Diary of a Financier

Top Newsstuffs (October 17-23)

In Bookshelf on Sun 23 Oct 2016 at 06:05

Top reads from across this week…

Macro

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

Disappointing report missed expectations, although prior months were revised higher & permits suggest next month will recover; nevertheless, this growth leader has now mean-reverted on a ytd basis; led lower by the continued collapse in multifamily starts, in which the boom might be over…housing-starts-2016-09
Monthly housing starts:  -12.0pp @ -11.9% yoy, -9.0% mom @ 1.047M saar (miss 1.180e); prior months revised up
Growth rate:  -2.4pp @ +3.7% 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]
#Neutral $XHB $ITB

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

Inflation remains in the ballpark of the Fed’s 2% target, as energy’s drag continues to lapse; remember that Yellen has said she’d tolerate higher inflation…Core inflation- PCE, CPI, Median CPI, trimmed mean CPI 2016.10
Core CPI (ex food & energy): -0.1pp @ +2.2% ttm, +0.1% mom (miss +0.2e)
Headline CPI: +0.4pp @ +1.5% ttm, +0.3% mom (meet +0.3e)
    Energy: +6.4pp @ -2.9% ttm, +2.9% mom
    Healthcare: -0.3pp @ +4.8% ttm, unch mom
    Used cars: -0.1pp @ -4.1% ttm, -0.3% mom
[Previously: Yellen’s “Optimal Control Policy” could have Fed target 2.5% inflation]
#Neutral

Fundamentals

S&P 500 valuation update: Progressing into easy comps (2016.10.15) | Fundamentalis
As the calendar turns toward 2016q4 & 2017q1, SPX enters a couple seasons of easy yoy comps due to China’s collapse & the energy crash (respectively)…
EPS (ntm): -0.32 wow @ $129.22
PE ratio (fw): -0.1 wow @ 16.5x
PEG ratio: -64bps wow @ 5.06x; continues compression as forward growth rate accelerates
Earnings yield: +5bps wow @ 6.06%
EPS growth rate (ntm): +35bps wow @ 3.26%
; highest since 1/2015
[See also: Healthcare sector upward revisions defy seasonality ($XLV)]
#Neutral #Valuations $SPX $SPY

Sentiment

Retail investor sentiment survey (2016.10.20)
by The American Association of Individual Investors (AAII)

Sentiment settles back down in extreme lows, regaining a bullish signal; in addition, there’s no better manifestation of investors’ postcrisis PTSD than the massive Neutral cohort…
Bull/Bear ratio: -13bps wow @ 0.63 (below 1.30 historical average & 1.00 – 1.80 extremes)Retail sentiment- bulls vs bears 2016.10.20
Bullish: -1.7pp @ 23.7% (below 39 avg & 30 – 45 extremes); lowest since Brexit panic & 104th lowest alltime reading
Bearish: +4.1pp @ 37.8% (above 30 avg & between 25 – 40 extremes)
Neutral: -2.4pp @ 38.4% (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]
#Bullish! #Contrarian

–Romeo

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