Transcript BigFoot-Open-Forum-2-18-2016

WHILE YOU ARE WATING
MIKE IS A BUTCHER – He’s 5’10”, has brown hair,
runs 2 miles a day, and wears “slim” blue jeans…..
….WHAT DOES HE WEIGH?
MEAT!!
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ANDY SPENDS TIME WITH HIS DOLL HOBBY
THESE SHOES
ARE JUST THE
CUTEST
THINGS
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LOGAN FINALLY GETS HIS TESLA
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BIGFOOT INVESTMENTS - OPEN FORUM
Feb 18, 2016
WELCOME!
Volume #236
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AGENDA
 WELCOME!
 ADMIN NOTES
 QUOTE OF THE DAY
 OPTIMISM GAUGE
 SWAPS AND SPREADS
 FED TRACKER
 MACRO ASSESSMENT
 READING THE “TEA LEAVES”
 DAVID’S COMMENTS
 ADVISOR INPUT
 LEE’S COMMENTS
 QUESTIONS/COMMENTS
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“NOTES”
IF YOU USE ANY OF OUR SLIDES, PLEASE REMEMBER TO
HAVE THEM APPROVED BY YOUR COMPLIANCE DEPARTMENT
 WE’LL KEEP EVERYONE ON MUTE SO WE DON’T GET FEEDBACK
 PLEASE SEND US A QUESTION – WE’LL GET TO IT ASAP
 WE WILL TAKE YOU OFF MUTE IF YOU RAISE YOUR “HAND”
THANK YOU!
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BigFoot Investments is now on
Twitter, LinkedIn!
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BigFoot On LinkedIn!
Don’t Forget To Join Our “Group”
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“QUOTE” OF THE DAY:
…we are in a precarious position in the U.S. with so many of our
institutions going down. Many of those pushing against the system
have no idea how precarious it is or what they will be destroying…..
…Those defending it don’t know how precarious its position is or even
what they’re defending, or why. But people lose respect for a reason.
Peggy Noonan - WSJ
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Optimism Gauge
As of: 2/18/2016
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Measuring Our Economy
Change
Weekly Updates
Last Update: 2/18/2016
New Monthly Updates
Indicator
Current Value
Prior/Metric Value
Current Value
- 0.241
- 0.474 (Revised)
-1.0
Chicago Fed National Act Index (3 Mon M/A)
-0.24
-0.19 (Revised)
-.50
Unemployment
4.9
5.0
+2.0
Weekly Jobless Claims (4Wk Mov Av)
273,250
281,250 (Revised)
+.50
ECRI Weekly Index (Against 52 Wk Av)
130.0
129.6
-.50
Conf Board Leading Indicators (NEW)
123.2
123.4 (Revised)
-1.0
92.0 (Final – Jan 2016)
92.6 (Final – Dec 2015)
+.50
354,159 (Jan-2016)
353,978 (Dec) Revised
+.50
93.9
95.2
+.50
48.2 (Expansion Line = 50)
48.0 (Revised)
-.50
Economic Capacity Utilization
77.1
76.4 (Revised)
+.50
Stock Market Moving Averages
Weekly Data Points
>50-day MA/>100-Day MA
St Louis Fed Financial Stress Index
University of Michigan Sentiment – Final
Monthly Retail Sales – ex Autos (Adjusted)
NFIB Small Business Sentiment
ISM Manufacturing
S&P Case-Shiller 20 City Comp Index (YoY)
5.8%
N/A
5.5%
-.50
+.50
Measuring our Economy
READING AS OF: 2/18/2016
40 50
30
70
20
Current Reading:
80
10
0
60
46.98%
46.98%
Trend: Negative
90
100
Economic Optimism Index
Prior Reading:
52.48%
Bias: Negative
Current:
Prior:
POSITIVE SINCE: 8/22/2012
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STRESS INDICATOR UP STRONGLY
-0.241 FROM -0.474
HIGHEST SINCE DEC 2011
Source: FRED
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WEBSITE VERSION
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FINANCIAL STRESS INDEX
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2/10 INDICATOR
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Credit Anticipates-Equity Confirms
As of: 2/17/2016
Swaps and Spreads
Rate
Prior
Current
Libor/OIS
0.24
0.24
Euribor/Eonia
-0.066
-0.055
DTCC Repo - Agency
0.504
0.522
DTCC Repo - MBS
0.507
0.525
DTCC Repo – Treasury
0.495
0.506
High Yield
8.62
8.45
Fed Reserve Currency Swaps-Short
91
90
Fed Reserve Currency Swaps-Long
0
0
2-Year Swap Spread
0.0460
0.0249
TED Spread
0.2740
0.3097
*Note: Status
Status
Status
Status*
= No major impact
= Negative Impact
= Moving Worse
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FED BET
Source: Federal Reserve Board staff calculations based on an econometric model described in the appendix to Janet L. Yellen (2015),
“Inflation Dynamics and Monetary Policy,” speech delivered at the Philip Gamble Memorial Lecture, University of Massachusetts,
Amherst, Mass., September 24, www.federalreserve.gov/newsevents/speech/yellen20150924a.htm. Built By Advisors For Advisors
DOWNSIDE RISK/VOLATILITY REMAIN HIGH
Source: AlphaSimplex
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MARKET REPEATS: NO RATE INCREASE THIS YEAR
http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
Source: CME; Federal Reserve
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FED TALK?
MEMBER
DISTRICT
TOPIC
LINK
Philadelphia
These {inflation} considerations make me a bit more conservative in my
approach to policy, at least in the very near term. Although I cannot give
you a definitive path for how policy will evolve, it might prove prudent to
wait until the inflation data are stronger before we undertake a second rate
hike.
https://www.philadelphiafed.org/publications
/speeches/harker/2016/02-16-16-aneconomic-outlook
New York
Two main dangers to expansions: Inflation, adverse impacts Fed can’t
control.
Inflation risk low so current focus on adverse shocks.
Assets/Liabilities of households crucial to economy absorbing shocks
Household debt situation much better than previous years
https://www.newyorkfed.org/newsevents/sp
eeches/2016/dud160212
Boston
"In my own view, if inflation is slower to return to target, monetary policy
normalization should be unhurried. A more gradual approach is an
appropriate response to headwinds from abroad that slow exports, and
financial volatility that raises the cost of funds to many firms."
http://www.bostonfed.org/news/speeches/ro
sengren/2016/021616/index.htm
FOMC
Minutes
- Jan -
See Slide
http://www.federalreserve.gov/newsevents/p
ress/monetary/20160217a.htm
Bullard
St Louis
Federal Open Market Committee’s (FOMC) case for monetary policy
normalization in 2015 rested on several key assumptions and that two of
these assumptions have now been called into question in 2016
https://www.stlouisfed.org/newsreleases/2016/02/17/st-louis-feds-bullarddiscusses-changing-imperatives-for-usmonetary-policy-normalization
Williams
San
Francisco
Later Today
Mester
Cleveland
Friday
Harker
Dudley
Rosengren
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MORE TALK
MEMBER
DISTRICT
TOPIC
Kashkari
Minneapolis
Large banks must similarly be able to make mistakes—even very big
mistakes—without requiring taxpayer bailouts and without triggering
widespread economic damage. That must be our goal. TBTF Speech
Kaplan
Dallas
No statements on monetary policy
LINK
https://www.minneapolisfed.org/news-andevents/presidents-speeches/lessons-from-thecrisis-ending-too-big-to-fail
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PRETTY STRONG STUFF
Source:
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WHAT THE FED SAID
• Language of dissent (Bullard)
•
“The Committee would be concerned if inflation were running persistently above or below this
objective.”
•
•
•
•
•
•
•
•
Real PCE decreasing – held down by costs of non-energy imports
Housing – continued gradual recovery
Manufacturing output declined
CAPEX slower/Inventory investment decreased
Energy pulling down inflation globally
Financial markets hampered by oil and concerns about global growth
Assessment of financial vulnerabilities as moderate on balance
Estimate that negative effects of lower equity prices and FX would be offset by low oil
prices and better fiscal results
Expect real GDP to expand somewhat faster moving forward
Forecast for inflation revised down slightly but would increase gradually through 2018
Premature to change outlook over the medium-term
Assessed inconsistencies with consumer spending against strong gains in household
income
Extended discussion about China’s economy/financial imbalances and impact on EMEs
Tighter financial conditions evident – stock market & credit markets
Many see increasing downside risks economy
•
•
•
•
•
•
•
Source: Federal Reserve
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MACRO DATA
IT’S BETTER,
THE SAME, AND
WORSE
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UNTIL WE FIX SOME THINGS MARKETS WILL NOT SETTLE







OIL
CHINA
DOLLAR
FED
INTEREST RATES
INFLATION
RECESSION
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LOOKING FOR A HOME
Source:
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WITH 76% REPORTING
NOTABLE EARNINGS COMMENTS:
 69% reported earnings above mean estimate – 49% below
 Blended earnings decline of -3.7% (12/31/2015 est was -3.9%)
 Without energy +2.4%
 68 companies negative guidance – 17 positive
 More companies beating EPS estimates – fewer beating Sales estimates
 12-month forward P/E is 14.7 based on closing price of 1829.08 (10-year aver = 14.2)
 With forward EPS of $124.25 market valuation is ≈1827
 Themes:




Source: FactSet
Dollar
Oil prices (Nets against currencies)
Slow global economic growth
Labor/wage impacts
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TWO DOWN IN A ROW
123.2
0.2% Decline
Source: Conference Board
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STILL DECIDEDLY NEGATIVE
CFTC S&P 500 speculative net positions
- 234,321
Source: CME
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WE’LL TAKE IT!
Source: Federal Reserve Bank of Atlanta
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IMPROVEMENT
+0.2%
+3.4%
Source: Census Bureau
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PRELIMARY DATA FOR FEB FALLS… AS EXPECTED
90.7 DOWN
FROM 92.0
Source: Univ of Michigan
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IMPORT/EXPORT PRICE INDICIES IMPROVE
-1.1 VERSUS
-1.4 FORECAST
Source: BLS
-0.8 VERSUS
-0.9FORECAST
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BUSINESS SALES – INVENTORIES JUST BLAH
NEEDS TO START
FALLING
Source:
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COMMENTS REQUIRED!
Stocks are still
strangely
correlated to oil
Source: WSJ
Junk spreads are
mainly in energy
Lots of +50
miscues
Those darn
macro indicators
ruin another
“theory”
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EMPIRE STATE MANUFACTURING SURVEY
NOT GREAT..OUTLOOK WEAK
Source: Federal Reserve Bank of New York
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HOPEFULLY JUST A BREATHER
Source: NAHB
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NOT BAD…
Down 4%
Up 16%
Source: MBA
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NEW YORK FED SURVEY ON INFLATION/WAGES
Steady
decline
Source: Federal Reserve Bank of New York
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IMPROVEMENT
Highest since
Nov 2015
Source: Federal Reserve
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HOUSEHOLD DEBT HIGHER BUT LESS RISK
Source: Federal Reserve Bank of New York
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STILL GROWING
+2.147 mb
Source: EIA
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U.S. Macro
-0.400
-0.450
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 Oil deal is not a deal – expect lower prices
 A level of “stress” prevails in credit markets and will cause short-term problems.
The Fed should change their “tune.” Thinking they will
 Bond market volatility will continue until they do
 No recession at this point
 Markets trading in a “news range”: Oil – Dollar – Fed – Interest Rates
 Markets need 2Q to reassess – no relief for now
 Politics will be a bigger market driver after super Tuesday. March 1st
 Sidelines (Cash) is fine
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David’s Corner
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Lee’s Comments
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QUESTIONS & COMMENTS
THANKS FOR JOINING US!
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