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JT Taylor: Clinton Hits Her Stride In Debate ... But Stumbles On Wall Street Ties

Takeaway: In last night's Democratic debate, Hillary Clinton appeared to beat out a meandering Bernie Sanders.

Editor's Note: Below is a brief excerpt from Potomac Research Group Senior Analyst JT Taylor's Morning Bullets sent to institutional clients each morning. 

ABOUT LAST NIGHT...

JT Taylor: Clinton Hits Her Stride In Debate ... But Stumbles On Wall Street Ties - bernie hill

 

We saw one of the most substantive, spirited, and aggressive debates of the whole election so far last night. From our perch, Clinton outperformed expectations and we suspect she'll take a significant bite out of Sanders' 30-point lead in New Hampshire on Tuesday.

 

Both did well throughout the night (and the moderators didn't compete for the spotlight), but after they sped through the 'stump speech' portion of the debate in the first hour, the advantage shifted Clinton's way as she demonstrated her versatility and command of the issues.

 

Bernie didn't do as well with the open format, and meandered at several points before reverting back to his familiar Wall Street refrain. The real upshot of last night is that Clinton showed something new, engaging, and well, presidential – injecting some much-needed confidence back into her campaign as the trail heads south where she needs to hit her stride. 

 

All was not entirely copacetic on the Clinton side, though...

CLINTON STUMBLES

We've said this before and we'll say it again: Hillary Clinton remains puzzlingly inept at handling questions about her ties to Wall Street. While she was marginally better on the topic last night, when asked on Wednesday about the nagging issue of receiving $600,000 in speaking fees from Goldman, her response was: "Well, that's what they offered."

 

Her campaign staff is at least sensitive to the issue, rescheduling her second Wall Street fundraiser in as many weeks until after the New Hampshire vote. Between the speaking fees and campaign contributions, her rhetorical assault on the financial sector rings hollow, even to non-Sanders supporters. 


Think January Was Bad? Here's Why Next Month's Jobs Report May Be Even Worse

Takeaway: January Challenger job cuts rose +42% Y/Y. While job cuts continue in energy, they've also emerged in retail.

Editor's Note: Below is a complimentary excerpt from a research note written yesterday by our Financials team. Analysts Jonathan Casteleyn and Josh Steiner analyze yesterday's Challenger Job Cuts report, a key leading indicator for what's happening in the jobs market. If you would like more information about subscribing to our institutional research, please contact sales@hedgeye.com.

 

Think January Was Bad? Here's Why Next Month's Jobs Report May Be Even Worse - jobslatecycle

 

The Challenger Job Cut announcements moved up notably in January, as the below chart from our Macro Team shows. Energy jobs cut popped to 20,103 which is in-line with the fastest rates of job loss in Energy we've seen since the beginning of Energy's decline.

 

While the energy sector's woes have been ongoing for some time, the newer development is the deterioration of non-energy labor conditions. Announced job cuts ex-energy were 55,011 in January, which brings the total announced cuts to 75,114, which is the highest level by far in the post crisis period, notwithstanding the one-off military related labor adjustment in July 2015.

 

To put this in perspective, that brings total announced layoffs to +42% Y/Y in January with no underlying distortions present in the data. Outside of Energy, Retail was the second biggest loser with job cuts rising 15.5k Y/Y.

 

This emergent trend of worsening labor conditions is also manifest in the initial jobless claims data. Seasonally adjusted claims continued their upward trend last week, rising by 8k from the revised 277k to 285k, and the year-over-year rate of change in rolling NSA claims has essentially converged to zero, deteriorating from -3.2% in the previous week to just -0.8% in the latest week.

 

Think January Was Bad? Here's Why Next Month's Jobs Report May Be Even Worse - challenger

 


McCullough: Why Weak Jobs Growth Spells Trouble For Stocks

 

In this brief excerpt from The Macro Show this morning, Hedgeye CEO Keith McCullough explains why Friday’s (lackluster) Jobs Report confirms our U.S. #GrowthSlowing Macro theme.


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A Troubling Global Macro Check-Up With Hedgeye CEO Keith McCullough

Takeaway: No matter how they spin it, permabulls (around the world) are getting crushed.

A Troubling Global Macro Check-Up With Hedgeye CEO Keith McCullough - World Market No 12.16.14 large

 

Today's U.S. jobs report number was flat-out ugly. Anybody long the S&P 500, Dow, Nasdaq, or Russell 2000 knows that. (Click here to watch Hedgeye CEO Keith McCullough on Fox Business explaining "why the jobs market peaked last year" ahead of consensus.) There's been nowhere to hide for long-only equity investors. Outside these fifty states, stock markets from China to Germany have been falling precipitously

 

Here's a look at (crashing) markets around the globe:

 

no "amore" here...

 

Germany is crashing too...

 

 

Over in Asia...

The Nikkei looks awful despite the BOJ's best efforts to huff hot air into its flagging economy.

 

 

Chinese parlor games continue...

Shanghai Composite Casino investors rushing for the exit...

 

 

Amidst the volatility and turmoil, we're finding plenty of trades for investors to take advantage of:

 

Oil

It's been an excellent short on short-term pops...

 

 

that barbarous relic...

Long Gold was a good call throughout 2016 but it looks overbought here...

 

 

THE LONG BOND

Perhaps our best call has been remaining bullish on the Long Bond (TLT). The 10-year Treasury yield continues to fall despite the Fed's December rate hike on our U.S. #GrowthSlowing Macro theme.

 

 

Stick with the process. Consensus missed all this. We didn't.


HedgeyeRetail (2/5) | DECK Cutting Store Anchor, BBBY Driving Traffic W/ Pretzels

Takeaway: DECK no near term turnaround, but cutting store anchor. New Bed Bath traffic driver - pretzels.

DECK - No near-term turnaround, but cutting store anchor

 

We never really understood the DECK store opening strategy. Now the company is hiring a 3rd party to close 15% of its current portfolio.

 

If you look at the store opening cadence since 2006 when the company had just 2 stores and fast forward to where we are today at 142 doors, and what that's subsequently done for returns as capex as a % of sales went from 1% as UGG relied on its wholesale distro to 5% at the height of the sq. ft. investment, it tells a pretty compelling negative story.

 

The question now is, as costs roll off and the company abandons its store strategy, will we see margins re-inflate and asset turns re-accelerate as the fixed asset base consolidates. The top line has been underwhelming for 3 straight quarters and doesn’t give us confidence in the immediacy of a turnaround, especially in an economy that is #latecycle.

 

We wouldn't touch this with a 10 foot pole on the long side today, with inventories up 26% on 1% sales growth. But it’s a name over the course of 6-9 months that might be worth taking a look at as working capital gets cleaned up, and assets are rationalized.

 

HedgeyeRetail (2/5) | DECK Cutting Store Anchor, BBBY Driving Traffic W/ Pretzels - 2 5 2016 Chart1

 

HedgeyeRetail (2/5) | DECK Cutting Store Anchor, BBBY Driving Traffic W/ Pretzels - 2 5 2016 chart2

 

BBBY - This Bed Bath promo email is hilarious. 

BBBY sent out this promo email yesterday, and it featured a bag of pretzels. That's it, a bag of pretzels. It's comical to think that a $2 discount on a bag of Pretzel Crisps can drive foot traffic. 'In Store Only'!

 

HedgeyeRetail (2/5) | DECK Cutting Store Anchor, BBBY Driving Traffic W/ Pretzels - 2 5 2016 chart3

 

JCP - JCPenney pursues sale of home office campus

(http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-newsCompanyArticle&ID=2136090)

 

DKS - Sports Authority to Take Steps Toward a Bankruptcy Filing

(http://www.bloomberg.com/news/articles/2016-02-04/sports-authority-said-to-take-steps-toward-a-bankruptcy-filing)

 

MAT - Mattel interested in possible merger --  has requested financial information about Mayborn, owner of prominent baby product manufacturer Tommee Tippee

(http://news.sky.com/story/1636597/mattel-makes-play-for-tommee-tippee-owner)

 

Big-box home décor retailer At Home has added four more locations averaging almost 100,000 sq. ft. each to its growing store portfolio

(http://www.chainstoreage.com/article/home-dcor-retailer-continues-expand)

 

JCP - JCPenney announced that it is pursuing sale of Home Office campus in TX in effort to reduce outstanding debt

(http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-newsCompanyArticle&ID=2136090)

 

Kate Hudson's fashion athletic brand Fabletics opening 2,000 sq.ft. store in Mall of America

(http://www.chainstoreage.com/article/fabletics-continues-offline-push)

  

Report says successful malls in India are changing strategy by reducing the size of anchor stores from ~70,000 sw. ft. to ~25,000 sq. ft. to bring in more international brands

(http://www.livemint.com/Industry/MDVIOuBc4OXQ2Byhk9NA6I/Malls-renovate-as-ecommerce-players-draw-away-footfalls-Re.html)

 


FLASHBACK | McCullough: Non-Farm Payrolls Peaked Last Year

Takeaway: Jobs are the latest of #LateCycle indicators. NFP peaked in rate of change terms in Febraury 2015.

Click The video below to watch

 

This past November Hedgeye CEO Keith McCullough nicknamed the supposedly strong October jobs number the, "Where’s Waldo jobs report." His message was clear: So what.

 

McCullough's point was that jobs are the latest of #LateCycle indicators and that NFP had already peaked in rate of change terms in Febraury 2015. On a related note, consensus missed today's jobs number because they don't understand our thesis. 

 

Watch the video above for more of his analysis. And feel free to show the chart below of NFP rolling over to anyone claiming the last few months of jobs reports have been "good" ...

 

Click to enlarge


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