Vacation Time?

(Editor's Note: The introduction to this morning's Early Look was written by Hedgeye President Michael Blum.)

 

“Vacation will kill you”

– Elon Musk

 

Ronald Reagan famously took the other side of this argument by proclaiming:

 

“It's true hard work never killed anybody, but I figure, why take the chance?”

 

Musk managed to build his own space program while at the same time challenging Detroit with an electric car. Reagan defeated Communism. You decide which of these two philosophies is better suited for success.

 

As avid readers of the Early Look will know, I had the once in a lifetime opportunity in January of 2014 to take on the challenge of building a second company alongside my role as President of Hedgeye. I became a Co-Founder and the CFO at Firefly Space Systems. In the 20 months since, I have worked harder than I ever have in my life.

 

One of the amazing cultural parallels between a Wall Street 2.0 research firm and a small satellite rocket business are leaders not afraid to unleash young, extremely talented employees with fire in their bellies. Keith and our leadership team here at Hedgeye have a long tradition of finding the brightest and most hungry recent graduates and providing them a platform to demonstrate their abilities. In sales, research or on the software engineering team, no one is limited in their opportunity to showcase their very best, demonstrate leadership and build their own business.

 

At Firefly, our CEO Dr. Tom Markusic employs the same philosophy. So long as we have a tier of seasoned engineering management to mentor and teach, our aerospace engineering grads from places like MIT , Princeton or UT Austin have the opportunity to take on responsibilities their peers at big aerospace companies can only dream of. The result is one of the most dynamic engineering organizations one can imagine.

 

Vacation? It’s a mere two weeks until Labor Day. I think I can wait a few days.

 

Back to the Global Macro Grind...

 

The introduction above  from Hedgeye President Michael Blum is spot on.  This is no time for a vacation! As it relates to the global markets, if you were out on vacation over the last week, you also would’ve missed the following:

 

Vacation Time? - Oil cartoon 12.09.2014

 

  1. Continued Oil Price Decline – Both WTI and Brent are down more than -50% over the last year.  More interestingly, WTI is set to have its 8th consecutive week of declines, which is the first time this has happened since 1986, or 29 years. Oil stockpiles continue to build globally, and the next major negative catalyst is likely to be a spike in U.S. inventories as U.S. refiners follow the typical season pattern and cut utilization from August to March. But don’t worry Fed Vice Chairman Fisher thinks low inflation is “temporary” . . .
  2. Continued Chinese Growth Data, Or Lack Thereof – Don’t worry, it’s only “temporary,” so if you were on vacation this week and missed it, that’s fine.  But the August Caixin Flash manufacturing PMI number from China came in at 47.1 for August.  This is lower than expectations of 48.2 and a sequential decline from July’s reading of 47.8.   In addition (not to pile on of course) this was the lowest reading since March 2009 and all of the key sub-indexes decreased at a faster pace than in July.
  3. Greek Prime Minister Going On Permanent Vacation - In a move that likely surprised nobody, Greek PM Tsipras resigned yesterday.   It seems to be an attempt to potentially consolidate his power, but as a leader in a time of economic turmoil, we aren’t sure we would advocate resignation.   Nonetheless, the Greek Drama, aka Gong Show, continues.
  4. Global Equities Deflating – It's been a rough week for global equities to say the least.  Of the major markets in Europe, Germany led the decline, down -6% for the week. The DAX is now down -11% for the month.   This morning Asia is getting pancaked across the board. Korea is down -3%, Japan -3%, and China -4%.   The Asian move this morning is likely keying off the decline in U.S. equities from yesterday. Although down a mere -3.2% for the month, the S&P 500 continues to be a relative out performer.  (Leading indicator for a better relative economy in the U.S. ?)
  5. Volatility Inflation – Earlier in the week, we re-tweeted a chart that highlighted that the Dow is in the tightest trading range this deep into the year (literally ever) with the range after 157 trading days at 6.44%.  (This includes data going back more than 100 years.)   It seems like that tweet likely signaled the bottom for equity volatility in the U.S. as the VIX is now currently up +49% on the week.
  6. Geopolitics Rearing Its Head – It wouldn’t be a fun vacation week of equity declines and negative growth data without some geopolitical tension thrown into the mix.  North Korean leader Kim Jong Un put his army on war footing.   The recent exchange of shells between North Korea and South Korea is the most significant exchange in about 5 years.  This is likely more than anything “rhetoric,” but nonetheless not an ideal time for negative geopolitical headlines.

 

So if the last week in the global macro landscape is telling us anything, vacation is officially over for the year!

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 2.03-2.16%

SPX 2027-2079 
RUT 1165-1206 (bearish)

VIX 14.22-19.94 (bullish)
Oil (WTI) 40.07-42.54 (bearish)

 

Keep your head up and stick on the ice,

 

Daryl G. Jones

Director of Research

 

Vacation Time? - Z CHART OF DAY 08.21.15 chart


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

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