Diary of a Financier

Top Newsstuffs (August 1-7)

In Bookshelf on Sun 7 Aug 2016 at 06:53

Top reads from throughout this week…

Macro

Personal income & outlays (June 2016)
by The Bureau of Labor Statistics (BLS)

Both income & spending growth remain strong, with savings rate settling in; the headline report beat expectations; comps were difficult because of significant upward revisions to prior year data (July is the annual revision cycle)…Real DPI vs PCE (2016.06)
Disposable personal income (Real DPI): -0.1pp @ +2.2% yoy, +0.1% mom
Personal consumption expenditures (Real PCE): +0.3pp @ +2.8% yoy, +0.3% mom
Personal savings rate: unch @ +5.3%
[Previously: Retail sales are bullish & A new generation of Depression Babies?]
#Bullish $XLY #Wages

Purchasing Managers Index (July 2016)
by Markit Economics

Global growth remains resilient, with meaningful repair across Emerging Asia & Europe; although US results were disappointing, velocity remains above-trend with internals signaling a tailwind…Global PMI composite 2016.07
Global PMI (Composite): +0.2 @ 51.4 (miss 53.9 LT avg)
Global PMI (Services): unch @ 51.3 (miss 54.3 LT avg)
Global PMI (Manufacturing): +1.0 @ 51.0
US ISM (Composite): -1.0 @ 55.1; down from a ytd highUS ISM PMI composite 2016.07, but still above post-recession average (54.6)
– US ISM (Services): -1.0 @ 55.5 (miss 56.0e); impressive recovery from last month’s one-off; corresponds to +2.6% real GDP (annualized)
    New orders: +0.4 @ 60.3
    Production: -0.2 @ 59.3
US ISM (Manufacturing): -0.6 @ 52.6 (miss 53.2e); while the trend continues to prove that manufacturing has bottomed, the dip of both backlog & employment into contraction is a bit troubling, even though internals (e.g. strong new orders & low inventory) signal a tailwind for next month; corresponds to +3.0% real GDP (annualized)
    New orders: -0.1 @ 56.9
    Production: +0.7 @ 55.4
    Backlog: -4.5 @ 48.0
    Inventories: +1.0 @ 49.5
    Prices: -5.5 @ 55.0
    Employment: -1.0 @ 49.4
Eurozone (Composite): +0.1 @ 53.2 (beat 52.9e); corresponds to +0.3% real GDP (annualized)
Eurozone (Services): +0.1 @ 52.9 (beat 52.7e)
Eurozone (Manufacturing): -0.8 @ 52.0 (beat 51.9e); France remains the biggest drag @ 48.6
UK: -4.2 @ 48.2; collapse due to Brexit referendum
Japan: +1.2 @ 49.3
China: official -0.1 @ 49.9 (miss 50.0e); unofficial +2.0 @ 50.6
Canada: +0.1 @ 51.9
India: +0.1 @ 51.8
South Korea: -0.4 @ 50.1
Taiwan: +0.5 @ 51.0
Brazil: +2.8 @ 46.0
#Bullish

Rail traffic monthly (July 2016)
by The 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: -1.6pp @ -7.9% yoyRailtraffic- total & groups (wow & ytd, 2016.07)
Growth rate: unch @ -7.4% ytd
Carload groups: 4 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

Senior loan officer survey (2016q2)
by The Federal Reserve (NY Fed)

Credit fundamentals recovered back up to a neutral signal, with healthy, procyclical accelerations in demand moderated by tightening standards; a deleveraged household sector is finally starting to releverage, taking take the handoff from the overleveraged corporate sector…C&I loans- demand, supply & cost 2016q2
Commercial & Industrial Loans (C&I): demand returns to expansion, and costs remain low, despite tightening supply
Commercial Real Estate (CRE/CMBS): demand is still expanding, even though supply continues to tighten significantly
Residential mortgages (RRE/RMBS): demand continues a massive, procyclical increase, and supply loosens proportionally; subprime tightening was a notable exception
Consumer loans: demand reaccelerates, and supply remains unchanged; auto loans tightening was a notable exception
Surveys net respondents’ qoq change in credit demand, spreads & lending standards.
[Previously: Commercial bank lending remains bullish & Total consumer indebtedness accelerates to bullish signal]
#Neutral #Credit cycle #Leading indicator $XLF $KBE $KRE $HYG $JNK

Sentiment

Retail investor sentiment survey (2016.08.04)
by The American Association of Individual Investors (AAII)

Sentiment remains a neutral signal, still in the lower end of its extremes…Retail investor sentiment survey- bulls 2016.08.04
Bull/Bear ratio: +1bp wow @ 1.11 (below 1.30 historical average, between 1.00 – 1.80 extremes)
Bullish: -1.5pp @ 29.8% (below 39 avg & 30 – 45 extremes)
Bearish: -1.6pp @ 26.8% (below 30 avg & between 25 – 40 extremes)
Neutral: +3.1pp @ 43.4% (above 31 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 1/2017).
[Previously: Institutional allocations send bullish signal]
#Neutral #Contrarian #TINA

Asset allocation survey (July 2016)
by The American Association of Individual Investors (AAII)

Allocations maintain neutral signals…
– Stocks: unch @ 64.1% (between 60% average & 70% extreme high)
Bonds: +0.6pp @ 18.0% (above 16% avg & 10% extreme low); a 3-year high
Cash: -0.6pp @ 17.9% (between 24% avg & 15% extreme low)
#Neutral #Contrarian $SPY $AGG

Interests

Study: American consumers’ allocation of gas savings
by The JP Morgan Institute

US consumption has empirically benefited from the energy price crash, and the boost is quantifiable as follows (per capita averages & allocation)…
Total change in disposable income: +$700
Savings: 17% (+$119)US consumer- allocation of energy savings to spending (% by category)
Spending: 73% (+$511)
    i/ Restaurants: 18%
    ii/ Groceries: 10%
    iii/ Entertainment: 7%
    iv/ Retail: 7%
[Previously: The historical impact of energy collapses on economic growth & The energy crash is now a headwind]
#Bullish $XLY $XLP $UGA

–Romeo

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