Diary of a Financier

Top Newsstuffs (March 14-20)

In Bookshelf on Sun 20 Mar 2016 at 05:17

Top reads from the week that was…

Macro

Retail sales (February 2016) | US Government Census
Data remains impressive when controlled for energy prices, with the trend signalling green-shoots from the US consumer; nevertheless, this is another weak report in aggregate, missing expectations even with big downward revisions that reverse last month’s acceleration…Retail sales (%change yoy & $gross, 2016.02)
Core (ex-autos): -0.4pp @ +2.1% yoy, -0.1% mom (miss +0.2e); prior month revised down
    Gas: -7.5pp @ -15.6% yoy, -4.4% mom
Core core (ex-gas & autos): +0.3pp @ +4.8% yoy, +0.2% mom
Headline: -0.3pp @ +3.1% yoy, -0.1% mom (meets -0.1e); prior month revised down
Retail sales account for ~31% of US GDP (~45% of the Consumption component).
[Previously: Consumption boom or depression babies?]
#Bullish

Real incomes (January 2016) | Bureau of Labor Statistics (BLS)
Personal income growth remains decent, sufficient to aid consumption’s acceleration (buoying the economy) in 2016 amidst a relatively strong dollar, low energy prices & deleveraged household balance sheets…Real income- avg hourly earnings (%change mom, 2016.02)
Real average hourly earnings: +0.1pp @ +1.2% yoy, unch mom; prior month revised higher
Earnings reflect average hours, inflation-adjusted, seasonally adjusted, for all private, nonfarm employees (wages & salaries).
[Previously: A new generation of Depression Babies?]
#Neutral

Housing permits, starts & completions (February 2016) | US Government Census
Another awesome report shows housing resuming its acceleration, unphased by big upward revisions to prior months; yoy data did benefit from easy comps; remains macro’s lonely sign of pent-up demand…Housing starts 2016.02
Monthly housing starts:  +29.1pp @ +30.9% yoy, +5.2% mom @ 1.178M saar (beats 1.146M exp); prior months revised higher
Growth rate:  +13.4pp @ +15.2% ytd
[Previously: The future is still so bright; See also: BAML says housing starts will accelerate & return to historical average in 2016/17, but Expect home sales to soften in 2016 due to low inventories]
#Bullish! $XHB $ITB

Inflation: Consumer Price Index (February 2016) | Bureau of Labor Statistics (BLS)
Core inflation rises to postcrisis high, creeping further above the Fed’s 2% target; the discussion is now turning to overheating & the Fed’s assertion that the deflationary bout (e.g. energy) was “transitory”…Core inflation- PCE, CPI, Median CPI, trimmed mean CPI 2016.02
Core CPI (ex food & energy): +0.1pp @ +2.3% ttm, +0.3% mom (beat +0.2e)
Headline CPI: -0.4pp @ +1.0% ttm, -0.2% mom (beats -0.3e)
    Energy: -6.0pp @ -12.5% ttm, -6.0% mom; sequential drag resumes as expected
#Neutral

Technicals

Commitment of Traders (COT): S&P 500 net speculative positioning (2016.03.18) | Commodity Futures Trading Commission (CFTC)
Despite the market’s continued recovery, shorts stay deep in extreme levels, maintaining the chance of short-covering to prolong the rally…SPX futures- net speculative positions (non-commercial longs less shorts) 2016.03.04
Net speculative positioning: -0.2k wow @ -205.9k contracts short (below -150k extreme)
Measures difference between non-commercial longs & shorts in SPX futures (# contracts).
#Bullish! $ES_F $SP_F

Sentiment

Retail investor sentiment survey (2016.03.17) | American Association of Individual Investors (AAII)
Sentiment remains a neutral signal, but retraces back down to the threshold of a contrarian buy signal…
Bull/Bear ratio: -41bp wow @ 1.12 (below 1.30 historical average, but between 1.00 & 1.80 extremes)Retail investor sentiment survey- bulls & bears 2016.03.10
Bullish: -7.4pp @ 30.0% (below 39 avg, at lower-bound of 30 & 45 extremes)
Bearish: +2.5pp @ 26.9% (below 30 avg, but above 25 extreme low)
Neutral: +4.9pp @ 43.2% (above 31 avg); ytd high
Measures respondents’ expectation for equity performance over next 6 months (through 9/2016).
[Previously: Retail allocations remain neutral & Strategist sentiment still a buy signal]
#Neutral #Contrarian

Global fund manager allocation survey (March 2016) | Bank of America Merrill Lynch (BAML)
Risk allocations recover a bit but remain near extreme lows, maintaining a risk-on buy signal not seen since 2012…
Equity: +8pp @ +13% OW (under +15 lower extreme & +50 upper); still OW highest beta/cyclical sectors
Bonds: -1pp @ -37% UW (between -60 & -20 extremes)BAML fund manager allocation survey- equity, fixed income, cash, sectors 2016.03
Cash: -0.5pp @ +5.1% OW (beyond +4.5 extreme high); off of a 15-year high
Commodities: +16pp @ -13% UW
Regions:
    US: +6pp @ -13% UW; off of an 8-year low
    Europe: +5pp @ +41% OW (beyond extreme high @ +1.1σ)
    Japan: -9pp @ +15% OW
    Emerging Markets: +12pp @ -11% UW
Surveys a sample of 200+ PMs with $700B+ in AUM, asking for portfolio positioning (overweight/underweight) relative to 60/30/10 benchmark.
#Bullish #Contrarian
#Bearish: $VNQ $XLY $EZU $XLK $XLU
#Bullish:  $XLE $EUR $EEM $XLB

–Romeo

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