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THE HEDGEYE DAILY OUTLOOK

 

TODAY’S S&P 500 SET-UP – January 19, 2012


As we look at today’s set up for the S&P 500, the range is 20 points or -1.38% downside to 1290 and 0.15% upside to 1310. 

 

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

THE HEDGEYE DAILY OUTLOOK - 3

 

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 1773 (1092) 
  • VOLUME: NYSE 797.74 (-1.58%)
  • VIX:  20.89 -5.90% YTD PERFORMANCE: -10.73%
  • SPX PUT/CALL RATIO: 1.67 from 1.42 (+17.61%)

 

CREDIT/ECONOMIC MARKET LOOK:


RATE CYCLE – this is something we talked about a lot in clients meetings in NYC for the last 2-days. This is very bullish for the US Dollar in terms of monetary policy differentials – all of Asia and Latin America are in easing mode after being hawkish while Bernanke should have been (throughout 2010). Brazil just cut by another 50bps; Philippines cut for 1st time since 09 (joining Indonesia, Thailand, Australia, etc). Bullish for Global Equities vs 2011.

  • TED SPREAD: 54.09
  • 3-MONTH T-BILL YIELD: 0.03%
  • 10-Year: 1.89 from 1.90
  • YIELD CURVE: 1.67 from 1.67

 

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: ECB president Draghi press conference with Sultan Bin Nasser al-Suwaidi of United Arab Emirates central bank
  • 8:30am: CPI (M/m), Dec., est. 0.1% (prior 0.0%)
  • 8:30am: Housing Starts, Dec., est. 680k (prior 685k)
  • 8:30am: Building Permits, Dec., est. 680k (prior 685k (revised)
  • 8:30am: Jobless Claims, week Jan. 14, est. 384k (prior 399k)
  • 9:45am: Bloomberg Consumer Comfort, week of Jan. 15
  • 10am: Freddie Mac 30-yr mortgage
  • 10:00am: Philadelphia Fed., Jan., est. 10.3 (prior 6.8 (revised)
  • 10:30am: EIA Natural gas storage
  • 11am: DoE inventories
  • 1:00pm: U.S. to sell $15b 10-Yr TIPS

 

WHAT TO WATCH: 

  • Eastman Kodak filed for bankruptcy protection from creditors, listing assets of $5.1b, debt of $6.8b
  • Bristol-Myers, AstraZeneca failed to win FDA clearance to sell first in new class of experimental diabetes pills as regulators sought more data on medicine’s safety
  • BankUnited said to decide to remain independent as takeover offers fall short of its expectations
  • Greece’s govt. in second day of talks with private creditors on accord that would slash nation’s debt
  • HUD Secretary Shaun Donovan, DoJ official set to meet with state AGs next week to rally support for proposed settlement with banks over foreclosure practices
  • TransCanada’s Keystone pipeline seen moving ahead on alternative route
  • Kinder Morgan said to be considering piece-by-piece sale of El Paso’s oil-exploration business as offers for entire operation due this week: WSJ
  • President Obama said to consider nominating Larry Summers to lead World Bank
  • Hedge funds may sue Greece in European Court of Human Rights to make good on its bond payments: NYT
  • No U.S. IPOs expected to price today

EARNINGS:

    • Huntington Bancshares (HBAN) 5:55 a.m., $0.14
    • BB&T (BBT) 6 a.m., $0.53
    • Knight Capital Group (KCG) 6 a.m., $0.25
    • UnitedHealth Group (UNH) 6 a.m., $1.04
    • BlackRock (BLK) 6:30 a.m., $2.98
    • Southwest Airlines Co (LUV) 6:50 a.m., $0.08
    • Bank of America (BAC) 7 a.m., $0.13
    • Johnson Controls (JCI) 7 a.m., $0.62
    • Morgan Stanley (MS) 7:15 a.m., $(0.57)
    • Rockwell Collins (COL) 7:30 a.m., $0.84
    • Fairchild Semiconductor (FCS) 7:30 a.m., $0.16
    • Freeport-McMoRan Copper & Gold (FCX) 8 a.m., $0.61
    • Union Pacific (UNP) 8 a.m., $1.82
    • PPG Industries (PPG) 8:11 a.m., $1.27
    • Progressive /The (PGR) 8:27 a.m., $0.35
    • Cubist Pharmaceuticals (CBST) 4 p.m., $0.33
    • Flextronics (FLEX) 4:01 p.m., $0.20
    • Google (GOOG) 4:02 p.m., $10.49
    • Capital One Financial (COF) 4:05 p.m., $1.55
    • Intel (INTC) 4:05 p.m., $0.61
    • Intuitive Surgical (ISRG) 4:05 p.m., $3.34
    • People’s United Financial (PBCT) 4:05 p.m., $0.19
    • American Express Co (AXP) 4:06 p.m., $0.99
    • International Business Machines (IBM) 4:06 p.m., $4.62
    • Microsoft (MSFT) 4:06 p.m., $0.76
    • Associated Banc-corp (ASBC) 4:10 p.m., $0.23
    • Skyworks Solutions (SWKS) 4:30 p.m., $0.50

 

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

 

COPPER – when the Doctor gives us the signal, we listen. That breakout my model signaled last week > $3.45/lb was as pure as a cold Canadian beer on the 1st of July. Copper up another +1.4% this morning in what should be considered nothing short of a massive squeeze = +11% YTD.

  • Sugar Traders Bet Biggest Glut in Five Years Ending: Commodities
  • Oil Gains in New York on Shrinking Stockpiles, Iranian Risks
  • Copper Climbs on Speculation China May Relax Curbs on Credit
  • Thai Rice Production Seen Climbing to Record After Floods
  • Gold Advances to a 1-Month High as Euro Rallies, Demand Gains
  • Corn Advances on ‘Irreversible’ Damage to Crops in Argentina
  • Cocoa Gains as West Africa Supply May Start to Slow; Sugar Rises
  • U.S. May Expand Corn Output to Offset Argentina Loss, FAO Says
  • Palm Oil Imports by Pakistan May Plunge on Truckers’ Strike
  • Super Bowl Chicken Wings Flying to Record High: Chart of the Day
  • Shell Venture Spurs Cosan’s Investment-Grade Bid: Brazil Credit
  • Oil Grab in Falkland Islands Seen Tripling U.K. Reserves: Energy
  • Cholera Risk Means Mounting Costs for Hapag-Lloyd, Torm: Freight
  • COMMODITIES DAYBOOK: Crude Rises on Shrinking Supply, Iran Risk
  • Food Demand to Stay ‘Strong’ Amid Global Slowdown, Viterra Says
  • Palm Oil Prices to Be ‘Firm’ in 2012 on Crude Oil, Soybeans
  • Aluminum May Extend Rally to $2,295 Per Ton: Technical Analysis

THE HEDGEYE DAILY OUTLOOK - 4

 

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 5

 

 

EUROPEAN MARKETS


THE HEDGEYE DAILY OUTLOOK - 6

 

 

ASIAN MARKETS


CHINA – get the slope of the money supply and lending cycle in China right (finally easing instead of tightening), you’ll get a lot of things Chinese Growth right. Shanghai Comp and Hang Seng both up another +1.3% respectively overnight on “news” that China’s top 5 banks are going to ease lending reqs. End of the world thesis = bad YTD.

 

THE HEDGEYE DAILY OUTLOOK - 7

 

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 8

 

 

 

The Hedgeye Macro Team


THE HBM: GMCR, PNRA, SONC, BAGL, DPZ, KKD, MCD, CAKE, RUTH, BJRI, BWLD

THE HEDGEYE BREAKFAST MENU


MACRO

 

MBA MORTGAGE APPLICATIONS SURVEY – With the yield on the 10-year U.S. government bond is hovering around 1.87%, the yields are translating to lower mortgage interest rates for refinancing and purchasing homes. The contract rate for 30-year fixed-rate conforming mortgages finished at 4.06%, down 5 basis points from its week ago level, and down 2 basis points from four weeks ago.  The mortgage applications composite index surged 23.1% in the week ending January 13, 2012, with big gains in both the purchase and refinance indices.

 

THE HBM: GMCR, PNRA, SONC, BAGL, DPZ, KKD, MCD, CAKE, RUTH, BJRI, BWLD - mba mortgage apps

 

 

ICSC SALES TRENDS - ICSC Research anticipates January comparable-store sales will grow by 2% to 3% for the month compared with a hefty 4.7% pace in January 2011.  For last week, the ICSC chain store sales index remained weak, with sales reduced by warm weather, but supported bygift car redemption.  The index gained only 0.1% following the prior week’s record 5.4% decline. Year-over-year growth also recovered only a small portion of its decline, rising from 2.8% to 3%.

 

MACRO COMMENTS FROM OUR CEO - Top 3 (most read) story on Bloomberg this morn is the World Bank cutting its US and Global GDP estimates – thanks for coming out guys:

  1. GROWTH – I hosted a dinner w/ 10 PMs at Patroon last night and it was clear that the most contrarian call I have right now is the opposite of the call I was making at the same dinner 12 months ago – I think US Growth estimates/expectations are too low for 2012. World Bank cutting US growth to 2.2% for 2012 (down from 3%) when  they should be raising estimates from 1.5% > 2.2%.
  2. GERMANY – both German Bunds and German stocks are flat out ripping at this pt of 2012. With the DAX now up +8.2% already for the YTD and 3.4B in 2yr notes coming in at 0.17%, the yield on Bunds is now lower than USTs and return on DAX for YTD higher than the SP500. A move > 6502 in the DAX (its long-term TAIL) could make this move a much bigger one. Germany likes a lower Euro.
  3. SENTIMENT – plenty are still frozen by this melt-up. Being net short is a train wreck position for 2012 YTD and being really long everything that’s really working means you had to buy it when it was getting clocked NOV/DEC. Beta chasing remains reality in the career risk mgt exercise; VIX 22.20 is a bearish TREND; and the II Sentiment survey is leaning too bullish at 2000 bps wide.

 

Something for everyone out there, which is why I think this US stock market’s range remains very trade-able w/ a bullish bias provided that my long-term TAIL of 1267 holds.

 

 

SUB-SECTOR PERFORMANCE


THE HBM: GMCR, PNRA, SONC, BAGL, DPZ, KKD, MCD, CAKE, RUTH, BJRI, BWLD - subsector fbr

 

 

QUICK SERVICE


NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

 

GMCR – got a big boost from some positive comments and scanner data

 

PNRA – I suspect PNRA continues to benefit from falling wheat prices and strong sales trends

 

SONC – After three long, painful years SONC might be bottoming.  I spent a lot of time at ICR trying to find out what the catalyst could be and walked away empty handed.  The set up for the long side is looking better, with valuation and sentiment both positive. The overriding negative is the strength of McDonalds and its current sales trends.

 

BAGL – New breakfast items or is it that wheat is in a bearish formation?

 

DPZ – After being up 90% over the past year its was going to be hard for DPZ to say enough yesterday to keep the momentum going. 

 

KKD – Despite yesterdays performance KKD has outperformed the S&P 500 by 360bps YTD.

 

OTHER QSR NEWS

 

MUSINGS FROM THE RESTAURANT FINANCE MONITOR – Where Do Fast Casual Customers Come From?  “During his presentation at the ICR XChange investors' conference last week, Smashburger CEO Dave Prokupek discussed the results of a survey the burger chain did of its customers—specifically, where they would have gone had they not gone to Smashburger. The results were revealing.  A few of Smashburger's customers, 17 percent, said they would have gone to a fast-food restaurant, while 32 percent said they would have gone to a casual-dining concept. This proves that casual dining chains are indeed more likely to lose customers to a fast-casual restaurant. More interesting was this: more than half, 51 percent, said they would have gone to another fast-casual restaurant, such as a burrito chain or a bakery-cafe concept.”

 

MCD has increased the price of some products in China by 0.50 to 2 yuan starting Jan. 12

 

 

FULL SERVICE

 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

 

CAKE – The ICSC sales trends remain weak and CAKE has a 0.8 positive correlation to that data set.

 

RUTH – continues very strong volume for a name with limited liquidity

 

For the second day in a row these two names are highlighted on the down side.  So far in 2012 BWLD and BJRI and the two worst performing stocks in the FSR space.

 

BJRI – Continues to struggle following the ICR performance

 

BWLD – Despite the whispers of strong top line trends in 4Q, this is out favorite short for 2012

 

 

OTHER FSR NEWS

 

DIN - A lawsuit challenging Applebee’s tip credit policies for servers and bartenders will go to trial later this year after the U.S. Supreme Court on Tuesday declined to hear an attempt to stop the case.  The Supreme Court’s move leaves intact a lower court’s ruling that will allow the Applebee’s tip-credit case to proceed to trial in September - NRN

 

THE HBM: GMCR, PNRA, SONC, BAGL, DPZ, KKD, MCD, CAKE, RUTH, BJRI, BWLD - stocks

 

 

Howard Penney

Managing Director

            

 

Rory Green

Analyst


THE M3: MSC; FERRY TERMINAL

The Macau Metro Monitor, January 18, 2012

 

STUDIO CITY CASINO STILL UNCERTAIN: GOV'T Macau Daily Times

Macau's secretary for Transport and Public Works, Lau Si lo, said gaming for the Macao Studio City project has not yet been approved.  “The approval is not completed. We can still require that the project goes according to the 2008 plan.”  The official also repeatedly rejected the existence of any ‘secret deal’ with MPEL.

 

PENINSULA FERRY TERMINAL STAYS PUT... FOR NOW Macau Business

The Outer Harbour Ferry Terminal will not be relocated before 2017, said the head of the Maritime Administration, Susana Wong Soi Man.  “I believe there will be no change to its location within the next five years but we need to have alternatives for the future.”  Renovation plans for the Outer Harbour Ferry Terminal is expected in 3Q 2012.


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

THE HEDGEYE DAILY OUTLOOK

 

TODAY’S S&P 500 SET-UP – January 18, 2012

 

As we look at today’s set up for the S&P 500, the range is 14 points or -0.59% downside to 1286 and 0.49% upside to 1300. 

 

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

THE HEDGEYE DAILY OUTLOOK - 3

 

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 682 (1604) 
  • VOLUME: NYSE 810.58 (-2.09%)
  • VIX:  22.20 +6.17% YTD PERFORMANCE: -5.13%
  • SPX PUT/CALL RATIO: 1.42 from 1.82 (-21.98%)

 

CREDIT/ECONOMIC MARKET LOOK:

 

GROWTH – we hosted a dinner w/ 10 PMs at Patroon last night and it was clear that the most contrarian call we have right now is the opposite of the call we were making at the same dinner 12 months ago – We think US Growth estimates/expectations are too low for 2012. World Bank cutting US growth to 2.2% for 2012 (down from 3%) when they should be raising estimates from 1.5% > 2.2%.

 

SENTIMENT – plenty are still frozen by this melt-up. Being net short is a train wreck position for 2012 YTD and being really long everything that’s really working means you had to buy it when it was getting clocked NOV/DEC. Beta chasing remains reality in the career risk mgt exercise; VIX 22.20 is a bearish TREND; and the II Sentiment survey is leaning too bullish at 2000 bps wide.

  • TED SPREAD: 54.20
  • 3-MONTH T-BILL YIELD: 0.03%
  • 10-Year: 1.85 from 1.87
  • YIELD CURVE: 1.63 from 1.64

 

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage, week of Jan. 13 (prior 4.5%)
  • 7:45am/8:55am: ICSC/Redbook weekly retail sales
  • 8:30am: PPI (M/m), Dec., est. 0.1% (prior 0.3%)
  • 9:00am: Net Long-term TIC Flows, Nov., est. $40.0b (prior $4.8b)
  • 9:15am: Industrial Production, Dec., est. 0.5% (prior -0.2%)
  • 9:15am: Capacity Utilization, Dec., est. 78.1% (prior 77.8%)
  • 9:30am: Fed’s Tarullo to testify on Volcker rule in Congress
  • 10am: NAHB Housing Market Index, Jan., est. 22 (prior 21)
  • 11:30am: U.S. to sell $30b 4-week bills

 

WHAT TO WATCH: 

  • World Bank cuts global growth forecast to 2.5% vs 3.6% (biggest cut in 3 yrs); says recession in the euro region threatens to exacerbate slowdown in emerging markets such as India, Mexico
  • Goldman reports 4Q results pre-mkt; analysts see weaker trading, investment banking rev. driving higher comp. expense ratio, potential negative oper. leverage
  • Greece close to deal with private creditors that would give them cash, securities with mkt value of ~32c per euro of govt. debt, said member of creditors’ cmte
  • Jerry Yang stepping down from Yahoo board of directors, its management; may remove barrier to Asia asset sale
  • Sumitomo Mitsui Financial will invest $93m in Moelis
  • Industrial production probably increased 0.5% in Dec., after declining 0.2% in Nov., economists’ est. ahead of today’s report
  • ASML forecast 1Q higher bookings; 4Q rev. beat est.; Taiwan Semi forecast 1Q rev. above est.
  • Google joins Wikipedia and other websites in opposing Hollywood-backed Congress anti-piracy measures
  • Samsung Electronics says it’s not interested in buying RIM
  • Apple filed another suit in Germany, seeking to ban sales of Samsung Electronics’s smartphones
  • IEA cuts estimate for global oil demand growth to to 1.1mbbl/d
  • Countrywide Financial co-founder Angelo Mozilo home loans to be examined after letter released by House Democrat yesterday

  EARNINGS:

      • Bank of New York (BK) 6:30 a.m., $0.53
      • PNC Financial (PNC) 6:33 a.m., $1.49
      • US Bancorp (USB) 6:45 a.m., $0.63
      • Viterra (VT CN) 7 a.m., $0.09
      • State Street (STT) 7:06 a.m., $0.94
      • Goldman Sachs (GS) 7:30 a.m., $1.23
      • Northern Trust (NTRS) 7:30 a.m., $0.68
      • Fastenal Co (FAST) 7:50 a.m., $0.29
      • Charles Schwab (SCHW) 8:45 a.m., $0.13
      • Plexus (PLXS) 4 p.m., $0.48
      • Wintrust Financial (WTFC) 4:01 p.m., $0.37
      • CLARCOR (CLC) 4:02 p.m., $0.67
      • F5 Networks (FFIV) 4:05 p.m., $1.01
      • Kinder Morgan (KMI) 4:05 p.m., $0.29
      • Kinder Morgan Energy Partners (KMP) 4:05 p.m., $0.61
      • eBay (EBAY) 4:15 p.m., $0.57
      • Xilinx (XLNX) 4:20 p.m., $0.37
      • SLM (SLM) 4:30 p.m., $0.49
      • HB Fuller Co (FUL) 5:30 p.m., $0.59
      • CVB Financial (CVBF) 8:45 p.m., $0.21

 

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

 

THE HEDGEYE DAILY OUTLOOK - 4

 

 

CURRENCIES

  • South Africa Corn Export Push May Exhaust Stocks: Commodities
  • Oil Rises to Three-Day High as Iran Tension Counters Economy
  • Sugar Rises on Tight Supply Before Brazil’s Crop; Coffee Climbs
  • Soybeans Drop as Rains in South America May Help Revive Crops
  • Gold May Climb in London on IMF Lending Boost, Weaker Dollar
  • Copper Falls 0.1% in London Trading, to $8,190.50 a Metric Ton
  • IEA Cuts 2012 Oil Demand Forecast, Warns of Further Decline
  • Gazprom Price Retreat Offers EON Hope as Euro Crisis Cuts Demand
  • Testing of Orange Juice for Fungicide May Continue Through July
  • U.S. Feedlots Buy Fewer Cattle as Supplies Tighten, Survey Says
  • Pentagon Aids Biofuels With $12 Million Buy: Chart of the Day
  • LontohCoal May Double H.K. IPO to $1 Billion for Zimbabwe Mine
  • Myanmar Buoyed by $8.6 Billion Port as Sanctions Abate: Freight
  • COMMODITIES DAYBOOK: BHP Iron Ore Production Rises to Record
  • Oil Inventories Climb a Fourth Week in Survey: Energy Markets
  • Record Petrobras-Vale Yield Gap Spurred by Supply: Brazil Credit
  • BHP Iron Ore Production Rises to Record, Beating Estimates

THE HEDGEYE DAILY OUTLOOK - 5

 

 

EUROPEAN MARKETS

 

GERMANY – both German Bunds and German stocks are flat out ripping at this pt of 2012. With the DAX now up +8.2% already for the YTD and 3.4B in 2yr notes coming in at 0.17%, the yield on Bunds is now lower than USTs and return on DAX for YTD higher than the SP500. A move > 6502 in the DAX (its long-term TAIL) could make this move a much bigger one. Germany likes a lower Euro.


THE HEDGEYE DAILY OUTLOOK - 6

 


ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 7

 

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 8

 

 

The Hedgeye Macro Team


THE POWER OF CIRCUMSTANCE

This note was originally published at 8am on January 13, 2012. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“If we had 8% unemployment, Keynes would be back.  We must remember that economists are not necessarily the creatures of great thought but of circumstance.  Keynes would not have written ‘The General Theory’ except in the Great Depression.”

-John Kenneth Galbraith, 1999

 

Today’s quote of the day is typical of Galbraith; he expressed his views with a masterful economy of language.   Ten years after Galbraith made his prediction that Keynes would be back in vogue if unemployment reached 8%, his prophecy came true.  Robert Skidelsky began writing “Keynes: Return of the Master” – on January 1st, 1999 – as unemployment was just under 8% and trending higher.  The Wall Street Journal also devoted a full-page spread to Keynes a week after Skidelsky put pen to paper. 

 

It’s difficult to understand the motivations of academic economists.  The measure of success for an economist, some might argue, is whether or not one’s theory stands the test of time and remains part of future policy debates.  The difficulty with this, as Skidelsky highlights, is that circumstances may permit your ideas to be heard outside of academia but they will almost certainly demand that theories will, as policies, be applied in a vulgarized form.  The discrediting of economists in recent times has prompted many public figures to disavow all ties with the profession; Tim Geithner is just one example.

 

Despite the provocative title of his aforementioned book, Skidelsky is realistic and honest about the role of circumstance in the ascension of Keynes and others to the throne of economics that some would place them on, stating that “just as Keynes succeeded politically because unemployment was the problem of the 1930s, Friedman succeeded politically because inflation was the problem of the 1970s.”  The rise of Barrack Obama and, perhaps, the ever-perseverant Mitt Romney are also permitted more by the fickle preferences of their time than the genius of their ideas.  Thankfully, politicians and the policies they implement are answerable to voters.  One long term positive emerging in the United States is what could be called the bottoming process of political participation in this country.  Obama’s engagement of the youth vote through social media was a political revelation of a scale not seen since Reagan went public with his appeal for voters to contact their state representatives to support Federal Tax Reduction Legislation in July 1981.  The Great Communicator understood the value of engendering a feeling of inclusivity among the electorate and he warned Congress of the importance of public opinion, also in 1981, by quoting Teddy Roosevelt’s message to Congress 80 years prior, “The American people are slow to wrath but when their wrath is once kindled, it burns like a consuming flame.”  The aftermath of the Great Recession has bred a new strain of voter: young, confused and dissatisfied with their vision of the future.  The internet is greasing the wheel of mobilization as circumstance drives voters to wonder what factors are behind the country’s predicaments and how they can be changed.

 

A Gallup poll conducted in July 2011 posed the following question to Americans: What do you think is the most important problem facing this country today?  The top three responses were “economy in general”, “jobs”, and “federal debt/deficit”, making up 31%, 27%, and 16% of the responses, respectively.  While Obama has recorded some significant coups in terms of the War on Terror and has taken pride in health care legislation passed on his watch, what the vast majority of Americans want is the economy to be back on track.  The longer the “Jobless Recovery” continues, the less relevant other topics become.

 

We believe that a strong dollar is the first step to rejuvenating American confidence. 71% of GDP is consumption and a stronger dollar increases purchasing power.  GDP growth has strengthened sequentially as the greenback appreciated and we expect that to continue.  Politicians in Washington need to recognize the strong dollar and the impact it has had on the economy recently.  The short term impact for jobs has been unmistakably positive.

 

Our Chart of the Day highlights this point clearly.  The two meaningful positive moves in the US Dollar Index since 2009 have coincided with improvements in employment growth.  One of the many positives of democracy is that, in the end, the mandate is made clear.  The People’s directive to Washington, D.C. is to create jobs.  Economists that debate the optimal method by which to achieve this end are not incentivized to compromise.  There are neither direct consequences of their words nor any clock hurrying them through their thought processes.  Politicians are not being afforded such shelter from scrutiny.  To compromise is the most human of actions and, whether they like it or not, many political figures in Washington are going to be forced to do just that from now on.  The circumstances – and the People – demand it.

 

Have a great weekend,

Rory Green

 

THE POWER OF CIRCUMSTANCE - strong dollar

 

THE POWER OF CIRCUMSTANCE - VP 1 13



Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.32%
  • SHORT SIGNALS 78.48%
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