INVITE | THE IRAN FACTOR: Contextualizing Iran's Impact on the Global Energy Industry

This Friday, January 22nd at 1:00 PM EST the Hedgeye Macro Team will host a conference call with Senior Energy Analyst Joe McMonigle from Potomac Research Group to discuss the implications of the U.S. and EU lifting sanctions on the Iranian energy industry. A corresponding slide deck will be available approximately 1 hour in advance of the call.


As part of Hedgeye’s recent acquisition of Potomac Research Group , we’re excited to introduce both McMonigle and former U.S. Energy Secretary Spencer Abraham to Hedgeye subscribers.

Watch the reply below.




This past weekend the International Atomic Energy Agency (IAEA) certified that Iran met its legal obligations as part of July’s agreement. The US and European Union (EU) lifted all nuclear related sanctions on Iran within hours.


In Friday’s call, we will outline some of the obvious and possibly unforeseen winners and losers after Implementation Day. The goal of the call will be to leverage the Potomac team’s policy experience, expertise, and network to contextualize key upcoming geopolitical catalysts amid a sea of mainstream noise post-deal.   



  • Near Term Surprise?: Iran has the capability to increase production near-term by a larger quantity and at a faster pace than most analysts and policymakers have forecasted.
  • Direction and Policy Tone of Releasing Deliverable Crude: We’ll give an update on the nearly 50MM barrels of crude stored on tankers offshore that is available for immediate delivery and on the move. Iran will move quickly to get into OPEC’s “market share” game (a game that Saudi Arabia will play for the foreseeable future).
  • Updated Iranian Oil Contract:  We’ll discuss the likely outcome of a re-worked Iranian Oil Contract. Iran’s Oil Ministry is planning a conference in London for oil companies and investors on February 22-24 to unveil its new Iran Petroleum Contract. In November, Iran held an introductory briefing for international oil companies on the new oil contract, and the general approach was received quite favorably.
  • Short-Term vs. Long-Term: While initial production capabilities may be significantly understated in the short-run, billions in western investment is needed to bring Iran back to pre-sanctions production levels.   
  • Which companies will participate? European oil companies are now free to do business in Iran. However, while the US lifted nuclear sanctions on Saturday, other US sanctions related to terrorism and human rights remain in effect and prevent US companies from immediately doing business in Iran.
  • Geopolitical Rivalries: A price war with rival, Saudi Arabia will commence. Russia is geopolitically-aligned with Iran, but they are business competitors. Russia was successful in taking many of Iran’s southern European clients. Iran will look to compete for this business at the same time that Europe is looking to diversify its energy needs away from Russia.  



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Spencer Abraham

Secretary Spencer Abraham serves as Senior Energy Analyst and is Chairman and CEO of The Abraham Group, an international strategic consulting firm focused on the energy sector and based in Washington, DC.

Secretary Abraham is a member of the Board of Directors of Occidental Petroleum, NRG Energy and PBF Energy. Secretary Abraham served as the tenth Secretary of Energy in United States history from 2001-2005 under President Bush. Prior to being named a Cabinet Member, Spencer served as an effective and highly productive U.S. Senator from Michigan for six years.

Secretary Abraham is a member of the Board of Directors of Occidental Petroleum, NRG Energy and PBF Energy.  In addition, he is a frequent commentator on FOX News, CNN and Bloomberg TV as well as a periodic contributor of op-ed articles to the Financial Times, The Wall Street Journal, The Washington Post, The Weekly Standard and other publications.

Secretary Abraham holds a law degree from Harvard University, where he co-founded the Federalist Society, and is a native of East Lansing, Michigan.


Joseph McMonigle

Joseph McMonigle serves as a Senior Energy Analyst and is president and co-founder of The Abraham Group LLC.

Mr. McMonigle is the former Vice Chairman of the Paris-based International Energy Agency. He also served concurrently as U.S. Representative to the IEA (2003-2005).

In addition, Mr. McMonigle served as Chief of Staff at the U.S. Department of Energy and also as the American co-chair of the U.S.-China Energy Cooperation Working Group. He is also an attorney and member of the Energy Bar Association as well as the Pennsylvania and District of Columbia bars.


50 Charts On Why Consensus Macro Is Dead Wrong On the U.S. Consumer

Takeaway: We reiterate our non-consensus bearish bias on U.S. consumption growth and domestic retail stocks.

The presentation hyperlinked below is jam-packed with our latest proprietary analysis on the domestic consumption cycle. It is broken into three distinct sections; the key takeaways are as follows:


  1. Key High-frequency Indicators (slides 5-34): Across the preponderance of relevant macroeconomic data, domestic consumption growth is markedly decelerating and is set to continue decelerating on a trending basis through at least 3Q16.  
  2. Household Debt Dynamics (slides 35-43): While consumer debt is certainly not the boogeyman it was leading up to and through the last downturn, the growth rates of auto and student loans remain worrisome to say the least. Moreover, peak household net worth portends a substantial degree of capital destruction in the months and quarters ahead.
  3. Domestic Demographic Trends (slides 44-51): The U.S. is currently experiencing the sharpest contraction in its core consumption demographic in modern history. Additionally, peak rates of ageing (think: Baby Boomer downsizing) are set to continue through the balance of the decade.


Click on the following link to download the associated PDF:


In #ConsumerSlowing we trust,




Darius Dale


Cartoon of the Day: Pervasive Weakness

Cartoon of the Day: Pervasive Weakness - weak over weak cartoon 01.19.2016


"In terms of both economic data and macro market read-throughs, last week was ugly," Hedgeye CEO Keith McCullough wrote in a note to subscribers earlier this morning. "Let’s not forget we had the 'misses' Friday with Industrial Production and Producer Prices (PPI) in recessions."

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Welcome Aboard! Atlanta Fed And IMF Cut Their GDP Estimates

Welcome Aboard! Atlanta Fed And IMF Cut Their GDP Estimates - consensus cartoon 07.29.2015


For the record:

  • Today, the IMF cut its growth outlook for the global economy by 0.2 percentage points to 3.4%.
  • Over the weekend, the Atlanta Fed (once again) cut its forecast for 4Q U.S. GDP to 0.6%. 


For those of you keeping score at home, we called it well ahead of them.


Our non-consensus macro team's #GrowthSlowing theme is 18 months old now, which we continue to reiterate. Our most recent 73-page Macro themes deck highlights the increasing probability of a U.S. #Recession in the 2Q or 3Q of this year. (To read more about our Macro team's non-consensus themes deck ping


Clearly, we've been front-running economic reality.


A few questions: Does anyone actually believe these central planning bureaucrats anymore? And do their often rosy economic forecasts have any credibility? 


We'll let you make up your own mind.


Here's Reuters:


"Twenty-eight out of the 30 initial calendar year forecasts by the IMF and World Bank for global, developed market and emerging market GDP growth for 2011-2015 proved too optimistic, in many cases wildly so."



Similarly, over the past few weeks, the Atlanta Fed has taken the hatchet to its own 4Q U.S. GDP estimate. As of Friday, that forecast is 0.6% versus 2.2% in late November. 


Welcome Aboard! Atlanta Fed And IMF Cut Their GDP Estimates - atl fed forecast




We're scratching our heads. Incidentally, Atlanta Fed head Dennis Lockhart doesn't seem to believe his own economic forecasts. Just last week, Lockhart said he was "mildly optimistic" that strong domestic consumption will help U.S. GDP growth in 2016.


Hang on. Where's the evidence of that? Below is a chart from our macro team showing the year-over-year slowing in personal consumption expenditure...


Welcome Aboard! Atlanta Fed And IMF Cut Their GDP Estimates - PCE


... And here's Lockhart's own Atlanta Fed GDP revision from Friday:


"The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2015 is 0.6 percent on January 15, down from 0.8 percent on January 8. The forecast for fourth quarter real consumer spending growth fell from 2.0 percent to 1.7 percent after this morning's retail sales report from the U.S. Census Bureau and the industrial production release from the Federal Reserve." (Emphasis added)


This disconnect between economic reality and the Fed's forecast isn't surprising if you've been listening to us. We've long chronicled the Fed's "serial over-optimism." By our tally, the Federal Reserve’s GDP forecasts, the "dot plot," have consistently overestimated growth, every year over the past 5 years, to the tune of 100 basis points.


So remember, as Hedgeye CEO Keith McCullough is fond of saying "One of the biggest risks to financial markets right now is believing the Fed's [or the IMF's] economic forecast."

Welcome Aboard! Atlanta Fed And IMF Cut Their GDP Estimates - Fed forecast cartoon 03.02.2015

All You Need To Know About The (Crashing) Russell 3000 In One Chart

Hedgeye Senior Macro analyst Darius Dale sent a note to institutional subscribers Friday outlining the bearish reality behind the Russell 3000's crash. It's not pretty. As you can see below, the average stock in the Russell 3000 has plummeted a monster -34% from its 52-week high.  


Click the image below to enlarge. 


All You Need To Know About The (Crashing) Russell 3000 In One Chart - russell 3000



This Chart Shows Why The Stock Market Selloff Isn't Over

Takeaway: Ignore this morning's stock market bounce.

This Chart Shows Why The Stock Market Selloff Isn't Over - bounce cartoon 01.12.2016


We know that consensus S&P 500 earnings estimates have come down markedly. However, what equity perma-bulls don't know is just how poorly this bodes for stocks.   


According to FactSet:


"For Q4 2015, the blended [estimated] earnings decline is -5.7%. If the index reports a decline in earnings for Q4, it will mark the first time the index has seen three consecutive quarters of year-over-year declines in earnings since Q1 2009 through Q3 2009."


so Why does this matter?


Check out the chart below. It shows what happens to U.S. equities when S&P earnings contract for more than two consecutive quarters. In short, the S&P 500 declines 20% or more.


This Chart Shows Why The Stock Market Selloff Isn't Over - EL profits large


in other words, watch out.

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