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The Macro Show Replay | November 13, 2015

 


Cartoon of the Day: Whatever It Takes!

Cartoon of the Day: Whatever It Takes! - Draghi cartoon 11.12.2015

 

Below is an excerpt from a note Hedgeye CEO Keith McCullough sent to subscribers earlier this morning: 

 

"... After suggesting #Deflation wasn’t a risk and European growth was 'encouraging,' our man Mario (ECB President Mario Draghi) pivots to 'downside risks are now clearly visible … and inflation dynamics have weakened,'" Hedgeye CEO Keith McCullough wrote earlier today. "Finally, some #truth – don’t forget that Down Euro = #Deflation via Strong USD."


Rate Hike 'Live Possibility'? NY Fed Head Can't Make Up His Mind

Takeaway: Conflicted NY Fed President debates himself over "whether the time is right to begin to normalize monetary policy."

You may have noticed this headline from the Wall Street Journal today.

 

Rate Hike 'Live Possibility'? NY Fed Head Can't Make Up His Mind - dudley

 

That’s odd.

 

As we recall, New York Federal Reserve President Bill Dudley was the same central planner who rocked markets last week when he mentioned that a December rate hike was a “live possibility.”

 

In today’s speech, Dudley was doing the same old song and dance, blaming the uncertainty surrounding a December rate hike on the damn data (as we affectionately refer to it here at Hedgeye).

Rate Hike 'Live Possibility'? NY Fed Head Can't Make Up His Mind - Fed cartoon 04.30.2015

 

Most interesting was Dudley’s reading of the “few issues” that could “still cloud the [economic] outlook.”

 

Amusingly, his take on the data acknowledged many of the concerns our Macro team at Hedgeye has been highlighting for a long time now, including recent “softness” in 3Q GDP, the strengthening dollar and the slowing manufacturing sector:

 

“With respect to the economic growth outlook, the softness in third-quarter real GDP—which according to its initial estimate rose at only a 1.5 percent annualized pace—and the weakness of the manufacturing sector have raised concerns that the U.S. economy may be losing some forward momentum. 

 

Sharp reductions in oil and gas drilling activity and a loss of international competitiveness associated with the dollar’s appreciation over the past year have restrained factory output. Judging from historical experience, the impact of the dollar’s recent strength has the potential to be protracted, so that the trade sector probably will continue to be a drag on growth in 2016.  Thus, the manufacturing sector is likely to continue to lag behind the rest of economy.”

 

Another key Hedgeye Macro theme is #Deflation. Funny enough, during his speech, Dudley mentioned “inflation” 47 times and begrudgingly admitted that it was running “well below” the Fed’s 2% objective.

 

Dudley again:

 

"... [that] the economy is growing only slightly at an above-trend pace and inflation is too low relative to our objectives, suggests that we need to think carefully whether the time is right to begin to normalize monetary policy."

 

This after San Francisco Fed President John Williams told USA Today just this week that there was a "very strong case" for a rate hike this year.

 

Huh?

 

While we wait for the Fed to make up their mind and interpret the data, here's an important reminder from Hedgeye CEO Keith McCullough.

 

“The Fed’s ‘forecast’ is wrong 70% of the time. They are the new market risk.”

 

Here's more From mccullough on the fed risk...



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Setting the Record Straight

Takeaway: Old Wall and its click-bait media has failed America.

We’ve heard some whoppers in our day, but what went down on Twitter yesterday may take the cake.

 

In short, a number of people completely mischaracterized a tweet Hedgeye CEO and Founder Keith McCullough wrote late in the afternoon. It ended up with a swarm of trolls accusing him of kicking a man who had just lost his job at Bloomberg.  

 

Let’s set the record straight.

 

Here’s the tweet that ignited the fireworks.

 

Setting the Record Straight - z bberg 2

 

As you can see above, McCullough’s tweet was directed at Bloomberg—not the recently laid off employee who emailed him. This was lost on the trolls.

 

As many people know by now, Keith has been increasingly critical of Bloomberg News and its “click-bait strategy” premised on peddling “a false economic narrative.” It’s clear to anyone paying attention that Bloomberg has made a series of poor editorial decisions over recent years. It appears that this may be finally catching up and costing people their jobs.

 

Most importantly… like the old-line media that Keith has been taking to task, Keith’s accusers only see their own prejudices and don’t bother to dig beneath the surface. While the haters were attacking him in earnest, Keith had already personally replied back to the laid off employee. In fact, Keith had thanked him for his email and offered to set up a job interview with him.

 

Setting the Record Straight - z bberg 3

 

Keith’s issue all along was with Bloomberg. It was never about the individual let go by them.

 

Setting the Record Straight - z bberg 4

 

Setting the Record Straight - z bberg 5

 

Setting the Record Straight - z bberg 6

 

The bottom line according to McCullough:

 

“What does an organization that is struggling as a result of selling fiction instead of truth deserve?  These left-leaning journos don't want the truth, they want a story. Real investigative research and journalism is a huge employment opportunity for truth seekers. Old Wall and its click-bait media has failed America. Bloomberg's strategy failed - so now they lay people off, and I give every honest soul who deserves one an interview. We're going to continue interviewing and hiring those they failed.”

 

Setting the Record Straight - z bberg 7


LNKD | Tracker Update (Talent Solutions)

Takeaway: Our tracker has moderated somewhat, but is still improving. However, we're still cautious about staying long into its 2016 guidance release

KEY POINTS

  1. SELLING ENVIRONMENT REMAINS SOLID: Our LNKD JOLTS tracker flattened out following the final update to 3Q15, suggesting an improving, but moderating selling environment.  Our tracker has produced a relatively tight correlation with LNKD's Talent Solutions ARPA dating back to 1Q11 (~0.72).  As a reminder, our LNKD Talent Solutions TAM analysis suggests that the bulk of that TAM is in the upsell opportunity (ARPA) vs. new account volume.  See 2nd note below for detail.  
  2. BUT CAUTIOUS INTO ITS 2016 GUIDANCE RELEASE: Our concern is not LNKD's fundamentals, but rather a conservative mgmt team that probably isn't willing to box itself into guidance that is can't confidently raise throughout the year.  The good thing is that won't be until February, so we will get at least 2-3 more updates to our tracker before then.  If our tracker continues to improve, then we may stay long into the release.  If not, we're definitely getting out of the way, and will reasses the setup post print.  

 

See the notes below for supporting detail/analysis on our LNKD Long thesis and post-print thoughts.  Let us know if you would like to disucss.  

 

Hesham Shaaban, CFA


@HedgeyeInternet 

 

 

LNKD | Tracker Update (Talent Solutions) - LNKD   ARPA vs. JOLTS 3Q15 4

 

LNKD: Thank You Santa (3Q15)
10/30/15 09:26 AM EDT
[click here]

 

LNKD: New Best Idea (Long)
07/14/15 08:00 AM EDT
[click here]


BREAKING: Draghi To Double Down on 'Whatever It Takes'

Takeaway: ECB President hints at easing after acknowledging deflationary risks.

BREAKING: Draghi To Double Down on 'Whatever It Takes' - Draghi cartoon 01.08.2015

 

ECB President Mario “Whatever It Takes” Draghi is teeing up another round of quantitative easing. Draghi addressed the European Parliament this morning ahead of the central bank’s December policy meeting. During the Q&A, Draghi’s responses were exceptionally dovish:

 

“The option of doing nothing would go against price stability… That is what will outline the strategy for the coming months.”

 

BREAKING: Draghi To Double Down on 'Whatever It Takes' - ecb draghi

 

In a note to subscribers, Hedgeye CEO Keith McCullough broke down Draghi’s comments and the recent policy about-face:

 

“After suggesting #Deflation wasn’t a risk and European growth was 'encouraging,' our man Mario (ECB President Mario Draghi) pivots to 'downside risks are now clearly visible … and inflation dynamics have weakened.' Finally, some #truth. Don’t forget that Down Euro = #Deflation via Strong USD.”

 

In related deflationary news, commodities are getting crushed.

 

BREAKING: Draghi To Double Down on 'Whatever It Takes' - crb chart

 

BREAKING: Draghi To Double Down on 'Whatever It Takes' - copper dr

 

It is just an awful November for whoever bought into the “reflation” thing that our competition has been pitching since July. 


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