Not Interested in Sweater Sets? - Europe’s Mania Continues

Position: Long Germany (EWG)


Hungary Turned the Wrong Way?


-In what appears like a last ditch effort to cut its public deficit and debt levels, Hungary’s PM Viktor Orban ordered the shift of $14 Billion (3 Trillion Forint) in assets from private pension funds to the state budget. The government’s move appears more akin to a Communist-era decision, and rightfully has investors spooked. The country’s main equity index (Budapest Stock Exchange Index) fell -3.2% today (or -10.7% in the last month) as the yield on the government’s 10 YR bond ran up to 8.1% versus 7.3% one week ago (see chart below).


Not Interested in Sweater Sets?  - Europe’s Mania Continues - mh1


Hungary, which was the first EU member to obtain an IMF-led bailout in 2008, did cut its budget deficit from 9.3% of GDP in 2006 to 4.4% in 2009, however strong disagreements between the government and the IMF have ensued over the years.  The latest disagreement includes Orban’s decision to tax certain industries, including the financial, energy, retail and telecommunication industries until at least 2014 to cut the deficit to 3% of GDP. In particular, a 16% bank flat tax was met with extreme push-back, especially considering that western European banks make up the lion’s share of the country’s banks. According to Economy Minister Gyorgy Matolcsy, the government plans to announce spending cuts of as much as 800 billion forint at the end of February, without providing details.



Spain’s Pain, cont.


-As the sovereign debt contagion remains front and center in Europe, it’s worth note that yields in Spanish and Irish bonds rose 10 and 18bps respectively, day-over-day, outpacing yields from their peer countries that were flat to up +2bps day-over-day. Suffice it to say, we see a long road ahead of Sovereign Debt in Europe. 


Not Interested in Sweater Sets?  - Europe’s Mania Continues - mh2



Irish PM Cowen’s Majority Ever Slimmer


-Initial results show that Sinn Fein candidate Pearse Doherty won a 40% majority in a by-election on Thursday to take a seat away from PM Cowen’s ruling party, Fianna Fail, to narrow his party’s parliamentary majority to two seats.


Doherty’s opposition to Cowen’s proposed austerity plan for 2011, to be decided by vote on December 7th,  will put further pressure on the passage of a €6 Billion austerity package, which is conditional for an estimate €85 Billion EU/IMF bailout agreement. As we’ve stated before, this is an explicit sign that Cowen is being Voted Off the Island, and will test the waters as the country attempts to secure a bailout.  We expect volatility in Irish markets into and out of the December 7th date.



Euro Broken


-The EUR-USD broke its TREND line of support today of $1.33. As our TREND lines back test with the highest probably in our models, this is certainly a meaningful move to keep front and center on your screens!  (We booked a gain in the Hedgeye Portfolio on our Euro short position via the etf FXE on 11/23).


Not Interested in Sweater Sets?  - Europe’s Mania Continues - mh3



Portugal (Finally) Passes Austerity


-Today, Portugal’s parliament approved the 2011 budget, scheduled to shave €5 Billion off the budget next year through such measures as:

  • 5% wage cut for public workers earning more than $2,005/month
  • Hiring freeze of government jobs
  • Raising VAT 2% to 23%

The long awaited passage of the budget from PM Jose Socrates’ Socialist government still leaves a main question unanswered—to what extent can the government reach its target to reduce the deficit from 9.3% in 2009 to 4.6% in 2011?  Data indicates that the budget gap increased +1.8% in the first ten months of this year.  The next weeks will tell just how quickly dominoes can fall…


Matthew Hedrick


Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more