Is Old Wall Warming Up To Our Late-Cycle Call?

Takeaway: We reiterate our call on deflation and growth slowing.

The Wall Street Journal published an interesting story written by Jon Hilsenrath this morning. Apparently, 58% of WSJ surveyed economists now think it is "likely" that within five years, short-term interest rates will be right back at zero. 

 

Is Old Wall Warming Up To Our Late-Cycle Call? - WSJ article

 

Here's the gist of it from Hilsenrath:

 

"Any number of factors could force the Fed to reverse course and cut rates all over again: a shock to the U.S. economy from abroad, persistently low inflation, some new financial bubble bursting and slamming the economy, or lost momentum in a business cycle which, at 78 months, is already longer than 29 of the 33 expansions the U.S. economy has experienced since 1854..."

 

Is Old Wall Warming Up To Our Late-Cycle Call? - wsj survey

 

Nothing new to us here.

 

In our 73-page Q4 Macro Themes presentation (published in October), we called out the simple fact that the current economic expansion was getting long in the tooth:

 

Click image to enlarge.

Is Old Wall Warming Up To Our Late-Cycle Call? - macro themes dek cycles  

 

Hilsenrath continues:

 

"Among the worries of private economists is that no other central bank in the advanced world that has raised rates since the 2007-09 crisis has been able to sustain them at a higher level."

 

Economists should be concerned. The latest round of U.S. economic data is "unequivocally bearish." Below is a video of our outspoken CEO Keith McCullough on Fox Business just before Thanksgiving discussing whether the U.S. is headed for recession in 2016.

 

Indeed, Old Wall economists have been slow on the uptake all year. Evidence? Our #Deflation call (now 18 months old) is a commonplace argument now, following the precipitous crash in commodities.

 

We continue to think that economists under-appreciate our #GrowthSlowing call (from Q3 2014). Then again, maybe some of them are finally wising up... 

 

Interestingly, one of the economists surveyed by the Wall Street Journal made the astute observation, as summarized by Hilsenrath, that the "U.S. expansion is now at an advanced stage and consumers have satisfied pent-up demand for cars and other durable goods."

 

"I call it late-cycle," the economist said. Sound familar? Thanks for coming out. We called out the "Late-Cycle" nature of the U.S. economy back in July. 

 

Still, what the WSJ surveyed economists seem to miss, even with this seemingly shocking revelation about U.S. growth, is that by raising interest rates the Fed might actually perpetuate an economic slowdown.

 

Is Old Wall Warming Up To Our Late-Cycle Call? - darius bingo

 

Our good friend and best-selling author Jim Rickards points out the Fed's nonsensical rationale for raising rates now:

 

Is Old Wall Warming Up To Our Late-Cycle Call? - rickards


Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more