Succinct Summation of Week’s Events:
Positives:
1) Multi family housing starts jumped by 111k to 489k, the most since 1988 and permits rose to the highest since 1990. Single family starts though fell by 6k while permits were up by just 6k.
2) The July NAHB home builder sentiment index was 60, 1 pt more than expected, in line with June (which was revised up by 1) and is at the best level since November ’05. The present situation rose 1 pt while future expectations were higher by 2 pts. Prospective Buyers Traffic fell 1 pt but only after jumping by 5 pts in June.
3) Initial jobless claims totaled 281k, 4k less than expected and down from 296k last week which had the July 4th holiday influence. Smoothing this out, the 4 week average though did rise to 283k, the highest since late April from 279k last week. Continuing claims, delayed by a week and thus likely also distorted by the holiday, fell a sharp 112k after rising by 62k in the week prior.
4) The NY manufacturing index was 3.9, slightly above the estimate of 3.0 and up from -2.0 in June. The internals however were very mixed as new orders fell 1.4 pts to -3.5 and is negative now for the 4th month in the past 5. Backlogs were -7.5 vs -4.8 in June and -11.5 in May. Employment was down 5.5 pts to 3.2, the lowest since December ’13. The 6 month business conditions outlook was up by 1.2 pts to 27 which compares with the 6 month average of 29.3. Capital spending plans rebounded by 10 pts to 21.3 but that puts it back to the 6 month average of 20.7.
5) Refi applications rose by 3.7% and are up 4.9% y/o/y.
6) US industrial production in June rose .3% m/o/m, one tenth more than expected. The manufacturing production component though was flat for now two months in a row. Utility output helped to lift the headline figure. Capacity utilization rose to 78.4% from 78.2% but it was all utilities and mining which drove the increase. Manufacturing capacity fell one tenth to 77.2%, matching the lowest since May 2014.
7) Business Inventories rose .3% m/o/m, in line. Sales rose .4% and the I/S ratio held at 1.36, just off the highest since ’09.
8) Amazon and Walmart think inflation is too high and they provide relief to millions with discounts across the board.
9) Foreign purchases of US notes and bonds rebounded in May as there was net buying of $53.4b, the most since February ’14. For the year to date however, just $6.7b of notes and bonds have been bought. In 2014, a net $165.6b were bought vs $40.9b in 2013 and more than $400b purchased in each of 2011 and 2012.
10) Retail sales, industrial production, fixed asset investment and Q2 GDP in China all came in better than expected. GDP in particular hit on the head the 7% target of the Chinese government, above the estimate of 6.8%.
11) Chinese credit growth spiked in June with 1.86T yuan (about $300b) of new loans extended. That was 460b above expectations and up from 1.2T in May. It is though about 100b yuan below June of last year. Money supply growth as measured by M2 accelerated to 11.8% y/o/y growth vs 10.8% in May. That was above the estimate of 11% and the quickest since February.
12) China’s exports rose by 2.8% y/o/y in June, rebounding after a 2.5% drop in May. Imports were down by 6.1% but that is better than the forecasted drop of 15.5% helped by lower import duties.
13) Helped by a shift in a holiday that brought sales into June from May, EU car registrations in June rose 14.6% y/o/y. Smoothing out the May rise of 1.3% has the two month average of 7.95% y/o/y growth which compares with the 6 month average of 7.9% growth.
14) UK weekly earnings ex bonus for the 3 months ended May rose 2.8% y/o/y, up from 2.7% last month and it’s the quickest pace of wage growth since February ’09. While the estimate was up 3%, real wage growth is finally being celebrated by UK consumers.
15) UK CPI was zero y/o/y in June. The core rate though was higher by .8%. Mark Carney doesn’t like the low level but UK consumers do as real wage growth improves.
16) The July German ZEW economic expectations index (surveying investors) fell to 29.7, the lowest since November, from 31.5 in June but that was slightly better than the estimate of 29. The current situation component was up 1 pt after dropping by 3 pts in June.
17) Positive for markets in short term as Europeans punt again on Greece.
Negatives:
1) Stanley Fischer today said “inflation is too low, we must get it back up to 2%.” If he looked at core CPI instead of core PCE, he’s about there as core CPI in June rose 1.8% y/o/y, matching the highest since July ’14 as the cost of living for the 35% of households that rent continues to jump. Rent of a primary residence was up by .4% m/o/m and 3.5% y/o/y. OER was up by .4% too and 3% y/o/y. Overall services inflation ex energy was up by 2.5% y/o/y which has been a pretty consistent trend. Energy and food prices were both higher which led to the .3% m/o/m gain. Apparel and used car prices fell. Medical costs were down .2% but are still up 2.5% y/o/y. Core CPI is running at a 2.3% annualized pace in the 1st half of 2015.
2) PPI ran hotter than expected with a .4% m/o/m gain at the headline level, the core rate was up by .3% and also taking out trade saw a .3% rise. Wholesale services inflation was higher by .3% too.
3) US Retail sales in June were soft. Sales ex gasoline stations fell .4% m/o/m. Sales ex auto’s and gasoline stations fell .2% m/o/m, six tenths weaker than expected and May was revised down by two tenths. Also taking out building materials to get to the so called ‘control group,’ sales were down by .1%, four tenths less than estimated.
4) After rising to 98.3 in May, the highest of 2015 and the 2nd best level in the recovery, the NFIB small business optimism index fell to 94.1 in June. It’s the biggest m/o/m drop since November ’12. The NFIB chief economist, said “June terminated a promising string of improvements in owner optimism during the first months of the year. While it is not a disaster or a signal of a looming recession, it is a disappointing sign that economic growth on Main Street is not set for a strong 2nd half of growth. The weakness was substantial across the board, showing no signs of a growth spurt in the near future.
5) The Philly manufacturing index for July fell to 5.7 from 15.2 and that was about half the expectation. It gives back the 8.5 pt jump in June and puts it more in line with the mediocre trend seen this year. The year to date average is 7.4 vs 18.6 in 2014. Optimism for the coming 6 months where rose almost 2 pts to the highest since January. On the flip side, capital spending plans for the next 6 months were down slightly to the lowest level since December ’13.
6) After jumping by 6.6% last week, the MBA said purchase applications to buy a home fell by 7.5% w/o/w. While this is still up 17% y/o/y, the index is at a 6 week low.
7) The preliminary UoM confidence index fell to 93.3 from 96.1 in May and vs the estimate of 96. The average year to date is now 94.6 but that remains well above the average last year of 84.1. Both current conditions and future expectations were down m/o/m. One year inflation expectations ticked up by one tenth to 2.8%.
8) There was an unexpected drop in the number of employed in the UK for the 3 months ended May of 67k vs a forecasted rise of 35k. The unemployment rate was higher by one tenth to 5.6% off the lowest level since 2008. The fall in those employed was the first time since March ’13. Also, jobless claims in June rose by 7k instead of falling another 9k as expected. This is the first rise since October ’12.
9) EU industrial production in May fell .4% m/o/m, worse than the estimate of up .2% with a 3.2% drop in energy production being the main reason for the miss.
Peter Boockvar
Chief Market Analyst, The Lindsey Group LLC

BONUS:
The travels and travails of the macro tourist
By Barry Ritholtz Columnist July 18
How’s your macro?
Not too good? Terrible? Unsure what that even means?
Let’s start here: Macro refers to the large geopolitical moments, and the natural and man-made disasters, that some investors track as potential market moving events. Large economic trends or reversals, diplomatic breakthroughs, political crises and even war are all macro events. Think: a tsunami that knocks out a Japanese nuclear power plant; the Arab Spring; the systemic failure of the credit markets in 2008-09; Russia’s annexation of Crimea. The ongoing Greek saga that has Europe on edge is all too macro.
Hanging on every twist and turn of the headlines are a group of folks we call “macro tourists.” They are a terrific source of chatter at any cocktail party — such as “Tsipras may have just doomed the Greeks for the next decade.”
Why does this matter to investors? For two reasons: First, macro tourists are everywhere; and second, they seem to be terrible stewards of your capital.
They remind me of the visitors to New York in the 1980s who were fleeced on the streets by card sharps running the Three-card Monte con. Macro tourists lose money by making similarly ill-advised bets where the odds are decidedly not in their favor.
Consider the international news flow in recent weeks and what many people think it could mean for the global economy:
●China’s Shanghai Stock Exchange Composite had a boom and bust this year: up 115 percent from Jan. 1 to its peak in June; then a 40 percent crash in a month. Still, Chinese markets are still up 83 percent over one year ago. An extraordinary intervention by the Chinese government created a bounce; who knows how long it will last?
●The Sisyphean labors of Greek debt are next. Will they/won’t they leave the euro? Who knows? At this point, most of us are suffering from debt drama exhaustion.
●Then there’s Iran: After 13 years of sanctions over its nuclear ambitions, an impasse has been breached. With the help of other countries, notably Russia, an enormous, game-changing treaty has been reached.
●And let’s not forget Cuba and our newly reestablished diplomatic relations (even as U.S. relations with China are deteriorating).
Market-moving headlines would seem to present an opportunity to capi­tal­ize on the potential volatility that often follows.
But here’s the big risk for investors who try to game the headlines: Figuring out what just happened is hard enough; the macro investor must guess at what’s ahead — outcomes for the near and far future as well as the market reaction to those outcomes.
Psychologists would describe it as creating a “variant perception,” which requires you to imagine what the crowd thinks it knows, what it owns and where it is probably wrong. Determining when the crowd will figure out that it’s wrong, and what it is likely to do about it, is even more difficult. Oh, then you have to get the timing of it all precisely right.
You might imagine that these big headlines would make this process easy on the macro investors. Anticipate the next big story, position yourself against the wrong-leaning crowd ahead of time and boom! Easy money!
Only it is not so easy. Despite the headlines, markets have mostly ignored the macro. Sure, we have seen some strong moves up and down and next-day reversals — but more than halfway through the year, the market has been stuck in a surprisingly tight range. Consider this data point: It has been 645 days since the S&P 500 saw even a 10 percent drawdown.
What does this mean to the average investor? Before becoming a “macro tourist” foolishly trading on headlines, consider these truths:
●News is factored into stock prices by the time it’s on the front page. These stories all develop over time. The headlines tend not to come out of the blue but are the result of incremental events over months and years.
●Headlines don’t drive markets. Profits and valuations do. These geopolitical events make for big splashy headlines, but ultimately have little affect on what matters to stock prices: corporate profits. Earnings are a fundamental driver of company valuations and therefore equity returns.
●Guessing isn’t investing: Making big bets on outcomes that are binary — i.e., a 50-50 probability — is not investing, it’s speculation.
It’s no wonder the macro tourists, both professional manager and amateur investor alike, have been for the most part unsuccessful.
Birinyi Associates creates one of my favorite research pieces each year. Laszlo Birinyi and his staff collect mainstream news articles and compile them all in an annual review. Seeing these headlines, all ominous warnings of terrible things to come — with their dates, after the fact — is downright hilarious.
Add to that the fundamental misunderstanding of risk that is prevalent among you humans. As it turns out, you worry about all the wrong things. You stress over the fiscal cliff and the sequester and Greece — all things over which you have no control and no way to figure out how the chips may fall if they do or don’t occur. Talk about wasted effort.
Instead, why not think about what you can control? Such as having a plan, reducing your costs, lowering your turnover and paying less in short-term capital gains taxes? These are things you can do, and the impact will be much more meaningful to your long-term returns than whether the Greek currency is the euro or the drachma.
Ritholtz is chief executive of Ritholtz Wealth Management. He is the author of “Bailout Nation” and runs a finance blog, The Big Picture. On Twitter:@Ritholtz.