Peter Boockvar

Well, as human nature never changes, sentiment ALWAYS follows price. And the Bulls are back now across the board. I say ‘across the board’ because now the AAII sentiment survey has joined the heavily leaning bull side of the Investors Intelligence data. II yesterday said bulls rose to 48.6 from 47.1 and that is the most since December 2021. Bears have shrunk to 25.7 from 27.2. That’s the least since one year ago. The AAII survey said Bulls rose to the highest since December 2021 also, at 37.5, up 7.6 pts. It bottomed at 17.7 in mid September 2022. Bears fell to the lowest since November 2021 by 9.6 pts to 25. It was 52.3 a month and a half ago and peaked at 60.9 last September. 

Bottom line, from a contrarian perspective we now need to pay attention and while not extreme and standing room only, the bull boat is getting filled up. 

AAII Bulls

AAII Bears

It was out a few days ago but if you haven’t read the January 2023 Senior Loan Officer survey from the Fed, it’s worth doing because the higher cost of capital and slowing economic activity is clearly tightening things on both the lending and demand side for loans. I’ll include the link here but simplify it with these quotes, “Regarding loans to businesses, survey respondents on balance reported tighter standards and weaker demand for C&I loans to large, middle market, and small firms over the fourth quarter. Meanwhile, banks reported tighter standards and weaker demand for all commercial real estate loan categories.” 

“For loans to households, banks reported that lending standards tightened or remained basically unchanged across all categories of residential real estate loans and demand for these loans weakened. In addition, banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs). Standards tightened and demand weakened, on balance, for credit card, auto, and other consumer loans.” 

//www.federalreserve.gov/data/sloos/sloos-202301.htm

This all leads to further moderation in economic growth. 

We’re seeing a lift in European bonds, stocks and the euro after Germany said its January CPI rose less than expected. It was still up robustly, higher by .5% m/o/m and 9.2% y/o/y but that was less than the estimate of up 1.3% m/o/m and 10% y/o/y. Complicating the German CPI number has been the energy subsidies given to households and that here helped to keep a lid on inflation. Because of the difficulty in figuring out what inflation would be otherwise, the 10 yr German inflation breakeven is unchanged but bond yields are lower with the 10 yr down by 10 bps after 4 days of higher yields. This is leading to lower yields across the region and helping US Treasuries to bounce with yields lower. 

We’ve heard a lot of tough hawkish talk this week from ECB members who will be hiking another 50 bps in March. Today the Swedish Riksbank raised rates by 50 bps too to 3% as expected but talked tough too. Interesting, they are shifting their QE from letting bonds mature to now outright selling them so Swedish bonds are getting hammered today with 10 yr yield up 17 bps. They are also talking up the Krona, “If the Krona continues to be weak, it will be considerably more difficult for the Riksbank to sustainably return inflation to target. A stronger Krona would be desirable.” As for possibility for more rate hikes, “Inflation is far too high and has continued to rise. The policy rate will probably be raised further during the spring.” 

As seen with all the other consumer product companies, Pepsi said basically in their earnings release tthey had no change in volumes but an 11% rise in revenue, so all price. 

Here is what Disney (a stock we own) said about its parks and cruise business, so we can glean some macro color from their earnings call: “At domestic parks and experiences, significant revenue and operating income growth in the quarter was achieved despite purposefully reducing capacity during select peak holiday periods by approximately 20% vs pre-pandemic levels, in order to prioritize the guest experience. Per capita guest spend at our domestic parks also showed strong growth. Order to date park attendance at both Walt Disney World and Disneyland Resort are pacing above prior year. And based on reservation bookings, we expect to see this trend continue. Disney Cruise Line was also a meaningful contributor to the y/o/y increase in domestic operating income, reflecting higher occupancy in the existing fleet.”

Also of note, their international parks business picked up, particularly in Paris. I’m sure the Shanghai one will this current quarter.