The above chart shows total outstanding Commercial & Industrial Loans (a proxy for bank lending to small and medium-sized business) over the past four months. After being relatively stagnant for most of the summer, C&I Loans have grown 2% in the past three weeks, bringing their year over year growth rate to a respectable 8.8%.
Since late 2010, C&I Loans have grown by fully one third, and are now very near their all-time high.
The continued and relatively strong growth of bank lending to businesses is a good omen for the future, since it reflects increased confidence on the part of banks and businesses. Capital goods orders may be sluggish (see previous post), but there are still bright spots to be found in the private sector.
ECRI Weekly Leading Index Rises
ReplyDelete"A measure of future U.S. economic growth rose to a three-week high while the annualized growth rate slipped to the lowest level in over a year.
The Economic Cycle Research Institute said its Weekly Leading Index stood at 131.1 in the week ended Oct. 18, up from 130.3 the prior week.
The index's annualized growth rate was 2.0 percent, the lowest since August 2012, down from 2.7 percent the previous week."
LIPPER FUND FLOW REPORT
ReplyDeleteWeekly 10/23/2013
Equity Fund Inflows $16.4 Bil; Taxable Bond Fund Inflows $3.1 Bil
xETFs - Equity Fund Inflows $6 Bil; Taxable Bond Fund Inflows $1.8 Bil
Weekly 10/16/2013 Equity Fund Inflows $12.7 Bil; Taxable Bond Fund Outflows -$1.4 Bil
xETFs - Equity Fund Inflows $2.2 Bil;
Taxable Bond Fund Outflows -$394 Mil
Weekly 10/09/2013 Equity Fund Outflows -$6.1 Bil; Taxable Bond Fund Outflows -$452 Mil
xETFs - Equity Fund Outflows -$142 Mil;
Taxable Bond Fund Inflows $959 Mil
Weekly 10/02/2013 Equity Fund Outflows -$3.1 Bil; Taxable Bond Fund Outflows -$2.2 Bil
xETFs - Equity Fund Outflows -$292 Mil;
Taxable Bond Fund Inflows $140 Mil
I think we will see C&I loans as long as commercial real estate values rise--if you have real estate, then you have collateral to pledge to get a loan....
ReplyDeleteSide note to Scott Grannis: What is amount of the Fed hoard of bonds acquired through QE?
Recently, you stated about $2.6 trillion, but this chart (see link below) shows the Fed's balance sheet near $4 trillion, and this paper by the S. Louis Fed puts QE at $3.7 trillion.
http://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
"Currently the U.S. real GDP is about 10% below its long-run trend (see Figure 2) and total asset purchases stand at $3.7 trillion (or less than 25% of GDP). Our model predicts that this level of asset purchases (even if permanent) would have little effect on aggregate output and
employment even though it could reduce the real interest rate significantly by 2 to 3 percentage points. These predictions are consistent with the empirical evidence."
http://research.stlouisfed.org/wp/2013/2013-028.pdf
So, what is the right number to put by QE?
Shaeffer's Investors Intelligence
ReplyDeleteA views of Mutual Fund Advisors:
Date...% Bullish... % Bearish
10/23......49.5........18.5
10/16......42.3........21.6
10/09......45.4........20.6
10/02......46.4........18.6
09/25......44.3........20.6
09/18......42.3........21.6
09/11......37.1........22.7
09/04......37.1........23.7
AAII Sentiment Survey Results as of 10/23/2013
ReplyDeleteHaving been about 40% Bearish in early September, these guys have followed the S&P 500 higher into Bullish territory. This is the highest they have been since the Spring of 2012. They have been skeptical throughout the 2013 Bull's ascent.
Bullish...49.2%
Neutral...33.2%
Bearish...17.6%
Change from last week:
Bullish: +2.9
Neutral: +4.4
Bearish: -7.3
Long-Term Average:
Bullish: 39.0%
Neutral: 30.5%
Bearish: 30.5%
I have been following Rogers' opinion since the early 1980s when he was interviewed in Barron's from time to time. I don't take what he says as gospel but when he announces that he is short the US market, I will sell a lot.
ReplyDeleteHere are a couple recent quotes from Jim Rogers, global investor and former partner of George Soros in their Quantum Fund.
October 3, 2013
Be Careful, You Are In A Fool's Paradise
"Be careful. The U.S. is the largest debtor nation in the history of the world. We may well have a big, big rally in the U.S. stock market, but it's not based on reality. I would encourage investors to know you're in a fool's paradise, be careful, and when people start singing praises, say, 'I've been to this party before, and I know know it's time to leave.'" - in CNBC.com
October 16, 2013
Fewer And Fewer Big Stocks Are Going Up
"Fewer and fewer big stocks are going up, which is what happened near the end of the last bubble in 1999. Now, I don't know how long this will go on, but it can't go on forever. That said, you can't really short this market either.
Asked when Rogers would go short he said: "If the market goes up 100% in the next 9 months, I would short it."
http://jimrogers-investments.blogspot.com/2013/10/be-careful-you-are-in-fools-paradise.html
Since Q3/08 the Fed has purchased about $2.6 trillion or so of bonds. Total Fed purchases (including everything prior to the QE period) are about $3.7 trillion. The Fed's balance sheet is about $3.7 trillion as a result of its purchases. Of that $3.7 trillion, about $1.1 trillion has been converted into currency, and the remainder mostly represents excess bank reserves held by banks.
ReplyDeletewhat really sticks out on those sentiment numbers are the % bearish. anything under 20% is kind of scary. obviously displays complacency. that said, I still maintain that timing stocks is impossible. you're either in it long term or out.
ReplyDeleteScott Grannis:
ReplyDeleteThanks for your answer.
$1.1 trillion in currency sounds like a lot...especially if people spend it, and it circulates.
At this point, do you contend that QE only goes into bank reserves, or it there a fraction that goes into currency?
BTW, the Fred chart below says there was $800 billion cash in circulation in 2008 and $1.2 trillion now...meaning that "only" $400 million in additional currency is in circulation since 2008 and the start of QE...
If the FRED chart holds water, then we still have an awful lot of QE that went somewhere besides into reserves....
http://research.stlouisfed.org/fred2/series/WCURCIR/
The Fed creates currency only on demand. Banks can exchange reserves for currency 1 to 1. But obviously no one holds currency, which pays nothing, unless they want to hold currency. The majority of the currency issued by the Fed is held overseas. If there is unwanted currency in the world, it comes back to the banks, and the banks will exchange it for reserves. So whatever amount of US currency there is in the world, that is equal to the world's demand for US currency.
ReplyDeleteScott--
ReplyDeleteThanks for the reply...
Well, you have settled this conversation by confusing me...
In any event, we can follow the numbers in the months ahead...the Fed is doing $85 billion a month in QE, and we can see what happens to bank reserves....
Why is the FBS buying 1/3 of a trillion in MBS this year?
ReplyDelete18 months of rising real estate prices and 3 3/8% mortgage rates not good enough?
All charts and economic figures should be QE adjusted...
I think most if not all the bank lending underway to is in support of Federally sponsored initiatives involving Detroit businesses, NSA projects, defense establishment projects, Washington DC development initiatives, IRS building construction, Homeland Security compound construction, TSA employee areas at airports, and so forth -- none of that money coming from banks is coming to Main Street USA -- banks only have enough money to fund private Federal development at this point -- the good news is that lending along Main Street can't get much worse at this point, so there's no reason for Main Streeters to fear future lending cuts...
ReplyDelete