Archive for Chart Of The Day – Page 2

AAII: Equity Allocations Hit a 2014 High in July

The AAII’s July asset allocation survey showed growing overall bullishness from retail investors as equity allocations jumped to their highest levels of 2014.  The current reading of 67.5% is the second highest monthly reading since the bull market began in 2009.  Here’s more detail from AAII:

“Allocations to stocks and stock funds reached their highest level of the year in July, according to the latest AAII Asset Allocation Survey. Bond and bond fund allocations rebounded to levels not seen since last January, while cash allocation fell to a 14-year low.

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%). It is also the 16th consecutive month and the 18th out of the past 19 months with equity allocations above their historical average of 60%.

Bond and bond fund allocations rose 0.7 percentage points to 16.7%, the largest allocation since January 2014. The historical average is 16%.

Cash allocations declined 1.3 percentage points to 15.8%. The drop puts cash allocations at their lowest level since March 2000 (15%). July was the 32nd month with cash allocations below their historical average of 24%.”

aaii

The Bigger they Come the Harder they Fall

Just passing along an interesting data point from Guggenheim:

“The S&P500 has now gone nearly 800 days since a correction of more than 10 percent – the “meaningful” level for many analysts. The more extended the market becomes, the larger the eventual decline may be. Over the last 50 years, the longer the time between market corrections, the steeper the drop once the correction does occur.”

ChartoftheWeek07242014

 

Rail Traffic: Still Chugging Along

Just catching up on an update from last week.  The latest rail data showed a continued downward trend in momentum, but coming off of very strong weekly readings over the last 2 months.

The current 12 week moving average is down to 7.2% which is well off the highs of 9.4% from early June.

If rail is an indicator of broader macro trends then this continues to point to a strong Q2 rebound in economic growth.

rails

The Scale of Monetary Happiness

Does money really buy you happiness?   

The opening quote in my new book is:

“The person who mistakes “money” for “wealth” will live a life accumulating things all the while mistaking a life of owning for a life of living.”

Although my book is all about understanding money, investing and the economy I tried my best to highlight what I think is one of the most important elements of understanding our monetary system – while money is important and necessary in this system it should not be viewed as the ends when it is merely a means to an end.

I got to thinking about this in more detail this weekend as I was reading this piece in the FT which discusses how greater wealth is indeed linked to greater happiness.  I don’t think this is necessarily wrong, but I would argue that greater wealth has a diminishing rate of return with regard to how effectively it can contribute to our happiness.

In order to conceptualize this I took Maslow’s Hierarchy of Needs and applied it to a spectrum showing that the higher up the hierarchy you go the less effective money is in helping you attain certain things.

Scale_Monetary_Happiness

Money is obviously a necessity because we all need things at the bottom of the hierarchy.  But as you climb higher you find that money has a diminishing rate of return in helping you acquire those things.  Money cannot buy you morality, purpose, meaning or many of the things that are higher on the scale.

So, does money buy you happiness?  Money can buy you a certain level of happiness and there is little doubt that money makes life easier in many ways.  But money cannot buy what might be seen as the ultimate forms of happiness. That includes things like purpose, meaning, friends, family, etc.  So don’t confuse the means with the end.  Doing so will warp your perspectives on what matters and what doesn’t.

Reminder: Tapering is not Tightening

A strange thing has happened ever since the “tapering” began last December – interest rates have fallen, stocks have risen and inflation expectations have actually increased.  This is almost exactly the opposite of what many people might have expected.  After all, if “tapering is tightening” and QE is “money printing” then something doesn’t add up here because stocks should have fallen and inflation expectations should have declined.  But when we look at the operational realities of QE it becomes clear that “tapering” really isn’t “tightening” in any meaningful sense.

As you can see in the chart below, the Fed really hasn’t started tightening in any meaningful sense.  In fact, their balance sheet is still expanding quite rapidly.  So, as I explained early last year, if we want to call QE “money printing” then tapering is really just “less money printing”.  Of course, that’s not how I view QE at all (see my QE primer here), but if you want to remain consistent with the mainstream view of things then that’s one way to view the tapering.

taper

 

Perhaps more importantly, the stock market doesn’t even perform poorly during the early phases of a tightening.  And the logic behind that is rather simple – the Fed reacts to an improving economy and if the Fed isn’t even reducing their balance sheet then we’re not even at the point in the economic cycle where the Fed thinks tightening is necessary.  And that means the economy is probably still too weak to warrant a real tightening.  And that, in a counterintuitive sort of way, is actually a good thing.

Chart o’ the day: Dividends and Buybacks Jump to new All-time High

We’ve officially round tripped it now.  Not only is the VIX at pre-crisis lows, but corporations are now issuing dividends and buying back shares like the crisis never happened (via Fact Set):

“Dividends per share (“DPS”) for the S&P 500 grew 12.5% in the trailing-twelve month (“TTM”) period ending in April. This also marks the thirteenth consecutive quarter in which DPS has grown at double-digit rates. Long-term, significant dividend growth—coupled with growth in share repurchases (which grew over 50%)—has helped quarterly shareholder distributions to reach record levels since at least 2005. In total, $249.1 billion was distributed to shareholders in Q1, which modestly surpasses the $242.1 billion distributed in Q3 2007.”

fig1

 

Chart O’ the Day: Round Trippin’ it

Not much to say here.  Just a chart of the volatility index.  Right back to where we were before the crisis occurred and fast approaching the all-time lows (via Bloomberg):

vix

U.S. Home Prices Still Rising Double Digits

Home prices continued to accelerate at a double digit pace in April according to CoreLogic.  The latest reading came in at 10.5% year over year which is the fifteenth consecutive double digit reading.  Since 1977 the CoreLogic housing price index has averaged a 5.7% annual change so the current rate of change is substantially higher than the historical norm.

While the annual rate of change looks strong it has decelerated in recent months from almost 12%.  Still, the housing market in the USA remains robust.  And that’s probably not surprising since Americans have become disillusioned by just about every other asset class as seen in this recent survey on various asset classes.

cl_hpi