Banks Highlighted in December
This Data Brief is a reprint from the original release in December 2022, making note of weakness in the banking sector, months before the domestic bank issues of March, 2023.
Insightful Data That Can Give You An Edge. The Data Brief from Patrick T Bulger. Do You Have The Edge or Has Your Competition Beat You to It?
December 20, 2022
A Data Brief from a Distilled Perspective
by Patrick T Bulger
Tangible View: 2023 First Half View: Fundamentals Still Eroding.
Regional Fed Reports are trending negatively.
Manufacturing and Service PMI readings have moved into contraction territory.
Consumer Condition: Credit card usage continues to rise while savings rate falls and I look for this to weigh on retail earnings.
Earnings warnings/forward guidance: I look for a downward trend to continue.
Consumer Sentiment out of the University of Michigan survey has continued to hover around cyclical lows.
Job cut announcements have picked up. Philadelphia Federal Reserve reported a downward revision of 1.1 million jobs from the Monthly Jobs Report. 1.1 million jobs reported in the “Big Deal” report Monthly that were not there. Wow.
Inflation: Wages, Transportation, Energy and Shelter, although down from extreme peaks, still remain elevated from pre-2021-22 Surge. Peak inflation is a distraction that appears to be behind us. I'm still paying more.
Deflation is a condition in which prices are falling and demand can also fall, equating to less pricing power, lower margins and less earnings. This can accompany a demand destruction. Stay tuned.
Housing: National Association of Home builders (NAHB) numbers declined to levels relative to '90, '07, and Covid, each of which were economically disrupted times.
Collateral in a declining economic environment, with rates that have increased, may affect the landscape negatively.
Think of banks, Fed, real estate, 2008, UK pensions last month, Credit Swiss. Are we next?
Curves remain inverted with size.
Fed hikes normally work with a lag in potential slowdown effects. Media Alert, there seems to be a repetitive theme of pauses and pivots. I stand firmly in the camp of “It's Never Different”. Know your history.
Bank Balance Sheets: How is the 2-3% mortgage portfolio doing with rates near 5%? Collateral? Not mentioned in Media.
Global Bank Credit Swiss, Bank of England, Swiss National Bank , Bank of Japan seem to have quelled their issues for now, and the dollar has returned to levels seen in Q2. Black Swan risk does still remain high in this view.
A few words on China, the view is that there will be no rescue of global economics from China. Internal debt issues, development debt pressure, consumer high exposure to real estate, runs on banks & fear of covid still grip. The view here is that ReOpen is another media conjure.
Short Term View is volatile and speculative. No Santa sightings yet. As always, speculation is not conviction nor core prudent investment, yet seems to be the major focus of most media.
The Actual Numbers can tell a story,
What you don't see can be bad, what the numbers say can be opportunistic.
Be Early, Be Prepared, If You Care.
Reach out on LinkedIn https://www.linkedin.com/in/patricktbulger/
The goal is to be profitable through what is viewed as normal, declining, end of cycle data.
The positioning remains defensive as economic trends are viewed as down, while volatility is expected to rise.
Hence, remaining macro defensive with micro flexibility is viewed as prudent.
Find out how portfolios are being positioned for the forward look and why.
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