Recap 12-16-13: SPX and TIPS look interesting, relatively speaking


First, this post from Quantifiable Edges is worth noting:

Over several time horizons op-ex week in December has been the most bullish week of the year for the SPX. The positive seasonality actually has persisted for up to 3 weeks. Below are the results since SPX options began trading in 1984.

Second, a Pimco article prompted me to look into the 10y real yield differential between US and the UK. It is actually trading at a fairly wide spread of ~100bps.

Not only is the spread near long term wides, it is also wide relative to the long term growth differential of just 35bps or so:

Separately, this is interesting:

It turns out that the real bottleneck is at the post-med-school step: residencies, those supervised, intensive, hazing-like, on-the-job training programs that doctors are required to go through before they can practice on their own. There has been little growth in residency slots; they totaled 113,000 in 2011-12, from 96,000 a decade earlier. Exactly why residencies have not increased faster is a subject of great debate in the health care industry.


  • Japan’s Tankan for large manufacturers increased to 16 from 12, above 15 estimates. The outlook was 14 up from 11 but below expectations of 17. Capex for the fourth quarter was +4.6% versus 5.5% expected.
  • EU Mfg PMI improved to 52.7 vs 51.9 exp and 51.6 prev. Germany was stronger than exp while France was weaker. GS notes that IFO survey readings have been coming in stronger than the PMI prints for some time.

  • US Empire Mfg dropped to 0.98 vs +5 exp and -2.21 prev
  • US Prelim PMI declined to 54.4 vs 55 exp and 54.7 prev
  • China Flash Mfg PMI declined to 50.5 vs 50.9 exp and 50.8 prev
  • Repurchase activity accounts for ~6.4% of daily trading volume, a new record; the prior high, 4.1%, was hit back in 2007. The proportion of trading is higher even as chief executive officers spend $343 billion less on buybacks so far this year, reflecting a seven-year decline in equity volume. Bloomberg
  • But FTA reports that JPM sees the global net issuance activity is less supportive, even though the US corporate debt – corporate equity issuance differential is forecast to remain wide:

  • NYT: Boehner attacks conservative groups both in public but esp. in private; the House Speaker has lashed out at conservative advocacy groups for attempting to block the Murray-Ryan budget compromise. Boehner warned rank-and-file House Republicans: “They are not fighting for conservative principles…they are not fighting for conservative policy…..they are fighting to expand their lists, raise more money and grow their organizations, and they are using you to do it. It’s ridiculous.”
  • some in Europe are increasingly concerned the new resolution process is far too cumbersome to actually be practical; some ~126 people would need to be consulted prior to a bank being resolved, far too many people should a rescue operation need to be performed over the weekend. FT
  • Speaking to French newspaper Le Journal du Dimanche Mr Draghi said that despite great efforts by the government, competitiveness of French corporates remains insufficient. Mr Draghi also said that a recovery of public finance could not only rely on tax increases.
  • NYT: Sending tremors across China’s political landscape, President Xi Jinping and other party leaders have authorized a corruption inquiry against the powerful former head of the domestic security apparatus, Zhou Yongkang
  • Sen. McCain said the US Senate was very likely to pass a bill imposing fresh sanctions on Iran at the end of the present 6-month negotiating period – Washington Post
  • GS notes from their Financials conference:
  1. Corporate loan growth could improve in 2014 as business confidence (particularly post budget deal) and CapEx improves.
  2. Credit card losses keep moving lower with JPM, DFS and COF saying loss rates could continue to improve and/or “normalized” loss estimates continue to decline.
  3. Expectations for the impact of tapering were universally positive, with banks believing a steeper yield curve will help margins.

Upcoming Data:

  • Tue: UK PMI, GermanyZew, US CPI, NAHB Housing Index, Japan Trade Balance
  • Wed: German IFO, MPC Minutes, UK Jobless Claims, US Housing Starts, FOMC, RBA FX Transactions
  • Thu: UK Retail Sales, US Philly Fed, Existing Home Sales, GfK Consumer Confidence
  • Fri:
  • Mon: