Diary of a Financier

Top Newsstuffs (May 16-22)

In Bookshelf on Sun 22 May 2016 at 06:01

Top reads from the week that was…

Macro

Housing permits, starts & completions (April 2016) | US Government Census
Great report exceeds expectations, as yoy data enters a stretch of difficult comps; nevertheless, upward revisions to prior months help maintain a strong trend in this prevailing bastion of pent-up demand…Housing starts 2016.04
Monthly housing starts:  -15.9pp @ -1.7% yoy, +6.6% mom @ 1.172M saar (beat 1.135M exp); prior months revised higher
Growth rate:  -4.3pp @ +10.2% 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 (April 2016) | Bureau of Labor Statistics (BLS)
Core inflation maintains acceptable levels near the Fed’s 2% target, and headline finally bounces, as energy’s drag wanes…Core inflation- PCE, CPI, Median CPI, trimmed mean CPI 2016.03
Core CPI (ex food & energy): -0.1pp @ +2.1% ttm, +0.2% mom (meet +0.2e)
Headline CPI: +0.2pp @ +1.1% ttm, +0.4% mom (beat +0.3e)
    Energy: +3.7pp @ -8.9% ttm, +3.4% mom
#Neutral

Fundamentals

S&P 500 valuation update: Forward estimates increase | Fundamentalis
The most predictive fundamental factor, Forward earnings growth, remains stagnant for ntm, but it’s back-end loaded to 2016h2…
EPS (ntm): -0.01 wow @ $123.00
PE ratio (fw): 16.6x
PEG ratio: 21x; n/a given weak forward growth rate est
Earnings yield: +3bps wow @ 6.01%
EPS growth rate (ntm): +9bps wow @ +0.78%

#Neutral #Valuations $SPX $SPY

Sentiment

Retail investor sentiment survey (2016.05.19) | American Association of Individual Investors (AAII)
Sentiment falls deeper into an extreme buy signal, with both the bull & neutral cohorts near records…
Bull/Bear ratio: -8bp wow @ 0.57 (below 1.30 historical average & 1.00 – 1.80 extremes)
Bullish: -1.1pp @ 19.3% (below 39 avg & 30 – 45 extremes)Retail investor sentiment survey- bulls, bears & neutrals 2016.05.19, near postcrisis lows
Bearish: +2.8pp @ 34.1% (above 30 avg & 25 extreme low)
Neutral: -1.7pp @ 46.6% (above 31 avg)
This is a significant signal, because of SPX historical average return after a sub-20 bullish reading (27 occurrences)…
Subsequent 6-months: +12.63% mean, 10% std dev; the only down period was 2008.03.10
Subsequent 12-months: +19.59% mean, 16% std dev; the only down period was 2008.03.10
Measures respondents’ expectation for equity performance over next 6 months (through 11/2016).
[Previously: Retail asset allocations remain neutral, Institutional allocations are neutral & Strategist sentiment still a buy signal]
#Bullish! #Contrarian #Wall of worry

Global fund manager allocation survey (May 2016) | Bank of America Merrill Lynch (BAML)
Risk allocations remain in extreme lows, maintaining a risk-on buy signal akin to 2012’s…
Equity: -3pp @ +6% OW (under +15 & +50 extremes)
Bonds: -4pp @ -41% UW (between -60 & -20 extremes)BAML fund manager allocation survey- equity, fixed income, cash & sectors 2016.05
Cash: +0.1pp @ +5.5% OW (beyond +4.5 extreme high); near a 15-year high (5.6% in 2/2016)
Commodities: +3pp @ -19% UW (between -20 & +12 extremes)
Regions:
    US: -8pp @ -18% UW
    Europe: -7pp @ +26% OW
    Japan: -3pp @ -6% UW
    Emerging Markets: +10pp @ +2% 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: #Cash $XLY $VNQ
#Bullish: $EWU $GBP $XLB

–Romeo

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