Since January, our Macro team has been highlighting the increasing likelihood that the U.S. economy slips into recession in Q2 or Q3 of 2016, as the preponderance of economic data continues to roll over.
Takeaway: What to watch on the election 2016 campaign trail.
Below is a brief excerpt from Potomac Research Group Chief Political Strategist JT Taylor's Morning Bullets sent to institutional clients each morning.
With Donald Trump's decisive win on Saturday and likely victory in Nevada tomorrow, his opponents -- namely Ted Cruz and Marco Rubio -- don't have much time to stop his march to Cleveland. While the terrain between NV and the mid-March primary states looks a lot like SC, two states on the docket are delegate-rich TX (March 1) and FL (March 15).
If Cruz and Rubio can't win their home states, where can they win, with the map turning to primary days with multiple contests? That gives them a significant disadvantage against a candidate who has mastered media coverage -- and who benefits from a divided three-way race when the map transitions to winner-take-all states.
In the Democratic race, Bernie Sanders is now staring down a similar numbers problem. Clinton's victory in Nevada wasn't the same kind of razor-thin margin in Iowa, in fact it was a stronger showing than many expected. This weekend's vote feels decisive, as the "Sanders Surge" narrative gets quickly rewritten. His coalition, while enthusiastic, doesn't have the same deep roots as Clinton's -- her firewall among African Americans and older voters in Nevada held.
Sanders has the cash and momentum to continue far into the primary -- but the campaign trail over the next three weeks doesn't get any less rocky for him, and the delegate math could quickly become insurmountable.
Clinton's victory in Nevada on Saturday dealt a blow not only to Bernie Sanders' campaign hopes, but also severely undercut the rationale for a run by Michael Bloomberg. He has left the trial balloon floating for a few weeks now, bemoaning the country's ills in public remarks, while remaining careful not to tip his hand as his decision deadline, at latest a few days after Super Tuesday, gets closer. The plausibility of his candidacy has fallen along with Sanders' prospects.
In this animated excerpt of The Macro Show, Hedgeye CEO Keith McCullough and Senior Macro analyst Darius Dale discuss why Barron’s is wrong on U.S. economic growth and why Friday’s GDP report will have a “0” in front of it.
Subscribe to The Macro Show today for access to this and all other episodes.
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Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.
Takeaway: High-level insights with some of the smartest investors and thinkers in the world.
Beyond our 30-plus analysts, Hedgeye's reach runs deep. We're fortunate to have relationships with some of the smartest and most sophisticated investors in the world. It's on that note that we highlight these five must-see Real Conversations where Hedgeye CEO Keith McCullough goes deep with some of the best and brightest global minds.
1. Jim Rickards, "Rickards, McCullough Unplugged on Fed, USD, Economy & More" (5/9/2014)
Controversial best-selling author James Rickards sits down with Hedgeye CEO Keith McCullough to discussed why "Keynesian economics is junk" and why "Yellen is worse than Bernanke."
2. David Stockman, "Crisis Coming? Stockman on ‘Likely Global Recession’ & Consequences of the Fed"
David Stockman, the outspoken former Reagan budget director and bestselling author of “The Great Deformation,” sat down with McCullough discussed why "we are in a fantastic bubble... that is a function of rogue central banking now fundamentally off the deep end."
3. "Real Conversations with James Grant of Grant's Interest Rate Observer" (6/12/2014)
James Grant, editor of Grant's Interest Rate Observer, discussed monetary policy, market froth, and why central banker-induced "financial leverage will fail."
4. Stephen Roach, "Roach on Global Imbalances, Risks and How It All Ends" (4/6/2015)
Stephen Roach, Yale University professor and former Chairman of Morgan Stanley Asia, joined McCullough to discussed why "central banking has lost its way."
5. Dan Alpert, "A Dire Appraisal of Our ‘Broken Global Economy’"(11/18/2014)
Dan Alpert, economic policy expert, author of “The Age of Oversupply,” and founding Managing Partner of investment bank Westwood Capital, discussed with McCullough why central bankers are "between a rock and a hard place" because "if you remove the stimulus keeping financial and real asset prices up... deflation would bring them crashing down."
Takeaway: Relying on unelected central planning bureaucrats to bail out stalling economies is a losing bet.
Nothing like new lows in European PMIs to get the QE-hope party started this morning!
European bulls are begging for more central market planning QE as Eurozone PMI hit new cycle lows. Check out the bloody red charts below:
... And the recent cliff dive in Eurozone PMI numbers:
Meanwhile, the euro is burning on all the easy money speculation. Here's analysis from Hedgeye CEO Keith McCullough in a note sent to subscribers earlier this morning:
"The euro is down another -0.6% vs. USD this morning after falling -1.1% last week with the composite Eurozone PMI hitting a 13 month low of 52.7 in FEB; since the risk range is $1.09-1.13, I expect this party to end at $1.09, and Gold to hold $1150"
Bulls love quantitative easing. They'll accept any justification to send European equities higher, especially if it means admitting that Europe's economy is slowing. Lets put this "bounce" in context:
"The DAX loves Burning Euro, +2.1% on the bounce but still very much in crash mode (-23% from the April 2015 peak when the European economic cycle was peaking); Draghi will have his work cut out for him at the March 10th meeting to break $1.09"
None of this should inspire confidence.
We'd put our money on economic reality (aka growth continuing to slow). Relying on some effervescent hope that un-elected central planning bureaucrats can bailout stalling economies around the world has been a losing bet for some time now.
Takeaway: We're moving LULU up a few notches on the core short idea list. FL Black Book on Wednesday @ 1pm ET.
FL | Black Book Ahead of the Print
Wednesday, @ 1PM ET
For Full Details CLICK HERE
Hedgeye Retail Idea List - Moving LULU up on the short side.
We're moving LULU up a few notches on the core short idea list. The stock is working for the year-to-date, but fundamentally, we still think that this is a very good brand housed within a bad company. Management is shooting to get back to a mid-50s gross margin, which is admirable. But the company has to invest in talent, distribution, branding, and e-commerce capability -- all which will A) take margins down, B) subsequently repair the top line (in 2+ years), and then, and only then will we even think about paying for a 'margin improvement story' here -- especially with UnderArmour and Nike committing incremental capital to women's fitness. We still think there is a meaningful management shake-up this year at LULU.
W - Wayfair adding office space, + 1,400 employees.
Various news sources have reported 3 new office building for Wayfair (2 in Maine, 1 in Texas) over the past couple of days equaling an addition of 1400 employees. That equates to an increase of 43% from current levels. Just another example of the company investing in the infrastructure to recognize a $90bn TAM that we think is overstated by as much as 50%.
NKE - Nike officially opens doors for Jordan Brand store located in the Central District of Hong Kong, complete with wall of all-gold Air Jordans
Fast-growing Kit and Ace seeks top executives after CEO let go
Toys "R" Us - Toys "R" Us trying to replace $1.6 billion in junk-rated bonds coming due through 2018
Sperry named official footwear of SoftBank Team Japan for 35th America’s Cup
MarineMax annoucned 1.25mm share repurchase program -- will replace April 2015 1mm share program, of which 772,716 shares had been repurchased
American Apparel head of manufacturing Martin Bailey resigns after 15 years
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