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SPECIAL FLASH CALL at 10:30am ET w/ Daniel Lacalle - Apocalypse Now (Or Not) In Greece?

Special contributor Daniel Lacalle will join Hedgeye’s European analyst Matt Hedrick and CEO Keith McCullough LIVE at 10:30am ET TODAY for a 15 minute flash call (plus Q&A) to discuss Greece’s ongoing ‘crisis.’

 

Lacalle is a renowned European economist, who previously worked at PIMCO and was a PM at Ecofin Global Oil & Gas Fund and Citadel.  He is the author of Life In The Financial Markets and The Energy World Is Flat and a lecturer for the IE Business School and Master MEMFI at UNED University.

 

KEY TOPICS ON THE CALL WILL INCLUDE 

  • Market implications of the closure of Greece’s banks and its markets
  • How far off is a Greek proposal with its creditors?  What concessions will be made? 
  • What’s the outcome of the Eurozone’s kick-the-can-down-the-road stance with Greece?
  • Will Greek fallout impact other member states?
  • Where does the EUR/USD go from here?

 

CALL DETAILS

Ping for more information.

 

SPECIAL FLASH CALL at 10:30am ET w/ Daniel Lacalle - Apocalypse Now (Or Not) In Greece? - 1. SOS


The Macro Show Replay | June 29, 2015

 


Macro's Visceral Edge

This note was originally published at 8am on June 15, 2015 for Hedgeye subscribers.

“Power’s flow and ebb can have a visceral edge.”

-Moises Naim

 

Macro markets tend to make you feel something. The people who are at wit’s end trying to bend and smooth economic gravity have feelings too. This weekend I found the perfect book for some of their central-planning-power lost. Ironically, it’s called The End of Power.

 

Now that the world has seen almost 600 rate cuts (since Lehman collapsed) and we’re in the midst of a #LateCycle slowdown, is this the beginning of that end? Or is it just my cyclical confirmation bias that Moises Naim tapped into?

 

“Long established, big players are increasingly being challenged by newer and smaller ones… what they are fighting so desperately to get and keep – is slipping away. Power is decaying.” –Naim (pg 1)

 

Macro's Visceral Edge - campfire cartoon 10.31.2014

 

Back to the Global Macro Grind

 

Isn’t that a nice way to start your week? After doing California last week, I’m in London today. I’m looking forward to seeing whether or not European investors have a visceral response to both the US cycle and secular demographic data #slowing.

 

#NoWorries, mates.

 

The way this macro show in the US goes is pretty straightforward. Just read the Barron’s Roundtable for a consensus on that. Yep, growth slowed due to “one offs… weather… etc.” but it will “bounce back” – so back end load those growth and earnings forecasts in 2015.

 

As you can see in the Chart of the Day, after the Old Wall and its media got blindsided by the Q1 earnings season (smoked in January) it proceeded to cut earnings estimates for the 1st half of 2015. In the 2nd half (and 2016) it’s right back to rainbows and puppy dogs.

 

Notwithstanding that you’d have to see things like producer prices (commodities, etc.) ramp big (from here) while:

 

A) the Dollar is rising due to

B) consensus expectations of a “rate hike”,

 

we’re still calling for both a cyclical and secular (demographic) slowdown.

 

Newsflash: to get things like Oil prices and PPI (producer prices) up year-over-year, what the Fed actually needs to do is devalue the Dollar and start talking up no-rate-hike. In other words, the bull case for stocks, commodities, and bonds is #SlowerForLonger.

 

Don’t buy that narrative? Or does it just make you feel something that just ain’t right? Macro markets don’t feel anything – they just tick. Last week’s catalyst for the Dow Jones Industrial Index (DIA) to be up for the 1st week in the last 4 was a DOWN DOLLAR:

 

  1. US Dollar Index  was down -1.4% last week (down -4.5% in the last 3 months)
  2. Dow, SP500, and Russell 2000 +0.3%, +0.1%, and +0.3% on the week, respectively
  3. Commodities (CRB Index) = +0.4% week-over-week (+4.1% in the last 3 months)
  4. Oil (WTI) = +1.4% week-over-week (+14.7% in the last 3 months)
  5. Gold = +1.0% week-over-week (+2.2% in the last 3 months)

 

Oh yeah, baby – how do you feel about that? And how, by the way, would you feel if the Fed does precisely what the Fed has been doing since that ugly March employment data point (released at the beginning of April, arresting the USD at epic 10 month highs)?

 

Need #MoarrrEasing? If you are in the business of never seeing a US asset price depression/recession again, I think the answer to that question is yes.

 

I think they called it The Great Recession. In reality it was the last time the US cycle slowed, but the 1st time that its core consumer spending cohort (35-54 Year old #Boomers) saw the year-over-year % change in population growth go negative.

 

(hint: 35-54 yr-old population growth is still negative and will be until the year 2020 – so I’m all in on a 2020 rate-hike)

 

Oh, and the meeting of that cyclical and secular slowdown (2007-2009) resulted in a “36.3% drop in the incomes of the top 1% of earners in the Unites States, compared to an 11.6% drop for the remaining 99%” (The End of Power, pg 6).

 

I’m not a boomer. So don’t blame me. Don’t blame my Mom & Dad just because they are Canadian either, eh. Instead, if the Fed hikes “just because it’s time”, you can congratulate Yellen for closing the “inequality gap” – because the pace of asset #deflation will be visceral.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 2.12-2.50%

SPX 2072-2104
Nikkei 20061-20767
VIX 12.61-15.65
USD 94.01-95.98
YEN 122.61-125.46
Oil (WTI) 57.78-61.80

Gold 1167-1198

 

Best of luck out there this week,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Macro's Visceral Edge - Chart of the Day


real-time alerts

real edge in real-time

This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.

Off The Lows?

Client Talking Points

EUROPE

They had the DAX and CAC down -5% at 2:00AM ET; now they’re down -3%. The levels obviously matter inasmuch as liquidity does – TREND levels to watch = DAX 11,375, CAC 4980, IBEX 11,199. 

YIELDS

Not “off the lows” for Greek, Italian, Spanish, etc. yields (Italy =25 basis points to 2.39% is finally > UST 10YR of 2.34%), and they’re high-grading with a big bid to UST + German Bunds too (10YR down -18 basis points on the day to 0.74%); this is the 4th time UST 2YR has failed to “breakout” > 0.75%.

S&P

Not “off the lows” for Greek, Italian, Spanish, etc. yields (Italy =25 basis points to 2.39% is finally > UST 10YR of 2.34%), and they’re high-grading with a big bid to UST + German Bunds too (10YR -18 basis points on the day to 0.74%); this is the 4th time UST 2YR has failed to “breakout” > 0.75%.

 

**The Macro Show - CLICK HERE to watch today's edition at 8:30AM ET, with special update on Greece.

Asset Allocation

CASH 44% US EQUITIES 6%
INTL EQUITIES 10% COMMODITIES 10%
FIXED INCOME 30% INTL CURRENCIES 0%

Top Long Ideas

Company Ticker Sector Duration
PENN

Not “off the lows” for Greek, Italian, Spanish, etc. yields (Italy =25 basis points to 2.39% is finally > UST 10YR of 2.34%), and they’re high-grading with a big bid to UST + German Bunds too (10YR -18 basis points on the day to 0.74%); this is the 4th time UST 2YR has failed to “breakout” > 0.75%.

ITB

Not “off the lows” for Greek, Italian, Spanish, etc. yields (Italy =25 basis points to 2.39% is finally > UST 10YR of 2.34%), and they’re high-grading with a big bid to UST + German Bunds too (10YR -18 basis points on the day to 0.74%); this is the 4th time UST 2YR has failed to “breakout” > 0.75%.

TLT

After a Fed-fueled week of strength in slow-growth, yield-chasing asset classes and long duration fixed income, both the Dollar and interest rates re-couped their losses from Fed Week. The dollar declined, rates increased, and as a result, those long of gold took some pain. Will this continue? Will a long, sustained rate liftoff ensue? We don’t think so. We continue to repeat that the chance of further downward revisions to forward looking growth estimates from the Federal Reserve and consensus macro is much more likely than not. The attempted suspension of economic gravity from policy makers weakens the currency and puts pressure on bond yields. We remain long of this set-up with gold and long-duration fixed income.

Three for the Road

TWEET OF THE DAY

Greek Drama https://app.hedgeye.com/insights/44923-greek-drama-a-hedgeye-contributor-view… via @hedgeye

@KeithMcCullough

QUOTE OF THE DAY

If you do not expect the unexpected you will not find it, for it is not to be reached by search or trail.

Heraclitus

STAT OF THE DAY

Greece has received the equivalent of 214% of its GDP in aid from the Eurozone, ten times more, relative to gross domestic product, than Germany after the Second World War.


CHART OF THE DAY: Off The Lows? #Broken...

Editor's Note: Below is a brief excerpt and chart from today's morning strategy note written by Hedgeye CEO Keith McCullough. Click here to subscribe and access the whole thing.

 

...Both levels and liquidity will matter most this morning. At 2AM EST, European Equity Futures had both the German DAX and French CAC indices down around -5% - four hours later, they were “off the lows” at -3%.

 

But unless you can contextualize risk (price, volume, volatility) across multiple-durations and cycles, what precisely does down -3% or -5% (or US Equity Futures down 35 or 22 handles) actually mean?

 

CHART OF THE DAY: Off The Lows? #Broken... - zz 06.29.15 chart


Off The Lows?

***JOIN US LIVE AT 8:30AM ET FOR A SPECIAL GREECE EDITION OF THE MACRO SHOW WITH HEDGEYE CEO KEITH MCCULLOUGH AND EUROPEAN ANALYST MATT HEDRICK. CLICK HERE.

 

“You learn a lot more from the lows because it makes you pay attention to what you are doing.”

-John Elway

 

What are you doing this morning? I assume what you need to do is a function of what you already did. Were you set up for Greece being “saved” again? Or were you taking down your exposure on last week’s European “bounce”?

 

Like any world class athlete, you have to really pay attention to what you are doing when risk is rising. From a cyclical investor’s perspective, that risk typically manifests at the end of a cycle, not the beginning.

 

With China, Europe, and the US slowing (at the same time) into the back half of 2015, you may very well have to get used to the manic media talking about markets being “off the lows” this summer – that’s what happens on the way down.

 

Off The Lows? - z storm

 

Back the Global Macro Grind

 

Both levels and liquidity will matter most this morning. At 2AM EST, European Equity Futures had both the German DAX and French CAC indices down around -5% - four hours later, they were “off the lows” at -3%.

 

But unless you can contextualize risk (price, volume, volatility) across multiple-durations and cycles, what precisely does down -3% or -5% (or US Equity Futures down 35 or 22 handles) actually mean?

 

If your #process is chasing weekly charts and trivial moving monkey averages, would you say that on a week-over-week basis nothing actually happened within the aforementioned % moves?

 

  1. EuroStoxx600 was +2.9% last week
  2. Germany’s DAX was +4.1% last week
  3. Greece was +16.0% last week

 

Or no? As long as the Greeks don’t let their markets (or banks) open, no worries, I guess. Oh, and if you’re one of the poor bastards who doesn’t trade markets and just wants some of his money back, too bad – you get 60 euros, max, per/day.

 

On liquidity, #newsflash: there is none.

 

So that’s a pretty easy risk to contextualize in both equity and fixed income terms. But what about the levels? Are European Equities undergoing what we call a Bullish-to-Bearish TREND Phase Transition?

 

Since A) we have slower-for-longer estimates for real European GDP growth than consensus for 2H of 2015 and B) my risk management signal says this recent 3-month breakdown (TREND duration signals) is real – for now my answer is yes.

 

To review some key European Equity market TREND levels that have broken:

 

  1. German DAX = 11,375
  2. French CAC = 4,780
  3. Spanish IBEX = 11,199

 

Implied by those signals (since I have price, volume, and volatility calculated within each) is RISING VOLUME (on down days) and RISING VOLATILITY in terms of how I measure it within my immediate-term risk range #process.

 

The other obvious thing the manic-financial-media tends to miss when its pundits navel gaze at equity indices being “off the lows” is cross-asset-class risk management correlations and signals.

 

Look at this morning’s move in Global Bond Yields, for example:

 

  1. GERMAN BUNDS: after ramping to lower-highs again last week, 10yr Bund Yields -18bps to 0.74%
  2. ITALIAN BONDS: after making higher-lows (again) last week, 10yr Italian Yields +25bps to 2.39%
  3. US TREASURIES: after making lower-highs (again) last week, UST 10yr Yield -13bps to 2.34%

 

This all came after a horrific week for US Treasuries where the short-end of the curve (2yr Yield) was, allegedly, “breaking out” (for the 4th time since December) but failed, miserably, again at 0.75%, falling back to 0.64% this morning.

 

While last week was a Dollar Up, Rates Up (USD +1.5% on the week vs. the Euro) week, this morning is the ole Dollar Up (small), Rates Down (hard) move that reminds you of the mother of all risks you saw from SEP-JAN. #Deflation

 

Got Debt #Deflation?

 

Greek Bond Yields (10yr) are +346bps this morning to 13.94%. No Sir “growth is back” chart chaser, that is not “off the lows.”

 

I think we’ll all learn a lot from this momentum-chasing-cycle slowing; especially if you didn’t learn anything from the last two US cycle tops (2000 and 2007) or the long-term-secular one that’s driving Europe toward another devaluation.

 

Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:

 

UST 10yr Yield 2.18-2.48% (bearish)

SPX 2079-2110 (bearish)
DAX 10,5 (bearish)
Nikkei 191 (bullish)
VIX 13.70-16.07 (bullish)
USD 93.96-97.11 (neutral)
EUR/USD 1.10-1.14 (neutral)
YEN 122.25-124.99 (bearish)
Oil (WTI) 57.87-61.13 (neutral)

Nat Gas 2.66-2.89 (neutral)

Gold 1165-1205 (bullish)
Copper 2.57-2.68 (bearish)

 

Best of luck out there this week,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Off The Lows? - zz 06.29.15 chart


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.32%
  • SHORT SIGNALS 78.48%
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