Diary of a Financier

Top Newsstuffs (August 15-21)

In Bookshelf on Sun 21 Aug 2016 at 07:09

Top reads from the last week…

Macro

Housing permits, starts & completions (July 2016)
by US Government Census

Solid report exceeds expectations, although not as good as meets the eye, due to slight downward revisions to prior months; maintains a strong trend in this economic growth leader…Housing starts 2016.07
Monthly housing starts:  +7.6pp @ +5.6% yoy, +2.1% mom @ 1.211M saar (beats 1.180e); prior months revised lower
Growth rate:  -0.4pp @ +6.7% ytd
[Previously: The future is still so bright; See also: BAML says housing starts will accelerate & return to historical average in 2016/17 & Expect home sales to soften in 2016 due to low inventories]
#Bullish $XHB $ITB

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

Core inflation decelerates back down closer to the Fed’s 2% target; overall a good report, as energy’s drag remains a headwind…Core inflation- PCE, CPI, Median CPI, trimmed mean CPI 2016.07
Core CPI (ex food & energy): -0.1pp @ +2.2% ttm, +0.1% mom (miss +0.2e)
Headline CPI: -0.2pp @ +0.8% ttm, unch mom (meets unch exp)
    Energy: -1.4pp @ -10.9% ttm, -1.6% mom
    Healthcare: +4.1% ttm, +0.5% mom
    Used cars: -3.7% ttm, -1.0% mom
[Previously: Yellen’s “Optimal Control Policy” could have Fed target 2.5% inflation]
#Neutral

Credit

Loans & leases in bank credit, all commercial banks (2016.08.03)
by St. Louis Federal Reserve (FRED)

Lending growth remained at a healthy velocity…
Weekly loan growth: +0.2pp @ +7.7% yoy (beat 7.3% historical average)Loans & leases in bank credit, all commercial banks (weekly, %yoy, 2016.08.03)
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.
[Previously: Consumer indebtedness returns to bullish signal, Loan officer survey remains a bearish signal & Depression Babies’ PTSD]
#Bullish #Releveraging #Credit cycle $XLF $KBE $KRE

Sentiment

Retail investor sentiment survey (2016.08.18)
by The American Association of Individual Investors (AAII)

Sentiment remains a neutral signal, improving a bit more, now up near historical norms were it not for the persistently outsized Neutral cohort…
Bull/Bear ratio: +6bp wow @ 1.17 (below 1.30 historical average, between 1.00 – 1.80 extremes)
Bullish: +4.3pp @ 35.6% (below 39 avg, but between 30 – 45 extremes)Retail investor sentiment survey- bulls & bears 2016.08.18
Bearish: -0.4pp @ 26.4% (below 30 avg & between 25 – 40 extremes)
Neutral: -3.9pp @ 38.1% (above 31 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 2/2017).
[Previously: Retail allocations remain neutral]
#Neutral #Contrarian #TINA

Global fund manager allocation survey (August 2016)
by Bank of America Merrill Lynch (BAML)

Risk allocations remain in extreme lows, maintaining a sector/region-specific risk-on buy signal akin to 2011/12’s…
Equity: +10pp @ +9% OW (below +15 & +50 extremes)BAML fund manager allocation survey- equity, fixed income, cash & sectors 2016.08
Bonds: -8pp @ -43% UW (between -60 & -20 extremes); off a 3.5-year high
Cash: -0.4pp @ +5.4% OW (beyond +5.0 extreme high); down fm a 15-year high
Commodities: unch @ -4% UW (between -20 & +12 extremes); remains a 3.5-year high
Regions…
    US: +2pp @ +11% OW; a 20-month high
    Europe: +5pp @ +1% OW; recovers from last month’s plummet to a 3-year low
    Japan: +0.6pp @ -1% UW; off a 4-year low
    Emerging Markets: +7pp @ +13% OW; a 23-month high
Sectors…
    Bearish: $VNQ #Cash
    Bullish: $KIE $GBP $XLE $ACWI
Surveys a sample of 200+ PMs with $700B+ in AUM, asking for portfolio positioning (overweight/underweight) relative to 60/30/10 benchmark.
#Bullish! #Contrarian

–Romeo

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