Chart Of The Week: Chinese Bulls?


Position: Long China via the CAF (closed end fund)

 We're fairly certain that being bullish on China is no longer a unique concept. The question now is can consensus continue to be right?

Taking a step back, in December of last year one of our Top 3 Macro Themes for Q109' was "Chindia does not exist." While Indian industrial production growth has finally turned positive in recent months (see chart), The New Reality remains - China's absolute year-over-year industrial production growth continues to both beat expectations and outperform their Indian counterparts.

Today, as we start to coagulate our thoughts on Q3 Macro Themes, we are posed with a very different question than that which we asked ourselves 6 months ago. Calling China from here is no longer about the delta of growth improving and outrunning the rest of the world. Calling China from here is more about ascertaining whether or not they can keep this momentum going.

Last week's Chinese economic data provided the latest facts, and they support an answer of yes for the Chinese bull case. If half of being right on global demand recovering in 2009 was about Chinese demand re-accelerating, the other half was about REFLATION. At a price level, we are mindful that the latter will ultimately have a negative impact on the former.

May's China data showed a continued acceleration in growth (see chart, Chinese industrial production growth shot up to +9% y/y) alongside further deflation in Chinese Consumer Prices (CPI was -1.4% y/y). This is as near perfect an economic cocktail as you can get. But perfect is as perfect does, and we need to stay on top of REFLATION's impact on both potential Chinese inflation creep, and slowing growth.

For now, we remain bullish on China.


Keith R. McCullough
Chief Executive Officer


Chart Of The Week: Chinese Bulls? - china23

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

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