus at these extreme levels…
Consumer sentiment index: -3.1pp @ 111.3%
#Grey swan #Noise $GXC $FXI

–Romeo

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