Diary of a Financier

Top Newsstuffs (April 18-24)

In Bookshelf on Sun 24 Apr 2016 at 06:04

Top reads from the week that was…

Macro

Housing permits, starts & completions (March 2016) | US Government Census
Somewhat disappointing report below expectations, as yoy data benefitted from easy comps; nevertheless, upward revisions to prior months help maintain a strong trend in macro’s lonely sign of pent-up demand…Housing starts 2016.03
Monthly housing starts:  -16.7pp @ +14.2% yoy, -8.8% mom @ 1.089M saar (misses 1.167M exp); prior months revised higher
Growth rate:  -0.7pp @ +14.5% 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

Fundamentals

S&P 500 earnings update: Forward estimates increase | Fundamentalis
As the calendar progresses to incorporate 2017q2 earnings consensus, growth returns to forward estimates due to back-end loaded out-months (not upward revisions)…
EPS (ntm): $126.08 vs $124.78 last wk
PE ratio (fw): 16.5x
PEG ratio: 7.87x
Earnings yield: 6.06%
EPS growth rate: +2.10% yoy, highest since 2015.01.30
“2016q1
Energy sector earnings growth is expected at -107.5%. My guess is the 2017 estimates are starting to incorporate a more stable crude oil price and Energy sector earnings growth.”
#Bullish? #Valuations $SPX $SPY

Credit

Loans & leases in bank credit, all commercial banks (2016.04.06) | 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) 2016.04.06
Weekly loan growth: +0.4pp @ +7.7% 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, signalling whether or not the private sector is suffering from post-traumatic stress — 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

Sentiment

Retail investor sentiment survey (2016.04.21) | American Association of Individual Investors (AAII)
Sentiment remains a neutral signal, but the massive, swelling neutral cohort is indicative of healthy uncertainty…Retail investor sentiment survey- bulls 2016.04.21
Bull/Bear ratio: -38bp wow @ 1.12 (below 1.30 historical average, but between 1.00 – 1.80 extremes)
Bullish: +5.6pp @ 33.4% (below 39 avg, but between 30 – 45 extremes)
Bearish: -1.0pp @ 23.9% (below 30 avg & 25 extreme low); off a ytd low
Neutral: -4.6pp @ 42.7% (above 31 avg); off a ytd high
Measures respondents’ expectation for equity performance over next 6 months (through 10/2016).
[Previously: Institutional allocations send bullish signal & Strategist sentiment still a buy signal]
#Neutral #Contrarian #Wall of worry

Interests

Interview: Haruhiko Kuroda (Bank of Japan, BOJ) | John Hilsenrath (The Wall Street Journal, WSJ)
Regarding the impact of negative interest rates and Qualitative & Quantitative Easing (QQE)…
“interest rates on [housing & corporate loans] declined significantly, by around 20bps… which would in due course stimulate housing investment, corporate investment, and so on and so forth. That is the most important impact…
In addition, negative rates won’t cause a run on the bank (e.g. depositors withdrawing cash), because retail deposit interest rates are still positive & the BoJ will penalize banks who resort to negative deposit rates.
Regarding additional policy accommodation…
“ECB recently reduced its negative interest rate to -0.4 %. Our negative interest rate is only -0.1 %. So, technically, theoretically speaking, you know, there will be further room for reducing, enlarging negative interest rate… without hesitation we would adopt additional monetary easing.”
$EWJ $DXJ

–Romeo

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