Diary of a Financier

Top Newsstuffs (July 4-17)

In Bookshelf on Sun 17 Jul 2016 at 05:55

Top reads from the last two weeks…

Macro

Retail sales (June 2016)
by US Government Census

Another awesome report crushes headline expectations, but that’s tempered by downward revisions to prior months; still continues the growth leadership from US consumers; headline data is shedding more & more of energy’s dead-weight on comps…Retail sales (%change yoy & $gross, 2016.06)
Core (ex-autos): +0.5pp @ +3.2% yoy, +0.7% mom (beat +0.4e); prior months revised lower
    Gas: -0.2pp @ -9.6% yoy, +1.2% mom
Headline: +0.2pp @ +2.7% yoy, +0.6% mom (beat +0.1e); prior months revised lower
Retail sales account for ~31% of US GDP (~45% of the Consumption component).
[Previously: PCE sends bullish signal & Consumption boom or depression babies?]
#Bullish $XLY

Inflation: Consumer Price Index (June 2016)
by Bureau of Labor Statistics (BLS)

Core inflation accelerates a bit more, now running a little hot relative to the Fed’s 2% target; headline’s recovery resumes as energy’s drag wanes…Core inflation- PCE, CPI, Median CPI, trimmed mean CPI 2016.06
Core CPI (ex food & energy): +0.1pp @ +2.3% ttm, +0.2% mom (meet +0.2e)
Headline CPI: unch @ +1.0% ttm, +0.2% mom (miss +0.3e)
    Energy: +0.6pp @ -9.5% ttm, +1.3% mom
    Healthcare: +3.8% ttm, +0.2% mom
    Shelter: +3.5% ttm, +0.3% mom
[Previously: Yellen’s “Optimal Control Policy” could have Fed target 2.5% inflation]
#Neutral

Rail traffic monthly (June 2016)
by Association of American Railroads (AAR)

The decline in railroad volume still manifests the collapse in manufacturing activity, led lower by energy & materials amidst the commodity supercycle’s bust…
Monthly traffic: +0.5pp @ -6.3% yoyRailtraffic- total & groups (wow & ytd, 2016.06)
Growth rate: +0.2pp @ -7.4% ytd
Carload groups: 6 of 20 posted gains for the month yoy
In particular, the secular decline of coal volumes (~40% of carloads makes it the largest category) is negatively skewing the data.
#Irrelevant? $IYT $XLB $XLE $DBC

Credit

Loans & leases in bank credit, all commercial banks (2016.06.29)
by St. Louis Federal Reserve (FRED)

Lending growth remained at a healthy velocity…
Weekly loan growth: +0.2pp @ +7.6% yoy (beat 7.3% historical average)Loans & leases in bank credit, all commercial banks (weekly, %yoy, 2016.06.29)
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 returns to bullish signal & Loan officer survey remains a bearish signal]
#Bullish #Releveraging #Credit cycle $XLF $KBE $KRE

Technicals

Quant study: New alltime highs in stocks are the “mother of all buy signals”
by Nautilus Research

SPX total return after achieving a new multiyear high (17 historical occurrences)…
1/ 3-months: +4.44% avg; 94% win rateSPX new multiyear alltime highs
2/ 6-mos: +8.54%; 100% win rate
3/ 12-mos: +15.56%; 100% win rate
#Bullish! #technicals $SPX $SPY

Sentiment

Retail investor sentiment survey (2016.07.14)
by American Association of Individual Investors (AAII)

Sentiment continues its recovery from Brexit’s extreme lows, but remains a neutral signal…
Bull/Bear ratio: +46bp wow @ 1.62 (above 1.30 historical average, between 1.00 – 1.80 extremes)
Bullish: +5.8 @ 36.9% (below 39 avg, between 30 – 45 extremes); continues recovery fm 11-year low
Bearish: -2.2pp@ 24.4% (below 30 avg, between 25 – 40 extremes)
Neutral: -3.6pp @ 38.7% (above 31 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 12/2016).
[Previously: Retail allocations remain neutral, Institutional allocations send bullish signal & Strategist sentiment still a buy signal]
#Neutral #Contrarian

Interests

Housing tailwind: Homeowners blacklisted by crisis-era foreclosures & short sales are eligible to borrow again
by Calculated Risk
Generally, debtors who defaulted on mortgages have to wait 7-years before they’re eligible to borrow again…
” A large number of the foreclosures were in 2009 and 2010, so those people will be eligible to borrow [in 2016/17].
#bullish $ITB $XHB $MBB $AGZ #MBS

–Romeo

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