Transporting Narratives

“Great is exactly what it isn’t.”

-Wallace Stegner

 

For some reason Willie Nelson is ringing in my head this morning. I’m on the road again.

 

And going West is where that quote from Stegner comes from. My Angle of Repose for the next 3 days will be across the sunny State of California, where I’m looking forward to debating Institutional Investors on what is really going on out there.

 

US and Global #GrowthAccelerating is exactly what isn’t right now. A #LateCycle US Labor report only reiterates that.

Transporting Narratives - It s different cartoon 06.08.2015

 

Back to the Global Macro Grind

 

For we strategist types, Transporting Narratives is fun. Meeting to meeting, that is what we do. So let’s start this morning’s narrative with the Transportation stocks.

 

In macro strategy there are some leading indicators that even the most creative storyteller can’t convince you that “it’s different this time.” When we went bullish on US #GrowthAccelerating in 2013, the Dow Transports (IYT) index was breaking out to the upside.

 

Now, after 73 months of a US economic expansion, it’s breaking down:

 

  1. Transports (IYT) led losers yesterday, down -2.1% vs. SPY -0.65%
  2. Transports (IYT) have been leading losers for the last month, -4.9%
  3. Transports (IYT) are now -8.7% for 2015 YTD

 

So what say you Mr. Global Growth Is Back man?

 

For those of us who have been on both the buy and sell side of the game, what we say with our #Timestamped positions speaks louder than our slide decks. On last week’s bounce, we signaled short the Transports (IYT) in Real-Time Alerts.

 

Here are my Top 3 ways to get out of the way on both US and Global #GrowthSlowing:

 

  1. Short Industrials (XLI) which continue to suck wind -2% YTD
  2. Short Financials (XLF) which failed (again) yesterday and remain in the red -0.4% YTD
  3. Short Transports (IYT) -8.7% YTD

 

Did I mention the Transports?

 

Actually there is a 4th way to express the Fed being more dovish (again) at the June 17th meeting, which is to take weakness in the US Dollar as a correlated tax on a #LateCycle and slowing US consumer (XRT).

 

Don’t forget that the US Retail Sales Growth cycle peaked in Q4 of 2014 at +4.5-4.7% year-over-year growth and has since slowed in its most recent reading (April) to +0.9% due to the sunny East coast weather. Did it rain enough in May?

 

Nah, let’s not talk about that data point or a 46.2 Chicago PMI reading for the month of May, when we can actually go back to a Durable Goods reading of -2.3% year-over-year in April and hope that the Fed didn’t see that one either.

 

Instead, let’s look away from the US data and see what Global Equities have been signaling for the last month:

 

  1. Russia -12%
  2. Portugal -9%
  3. Greece -8%
  4. Brazil -7%
  5. Turkey -7%
  6. Germany -7%
  7. Indonesia -6%
  8. Taiwan -5%

 

To be fair, I guess the Dow Transports are “outperforming” Taiwanese Stocks by 30 basis points in the last month. That must be the all-systems go on global growth signal, eh?

 

Oh, then there’s the narrative that “bond yields are rising because growth and inflation are back.”

 

On that data front this morning:

 

  1. Swiss consumer prices (CPI) deflated -1.2% year-over-year in May
  2. Chinese producer prices (PPI) deflated -4.6% year-over-year in May
  3. Chinese CPI slowed from +1.5% y/y in April to +1.2% in May

 

There’s definitely a narrative out there (perpetuated by Mario Draghi which I think was a huge mistake) that both the European and US economies are accelerating. We hear it in investor meetings every day (I think our competition is on the road too).

 

Unfortunately for the bullish growth narrative, both the economic data and market moves discounting future growth expectations are reminding you that #accelerating is exactly what it isn’t.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 2.03-2.41%

SPX 2067-2104
VIX 13.75-15.90
USD 94.64-96.41
EUR/USD 1.08-1.13
Oil (WTI) 56.99-61.50

Gold 1170-1200

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Transporting Narratives - Z 06.09.15 chart


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

Got Process? Zero Hedge Sells Fear, Not Truth

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

read more