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Pay It Forward

This note was originally published at 8am on June 12, 2014 for Hedgeye subscribers.

“For of those to whom much is given, much is required.”

- President John F. Kennedy

 

Last night Keith and I took a private car service into Manhattan to watch the New York Rangers play the Los Angeles Kings in the fourth game of the Stanley Cup Finals.   Clearly, given such an experience, there is no doubt we are among the fortunate in this fine nation.

 

While most of you that are reading this have worked hard to achieve your position, we have all also received a helping hand along the way.  That helping hand may have been from a mentor, from a coach, or just being born somewhat lucky.  But, regardless, we all now have the opportunity to give back.

 

In the spirit of #PayingItForward, Hedgeye has formed a non-for-profit called Hedgeye Cares, which will be dedicated to giving back to charities in Connecticut.  Our inaugural event will be the 2014 Hedgeye Cares Golf Challenge to be held on September 16th at the Great River Golf Club in Milford, CT.   The proceeds from this event will go to Bridgeport Caribe Youth Leaders (BCYL).

Pay It Forward - Pay it forward chart1

BCYL is non-profit based in Bridgeport, CT, one of the more economically disadvantaged cities in Connecticut, and provides athletic and enhanced educational opportunities to youths aged 5 to 18 to whom much has not been given.   Currently, the program provides opportunities for some 500 kids in the Bridgeport area and we will be focused on expanding that number.

 

We hope you will consider joining us for a golf outing on September 16th and if you aren’t a golfer and or cannot make the event, we hope that you will consider sponsorship or auction donations and join us in #PayingItForward.  Details can be found here.

 

Back to the Global Macro Grind...

 

Speaking of giving, the Kings actually gave the Rangers a fighting chance last night by losing 2 -1, so the Stanley Cup Finals return to the City of Angels this Friday.  On some level, the Rangers have already exceeded expectations by winning last night.  Specifically, of the 320 NBA, MLB or NHL teams that have found themselves up 3 – 0 in a seven game series, 65% have gone on to win the next game and close out the series.

 

In terms of coming back and winning the entire series from a 3 – 0 deficit, it has only happened four times in 171 opportunities in the NHL.  For you math geeks, that equates to right around a 2.3% chance of overcoming a three game deficit.  So is a comeback probable? No. But as they say, hope springs eternal.

 

Speaking of probabilities, as equity investors we can be pretty sure that volatility on the SP500, as measured by the VIX, won’t stay below 11 for long.   Pull back a long term chart of the VIX on your Bloomberg this morning and you will see what we mean.   The last time the VIX hit this level was actually January of 2007. Thereafter, volatility made a steady climb before peaking in October 2008 at ~60.

 

So as investors, feel free to bet that VIX will go lower from here, but practically that is about as likely as Iran, Honduras, or Costa Rica winning the World Cup.  According to Oddshark.com, the odds on that are more than 1500 – 1.  Math doesn’t always work, just ask California Chrome, but over time life is much simpler when we play the odds.

 

Speaking of odds, the likelihood is high that many of us wouldn’t have bet on a Eurozone Industrial production number that came in well ahead of expectations this morning.   According to my colleague Ben Ryan:

 

“Industrial Production printed much stronger than expected (five-month high) for April with strength in energy and non-durable goods production which increased +2.5% and +2.1% respectively. Month-over-month, seasonally-adjusted industrial production increased +0.8%, beating expectations of +0.5%. Note that March was downwardly revised to -0.4%, so April’s increase follows a pretty bad number."

 

Following a bad number or not, that is the kind of number that we macro analysts underline with a big green highlighter (green being bullish) in our notebooks.

 

Even as European data continues to get better on the margin, we remain cautious, to say the least at current VIX levels, on the U.S. economy.  In the Chart of the Day, we’ve highlighted our U.S. GDP summary table going back two years to March 2012.

 

The key takeaway from this table is that healthcare spending was critical in supporting GDP in the 1st quarter.  With the census bureau’s release of the 1Q14 QSS survey yesterday, that estimate of healthcare spending saw a sharp negative reversal. 

 

According to my colleague Christian Drake:

 

Services consumption was the singular source of strength in the 1Q14 GDP report and most of that was from Healthcare Services which contributed +1.01% to GDP – that estimate of accelerating healthcare consumption just got revised to negative growth which will take the final GDP estimate for 1Q down to -2.0% plus or minus. 

 

The net-net of this is that the final estimate of 1Q GDP (June 25th) will be (even more) dismal and GDP is likely to miss the ever bullish consensus expectations for full year 2014.  When combined with increasing uncertainty in the 2014 mid-term elections, see Eric Cantor, we may just have an opportunity for you equity bears to #PayItForward in the coming months.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 2.44%-2.67%

SPX 1915-1951

RUT 1138-1178

VIX 10.74-13.34

USD 80.31-80.95

Gold 1240-1274 

 

Keep your head, stick on the ice and belief in the Rangers,

 

Daryl G. Jones

Director of Research 

 

Pay It Forward - chart of the day


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – June 26, 2014


As we look at today's setup for the S&P 500, the range is 41 points or 1.40% downside to 1932 and 0.69% upside to 1973.                                                  

                                                                             

SECTOR PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:

 

THE HEDGEYE DAILY OUTLOOK - 10

 

CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 2.08 from 2.08
  • VIX  closed at 11.59 1 day percent change of -4.45%

 

MACRO DATA POINTS (Bloomberg Estimates):               

  • 8:30am: Initial Jobless Claims, June 21, est 310k (prior 312k)
  • 8:30am: Personal Income, May, est. 0.4% (prior 0.3%)
  • 8:30am: Personal Spending, May, est. 0.4% (prior -0.1%)
  • 9:45am: Bloomberg Consumer Comfort, June 22 (prior 37.1)
  • 11am: Kansas City Fed Manufact., June, est. 10 (prior 10)
  • 8:30am: Fed’s Lacker speaks in Lynchburg, Va.
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas storage change
  • 1:05pm: Fed’s Bullard speaks in New York

 

GOVERNMENT:

    • House, Senate in session
    • Israeli Pres. Shimon Peres to receive Congressional Gold Medal
    • 9:15am: House Financial Services panel holds oversight hearing on SEC’s division of trading and markets
    • 9:30am: Senate Judiciary Committee markup of S. 2454, Satellite Television Access Reauthorization Act; S. 517, Unlocking Consumer Choice/Wireless Competition Act
    • 10am: Senate Finance Cmte Chairman Ron Wyden markup for proposal to shore up highway trust fund through end of year
    • 10:30am: Senate Appros Cmte markup of DHS appropriations bill
    • U.S. ELECTION WRAP: Election Night Preserves Old Guard

               

WHAT TO WATCH:

  • LSE to buy Frank Russell for $2.7b to boost indexes, ETF
  • Philip Morris cuts earnings forecast amid currency headwinds
  • BNP said to face yr-long dollar-clearing curb in U.S. case
  • Nabors unit, C&J Energy Services to combine in $2.86b deal
  • GoPro IPO raises $427m as shares price at top-end of range
  • China finds $15b of loans backed by false gold trades
  • Ukraine peace deal optimism wanes as cease-fire deadline looms
  • IRS’s Lerner weighed audit involving Grassley, e-mails show
  • BHP considers opportunities to export oil condensate from U.S.
  • Supreme Court to issue rulings

 

EARNINGS:

    • Accenture (ACN) 7:01am, $1.21
    • ConAgra Foods (CAG) 7:30am, $0.55
    • Empire (EMP/A CN) Bef-mkt, C$1.22 - Preview
    • Lennar (LEN) 6am, $0.51 - Preview
    • McCormick (MKC) 6:30am, $0.62
    • Nike (NKE) 4:15pm, $0.75 - Preview
    • Progress Software (PRGS) 4:15pm, $0.34
    • Schnitzer Steel Industries (SCHN) 8:30am, $0.06
    • Shaw Communications (SJR/B CN) 8am, C$0.49 - Preview
    • Steelcase (SCS) Bef-mkt, $0.16
    • Winnebago Industries (WGO) 7am, $0.39
    • Worthington Industries (WOR) 8:25am, $0.67

 

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • China Finds $15 Billion of Loans Backed by Falsified Gold Trades
  • Brent Trades Near One-Week Low as Iraq Supplies Rise; WTI Holds
  • U.S. Corn Glut Expanding at Fastest Pace Since 2005: Commodities
  • Cotton Futures Fall After Entering Bear Market on Global Supply
  • Gold Falls as Investors Weigh U.S. Economy Amid Slower Purchases
  • Aluminum Users Stick With LME as Alternative Yet to Gain Volume
  • Steel Rebar Climbs as Ore Posts Record Gain on China Property
  • China’s Gold Imports From Hong Kong Drop as Yuan Rate Swings
  • Stronger Indian Gold Demand to Support Prices in 2H: Macquarie
  • Goldman Says Shale Gas Boom Driving Fear Out of Market: Energy
  • Danske Bank Says Brent May Slip to $110/Bbl as Iraq Oil Stable
  • Iraq Crude Untouched by Violence Means Options Seen Too Bullish
  • El Nino Has 60% Chance of Starting by End of August, UN Says
  • California Drought Means Record Produce Prices: Chart of the Day
  • Rubber in Tokyo Climbs to 2-Month High as China Inventory Falls

 

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 6

 

GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EUROPEAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


LULU – Cliff Notes of Our Best Ideas Call

Takeaway: Here’s why we think Chip’s activist campaign will fail miserably, and why it’s ultimately good for shareholders.

Conclusion: Today we hosted a conference call to discuss the rationale behind why we added LULU to our Best Ideas list as a long after the stock’s latest collapse. As we’ve said before, the call right now has nothing to do with our confidence in the business or the team running it. This is a company in a defendable category with an outstanding brand, a $95bn addressable market, and a realizable $4-$5bn revenue stream over 5-years. But the catch is that it’s still sitting on a $500mm management team and operating structure.  The good news is that never in LULU’s history has there ever been a path to creating value, and that’s due to the sometimes painful, and usually embarrassing presence of its founder, Chip Wilson. But we think that the Board structure that he created will ultimately lead to him outright failing in his current attempt to regain control of the company. That is likely to be a catalyst for one of many forms of change, which we explored in our presentation and deck.  We plucked out a few of the more salient slides that we think are worth considering. Let us know if you’d like the replay and the full materials.

 

The LULU Bracket

This diagram is noisy. It’s supposed to be. Start reading it on the left with the decision of whether or not Chip Wilson wins control of the Board We very generously gave him 20% probability. But in reality he’ll be lucky to get 10%. If he loses, which he will, we think that one of two outcomes is most likely; a) he sells his stock (35% chance) – representing 27.7% of shares outstanding, or b) there’s a deal – 10% likelihood of a buyout, or 20% chance of an acquisition. When all is said and done, about 80% of the outcomes get us to a price well above $41.

 

LULU – Cliff Notes of Our Best Ideas Call - lulu1

 

Outcomes, As We See Them

1)      Management Team Upgrade (49% probability): Each scenario results in a potential management upgrade, but the biggest likelihood is if Wilson sells his stock. All in, we get to a 49% chance of a meaningful change in management (including putting in place a high caliber CEO). This company needs better executives, and a lot more of them. This is a team that we think would proactively invest in systems needed to more appropriately discount product – something LULU sorely needs – and tackle its competitors head on instead of clinging on to a ridiculous hope of a perma 55% Gross Margin. The way it is being run today, the company is on its way to becoming Coach. We firmly believe changing that path is not a very difficult one. All in, this scenario gets us back to the discussion of $3-$4 in earnings power, or a $60-$100 stock (20x $3.00, and 25x $4.00).
 

2)      Deal (30% probability): The biggest barrier to a deal getting done in the past has been that Chip didn’t want it to happen. Now he’s likely searching for one. Our sense on Wilson is that he feels handcuffed by LULU. He’s not allowed to participate in anything having to do with the company aside from attend Board meetings, but he’s too big a shareholder to go off and start another brand (something he’s actually very good at) due to his non-compete. If he can’t gain control, he could look to get the company sold. We think that a buyout with a PE partner is not very likely – as there’s not a ton of private buyers that would take out a high margin company at 15x EBITDA. But we think that the set of strategic buyers is a) far more expansive and b) less price-sensitive.
 

3)      Status Quo (21% probability): This outcome pretty much stinks. The reality for LULU is that a status quo management team and status quo operating plan results in a far less than status quo stock price. We see about $10 downside to $30-32 if this is the case ($1.50 in EPS – 15x p/e and 10x EBITDA). This is the outcome that would cause us to pull the plug on our call – though we don’t think this will come to fruition.

 

LULU – Cliff Notes of Our Best Ideas Call - LULU2

 

Board Considerations

There’s a few reasons why Chip will likely not regain control of the Board.

1)      Giving up the title of Chairman in late 2013 is the worst thing Chip could have done. We think that was one of the final moves in a game of chess the real Board was playing with him. He agrees to step down from being Chairman if Laurent Potdevin gets the green light to be CEO. Potdevin is likely not the guy for this job, but it was a great move in hindsight by the Board.
 

2)      Why? Only the CEO, Chairman or a majority of the Board can call a special vote at LULU. Chip cannot do it. He literally has a better shot at selling the company outright than he does in calling a simple special Board meeting.
 

3)      There are 10 Board members, and three are clearly on ‘Team Chip’. But the Board has an offensive weapon in that it is authorized to have between 3 and 15 Board seats. All the Board needs is a simple majority (which Chip likely will not be included in) and it can appoint up to five new Directors -- none of whom are likely to be aligned with Wilson.
 

4)      Better yet, there are staggered seats with three year terms. So if Board members are appointed today, he or she doesn't have to be voted on by shareholders until 2017.
 

5)      All in, Chip’s ownership has been steadily shrinking, but his influence has been shrinking faster. He knows this. All the more reason to make a move to get out.
 

LULU – Cliff Notes of Our Best Ideas Call - lulu3

 

Who’s A Buyer?

We think that there’s a lot of companies that want to own LULU, but unfortunately, not a lot of companies can afford to do the deal at $8bn. We calculated the leverage for a host of suitors pre and post transaction, and also looked at year 1 accretion and dilution for each company. The punchline for us is that LULU is not likely to be bought by an American company. We’re thinking German, French or Japanese.

a)      Nike: NKE won’t buy what it thinks it can build for less money. Whether you agree with them or not is irrelevant. They think they can beat LULU organically, so they won’t buy it.
 

b)      Adidas: AdiBok needs it, can afford it, and couldn’t care less about near-term dilution. This makes a ton of sense.
 

c)       UnderArmour: This makes zero sense strategically or financially. I’m surprised I’m asked this so often.
 

d)      VFC: This would be a big nut for VFC to digest, but they could afford it – barely. VFC has gotten less value-conscious in recent years (i.e. TBL) so maybe it’s a possibility. But a dark horse for sure.
 

e)      PVH: This is a company that needs a deal like LULU, but it would crush PVH financially. Tough luck Manny.
 

f)       Fast Retailing: The Japanese owner of Uniqlo is looking to aggressively expand into the US, and needs to diversify away from its mall retail fashion push. The fit makes sense, the accretion is a no brainer even past $70, and let’s not forget that Fast was almost on the hook for buying J Crew in March for $5bn until it saw how bad Mickey’s business was trending.
 

g)      Kering: CEO is on the tape saying he wants to buy sports brands to augment Puma, Tretorn and Volcom. KER could digest LULU in a heartbeat. French company might keep Laurent on board, as well.
 

h)      GPS: This one is another consideration – albeit a long shot. It would take GPS’ debt to total capital to about 65%, which is likely far above the Fisher family’s comfort level. Perhaps GPS will be content chipping away at LULU with Athleta, which is crushing it.

 

LULU – Cliff Notes of Our Best Ideas Call - lulu4

LULU – Cliff Notes of Our Best Ideas Call - lulu5

 

LULU – Cliff Notes of Our Best Ideas Call - lulu6

LULU – Cliff Notes of Our Best Ideas Call - lulu7


investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

Energy Markets Muddling Along

Takeaway: Market sentiment suggests investors are preparing for the next geopolitical catalyst

Brent has now closed in the red 3 out of the last 4 days but remains within 1% of year-to-date highs reached last Thursday: 

 

Energy Markets Muddling Along - Performance Data Oil and Gas

 

Despite the relatively light volumes and inactivity over the last several days, BRENT, WTI, and Natural Gas are flashing bullish @Hedgeye TREND signals: 

 

Energy Markets Muddling Along - WTI Trend Chart

 

Energy Markets Muddling Along - Brent Trend Chart

 

Energy Markets Muddling Along - Nat. Gas Trend Chart

 

With the week-over-week increase, investors at NYMEX have the most bullish exposure of 2014. Weekly data from the CTFC detailing futures and options positions shows investors are leaning long 479K contracts in BRENT futures, a level more than 2 standard deviations above the trailing twelve-month average. Net futures and options positions increased significantly moving into this week: +8.9% for BRENT and +8.1% for Natural Gas. 

 

Energy Markets Muddling Along - Oil Sentiment Chart

 

Energy Markets Muddling Along - Oil sentiment Table

 

With all of uncertainty in global energy markets, implied volatility in BRENT spot contracts spiked last week and has held its level, hovering slightly above 1 standard deviation from its trailing 12-month average.

 

The week-over-week increase in bullish sentiment and implied volatility, coupled with relatively lighter volumes, points to the uncertainty in the next geopolitical catalyst that may roil supply lines.

 

Energy Markets Muddling Along - Volume Brent WTI Nat. Gas

 

Energy Markets Muddling Along - Implied Vol. Table

 

Energy Markets Muddling Along - Implied Volatility Chart Brent

 

 

The Hedgeye Macro team will be hosting an expert call featuring Dr. Meghan O'Sullivan, Kirkpatrick Professor of the Practice of International Affairs and Director of the Geopolitics of Energy Project at Harvard University's Kennedy School. The call will be on Friday, June 27th at 1:00pm EDT. We hope to gain a better understanding of the regional tension in the Middle East from someone who has firsthand experience:

 

Call Details

 

Meghan served as special assistant to George W. Bush and National Security Advisor for Iraq and Afghanistan from 2004-2007. She has spent two years in Iraq, most recently in the fall of 2008 at the conclusion of the security agreement and strategic framework agreement between Washington and the government of Iraq. Prior to her current post, Meghan was a senior director for strategic planning and southwest Asia in the NSC as well as political advisor to the coalition provisional authority administrator and deputy director for governance in Baghdad.

Please ping  for more information on joining the call.

 

Ben Ryan

Analyst

 

 

 


NKE – Consider the World Cup Biorhythm

Takeaway: 23x p/e is a tough risk/reward for a company that can barely grow EPS when the brand is hotter than ever.

We’re no more or less excited about owning Nike into the 4Q print to be reported after the close on Thursday. A few thoughts…

  1. Revenue Looks Good: We could see a slight beat on the top line. The company guided towards a high single digit rate. The brand still has solid momentum in the US and Western Europe. In ‘Nike Speak’ high-single digit sales guidance equals 11-12%. The Street is at 9.6%.
  2. Gross Margin Expectations Appropriately High: The Street is already looking for a 44.7% Gross Margin, which is 75bps ahead of last year and represents a meaningful sequential pick-up in the 2-year trend. We’re seeing a shift toward higher GM jurisdictions (which could also help tax rate), so this is a reasonable expectation. But we’d be surprised by much more – especially given that inventories ended the last quarter +15%.
  3. Need SG&A to Shine – and It Won’t: So with a likely slight sales beat, and in-line GM, that leaves it all up to SG&A to save the day.  The problem is that in all our years covering Nike, we have never seen the company spend money at the clip (even relative to size) that we’re seeing today. Nike is one of the best steward’s of capital in this industry, so it’s earned the benefit of the doubt as it relates to its capital allocation process which will ultimately result in increased cash flow at some point down the road. But with the company spending an estimated $100mm-$150mm on World Cup, we can’t exactly bank on this being the quarter for an SG&A beat. Let’s consider that number for a minute. This coming quarter, UnderArmour will spend about $55mm in marketing on EVERYTHING. Nike will spend 3x that on one sporting event.
  4. The World Cup Factor: A few people have told us “there’s no way Nike misses during World Cup”. That’s probably true. There’s no way it will allow itself to be in the financial press as disappointing while the biggest sporting match in the world is being played out . But mind you that Nike has not beaten by more than a penny in each of the past three World Cups.
  5. Nike’s biorhythm; The problem is that the Cup is always played in conjunction with Nike reporting its fourth fiscal quarter. Aside from Nike spending huge sums of capital on this event, you need to take into account Nike’s own internal financial biorhythm.  The same factors that lead to conservative goal setting between regional GMs and the C-Suite (and subsequent EPS smoking in quarters 1 through 3 also lead to muted upside in Q4). Why? If you are a business unit head at Nike, you have to fight for a given SG&A budget in a given year. If you don’t spend every last penny, then the chance of getting a similar (or larger) budget next year is slim to none. We’ve all heard the stories about what most people would consider excessive spending at Nike (ie. hiring rock bands to play at happy hour for your department). Most of those stories are true, and almost all happen in the fourth quarter.  The point is, if there is a quarter where you’re looking for NKE to beat on the SG&A line, 4Q probably won’t be the one – especially one where World Cup is being played in the back yard of Nike’s highest-profile National Team – Brazil.
  6. Guidance Not Headed Higher: The company already issued preliminary guidance for the May ’15 year “at or above our high-single-digit target range.“  It won’t come out and take guidance higher when the year is only four weeks old. They won’t take guidance down, either. But there’s an 80% chance it sticks with its previous comment, 15% chance it backs away, and 5% it guides higher.  

 

We’re not averse to owning Nike for someone who has an extremely long duration. But there’s no way we can justify putting money to work here for a company that is barely growing earnings when the brand is hotter than ever.  With the stock at 23x next year’s earnings, we simply think that there’s much better risk/reward elsewhere.  

 

NKE – Consider the World Cup Biorhythm  - nke financials


Poll of the Day Recap: 58% Voted Yes and say Fed Easing is Back on the Table

Takeaway: 58% voted YES, 42% voted NO

The US economy contracted a steep 2.9% in the first quarter, the government reported this morning, a decline that took many by surprise, but not Keith McCullough and the Macro team here at Hedgeye. They have been making the #GrowthSlowing call for months.

 

They also expect the Fed to react, writing today, “With respect to 2014, the Fed will continue to surprise investors by incrementally easing as the year progresses. An example of this is last week’s rhetorical easing via extending rate hike guidance. A cessation of tapering at the September 16-17 FOMC meeting is not out of the question (then the Fed will likely have to cut their 2014 growth forecasts – again).”

 

That leads us to today’s poll question.

 

Does today's GDP stink bomb put Fed easing (more cowbell!) back on the table?

 

Poll of the Day Recap: 58% Voted Yes and say Fed Easing is Back on the Table - Dovish Hawkish

 

At the time of this post, 58% voted YES, 42% voted NO.

 

Voters who believe YES the GDP print put Fed easing back on the table reasoned:

  • The Fed will continue the easing beyond original plans, but not in the form of buying T-Bills, mortgages, etc. Fed will continue to taper down to zero and then ease through some backdoor method not so visible to the markets, i.e., the EU buys T-Bills and in turn Fed buys ECB debt somewhat behind the scenes. All IMHO.
  • The Fed can't help itself. At the first sign (in their minds) of any problem, they'll revert to more easing. Plus, I thought Janet Yellen was very dovish when she spoke last week.
  • We've built a habit out of easing, and weaning off of that will be nearly impossible since it's produced results in terms of stabilizing the markets.

Those who voted NO Fed easing is not back on the table has this to say:

  • No a change in the monetary policy will only confuse the markets. By the way the GDP number is backward looking, in theory the FED is looking forward and they are seeing a better economy in the future (of course they could be wrong as they have been so many times in the past). So no, IMO they will stay put.
  • Yellen has a clear runway to stay the course. Any bumps in the road can be attributed to the prior Fed (OK, so she was co-chair, but that's only "co") and both the political will - and more important stock prices - seem to want her to continue to taper and beyond.
  • Although very bad, the data is incredibly skewed by the drop in healthcare spending. A cynic would say this is to help flatten the 2Q final print when we'll see a big healthcare spend reversion just a few weeks before mid-term elections.
  • GDP is looking in the rear-view mirror. The Fed will focus on what's happening this quarter and next. By all accounts, we're seeing some level of recovery, albeit choppy. As such, I think the Fed stays the course and keeps tapering.


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.

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