United Kingdom – Prognosis Negative

Research Edge Position: Short the British Pound via FXB


We’ve maintained a bearish view on the UK since we began publishing research early last year and the data out late last week continues to provide confirmation for our thesis. It is noteworthy that the UK reported a -0.4% contraction in GDP in Q3 quarter-over-quarter, surprising forecasters that expected a modestly positive growth rate, and calling into question the ability of substantial stimulus programs issued by the Central Bank and government over the last months to right the economy.


The UK has now underperformed both Germany and France for two consecutive quarters, as the Eurozone’s largest economies returned to growth (+0.3% Q/Q) in Q2.  Italy already released its Q3 GDP at 1.0% Q/Q and we’ll be waiting for other countries to release their GDP figures in the coming weeks. Clearly the inability of PM Gordon Brown and Co. to lead the economy out of recession bodes not only poorly for his party which is fighting for reelection next year, but puts into question the Bank of England’s latest decision to not increase its 175 Billion Pound program to further aid the economy.  


The lack of confidence in management along with burgeoning government debt has encouraged Pounding the Pound (see chart below).  Friday’s GDP announcement put monster downward pressure on the Pound, sending it down 2.2% versus the Euro and 2.3% versus the USD intraday. Fortuitously, we shorted the Pound via FXB (British Pound Sterling Trust) on 10/16 in our model portfolio, a position we’re comfortable holding for a TRADE.


 A separate report out on Friday from the Statistics Office showed that industrial production declined 0.7% Q/Q, manufacturing contracted 0.2%, and construction fell 1.1%, a cocktail of negative data to add to rising unemployment and a annual inflation rate (+1.1%)  that is running higher than in the Eurozone (-0.3%), a bearish point as the economy comes off its bottom. In aggregate, the FTSE has underperformed the DAX and SP500 by a measurable spread for most of the year, a trend we expect to continue.



Matthew Hedrick


United Kingdom – Prognosis Negative - Pound1


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

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more