The Global Macro Pants

Waking up in the early morning to a global macro investment process that you can hang your hat on will pay off in 2008. As many US centric investors are being forced to realize, many more factors affect global markets than their recent “one on one” with a US company’s CFO. It’s “Macro Time”, and successes will be born where proactive investment preparation meets opportunity.

Let’s put the global macro pants on and take a walk to Asia. Yesterday, we called out Thailand’s developing economic problems. This morning, in a sentence, I can show you the domestic political unrest associated with those problems. If you want to find where people’s emotions rest, follow the money. This morning’s headline from Bloomberg out of Thailand is as follows: “Thai protesters stormed Prime Minister Samak Sundaravej's office compound and occupied a state- run television station, meeting little police resistance as the government avoided violent clashes that might force its collapse”…

Thailand’s stock market closed down another -2% over night, and the Thai Baht hits new year to date lows, daily. While China’s stock market lost another -2.6% last night, taking its fall from the “its global this time” October 2007 highs to -61%, the point here is that the contagion associated with slowing growth and accelerating Asian inflation is starting to spread. The Thai Stock Exchange is down -25% now since May 21st. This is Southeast Asia’s 2nd largest economy. This chase to the Chinese YTD percentage declines is called geographic mean reversion.

Maybe we should all run out and “buy the dip” and scoop up some of them Asian Country ETF’s (Exchange Traded Funds) – uh, no. From Japan (EWJ), to Korea (EWY), to Taiwan (EWT), these snake oil salesman index products have provided everyone from the Harvard Endowment to Joe Globally Diversified nothing but headaches in the last 3 months. Does anyone remember the Asian currency crisis? The Korean Won is down -7.3% since mid July alone, and hitting its lowest level since 2004 this morning. Those who do not respect history’s lessons, are unfortunately doomed to repeat them.

Global growth is slowing faster than Wall Street understands. Stock markets are leading indicators, and you can pull up any Asian ETF and run the math on how far they have fallen in 2008. If you’re more of a short term trading type, don’t bother with the YTD numbers. Try a 5 day chart of Pakistan since Musharraf left – that’s down -14.5%, in a straight line.

As Asia slows, Europe is feeling it, big time. That’s one reason why the Euro currency is hitting a 6 month low versus the US Dollar this morning. London was closed for trading yesterday, but opened this morning’s session down -2%, breaking my short term momentum support level. The S&P 500 did the same yesterday. That level in the FTSE is 5412, and for the S&P 500 its 1274. When it’s “Macro Time”, I respect the math, above all else.

The Minister of Finance in Copenhagen definitely respects the math. This morning he is cutting Denmark’s economic growth forecasts well into 2009. His outlook suggests that economic stagflation is going to be a protracted process. Remember that Denmark was the 1st economy in the European Union to officially move into a recession. Now the dominos are falling. As cost of capital increases, globally, and access to it tightens, the “Trend” in Europe remains the same as that in the US. It’s negative, and deteriorating.

On a cheerier note, the full court media press is on Dick Fuld. So I won’t have to harp on his missing the macro call much longer, I hope. Fortunately, the short squeeze rumor of the Korean Development Bank buying Lehman didn’t come to fruition. The implications of Singapore owning Merrill Lynch, and Korea owning Lehman Brothers, are not those that will enhance Transparency in the US Financial system. As Asian growth slows, so will the currency adjusted growth of the cash in their “Sovereign” coffers. The US Dollar is now +8% since July 14th. I maintain that’s where you need to be. For now, US denominated cash, remains king.

Good luck out there today,

Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more