Diary of a Financier

Top Newsstuffs (October 3-9)

In Bookshelf on Sun 9 Oct 2016 at 05:21

Top reads from across this week…

Macro

Purchasing Managers Index (September 2016)
by Markit Economics

Global growth remains resilient, with a big recovery from the US dispelling last month’s warning; the UK regained its pre-Brexit pole positing; Europe’s hanging onto decent velocity; the rest of the world is relatively stagnant…
Global PMI (Composite): +0.3 @ 51.7 (below 53.9 LT avg)Global PMI composite 2016.09
Global PMI (Services): +0.3 @ 51.6 (below 54.3 LT avg)
Global PMI (Manufacturing): +0.2 @ 51.0 (below 51.3 LT avg)
US ISM (Composite): +5.2 @ 56.4 (above 54.6 post-recession avg); recovers fm biggest drop since 11/2008
– US ISM (Services): +5.7 @ 57.1 (beat 52.9e); a huge beat retraces last month’s unexpected crash; corresponds to +3.2% real GDP (annualized)us-ism-pmi-composite-2016-08
    New orders: +8.6 @ 60.0
    Production: +8.5 @ 60.3
    Employment: +6.5 @ 57.2
    Export orders: +10.0 @ 56.5
US ISM (Manufacturing): +2.1 @ 51.5 (beat 50.2e); a welcome recovery from last month’s crash, including a tailwind from continued inventory drawdowns; corresponds to +2.6% real GDP (annualized)
    New orders: +6.0 @55.1
    Production: +3.2 @ 52.8
    Inventories: +0.5 @ 49.5
    Employment: +1.4 @ 49.7
Eurozone (Composite): -0.3 @ 52.6 (meet 52.6e); corresponds to +0.3% real GDP (annualized)
Eurozone (Services): -0.6 @ 52.2 (beat 52.1e)
Eurozone (Manufacturing): +0.9 @ 52.6 (meet 52.6e); France’s drag is waning
UK: +2.0 @ 55.4; continues huge recovery after Brexit’s 41-month lows
Japan: +0.9 @ 50.4
China: official unch @ 50.4 (meet 50.4e); unofficial +0.1 @ 50.1
Canada: -0.8 @ 51.1
India: -0.5 @ 52.1
South Korea: -1.0 @ 47.6; a 14-month low
Taiwan: +0.4 @ 52.2
ASEAN: +0.2 @ 50.5; led by Philippines @ 57.5, a record high
Brazil: +0.3 @ 46.0; amidst rolling political crisis from Rousseff impeachment
#BullishUS #NeutralACWI

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

Although the collapse decelerated a bit, 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: +2.2pp @ -5.7% yoy
Growth rate: +0.2pp @ -7.2% ytd
Carload groups: 8 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 (2016.09.21)
by St. Louis Federal Reserve (FRED)

Lending growth has accelerated out of its summer slump, remaining a steady indication of the real economy’s health…
Weekly loan growth: unch @ +8.2% yoy (beat 7.3% historical average)loans-leases-in-bank-credit-all-commercial-banks-weekly-yoy-2016-09-21
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

Household debt service & financial obligations (2016q2)
by The Federal Reserve (Fed)

Households remain as deleveraged as they’ve been at any point in history (or at least since the record started in 1980s); although student debt is a real problem for the Millennial generation, consumers have a lot of dry powder…household-debt-service-ratio-financial-obligations-ratio-2016q2
Debt Service Ratio (DSR): +4bp yoy @ 9.98%, +1bp qoq; near the alltime low (9.86% in 2012q4)
Financial Obligations Ratio (FOR): +9bp yoy @ 15.42%, unch qoq; near alltime low (14.92 in 2012q4)
All ratios are relative to disposable personal income (DPI); the Financial Obligations Ratio (FOR) is a broader measure that includes non-debt liabilities like rent, leases, insurance & taxes.
#Bullish!

Sentiment

Retail investor sentiment survey (2016.09.29)
by The American Association of Individual Investors (AAII)

Sentiment bounces back from extreme lows, regaining a neutral signal; there’s no better manifestation of investors’ postcrisis PTSD than the massive Neutral cohort…
Bull/Bear ratio: +38bps wow @ 1.03 (below 1.30 historical average & between 1.00 – 1.80 extremes)retail-sentiment-bulls-vs-bears-2016-09-29
Bullish: +4.8pp @ 28.8% (below 39 avg & 30 – 45 extremes)
Bearish: -9.2pp @ 27.9% (below 30 avg & between 25 – 40 extremes)
Neutral: +4.4pp @ 43.3% (above 31 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 4/2017).
[Previously: Institutional allocations remain a bullish signal & Net speculative futures positioning normalizes after extremes]
#Neutral #Contrarian

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

Allocations remain neutral signals…
– Stocks: -1.2pp @ 65.4% (between 60% average & 70% extreme high)
Bonds: -1.1pp @ 16.3% (above 16% avg & 10% extreme low); down from July’s 3-year high to this month’s 12-month low
Cash: +2.3pp @ 18.3% (between 24% avg & 15% extreme low)
#Neutral #Contrarian $SPY $AGG

–Romeo

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