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The Week Ahead

The Economic Data calendar for the week of the 17th of August through the 21st of August is full of critical releases and events.  Here is a snapshot of some of the headline numbers that we will be focused on.

 

CLICK IMAGE TO ENLARGE.

 

The Week Ahead  - Z WEEK AHEAD 08.14.15 Week Ahead



Are You A Democrat Or A Socialist?

By Moshe Silver

 

Election time kicks off with something for everyone – from Donald Trump ( all Circus, no Bread) to Bernie Sanders (Bread on every table and free Circus tickets for everyone.) 

 

Are You A Democrat Or A Socialist? - z 44

 

If you thought the average voter is not politically sophisticated, we offer Representative Debbie Wasserman Schultz, the chairwoman of the Democratic National Committee, who in a television interview was unable to articulate the difference between a Democrat and a Socialist.

 

America’s political multiple personality disorder goes back to the debate over the Constitution; the Federalists wanted to keep the loose confederation of states under the Articles of Confederation, and were opposed by James Madison’s Virginia faction who arrived in Philadelphia in 1787 determined to create a strong central government. If the Federalists were lilies in a pond — all drawing nourishment from the same pool, yet all free to float independent of the rest — the constitutional faction envisioned a wheel with the central government at its hub and the states as spokes; each distinct, yet joined in a single structure.

 

In the debate the term “federal” underwent a metamorphosis until the original Federalists (supporters of the Articles) were transformed into Anti-Federalists (opponents of the Constitution).  Within days of the draft constitution being submitted to the Continental Congress, critical pamphlets appeared under Roman pseudonyms, emphasizing the republican values of their authors (the first were signed “Cato” and “Brutus.”)

 

Into the fray leapt Alexander Hamilton.  Wielding one of the most brilliant and prolific pens in history, Hamilton oversaw the creation of the cornerstone of American political thought, The Federalist Papers. The (new) Federalists were much better organized, and had a more robust program than their antagonists. The Anti-Federalists were, after all, arguing for the status quo and against change; the Federalists were arguing for a document that would forge a nation.

 

The core of Hamilton’s vision was a national bank and a strong central government that would assume the debts of the states, collect tariffs, field a standing military, and allocate the nation’s resources among the states as required, and not in proportion to their population or ability to raise funds. Hamilton insisted that only the full faith and credibility emanating from a strong central bank would make America a full member of the club of nations.

 

Jefferson and his Republicans opposed Hamilton’s Federalists, rejecting the notion of a central government, a central bank, and a standing military. The end of the Napoleonic wars in Europe also reduced tension in America, and a growing sense of national unity reduced domestic partisanship. The Federalists withered, while the remaining Republicans rallied around Andrew Jackson, and in the early 1830s were renamed the Democratic Party, which it remains.

 

Jackson was hostile to the notion of a central bank and a paper currency. Thus it is something of a hoot that Jackson will remain on the $20 bill while Hamilton  is bounced for a player to be named later, a victim to the very system he created.

 

Today’s Democratic Party website says they

 

“… believe that we’re greater together than we are on our own — that this country succeeds when everyone gets a fair shot, everyone does their fair share, and everyone plays by the same rules. Our party, led by President Obama, is focused on building an economy that lifts up all Americans, not just those at the top.”

 

Historians trace the origins of socialism to the French Revolution and the labor abuses of the Industrial Revolution. The Socialist Party USA homepage wants

 

“… to establish a radical democracy that places people’s lives under their own control… non-racist, classless, feminist socialist society… where working people own and control the means of production and distribution through democratically-controlled public agencies, cooperatives, or other collective groups… where the production of society is used for the benefit of all humanity, not for the private profit of a few…”

 

So are you a Democrat or a socialist?

 

Today’s Democratic party occupies Hamilton’s hub and spokes position, seeking to strengthen the hub against the excesses of moneyed interests. (Positioning yourself as the party of the common person is difficult when your front-runner — nay, only-runner —complains that she has it tough, in a year where she and her husband took in some $25 million in speaking fees.  At the same time, a focus group of Trump supporters, all white, and mostly working-class, declared with passion “he’s one of us!” Did we sleep through something?)

 

Democrats place their faith in centralized of control over resources, restraint on excessive local interests, with guarantees of local autonomy where consistent with the national interest. The imperfection of elected leaders is balanced by the separation of powers, and the guarantee of regular elections which gives us an opportunity to throw the bums out.

 

If you think legitimate private and local interests need to be held in check and administered by a strong central government for the benefit of all, you could be a Democrat.

 

If, on the other hand, you believe in Philosopher Kings capable of magnanimously administering resources so that everyone is guaranteed to be a productive and valued member of society, then you may be a socialist.

 

If you are still not sure whether you are a Democrat, Republican or Socialist — or even too confused to call yourself “undecided” — don’t worry. The candidates are in the same boat as you.  But unlike you, one of them will be our next president.

 

 — Publius Puer

 

Moshe Silver is a Managing Director at Hedgeye and author of Fixing a Broken Wall Street.




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A Brief Update on One of Hedgeye's Top Q3 Global Macro Themes: #EuropeSlowing

One of our Top Q3 Global Macro themes -- #EuropeSlowing -- remains intact following the release of Q2 2015 GDP this morning.

 

  • The Eurozone missed expectations (+0.30% Q/Q vs +0.40%); 
  • Germany improved from the prior quarter but missed expectations (+0.40% Q/Q vs +0.50%); 
  • France saw a huge negative divergence, recording 0.0% (exp. +0.20%) vs last quarter of +0.60%.

 

We continue to recommend remaining short of the EUR/USD (etf FXE).

 

A Brief Update on One of Hedgeye's Top Q3 Global Macro Themes: #EuropeSlowing - Fed balloon03.25.14

 

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Consensus Positioning, China, Eurozone

Client Talking Points

Consensus Positioning

The market reacted to the currency devaluation move out of Beijing this week by tagging the USD Wednesday as rate hike expectations were taken down. The dollar is actually down on the week vs. the devaluation and more of what you saw on Wednesday with XLE leading S&P sectors is a risk that will have to be tactically managed over the next few months as consensus is positioned for deflation/rate hike. Consensus is positioned long dollars, extremely short of gold, long treasuries, short-crude. We continue like treasuries on either side of the relative policy moves from the Fed.

China

To recap. an awful month of data for July which has implications for commodity trade globally, factory output slowed sequentially Y/Y, fixed asset investment growth touched a 15-year low, property investment growth slowed to the lowest level since March 2009, industrial production yesterday was a big miss, slowing to +6.0% Y/Y vs. +6.6% est. (+6.8% June), exports declined -8.6% Y/Y in July, Chinese steel output declined -4.6% Y/Y (down -1.8% Y/Y through the first 7 months of the year). Expect more of something from Beijing, whether it’s stimulus measures or more devaluation.         

 

Eurozone

Our Top Q3 Global Macro theme of #EuropeSlowing remains intact following the release of Q2 2015 GDP this morning:  the Eurozone missed expectations (+0.30% Q/Q vs +0.40%); Germany improved from the prior quarter but missed expectations (+0.40% Q/Q vs +0.50%); and France saw a huge negative divergence, recording 0.0% (exp. +0.20%) vs last quarter of +0.60%. We continue to recommend remaining short of the EUR/USD (etf FXE).

Asset Allocation

CASH 60% US EQUITIES 4%
INTL EQUITIES 5% COMMODITIES 0%
FIXED INCOME 24% INTL CURRENCIES 7%

Top Long Ideas

Company Ticker Sector Duration
HOLX

In an analysis of the demographics of the newly insured, Pap testing, HPV, and mammography were at the top of the list of products that would be positively impacted by the ACA.  As we reach the #ACATaper stage, will HOLX take a hit to their Diagnostic segment? It is possible, in our view, but so far a minor risk. As we learned last week from a lab operator, Qiagen is likely to continue to cede their 14% HPV testing share to HOLX. So while the #ACATaper appears to be finally here, there are offsets. On a disappointing note, our 3D Tomo Tracker update for July came in at 24 facilities. Down sequentially from June, and down from a peak of 54 in May. Our forecast algorithm, which is based on these updates, remains unchanged. While 20 is low, it is probably a blip in the longer term adoption cycle.

PENN

PENN has emerged as the first domestic gaming growth story in 10 years with a new casino in Massachusetts this year and one in San Diego next year. Meanwhile, regional gaming trends have stabilized, providing near term earnings visibility and upside. Upcoming catalysts include the monthly release of State gaming revenues for July, including Massachusetts, and positive earnings revisions.

TLT

Sometimes the macro rotation and allocation playbook is relatively straightforward. As growth slows and "reflation" deflates, you want to be buying A) Long-term Bonds and B) stocks that look like bonds. Bond proxies and defensive yield consistently outperform alongside the dual deceleration in demand and prices and Utilities and REITS remain the go-to sectors for growth slowing, defensive yield exposure.

Three for the Road

TWEET OF THE DAY

I'm getting ready to publish my near "Dirty Dozen" restaurant companies that should never have gone public! This is going to be a classic!

@HedgeyeHWP

QUOTE OF THE DAY

“The secret of getting ahead is getting started.”

                   -Mark Twain

STAT OF THE DAY

Tim Tebow accounted for 55 touchdowns during his Heisman Trophy-winning season (2007), the most ever for a player in the SEC.


CHART OF THE DAY: Swimming Naked? Oil Industry Employment

Editor's Note: The chart and excerpt below are from this morning's Early Look written by Hedgeye analyst Ben Ryan. For more information how you can subscribe to the Early Look click here.

 

With growth slowing, an FX catalyst, and secular headwinds globally coming to fruition at the same time, our expectation is that we will continue to see who  in commodity-leveraged industries is “swimming naked” as Warren Buffett likes to say. It’s only a matter of time before the carnage in the energy space flows through to the real economy (see Chart of the Day below).

 

CHART OF THE DAY: Swimming Naked? Oil Industry Employment - z bizness 08.14.15 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 80.64%
  • SHORT SIGNALS 78.61%
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