Diary of a Financier

Top Newsstuffs (May 23-29)

In Bookshelf on Sun 29 May 2016 at 06:07

Top reads from the week that was…

Macro

Manufacturers’ durable & capital goods (April 2016) | US Department of Commerce
Another weak report shows more pain for manufacturing, with ytd comps sliding deeper into contraction; the drawdown in inventories at least shows decent internals that could provide a future tailwind…
Core durable goods (ex-transportation)Core durable goods & capex (% change yoy, 2016.04)
    Orders: -1.1pp @ -1.0% ytd, +0.4% mom (beat +0.3e)
    Shipments: -0.9pp @ -2.0% ytd, +0.3% mom
Core capex (capital goods, ex-defense & aircraft)
    Orders: -3.0pp @ -4.1% ytd, -0.8% mom (miss +0.3e)
    Shipments: -2.3pp @ -4.7% ytd, +0.3% mom (beat +0.1e)
Core inventory (ex-transportation)
    Inventories: -0.5pp @ -3.5% ytd, -0.2% mom
#Bearish #Contraction

Gross Domestic Product: Second estimate (2016q1) | Bureau of Economic Analysis (BEA)
Upward revision slightly misses expectations, continuing the multiyear habit of seasonally weak Q1s; consumption continues to buoy growth, as internals (like inventory drawdowns) are decent tailwinds for Q2…
Real GDP (Q1): +0.3pp @ +0.8% qoq saar (miss +0.9e)Real GDP components 2016q1.ii
    Inflation: Core +1.6%; Headline +0.6%
    Consumption (PCE): unch @ +1.9%
    Investment: +0.9pp @ -2.6%; Residential +17.1%; Nonresidential -6.2%, attributable to energy crash
    Government spending: unch @ +1.2%; Federal -1.6%; State & local +2.9
    Exports: +0.6pp @ -2.0%
    Imports: -0.4pp @ -0.2%
    Inventories: -0.20pp detraction fm GDP growth rate
Real GDP per capita (Q1): +1.13% yoy, -0.30% qoq; -10.3% 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 $XLE

Credit

US household debt & credit report (2016q1) | Federal Reserve Bank of New York (NY Fed)
Credit expansion resumed in Q1, re-accelerating above trend GDP growth…
Total consumer indebtedness: +0.8pp @ +3.3% yoy, +1.1% qoq @ $12.13T; only 3.3% below alltime record high ($12.68T in 2008q3)
Mortgages: +2.4% yoy, +1.4% qoq @ $8.37THousehold debt & credit- composition & delinquency status 2016q1
Non-housing debt: +7.3% yoy, +0.6% qoq @ $3.40T
    Auto loans: +9.6% yoy, +0.7% qoq @ $1.07T; record high
    Credit cards: +3.9% yoy, -2.9% qoq @ $0.71T
    Student loans: +5.7% yoy, +2.3% qoq @ $1.26T; record high
Delinquencies:
    Total: -0.2pp qoq @ 5.0% (vs 7.2% LT average); lowest since 2007q2
    90+ days: -0.1pp qoq @ 3.6%; improvement led by student loans
#Bullish #Releveraging

Sentiment

Retail investor sentiment survey (2016.05.26) | American Association of Individual Investors (AAII)
Sentiment falls deeper into an extreme buy signal, with both the bull & neutral cohorts at multidecade extremes…
Bull/Bear ratio: +4bp wow @ 0.61 (below 1.30 historical average & 1.00 – 1.80 extremes)
Bullish: -1.6pp @ 17.8% (below 39 avg & 30 – 45 extremes)Retail investor sentiment survey- bulls, bears & neutrals 2016.05.26, lowest since 2005
Bearish: -4.7pp @ 29.4% (above 30 avg & 25 extreme low)
Neutral: +6.3pp @ 52.9% (above 31 avg), highest since 1990
This is another significant signal, because of SPX historical average return after both a 50+ neutral reading & sub-20 bull reading (6 occurrences)…
Subsequent 6-months: +11.2% mean, 5.6% std dev; no down periods
Subsequent 12-months: +25.7% mean, 7.1% std dev; no down periods
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

Interests

The great consolidation: A stealth bear market | The Irrelevant Investor
SPX’s -15.3% drawdown in 2016q1 was by definition only a correction, not a bear market, but it served the same purpose, considering…SPX- days without new high (1970-2016)
1/ The average stock -34%
2/ The longevity of this consolidation: “Since 1970, the S&P 500 has on average made a new all-time high every 38 days. It’s now been 252 days.”
#Bullish $SPY #quantitative

–Romeo

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