Diary of a Financier

Top Newsstuffs (December 5-11)

In Bookshelf on Sun 11 Dec 2016 at 05:12

Top reads from across this week…

Macro

Trade balance (October 2016)
by US Department of Commerce

Decent report to start Q4; the trade deficit missed expectations due to constructive revisions to prior month data; gross trade volumes remain healthy; the deficit is continuing to repair thanks to slower trade with China & declining petroleum imports…
Net exports: -2.4% yoy, -17.8% mom @ -$42.6B deficit (miss -$42.0B exp)Trade deficit 2016.10
    Exports: +0.4% yoy, -1.8% mom @ $186.3B; +13% above the precrisis peak
    Imports: +0.8% yoy, +1.3% mom @ $229.0B
The net balance of trade accounts for ~ 3-5% of US GDP.
#Neutral #EX #IM #NX #Globalization

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

Although a cumulative decline in railroad volume still manifests the collapse in manufacturing activity, this month’s data showed a big acceleration that was the first expansion in many years; this likely isn’t as attributable to the Election as easy yoy comps (since energy & coal shipments continue to contract amidst the commodity supercycle’s bust), but wait for a trend to develop before making any judgements…
Monthly traffic: +4.3pp @ +1.1% yoy
Growth rate: +0.8pp @ -5.8% ytd
Carload groups: 11 of 20 posted gains for the month yoy
In particular, the secular decline of coal volumes (~40% of carloads makes it the largest category) has been negatively skewing the data.
#Bullish $IYT $XLB $XLE $DBC

Credit

Loans & leases in bank credit, all commercial banks (2016.11.23)
by St. Louis Federal Reserve (FRED)

Lending growth remained at a healthy velocity, albeit a neutral signal after its post-Election deceleration; now near ytd lows…
Weekly loan growth: unch @ +7.1% yoy (below 7.3% historical average)Loans & leases in bank credit, all commercial banks (weekly, %yoy, 2016.11.23)
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 remains a bullish signal, Banks’ future credit supply & demand fundamentals expected to remain neutral & Households remain extremely deleveraged]
#Neutral #Releveraging #Credit cycle $XLF $KBE $KRE

Sentiment

Retail investor sentiment survey (2016.12.08)
by The American Association of Individual Investors (AAII)

Continuing last week’s mean reversion from the post-Election spike, sentiment remained a neutral signal; the Neutral cohort speed below its average, having been persistently outsized throughout the entire post-crisis recovery…
Bull/Bear ratio: -50bps wow @ 1.75 (above 1.30 historical average, but between 1.00 – 1.80 extremes)
Bullish: -0.7pp @ 43.1% (over 39 avg, but between 30 – 45 extremes)
Bearish: +1.4pp @ 26.5% (below 30 avg, but between 25 – 40 extremes)
Neutral: -0.7pp @ 30.4% (below 31 avg)
Measures respondents’ expectation for equity performance over next 6 months (through 5/2017).
[Previously: Retail allocations remain neutral & Institutional allocations remain a bullish signal]
#Neutral #Contrarian

Technicals

Technical study: S&P 500 long term regression & standard deviation (November 2016) | Doug Short (dshort)
The inflation-adjusted SPX is still resting right above the 2 sigma threshold (relative to its LT trend) — a level that has historically marked a market top…
Historical variances:
    Currently: +2pp mom @ +87%; still down from the cycle high @ +91%
    Panic of 1907: +85%SPX long term regression & standard deviation (2016.11)
    Great Depression: +81%
    Tech Bubble: +149%
    Great Recession: +88%
– Mean: +1.8% average annual real return
Standard deviation (σ): ±40.6%
Uses $SPX real (inflation-adjusted) prices with exponential regression starting in 1871.
#Bearish #Mean reversion #Secular

–Romeo

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