Succinct Summations of Week’s Events for 6.17.2016 (plus The Next Subprime)

For the second week in a row, the succinct summation fails to include what I consider to be the biggest story of the week, the so-called Brexit.  This week it was seriously amped up by Thursday's murder of British MP Jo Cox, a leading anti-Brexit politician.  The vote is coming later this week, and it may have global ramifications.  Other negatives include manufacturing down a bit, jobless claims up a bit, and stocks down for a second consecutive week (primarily because of the Brexit threat.)  Positives include higher sales and lower prices.  And as a consequence of the higher sales, lower inventories.

This week's bonus is today's Washington Post column scolding all those clever investors who are so risk-averse that they are still on the sidelines sitting on all their cash and thus missing out on the biggest equities run-up in history.  Despite this being the second most serious financial crisis in a century, those who just patiently and calmly stayed with the market did very well.  Those who remain convinced that another major calamity akin to the subprime disaster is right around the corner are losing big.  Enjoy, and have a good week.

Succinct Summations of Week’s Events for 6.17.2016

June 17, 2016 4:30pm by Barry Ritholtz

Succinct Summations for the week ending June 17th 2016

Positives:

1. Retail sales rose 0.5% month over month, above the 0.3% expected increase. Retail less auto & gas rose 0.3% m/o/m.
2. Import prices are down 5% y/o/y, but rose 1.4% m/o/m, the largest monthly increase in 4 years.
3. PPI-FD rose 0.4%, the highest reading since May 2015. This along with import prices suggests inflation might be picking up.
4. Housing starts rose to an SAAR of 1.164M, above the 1.164M expected.
5. CPI rose just 0.2% m/o/m, so import prices and PPI are not showing up just yet.
6. Strong retail sales curbed the business inventory buildup to just a 0.1% increase m/o/m.
7. NFIB Small Business Optimism Index came in at 93.8, slightly above expectations.

Negatives:

1. Industrial production fell 0.4% m/o/m. The manufacturing component 0.4% as well.
2. U.S. stocks fell for the second straight week.
3. Jobless claims rose to 277k, up from 264k previously.
4. MBA mortgage application composite index fell 2.4% w/o/w, despite mortgage rates falling to their lowest level since January 2015.
5. Housing permits came in at an SAAR of 1.138M, up from the prior reading of 1.116M. However this is down 10.1% y/o/y

 What Is the Next Subprime ? - The Big Picture

What Is the Next Subprime ?

June 19, 2016 10:00am by Barry Ritholtz

My Sunday Washington Post Business Section column is out. This morning, we look at what investors have been afraid of “the next sub-prime,” and how those fears have impacted their portfolios.

This is not a market call, but an observation as to how people’s normal fears and risk aversion led them to miss large gains which would have made yup for their 2008-09 losses.

The print version had the full headline Priming your portfolio for a crisis? You may miss out on big gains, while the online version The real risk in the market is staying out of it.

Here’s an excerpt from the column:

“Some investors, having been repeatedly mangled by events not of their making, never fully recovered from that 57 percent crisis collapse in the stock market. They are now dedicated to not letting any of that ever happen to them again. No more drawdowns! Every market twitch is a sign! No part of the economy is safe from another collapse — and it’s coming!

This risk aversion has led them to miss a huge run-up in U.S. equities.

“Ignore the market recovery,” they exhorted almost as soon as it began in March 2009. “We are going to get shellacked even worse,” they said, 207 percent ago. They are suffering from a financial variant of post-traumatic stress disorder.”

Source:
The real risk in the market is staying out of it
Barry Ritholtz
Washington Post, June 19 2016
http://wapo.st/1UH9DwR