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5 Must-See Clips Distilling Hedgeye's Best Ideas

5 Must-See Clips Distilling Hedgeye's Best Ideas - keith cartoon

 

Want a quick primer on what Hedgeye CEO Keith McCullough thinks about financial markets right now?

 

The videos below will do precisely that and give you a distinct advantage over the crowd. In less than 15 minutes, you'll gain insight into some of our highest conviction ideas. Whether you watch one or all, these videos should help shelter your portfolio from market meltdowns like today.

 

P.S. If you like what you see here, you'll definitely enjoy and benefit from our deeper, more granular offering to subscribers. Incidentally, we're having a New Year's promo. Click here to learn more and get a ridiculously good deal.

 

Enjoy!

 

McCullough: The Three Signs of Coming Recession

 

Hedgeye CEO Keith McCullough breaks down the three precursors to a U.S. recession and urges viewers to be wary of one in 2016.

 

 

McCullough: This Is Our Best Idea Right Now

 

McCullough shares our current best idea and highlights the risks of Old Wall-styled year-end calls.

 

The U.S. Economic Outlook In 2016? Not Good

 

McCullough and Senior Macro analyst Darius Dale discuss U.S. third quarter GDP and why our non-consensus 2016 growth outlook is looking grim.

 

MCCULLOUGH: THE BEST WAY TO PLAY THE COMING RECESSION

 

McCullough explains why he’s becoming “the most bullish guy on Wall Street again.” Watch the video to see exactly what he’s so bullish on.

 

 

McCullough: ‘Sharp and Ugly Reformation’ Headed for Wall Street

 

McCullough delivers a fiery response to a subscriber’s question on the staggering level of “negligence and arrogance” from bankers, the Federal Reserve and financial media.

 


Permabulls Are Living In a Fantasy World

Takeaway: A quick parsing of Old Wall's storytelling.

Permabulls Are Living In a Fantasy World - 8 ball bubble 12.11.2015

 

After (wildly) missing the mark in 2015, Wall Street consensus is calling for a 7% gain in the S&P 500 for 2016.

 

We'd take the other side of that trade.  

 

Meanwhile, as the first trading day of the year begins, Old Wall's bullish cabal isn't getting much help from global equity markets.

 

(Today's performance [in dollar terms] is highlighted in the image below)

Permabulls Are Living In a Fantasy World - wei ytd

 

Global markets took a beating after China's lackluster manufacturing data and the US's own (recessionary) ISM number.

 

Permabulls Are Living In a Fantasy World - ism recession tracker 

 

For 2016, Wall Street equity strategists had been forecasting profitable year for U.S. stocks, with an S&P 500 target of 2,200. Funny enough, they were a bit more circumspect this go-around. Last week, we noted that many big bank strategists had pegged their 2016 S&P 500 price target to a number now below their 2015 prediction.  

 

Weird, right?

 

We've been warning you for a while now about the coming pullback in equity markets. Here's Hedgeye CEO Keith McCullough, in a video from a month ago, summing up that risk in one word.

 

 

Globally, stocks are down today precisely because investors are coming to grips with our #LateCycle and #GrowthSlowing Macro themes.

 

 

Remember too, that our Macro team called the highs before the August cliff-dive in the S&P 500 contrary to Wall Street storytelling.

 

... And here's how it all played out in the real world during 2015.

 

 

Today's selloff was not a good start for Old Wall permabulls. Here's a decent New Year's resolution for investors still recovering Old Wall forecasting hangovers.

 

 

Or celebrate the New Year by joining us.


RTA Live: January 4, 2016

 


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McCullough: ‘The Economy Is A Slow Moving Train Wreck’

On Fox Business' Mornings with Maria today, Hedgeye CEO Keith McCullough discussed why investors shouldn't buy equities on today's pullback and why he still likes the Long bond (TLT).

 


INSTANT INSIGHT | China Reignites Global Growth Fear

INSTANT INSIGHT | China Reignites Global Growth Fear - China growth cartoon 11.19.2015

We'll say it again... Growth IS Slowing.

 

That's been our mantra here at Hedgeye for a year and a half now. As we turn the page on 2015, many on Wall Street woke up to that simple fact this morning.

 

Global equity markets are almost universally selling off following a contractionary PMI reading out of China coupled with last week's PMI bomb in the U.S. The Shanghai Composite Casino plunged 7% today on the manufacturing report.

 

 

Here's some analysis from Hedgeye CEO Keith McCullough in a note sent to subscribers this morning:

 

"... I guess the year-end markups on no volume lost their luster – China had already devalued Yuan to a 5yr low as the economy continued to slow – today the casino in Shanghai is halted (again) at -7% on the day – the “EM/China Growth” story reminds us of Ned Stark in Game of Thrones (it died early in this cycle call and it is not coming back)"

 

(From our October Q4 Macro Themes presentation)

INSTANT INSIGHT | China Reignites Global Growth Fear - ned stark 

 

In other #GrowthSlowing news...

 

"Copper tagged for another -2.7% drop to kick off 2016 - friendly reminder that PMIs have not “bottomed” and the bearish credit cycle is still early relative to some of the crashes we’ve seen in commodity linked currencies, countries, and equities," McCullough wrote. 

 

 

We're watching all of the data, not navel-gazing at the Dow. In addition to #GrowthSlowing, our #Deflation call in commodities, is 18 months old now too.

 

As the data evolves, so do our Macro calls. That's why tomorrow at 1:00pm ET McCullough is hosting our Q1 Macro Themes conference call. Ping sales@hedgeye.com for access.

 

Our top theme for 2016?

 

U.S. #Recession


MONDAY MORNING RISK MONITOR | THE TED SPREAD

Takeaway: The TED Spread has been moving higher for a month and is now at levels last seen in Fall, 2011 (EU Sov Debt Crisis / S&P D/G US AAA).

 

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM11

 

Key Takeaway:

While most of our risk monitor measures were quiet last week, the one that caught our attention this morning was the TED Spread. The TED Spread is notable both for its trajectory/trend and for its absolute level. It stands at 45 bps now, which is +5 on the week and +25 bps on the month. That's a large rise in a short span of time and brings the gauge to levels last seen in the Fall of 2011 - an environment characterized by growing angst over the risk of an EU Sovereign debt/banking crisis coupled with the fallout from S&P's downgrade of the US Credit rating.

 

As a reminder, the TED Spread - the spread between 3M Libor and 3M Treasuries - is the gauge of perceived systemic risk in the US banking system. In other words, it's a quantitative measure of the risks to the banking system posed by energy, EM, recession, etc. For more, see our labor note from Thursday last week (Initial Claims: Raise Shields!) highliting the recent degradation in the domestic labor market.


Current Ideas:


MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM19

 

Financial Risk Monitor Summary

• Short-term(WoW): Negative / 2 of 12 improved / 4 out of 12 worsened / 6 of 12 unchanged

 • Intermediate-term(WoW): Negative / 3 of 12 improved / 7 out of 12 worsened / 2 of 12 unchanged

 • Long-term(WoW): Negative / 1 of 12 improved / 3 out of 12 worsened / 8 of 12 unchanged

 

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM15 2

 

1. U.S. Financial CDS – Swaps were little changed for US Financials on the week. 

Tightened the most WoW: ALL, WFC, MMC
Widened the most WoW: COF, PRU, ACE
Tightened the most WoW: MMC, ACE, AIG
Widened the most MoM: ALL, COF, PRU

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM1

 

2. European Financial CDS – Swaps mostly widened in Europe last week. Portugal's Banco Espirito Santo widened by the largest margin, by +174 bps to 862.

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM2

 

3. Asian Financial CDS – Swaps of Chinese and Japanese banks were uneventful last week. However, Indian bank swaps had notable moves, both widening and tightening; changes in Indian bank CDS ranged from -7 bps to +19 bps.

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM17

 

4. Sovereign CDS – Sovereign swaps in developed markets were little changed on the week. 

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM18

 

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM3

 

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM4


5. Emerging Market Sovereign CDS – Brazilian sovereign swaps remain a major concern trading just below 500 bps.

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM16

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM20

6. High Yield (YTM) Monitor – High Yield rates fell 3 bps last week, ending the week at 9.06% versus 9.09% the prior week.

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM5

7. Leveraged Loan Index Monitor  – The Leveraged Loan Index rose 5.0 points last week, ending at 1805.

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM6

8. TED Spread Monitor  – The TED spread rose 5 basis points last week, ending the week at 45 bps this week versus last week’s print of 40 bps.

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM7

9. CRB Commodity Price Index – The CRB index rose 0.6%, ending the week at 176 versus 175 the prior week. As compared with the prior month, commodity prices have decreased -3.8%. We generally regard changes in commodity prices on the margin as having meaningful consumption implications.

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM8

10. Euribor-OIS Spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread tightened by 3 bps to 8 bps.

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM9

11. Chinese Interbank Rate (Shifon Index) – The Shifon Index rose 6 basis points last week, ending the week at 1.99% versus last week’s print of 1.93%. The Shifon Index measures banks’ overnight lending rates to one another, a gauge of systemic stress in the Chinese banking system.

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM10

12. Chinese Steel – Steel prices in China rose 2.2% last week, or 43 yuan/ton, to 2001 yuan/ton. We use Chinese steel rebar prices to gauge Chinese construction activity and, by extension, the health of the Chinese economy.

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM12

13. 2-10 Spread – Last week the 2-10 spread tightened to 122 bps, -2 bps tighter than a week ago. We track the 2-10 spread as an indicator of bank margin pressure.

MONDAY MORNING RISK MONITOR | THE TED SPREAD - RM13


Joshua Steiner, CFA



Jonathan Casteleyn, CFA, CMT


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