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Call Invite | Don Kohn Previews the FOMC Meeting

Takeaway: Join us next Monday, March 14 at 11:00 a.m. ET, for a call with former Fed Vice Chairman Don Kohn to preview the March 15-16 FOMC meeting.

Don Kohn Previews the FOMC Meeting

 

The Potomac Research Group - A Hedgeye company - will be hosting a call with former Fed Vice Chairman Don Kohn Monday, March 14 at 11:00 a.m. ET to preview the March 15-16 FOMC meeting. Don will offer his outlook on the labor market, inflation, consumer spending, manufacturing data, and other factors that will factor into the Fed's rate hike calculus. 

 

Participating Dialing Instructions

Toll Free:

Confirmation Number: 13630084

 

Don Kohn's Bio:

Don is an expert on monetary policy, financial regulation and macroeconomics and serves as the Senior Economic Strategist for the Potomac Research Group. He brings 40 years of experience working for the Federal Reserve, where he was a key adviser to the last three Federal Reserve chairmen and served as a member and then Vice Chairman of the Board of Governors from 2002 to 2010.  

 

Don has written and published extensively on monetary policy and its implementation and on a variety of other subjects related to central banking.  He chaired an important international committee of central bankers through the period of the recent financial crisis.  He received a B.A. in economics from the College of Wooster and a Ph.D. in economics from the University of Michigan.


A Look At Last Night's Democratic Debate... & The Flood Of Anti-Trump Money

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.

MIAMI MELEE:

 

A Look At Last Night's Democratic Debate... & The Flood Of Anti-Trump Money - hillary clinton

 

Last night's Democratic debate was supposed to be last one on the official schedule (two more have been added), and would have been the final punctuation mark in Hillary Clinton's clinching of the nomination had she not been upset in MI. Bernie Sanders, reanimated by his Tuesday win, largely fought her to a draw.

 

We continue to get the sense that Team Clinton is discounting Sanders' tenacity, even after all that's happened. She had a lot of good moments last night, but she still lacks coherence on her Wall Street speeches, and she doubled down on iffy attack lines about the auto bailouts, immigration, and health care that are unlikely to stick. She's not any less likely to be the nominee after this week, but her inability to put Sanders away has her supporters rightly concerned anyway. 

SANDERS' SLOG:

 

A Look At Last Night's Democratic Debate... & The Flood Of Anti-Trump Money - bernie sanders image

 

Sanders' surprise win in MI will not win him the nomination, but it has certainly added another dimension to the race as the primary trudges onward. Wins like MI will allow Sanders to continue to land jabs on Clinton's more centrist stances, and the longer he contests the primary the more she'll be dragged to the left.

 

Call it a broken record or call it message discipline, but Bernie's core themes are as clear as ever, while Clinton's remain a mosaic of policy proposals that she hasn't been able to bring into focus. Her inevitable drift leftward may not hurt her much if Trump is her opponent in the general election, but it has a big impact on how she'd have to govern as president. 

THROWING MONEY AWAY?

 

FL's primary next week is the first major, and possibly last, test of the anti-Trump movement. In FL, outside groups have purchased over $12 million in attack ads aimed at Trump -- a princely sum compared to the less than $10,000 spent on anti-Trump buys in both MI and MS. Efforts to oppose Trump have been disorganized and ineffective, and we'll see if the bruised establishment's efforts pay off at all in Florida -- though we expect it'll do little to move the needle.


Why Jobless Claims Suggest Recession May Be Closer Than You Think

Takeaway: We may be mere months away from U.S. recession according to jobless claims.

Editor's Note: See today's 259k jobless claims print? That's not the bullish harbinger many investors make it out to be. In fact, it might just be the last shoe to drop before a recession sinks in. That's one of the key takeaways from a recent institutional research report written by our Financials analysts Josh Steiner and Jonathan Casteleyn. Below is a brief excerpt. To get full research access email sales@hedgeye.com.

 

Why Jobless Claims Suggest Recession May Be Closer Than You Think - late cycle

 

EXCERPT FROM RESEARCH REPORT: 

 

"... While we may sound a bit like a broken record on this point, we still think it bears repeating that the cycle is late stage. The chart below shows that there has historically been a time limit on how long the labor market can run this hot.

 

The chart shows that in the last three cycles, claims have run below 330k for 24, 45, and 31 months before recession set in. The current sub-330k run just entered month 25. That puts us one month past the minimum, 8 months from the 33-month average, and 20 months from the 1990s record-setting expansion."

 

CLICK TO ENLARGE

Why Jobless Claims Suggest Recession May Be Closer Than You Think - jobless claims


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

McCullough: The Beginning of the End

 

In this brief excerpt from The Macro Show this morning, Hedgeye CEO Keith McCullough discusses the latest “Viagra” monetary policy moment and why central planners’ days are numbered.

 

Subscribe to The Macro Show today for access to this and all other episodes. 

 

Subscribe to Hedgeye on YouTube for all of our free video content.


Behold The Impotent ECB Viagra

Takeaway: The Central Market Planning #BeliefSystem is breaking down.

 

The ECB popped its latest Viagra pill this morning in a desperate attempt to stimulate Europe's flacid economy. Markets didn't buy it and did the exact opposite of what central planners intended.

 

In other words...

 

The euro soared and equity markets are falling.

 

A brief recap of the ECB announcement:

  • The ECB cut its main interest rate to 0% from 0.05%
  • The deposit rate was trimmed from -0.3% to -0.4%
  • Quantitative easing purchases increased to €80 billion per month, from €60 billion, and was expanded to include corporate bonds
  • Marginal lending rate is now 0.25% from 0.3%

What happened in macro markets following the policy announcement is even more important. European equities rallied, at first, with Italy up as much as 2%, following ECB head Draghi's press conference.

 

Then, it all came apart and equities fell. 

 

Here's European equities before (10 am ET): 

Behold The Impotent ECB Viagra - europe viagra moment

 

... And after (11:30 AM):

Behold The Impotent ECB Viagra - wei equities

 

Meanwhile, as Draghi was laying out the ECB stimulus measures, the Euro tumbled 1.4% versus the U.S. dollar (i.e. Draghi's intent) but then completely reversed. As of now, the Euro/USD is up 1.3%.

 

Here's what that looked like this morning:

Behold The Impotent ECB Viagra - eurusd chart draghi

 

Macro markets are wising up and clearly questioning the potency of central-planning policy tools. Note: The ECB cut its outlook for growth and inflation:

 

 

Key takeaways? 

 

"Why not ask yourself if this is the beginning of the end – of the grand central-market-plan," Hedgeye CEO Keith McCullough wrote on 2/23 in a recent Early Look entitled "Big Bank Theory." McCullough continues:

 

"My Big Bang Theory for the #CurrencyWar (one of the Top 3 Themes in our Macro deck right now) is as follows:

  1. Japan is no longer able to convince markets that it can burn its currency at the stake on command
  2. Japan’s Yen starts to rise, and Japanese stocks start to crash
  3. Europe then fails to convince consensus of the same
  4. Euro goes up (instead of down) on Draghi’s next central-market-planning day (March 10)
  5. European and US stocks resume their current crashes and go straight down

I know, I know. It’s just a theory. But it’s what I would call one that has a probability that is rising, not falling, in rate-of-change terms."

 

 

So here's what you really need to know:

  


ECB Delivers!

Draghi to the rescue?!  The ECB cut the Main Refinancing Rate 5bps to 0.00%, cut the Deposit Rate 10bps to -0.40%, and cut the Marginal Lending Facility by 5bps to 0.30%. It also increased the “drugs” through its asset purchasing program (QE), now delivering €80 billion/month of purchases (from €60 billion prior) and expanding its purchasing mandate to bonds of non-bank corporations (specifically investment grade financial companies).

 

And the markets rejoiced!  European indices bounced +2 to +3% and the EUR/USD first fell (~ -1.5%) on the annoucement but has currently rallied +1.1% in line with our Big Bang Theory call that today’s ECB QE announcement would perversely strengthen the common currency.

 

Is all good under the Eurozone hood?  Far from! Our call of #EuropeSlowing remains firmly planted. Below we show our proprietary Eurozone GIP (growth, inflation, policy) model, charting our outlook for the coming quarters –the Eurozone finds itself in the ugly Quad 4 equating to growth slowing as inflation decelerates.

 

It therefore came as no surprise that the ECB’s staff downgraded the region’s growth and inflation projections vs its prior projections in December of last year:

  • Eurozone GDP Projections at 1.4% Y/Y in 2016 (vs December projection of 1.7%), 1.7% in 2017 (vs 1.9% prior) and 1.8% in 2018
  • Eurozone CPI Projections at 0.1% Y/Y in 2016 (vs December projection of 1.0% in Sept), 1.3% in 2017 (vs 1.6% prior) and 1.6% in 2018.

ECB Delivers! - EUROZONE

 

As we discussed in Friday’s note titled Top 7 Reasons Why the ECB Will Act on March 10th, we do not see Draghi (nor other global central bankers) arresting Economic Gravity with policy like QE and rates at and below the zero bound. To us, Draghi’s belief that his policy tool kit is a “transmission mechanisms” to the real economy is a pipe dream.

 

In this light, Keith coined the term Big Bang Theory, to underline that after 600 rate cuts globally, there’s a new regime of investors that has given up on the belief that central bankers can artificially produce stimulus and weaken their currency for economic benefit.  This policy hasn’t worked in Japan, and it isn’t going to work in the Eurozone.

 

Euro strength!  Specifically heading into today’s meeting we signaled that Draghi’s “simulative measures” would strengthen the EUR/USD rather than weaken the common currency, and suggested trading the band of $1.08 to $1.12. #PlayBook

 

How long will Draghi’s policy QE juice last?  All we know is that we don’t want to be on the merry-go-round when the music stops, and will continue to outline our risk tolerance and risk ranges across European securities. Feel free to email us if there are specific tickers you’d like levels for. 

 

ECB Delivers! - neu. EUR


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.28%
  • SHORT SIGNALS 78.51%
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