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Cartoon of the Day: A Crude Joke

Cartoon of the Day: A Crude Joke - Oil cartoon 04.07.2016

 

No follow through on yesterday's 5.1% pop in oil prices. WTI back down today. 


Where We're At: Long Bonds & Crashing Global Equities

rate hike? WHAT RATE HIKE?

 

Where We're At: Long Bonds & Crashing Global Equities - Slow growth cartoon 09.11.2015 copy large

 

There's been a massive rally in Long Bonds today as the Fed tacitly confirmed our #GrowthSlowing macro theme yesterday. On a related note, we are still advising our subscribers toown TLT.

 

Where We're At: Long Bonds & Crashing Global Equities - 10yr treasury yield

 

Meanwhile, in equity markets...

 

There have been fairly stark drawdowns across global equity markets year-to-date. Another symptom of slowing growth. Here's an abbreviated YTD scorecard: 

  • S&P 500: 0.0%
  • Dow: 0.8%
  • Nasdaq: -2.9%
  • Russell 2000: -3.5%
  • Euro Stoxx: -12.1%
  • UK, FTSE: -1.7%
  • France, CAC: -8.4%
  • Germany, DAX: -11.3%
  • Italy, FTSE MIB: -21.5%
  • Spain, IBEX: -13.1%
  • Japan, Topix: -17.8%
  • China, Shanghai Comp: -15.0%
  • South Korea, Kospi: 0.6%

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.


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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


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.

 


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