Diary of a Financier

Top Newsstuffs (November 21 – December 4)

In Bookshelf on Sun 4 Dec 2016 at 05:02

A nice, long list of top reads to catchup from both the Thanksgiving holiday week and this past week…

Macro

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

Huge bumps in both income & spending redouble the trend acceleration — even after Q3’s big spikes & upward revisions to prior months’ data; the headline report beat expectations too…Real DPI vs PCE (2016.10)
Disposable personal income (Real DPI): +0.6pp @ +2.7% yoy, +0.4% mom
Personal consumption expenditures (Real PCE): +0.4pp @ +2.8% yoy, +0.1% mom
Personal savings rate: +0.3pp @ +6.0%
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

Consumer confidence survey (November 2016)
by Conference Board

Sentiment surged to a new postcrisis high — rarefied air historically speaking…consumer-confidence-vs-gdp-2016-11
Consumer confidence index: +8.5 mom @ 107.1 (beat 101.5e); a new postcrisis high; 77th percentile of historical data
[Previously: Retail sales bullish & A new generation of Depression Babies?]
#Bullish! $XLY

Purchasing Managers Index (November 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): unch @ 53.3 (below 53.9 LT avg); remains at a 12-month highGlobal PMI composite 2016.11
Global PMI (Services): +0.1 @ 53.3 (below 54.3 LT avg); a 12-month high
Global PMI (Manufacturing): +0.1 @ 52.1 (above 51.3 LT avg); a 27-month high
US ISM (Composite): +1.8 @ 56.7 (above 54.6 post-recession avg)
– US ISM (Services): +2.4 @ 57.2 (beat 55.5e); big acceleration crushes expectations; corresponds to +3.3% real GDP (annualized)US ISM PMI Composite 2016.11
    New orders: -0.7 @ 57.0
    Production: +4.0 @ 61.7
    Employment: +5.1 @ 58.2
US ISM (Manufacturing): +1.3 @ 53.2 (beat 52.3e); another big acceleration, even without Inventories’ tailwind being manifest yet (still in contraction); corresponds to +3.2% real GDP (annualized)
    New orders: +0.9 @ 53.0
    Production: +1.4 @ 56.0
    Deliveries: +3.5 @ 55.7
Eurozone (Composite): +0.7 @ 53.9 (miss 54.1e); corresponds to +0.4% real GDP (annualized)
Eurozone (Services): +1.0 @ 53.8 (miss 54.1e)
Eurozone (Manufacturing): +0.2 @ 53.7 (meet 53.7e); led higher by Netherlands
UK: -0.8 @ 53.4; GBP weakness is driving-up input costs (my post-Brexit base case expectation was for high inflation)
Japan: -0.1 @ 51.3
China: official +0.5 @ 51.7 (beat 51.0e); unofficial -0.3 @ 50.9
Canada: +0.4 @ 51.5
India: -2.1 @ 52.3; down from a 22-month high, impacted by demonetization crackdown
South Korea: unch @ 48.0
Taiwan: +2.0 @ 54.7; a 27-month high
ASEAN: +0.2 @ 49.4
Brazil: -0.1 @ 46.2; little impact from the Central Bank’s easing monetary policy
#Bullish!

Gross Domestic Product (Second estimate, 2016q3)
by Bureau of Economic Analysis (BEA)

The acceleration increased after this first revision, beating expectations; growth was aided by a new tailwind from the re-stocking of Inventories after a string of drawdowns (as expected)…
Real GDP (Q3): +0.3pp @ +3.2% qoq saar (beat +3.1e)Real GDP 2016q3ii
    Inflation: Core +1.9%; Headline +1.4%
    Consumption (PCE): +0.7pp @ +2.8%
    Investment: -1.0pp @ +2.1%; Residential -4.4%; Nonresidential +0.1%
    Government spending: -0.3pp @ +0.2%; Federal +2.5%; State & local -1.1%
    Exports: +0.1pp @ +10.1%
    Imports: -0.2pp @ +2.1%
    Inventories: -0.12 @ +0.49pp contribution to GDP growth rate
Real GDP per capita (Q3): +2.18% yoy; 10.1% below LT regression trend
Real GDP (2015FY): unch @ +2.6% yoy
Real GDP (2014FY): unch @ +2.4% yoy
Real GDP (2013FY): unch @ +1.7% yoy
#Bullish!

Manufacturers’ durable & capital goods (October 2016)
by US Department of Commerce

The ytd comps remain uninspiring, although this report showed a nice sequential surge that beat expectations, in addition to prior month data being revised higher; capex continues to struggle due to mining/energy bust; on the bright side, the much-needed drawdown in inventories continues…
Core durable goods (ex-transportation)Core durable goods & capex- new orders (% change yoy) 2016.10
    Orders: unch @ -0.9% ytd, +1.0% mom (beat +0.2e)
    Shipments: +0.2pp @ -1.4% ytd, +0.9% mom
Core capex (capital goods, ex-defense & aircraft)
    Orders: -0.1pp @ -4.0% ytd, +0.4% mom (beat +0.3e)
    Shipments: -0.1pp @ -5.2% ytd, +0.2% mom
Core inventory (ex-transportation)
    Inventories: +0.3pp @ -1.5% ytd, unch mom
#Bearish #Contraction $XLI

Credit

US household debt & credit report (2016q3)
by The Federal Reserve Bank of New York (NY Fed)

Credit expansion accelerated again, rallying further above trend GDP growth…
Total consumer indebtedness: +0.1pp @ +2.4% yoy, +0.5% qoq @ $12.35T; only 2.6% below alltime record high ($12.68T in 2008q3)
Mortgages: +1.1% yoy, -0.1% qoq @ $8.35THousehold debt & credit- composition & delinquency status 2016q3
Non-housing debt: +6.7% yoy, +2.3% qoq @ $3.17T
    Auto loans: +8.6% yoy, +2.9% qoq @ $1.14T; record high
    Credit cards: +4.6% yoy, +2.5% qoq @ $0.75T
    Student loans: +6.3% yoy, +1.6% qoq @ $1.28T; record high
Delinquencies:
    Total: +0.1pp qoq @ 4.8% (vs 7.2% LT average); off lowest level since 2007q2
    90+ days: unch qoq @ 3.3%; student loans show continued repair
[Previously: Banks’ future credit supply & demand fundamentals expected to remain neutral, Commercial lending remains bullish & Households remain extremely deleveraged]
#Bullish #Releveraging

Technicals

Update: SPX 2016 ytd vs historical seasonality (S&P 500, 1990-2015)
by Topdown Charts
SPX 2016 ytd vs historical seasonality
As we enter December, SPX is entering what’s historically its best month, with 2016 already having closely tracked its average daily return pattern.
[Previously: Stock market seasonality enters bullish year-end push]
#Bullish $SPX $SPY

Sentiment

Retail investor sentiment survey (2016.12.01)
by The American Association of Individual Investors (AAII)

Sentiment finally relents, descending back into a neutral signal after last week’s post-Election spike into extremes; having been persistently outsized throughout the entire post-crisis recovery, the Neutral cohort now remains near its average — although there’s high variance among respondents’ expectations of the Trump administration…
Bull/Bear ratio: -50bps wow @ 1.75 (above 1.30 historical average, but between 1.00 – 1.80 extremes)Retail investor sentiment- bulls & bears 2016.12.01
Bullish: -6.1pp @ 43.8% (over both 39 avg & 30 – 45 extremes); down from a 22-month high
Bearish: +3.0pp @ 25.1% (below 30 avg, but between 25 – 40 extremes)
Neutral: +3.1pp @ 31.1% (above 31 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 5/2017).
#Neutral #Contrarian

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

Allocations remain neutral signals; respondents were mixed on the Trump administration, with those who were bullish on his policies being offset by those who were uncertain (suggesting that the Trump rally isn’t fully-discounted or ahead of itself)…
– Stocks: +1.7pp @ 66.4% (between 60% average & 70% extreme high)
Bonds: -0.2pp @ 16.4% (above 16% avg & 10% extreme low); up from a 12-month low
Cash: -1.5pp @ 17.2% (between 24% avg & 15% extreme low); a 17-month low
#Neutral #Contrarian $SPY $AGG

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

Risk allocations remain at extreme lows, maintaining a risk-on buy signal akin to 2011/12’s, although some of the “uncertainty” has started dissipating, as manifest by waning cash levels…
Equity: -3pp @ +8% OW (bullish signal, below +15 & +50 extremes)BAML fund manager allocation survey- Equity, Fixed income, Cash, Sectors 2016.11
Bonds: +2pp @ -48% UW (neutral signal, between -60 & -20 extremes)
Cash: -0.8pp @ +5.0% OW (bullish signal, meets +5.0 extreme high); down from a 15-year high, but still at 2σ
Commodities: -2pp @ -2% EW (neutral signal, between -20 & +12 extremes); down from a 4-year high
Regions…
    US: unch @ -7% UW
    Europe: +3pp @ +8% OW (neutral signal); continues recovery from July’s a 3-year low
    Japan: -2pp @ -5% UW (neutral signal); continues recovery from a 4-year low
    Emerging Markets: -27pp @ +4% OW (neutral signal); down from a 3.5-year high
Sectors…
    Bearish: #Cash $XLF $XLY
    Bullish: $GBP $EWU $IYZ
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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