Recap 2014-09-16: BAML FMS

Commentary:

Cash levels are at 4.6%, which remains elevated, and roughly where they were through the second half of 2013. This suggests that corrections will likely continue to be shallow:

Valuation concerns continue to rise:

HY was perceived as vulnerable, although it’s not clear how stale this is given recent price action:

Note also that the respondent sample shrank. 159 people responded this month, vs 177 last month. Aggregate AUM declined sharply to 427bn vs 529bn prev.

BAML also does an EU based survey. There was a very substantial jump in the percentage of respondents expecting another recession, which may be overdone:

And unsurprisingly, short EURUSD is a very consensus view – on par with mid 2008 and early 2010 levels:

Also very popular is overweight Germany vs France in equities space:

Separately, @EU_Eurostat noted that annual hourly labor cost growth rose 1.2% in Q2, roughly unchanged over the past 4 quarters. This suggest deflation fears may be overdone:

A great post on why Hedge Funds are unlikely to cut fees much:

http://www.bloombergview.com/articles/2014-09-16/calpers-has-lost-interest-in-hedge-funds

Finally, a long but fantastic post on the James Bond movie Skyfall:

http://epicureandealmaker.blogspot.com/2014/09/some-work-of-noble-note-may-yet-be-done.html

Notable:

  • UK CPI slowed to 1.5% as exp vs 1.6% prev, but the core measure ticked higher to 1.9% vs 1.8% exp and prev. PPI Output fell to -0.3% YoY vs -0.2% exp and -0.1% prev
  • German ZEW declined to 6.9 vs 5.0 exp and 8.6 prev
  • US Core PPI rose to 1.8% as exp vs 1.6% prev
  • RBA Minutes:
  1. Housing prices were continuing to increase in the larger cities and members considered that the risks associated with this trend warranted ongoing close observation
  2. the exchange rate remained above most estimates of its fundamental value, particularly given the declines in key commodity prices

Firms are repurchasing their stock at the fastest pace since before the financial crisis; companies bought back $338B worth of stock in H1, the most since ’07. Buybacks increasingly are dominating the market – corporate repurchases were 25% of total volume at Goldman in mid-Aug, about double the long-term trend. WSJ

Upcoming:

  • Wed: BoE Minutes, UK Employment, US CPI, NAHB Housing Index, FOMC, NZ GDP
  • Thu: UK Retail Sales, ECT 1stTLRTO, US Jobless Claims, Housing Starts, Philly Fed
  • Fri: Quadruple Witching, Canada CPI
  • Mon: US Existing Home Sales, EU Consumer Confidence, Dudley speaks, HSBC China Mfg PMI
  • Tue: EU PMI, US FHFA House Price Index, US Markit Mfg PMI, Japan Mfg PMI
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