Recap 2014-08-05


Items from the AAII survey that suggests this correction may take time and space to play out:

  • Stock and stock fund allocations rose 0.5 percentage points to 67.5%. This is the largest allocation to equities since December 2013 (68.3%).
  • Cash allocations declined 1.3 percentage points to 15.8%. The drop puts cash allocations at their lowest level since March 2000 (15%).

Via Frederik Ducrozet @fwred – US yield correlations with the data are diverging at different points in the curve:

The consensus view is that the long end is dominated by Fed buying and reserve flows. But you can be reasonably sure that the consensus is usually wrong on this type of thing.

Following the SLOS yesterday, via the WSJ, GS has an index that suggests mortgage credit availability is significantly tighter now than even early in the last recovery:

A breakdown:

Fed Paper: Using data on developing economies, we estimate a flexible semiparametric panel data model that incorporates potentially nonlinear effects of inflation on economic growth. We find that inflation is associated with significantly lower growth only after it reaches about 12 percent, which is notably lower than the comparable estimate obtained from a threshold model.


  • RBA kept policy unchanged as exp :
  1. Overall, the Bank still expects growth to be a little below trend over the year ahead.
  2. But growth in wages has declined noticeably and is expected to remain relatively modest over the period ahead, which should keep inflation consistent with the target even with lower levels of the exchange rate.
  3. On present indications, the most prudent course is likely to be a period of stability in interest rates.

US ISM Non-Mfg improved to 58.7 vs 56.5 exp and 56 prev

UK Services PMI improved to 59.1 vs 58 exp and 57.7 prev

Italy Services PMI declined to 52.8 vs 53.8 exp and 53.9 prev

Japan Service PMI improved to 50.4 vs 49 prev

China HSBC Service PMI dropped sharply to 50 vs 53.1 prev

AU Services PMI improved to 49.3 vs 47.6

AU Trade Balance improved to -1683M vs -2000M exp and -1911M prev

Bank of Japan officials are concerned about increasing signs of weakness in the economy following a sales-tax increase, according to people familiar with the central bank’s discussions. Governor Haruhiko Kuroda and his board will discuss this week if they should lower their assessment of the nation’s exports and also whether to express caution about a decline in industrial production, said the people, who asked not to be identified because the talks are private.

France – Moody’s said the country would likely miss its deficit reduction targets due to sluggish growth and delayed economic reforms – WSJ

UK banking industry – Moody’s changes its outlook on the UK banking industry from stable to negative; the outlook change reflects neg. credit implications of finalization of UK resolution and bail-in regime and related “ring-fencing” framework – Reuters

In supersecret cyberwar game, civilian-sector techies pummel active-duty cyberwarriors -Navytimes


  • Tue: NZ Employment,
  • Wed: US Trade Balance, Australia Employment
  • Thu: BoE, ECB, Canada Building Permits, US Jobless Claims, Australia Home loans, Japan Eco Watchers
  • Fri: German Current Account, Canada Employment, US Unit Labor Costs, China CPI
  • Mon: Canada housing Starts, Australia NAB Business Confidence, House Price Index
  • Tue: German ZEW, US NFIB Survey, WASDE reports, Japan 2Q GDP