Diary of a Financier

Top Newsstuffs (May 22-28)

In Bookshelf on Sun 28 May 2017 at 06:15

Top reads from across the past week…


Manufacturers’ durable & capital goods (April 2017)
by US Department of Commerce

Despite missing expectations, data remain at high velocity far above trend GDP; good to see capex maintain its footing after struggling for years with the mining/energy bust; the pent-up-demand from inventory drawdowns is being digested, so the tailwind is abating…
– Core durable goods (ex-transportation)
    Orders: +3pp @ +4.9% yoy, -0.4% mom (miss +0.5e)
– Core capex (capital goods, ex-defense & aircraft)
    Orders: -0.1pp @ +2.9% yoy, unch mom
– Core inventory (ex-transportation)
    Inventories: +1.5pp @ +2.8% ytd, +0.2% mom; prior month revised significantly higher
#Bullish $XLI

Gross Domestic Product (Second estimate, 2017q1)
by Bureau of Economic Analysis (BEA)

A nice upward revision beats expectations, but this velocity nevertheless prolongs a trend of underwhelming Q1s; consumption was really disappointing (and all yoy comps will get tougher henceforth); good to see both a big spike in investment and more inventory drawdowns…
Real GDP (Q3): revised +0.5pp @ +1.2% qoq saar (beat +0.8e)
    Inflation: Core +2.4%; Headline +2.2%
    Consumption (PCE): +0.3pp @ +0.6%
    Investment: +0.5pp @ 4.8%; Residential +13.8%; Nonresidential +11.4%; IP +6.7%
    Government spending: +0.6pp @ -1.1%; Federal -2.0%; State & local -0.6%
    Exports: unch @ +5.8%
    Imports: -0.3pp @ +3.8%
    Inventories: -1.07pp detraction from GDP growth rate
Real GDP per capita (Q2): +0.54% yoy; 9.9% below LT regression trend
Real GDP (2016FY): +1.6% yoy
Real GDP (2015FY): +2.6% yoy
Real GDP (2014FY): +2.4% yoy
Real GDP (2013FY): +1.7% yoy

Credit (NEUTRAL)

Loans & leases in bank credit, all commercial banks (2017.05.10)
by St. Louis Federal Reserve (FRED)

Lending growth keeps getting weaker, having already hit multi-year lows after March’s major deceleration, although econometrics suggest that this could be a lagged effect of 2015/16’s industrial production slowdown, which difficult comp doesn’t get lapped until 2017YE…
Weekly loan growth: -13bps mom @ +3.82% yoy (below 7.3% historical average)
This is a key indicator; although the Fed’s rising rates & Trump’s deregulation increase NIMs, I’d expect continued credit expansion due to household & corporate balance sheets being more deleveraged than at any point since the 1970s.
[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 (BULLISH)

Retail investor sentiment survey (2017.05.25)
by The American Association of Individual Investors (AAII)

Sentiment retraces last week’s crash, returning right back to the neutral signal from which it came…
Bull/Bear ratio: +25bps wow @ 1.10 (below 1.30 historical average, but between 1.00 – 1.80 extremes)
Bullish: +9.0pp @ 32.9% (below both 39 avg & 30 – 45 extremes)
Bearish: -4.3pp @ 30.0% (above 30 avg, but between 25 – 40 extremes)
Neutral: -4.8pp @ 37.1% (above 31 avg); another post-Election high
Measures respondents’ expectation for equity performance over next 6 months (through 11/2017).
[Previously: Retail allocations remain neutral & Quantifying the “wall of worry”]
#Neutral #Contrarian

Valuations (NEUTRAL)

Fundamentals (BULLISH)

Technicals (NEUTRAL)




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