DIRTY WORD

During our Q3 themes call we talked about inflation returning in Q4.  We are not calling for STAGFLATION but the possibility is there. 

As a result of sharply higher energy and food price increases, the headline producer price index rose for the third consecutive month.  After gains of 0.3% in April and 0.2% in May, the PPI rose 1.8% in June. The increase was above the consensus projection of 0.9%.  June's 1.8% advance is the largest since the 2.4% gain posted in November 2007.  The 6.6% rise in energy prices suggests that there is upside risk to June's consumer price index reading.

DIRTY WORD - USPPI

While the core PPI surged 0.5% -the biggest increase in almost a year,  almost all of this upside reflected a surge in car & truck prices which can be an unreliable indicator.  Not including autos, the core was up only about 0.1%.  Not so bad!

A Commerce Department report today showed U.S. retail sales rose in June, helped by incentives on autos and higher gasoline prices which boosted service-station receipts. The 0.6% increase was larger than forecast and was the biggest gain since January.  Importantly, excluding automobiles and gasoline, sales dropped for a fourth consecutive month.  

The headline retail sales number in June looks positive on the surface, but the recession has limited retail sales increases to only four of the past 12 months.  Most consumers continue to be cautious in the face of rising unemployment and falling home values.

So where do we go from here?  According to Bloomberg, GDP growth will average 1.5% in 2H09 after declining in 2Q09.  Betting that the consensus is nearly always wrong, the 1.5% GDP figure looks aggressive and the risk is to the downside. 

A soft economy in 4Q, coupled with our 4Q inflation call and the possibility of stagflation cannot be ruled out yet.

Howard W. Penney

Managing Director


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