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Growing Cracks In Macro Markets

Takeaway: Increasing signs of risk and fragility are revealing themselves around the globe.

Growing Cracks In Macro Markets - Lower for longer cartoon 05.28.2015

 

In case you missed it, just last night, IMF head Christine Lagarde said that growth has been "too low for too long," many people were "simply not feeling it" and warned that the IMF may lower its global growth forecast.

 

In related news.

 

Bingo!

 

Unfortunately... Lagarde returned to the old chestnut that central planners had the tools to gin up economic sentiment, activity, etc. As we've noted, monetary policy potency is failing around the world. Here's analysis from Hedgeye CEO Keith McCullough in a note sent to subscribers this morning:

 

"But what do doves do when the #BeliefSystem on central-market-planning is breaking down? Draghi + Constancio both out this morning trying “whatever is needed” … Draghi says he “will not surrender”… Euro only moving -0.1% on that; Spanish and Italian stocks barely up and remain in crash mode."

 

Take a look at Germany

 

The dim outlook in Europe isn't getting any brighter.

 

Sorry Draghi.

 

Here's what negative interest rates (NIRP) really do to an economy via the Bank of International Settlements. According the Reuters:

 

"Euro zone banks should be encouraged to keep more of their profits rather than pay dividends, to bolster their capital and finance new loans, the head of research of the Bank of International Settlements [Hyun Song Shin] said on Thursday...

 

In his speech, Shin also said negative central bank interest rates discourage lending by squeezing the margin between the rate at which banks lend, which falls along with the policy rate, and the rate on deposits, which rarely goes below zero."

 

Not to mention Japan's crashing equity markets:

 

 

The #BeliefSystem that central planners can bend and smooth economic gravity is breaking down.


Ignore the Pop: Oil Is Headed Lower

Takeaway: That 5% pop in WTI yesterday? It doesn't change our view that crude prices are headed lower.

Ignore the Pop: Oil Is Headed Lower - oil cartoon 03.29.2016

 

Wondering what to do after yesterday's big oil bounce? Below is some brief analysis and our updated risk ranges via Hedgeye CEO Keith McCullough in a note sent to subscribers today:

 

"No follow through to the +5.1% WTI day as the pop in this inverse correlation trade runs into resistance; immediate-term risk range for WTI is now $35.04-40.25 (top end of the range used to be closer to $42-43); we’ll be hosting our Q2 Macro Themes Call at 11AM EST"

 

 

On The Macro Show, McCullough added:

 

"As you can see in the chart [above], oil is starting to signal a series of lower highs. Oil would have to break out above $46 to get through our Tail risk level. The immediate term risk range is back down [$35.04-40.25]. So nevermind going to $46. It doesn't look like oil can get to $42 or $43, which used to be the top end of the immediate-term risk range.

 

That's important because US equity markets are hooked what? Other than the biotech charts yesterday, yes, markets are hooked on reflation and dollar down. Everything that Europe and Japan tried and is now failing."

 

Yes, that's how we think the movie ends.


CHART OF THE DAY: A Prime Example of Central Planning Failure

Editor's Note: Below is a brief chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.

 

"... We’ll get into much more detail on how the #BeliefSystem is breaking down in both Japan and Europe on our Q2 Global Macro Themes Call at 11AM EST, but at a basic level here were some basic rules that levered macro strategies used to get paid by:

 

  1. BOJ (Bank of Japan) prints, devalues, and prints => Yen falls => Japanese Stocks rise
  2. ECB (European Central Bank) says “whatever it takes” => Euro falls => European Stocks rip"

 

CHART OF THE DAY: A Prime Example of Central Planning Failure - 04.07.16 chart


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Replay: Healthcare Q&A with Tom Tobin | $ZBH $AHS $MD $HCA $HOLX

CLICK HERE to access the associated slides.

 

Healthcare analysts Tom Tobin an Andrew Freedman hosted a live Q&A today to review their latest research and answer your questions.

 


Cartoon of the Day: Listen Up!

Cartoon of the Day: Listen Up! - Yellen cartoon 04.06.2016

 

All eyes on the Fed today, ahead of the release of the FOMC minutes.


A Brief Warning On Q1 Earnings

Takeaway: Be very careful out there.

A Brief Warning On Q1 Earnings - earnings cartoon 01.27.2015

 

Think first quarter earnings are growing gangbusters? Think again.

 

Here's the latest from our Macro team in a note sent to subscribers this morning:

 

"Q1 earnings season kicks-off next week with the bulge bracket banks leading the way (JPM next Wednesday). If you think we’ll follow-up an awful Q4 2015 reporting season (S&P revs -4.0% Earnings -6.9%) with a rebound, think again. We won’t be lapping bad comps until at least Q3 of this year (reported in Q4). In Q1 of 2015, 8/10 sectors saw Y/Y earnings growth, and the one sector with awful earnings was energy, where WTI averaged $48.57 vs. $33.63 in Q1 0f this year. Don’t get excited about Q1 earnings season. It will be more of the same. #thecycle."

 

Here's the chart highlighting why all of this is so significant.

 

A Brief Warning On Q1 Earnings - z 77

 

 


Early Look

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