Diary of a Financier

Top Newsstuffs (October 31 – November 6)

In Bookshelf on Sun 6 Nov 2016 at 06:05

Top reads from across this week…

Macro

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

Although both income & spending decelerated a bit more, they maintain healthy trends after big spikes in Q3; downward revisions to prior month data were significant; the headline report was mixed, missing expectations for DPI, but meeting for PCE…Real DPI vs PCE (2016.09)
Disposable personal income (Real DPI): -0.3pp @ +2.1% yoy, unch mom
Personal consumption expenditures (Real PCE): -0.2pp @ +2.4% yoy, +0.3% mom
Personal savings rate: -0.1pp @ +5.7%
Consumer spending accounts for ~70% of US GDP, as this report is a broader measure than the Retail Sales reported earlier this month.
[Previously: Retail sales remain bullish & A new generation of Depression Babies?]
#Bullish $XLY #Wages

Purchasing Managers Index (October 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): +1.6 @ 53.3 (below 53.9 LT avg); an 11-month highGlobal PMI composite 2016.10
Global PMI (Services): +1.6 @ 53.2 (below 54.3 LT avg); an 11-month high
Global PMI (Manufacturing): +1.0 @ 52.0 (above 51.3 LT avg); a 2-year high
US ISM (Composite): -1.9 @ 54.5 (below 54.6 post-recession avg)
– US ISM (Services): -2.3 @ 54.8 (miss 56.1e); good trend velocity growth despite the miss; corresponds to +2.3% real GDP (annualized)US ISM PMI Composite 2016.10
    New orders: -2.3 @ 57.7
    Production: -2.6 @ 57.7
    Employment: -4.1 @ 53.1
    Inventories: +0.5 @ 52.0
US ISM (Manufacturing): +0.4 @ 51.9 (beat 51.6e); I’d expect more of a tailwind to materialize from these continued inventory drawdowns, but the internals are starting to flash a warning sign, with New Orders decelerating despite Backlog & Inventories collapsing — perhaps a wait-and-see with the Election on 11/8; corresponds to +2.8% real GDP (annualized)
    New orders: -3.0 @ 52.1
    Production: +1.8 @ 54.6
    Inventories: -2.0 @ 47.5
    Backlog: -4.0 @ 45.5
    Employment: +3.2 @ 52.9
Eurozone (Composite): +0.7 @ 53.3 (miss 53.7e); corresponds to +0.3% real GDP (annualized)
Eurozone (Services): +0.6 @ 52.8 (miss  53.5e)
Eurozone (Manufacturing): +0.9 @ 53.5 (beat 53.3e); huge beat behind France’s full recovery
UK: -1.2 @ 54.3
Japan: +1.0 @ 51.4
China: official +0.8 @ 51.2 (beat 50.4e); unofficial +1.2 @ 51.2
Canada: +0.8 @ 51.1; up from a 7-month low
India: +2.2 @ 54.4; a 22-month high
South Korea: +0.4 @ 48.0; up from a 14-month low
Taiwan: +0.5 @ 52.7
ASEAN: -1.3 @ 49.2; the data is insignificant, because Philippines hadn’t reported as of this release, after the country hit a record high last month
Brazil: +0.3 @ 46.3; the Central Bank finally intervened by easing monetary policy (not reflected in survey data)
#NeutralUS #BullishACWI!

Trade balance (September 2016)
by US Department of Commerce

Awesome report that’ll pad Q4 GDP, with the trade deficit beating expectations and gross trade volumes remaining healthy; the deficit is continuing to repair thanks to slower trade with China & declining petroleum imports…
Net exports: +11.3% yoy, +10.1% mom @ -$36.4B deficit (beat -$38.9B exp)
    Exports: +0.9% yoy, +0.5% mom @ $189.2B; +14% from the precrisis peak
    Imports: -1.3% yoy, -1.3% mom @ $225.6B
The net balance of trade accounts for ~3-5% of US GDP.
#Bullish #EX #IM #NX #Globalization

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

Although the contraction continues to decelerate, 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: +2.5pp @ -3.2% yoyRailtraffic weekly 2016.10
Growth rate: +0.6pp @ -6.6% 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

Sentiment

Retail investor sentiment survey (2016.11.03)
by The American Association of Individual Investors (AAII)

Sentiment dips again before the Election, wading deeper into extreme lows indicative of a bullish signal; there’s no better manifestation of investors’ postcrisis PTSD than the massive Neutral cohort…
Bull/Bear ratio: -4bps wow @ 0.69 (below 1.30 historical average & 1.00 – 1.80 extremes)Retail investor sentiment- bulls & bears 2016.11.03
Bullish: -1.1pp @ 23.6% (below 39 avg & 30 – 45 extremes); lowest since Brexit panic & 104th lowest alltime reading
Bearish: +0.2pp @ 34.3% (above 30 avg & between 25 – 40 extremes)
Neutral: +0.9pp @ 42.0% (above 31 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 4/2017).
[Previously: Institutional allocations remain an extremely bullish signal]
#Bullish! #Contrarian

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

Allocations remain neutral signals…
– Stocks: -0.6pp @ 64.7% (between 60% average & 70% extreme high)
Bonds: +0.3pp @ 16.6% (above 16% avg & 10% extreme low); up from a 12-month low
Cash: +0.4pp @ 18.7% (between 24% avg & 15% extreme low)
#Neutral #Contrarian $SPY $AGG

–Romeo

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