Diary of a Financier

Top Newsstuffs (November 6-12)

In Bookshelf on Sun 12 Nov 2017 at 05:54

Top reads from across the past week…

Macro (BULLISH)

Rail traffic monthly (October 2017)
by The Association of American Railroads (AAR)

A good acceleration retraces back up to solid velocity recovering from a multi-year decline, although it’s still attributable to easy yoy comps and seasonality that provide a tailwind until 2/2018…
Monthly traffic: +2.4pp @ +3.1% yoy
Growth rate: unch @ +3.6% ytd
Carload groups: 12 of 20 posted gains yoy; led by Coal’s recovery (+10% ytd) from a low yoy comp base, albeit tempered by Motor Vehicles (-7% ytd) and Energy’s continued collapse (-14% ytd)
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 (BEARISH)

Loans & leases in bank credit, all commercial banks (2017.10.25)
by St. Louis Federal Reserve (FRED)

Lending growth remains ugly, after a big ytd deceleration to multi-year lows; 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: +28bps mom @ +3.56% yoy (below 7.3% historical average)
This is a key indicator; although the Fed’s rising rates & Trump’s deregulation jawboning should increase NIMs and corporate debt is relatively bloated, I’d still expect continued, aggregate credit expansion, since household balance sheets are more deleveraged than at any point since the 1970s.
[Previously: Households remain extremely deleveraged; See also: Senior loan officer survey expects bank credit supply & demand fundamentals to remain neutral]
#Bearish #Releveraging!? #Credit cycle $XLF $KBE $KRE

 

Fundamentals (BULLISH)

 

Valuations (NEUTRAL)

 

Sentiment (BULLISH)

Retail investor sentiment survey (2017.11.09)
by The American Association of Individual Investors (AAII)

Sentiment remains neutral in aggregate, but spikes closer toward extremes indicative of a bear signal; more importantly, the neutral cohort continues to recede — a sign of both broader-based participation and the wall-of-worry’s dismantling…
Bull/Bear ratio: +38bps wow @ 1.58x (below 1.30 historical average, within 1.00 – 1.80 extremes)
Bullish: +5.4pp @ 45.1% (above both 39 avg and 30 – 45 extremes); highest since 1/2017
Bearish: -4.5pp @ 28.6% (below 30 avg, within 25 – 40 extremes)
Neutral: -1.0pp @ 26.4% (below 31 avg and 40 extreme)
Measures respondents’ expectation for equity performance over next 6 months (through 4/2018).
[Previously: Retail allocations remain neutral, Institutional allocations maintain bullish signal for US risk, Strategist sentiment remains neutral & Quantifying the “wall of worry”; See also: Household equity allocations at postcrisis lows sends a bullish signal]
#Neutral #Contrarian

 

Technicals (NEUTRAL)

 

 

–Romeo

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