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Cartoon of the Day: The Cycle

Cartoon of the Day: The Cycle - GDP cartoon 04.11.2016

 

The U.S. growth outlook is getting pretty grim. The Atlanta Fed's GDPNow tracker for U.S. economic growth in Q1 2016 just hit 0.1% after a spate of new negative data.

 

We've been making this bearish call for a while now and highlighted in our Q2 Macro themes that "the U.S. economy faces its toughest GDP comp of the cycle in 2Q16."


Central Planning Delusions: From Helicopter Money To NIRP

Central Planning Delusions: From Helicopter Money To NIRP - central bank cartoon 02.17.2016

Falling behind on the latest central planning nonsense?

 

We think it's pretty clear that the central planning #Belief system is breaking down (see chart below... since the BOJ announced negative interest rates (1/29), the Yen is up +10.8% and the Nikkei is down -10.1%)

 

Central Planning Delusions: From Helicopter Money To NIRP - boj nirp nikkei jpy 

 

However, the links below are must-reads to stay up on the latest central planning shenanigans around the world. Whether you agree or disagree with the authors, insights abound, from Ben Bernanke's defense of "helicopter money" to German Finance Minister Wolfgang Schäuble comparing easy-money policies to drug addiction.

 

Enjoy!

 

  1. Ben Bernanke's Brookings blog: What tools does the Fed have left? Part 3: Helicopter money --  Helicopter money gets the Bernanke stamp of approval and how it would work... "Money-financed fiscal programs (MFFPs), known colloquially as helicopter drops, are very unlikely to be needed in the United States in the foreseeable future... However, under certain extreme circumstances—sharply deficient aggregate demand, exhausted monetary policy, and unwillingness of the legislature to use debt-financed fiscal policies—such programs may be the best available alternative. It would be premature to rule them out."
  2. IMF: The Broader View: The Positive Effects of Negative Nominal Interest Rates -- Insight on the IMF's latest thinking about negative interest rates... "Although the experience with negative nominal interest rates is limited, we tentatively conclude that overall, they help deliver additional monetary stimulus and easier financial conditions, which support demand and price stability. Still, there are limits on how far and for how long negative policy rates can go."
  3. WSJ: Germany’s Schäuble: Time Is Near to End Central Banks’ Easy-Money Policies -- Refreshing sanity from ECB critic German Finance Minister Wolfgang Schäuble... "There is a growing understanding that excessive liquidity has become more a cause than a solution to the problem,” Mr. Schäuble said, comparing the move away from easy-money policies to ending a drug addiction."

  4. Bloomberg: Former Yellen Adviser Proposes Sweeping Reform of Fed System -- Good ideas... "Dartmouth College professor Andrew Levin targeted four areas of change for the Federal Reserve system: make the Fed a fully public institution; ensure the process of picking regional Fed presidents is transparent; set seven-year term limits for regional presidents and Board governors; and make the entire Fed subject to external review."

Retail: The Next Chapter ... 11

Takeaway: Three months into 2016 and we're already rivaling Great Recession bankruptcy rates. What say you, Sears?

Editor's Note: Below is an institutional research note written by Hedgeye Retail analysts Brian McGough and Alec Richards. To read more of our Retail team's research ping sales@hedgeye.com.

 

Retail: The Next Chapter ... 11 - retail island 1 14 15

 

It's so easy to succumb to the 'water torture' of Chapter 11 press releases in retail coming from the likes of Sports Authority, Vestis Retail Group (Eastern Mountain Sports, Bob's, and Sports Chalet), and Pacific Sunwear. But it's important to take a step back. Then another. And another. Then, and only then, does the big picture come into focus about the broader economic cycle.

 

Consider this...over the average economic cycle, we see 15 to 25 retail chains go under. Those represent roughly 1% of Retail Sales. Naturally, the filings are not even by year. Sometimes (like when the economy is ripping) there are none. Plenty of profits to go around for even the worst retailers. But some years there's upwards of 15 (Great Recession).

 

In just a little more than three months, we've already seen 4 parent bankruptcies (6 chains) in US Retail. Annualized, that's about 16, or 0.5% of retail. 

 

After an extremely tough winter selling season for shoes and apparel, it's only natural that we'd see this year push the 2016 tallies to a level close to what we saw in the Great Recession.

 

Sears, anyone?

 

Retail: The Next Chapter ... 11 - retail chapter 11


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INSTANT INSIGHT: The Key Implications Of Oversold U.S. Dollar

INSTANT INSIGHT: The Key Implications Of Oversold U.S. Dollar - dollar crumbled

 

Below are a number of important callouts this morning to help investors risk manage these manic macro markets.

 

Top of the list? The U.S. Dollar.

 

Here's analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers earlier this morning:

 

"After falling another -0.4% last week to YTD lows of -4.5%, the US Dollar Index is signaling immediate-term oversold in my model for the first time in April (the 30-day correlation b/t USD and SP500 is -0.90)."

 

U.S. Dollar oversold implications?

 

As McCullough points out in this morning's Early Look, Commodities (CRB Index) have an inverse correlation (30-day duration) of -0.88 vs. the US Dollar, which explains Oil's pop last week:

 

"WTI +8% last week (after falling -7% in the week prior) will be as important to watch as anything US Equity Market Beta this week; risk range is signaling a lower-high of $39.99/barrel as Oil Volatility (OVX) signals a higher-low of 43.14."

 

With the S&P 500 and Commodities inversely correlated to the US Dollar (-0.9), oil and equity investors are clearly begging for a “dovish” Fed.

 

That raises an important question...

 

What actually gets investors paid when the Fed goes dovish and tacitly agrees with our Macro team's U.S. #GrowthSlowing call?

 

Long Bonds (TLT)

(up +9.5% ytd versus +0.2% for S&P 500)

 

 

INSTANT INSIGHT: The Key Implications Of Oversold U.S. Dollar - tlt say cheese


CHART OF THE DAY | Style Factors: What Is (& Isn't) Working In 2016

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

 

"... Yep. Wall Street is as long “reflation” (Oil and Gold on an absolute basis, and SPY on a relatively less net short basis) as it has been all year long and still fighting the wall of worry on our Long Bond Bull.

 

The 10yr US Treasury Yield dropped another 5 basis points (down -55 bps YTD) last week to 1.72% and continues to signal what US Equity’s top performing Style Factor (Low Beta Stocks = +7.5% YTD vs High Beta -3.0%) does…"

 

CHART OF THE DAY | Style Factors: What Is (& Isn't) Working In 2016 - 04.11.16 chart


REPLAY! This Week On HedgeyeTV

Our deep bench of analysts take to HedgeyeTV every weekday to update subscribers on Hedgeye's high conviction stock ideas and evolving macro trends. Whether it's on The Macro ShowReal-Time Alerts Live or other exclusive live events, HedgeyeTV is always chock full of insight.

 

Below is a taste of the most recent week in HedgeyeTV. (Like what you see? Click here to subscribe for free to our YouTube channel.)

 

Enjoy!   

 

1. About Everything | A Perfect Storm of Trends Points to Less Interest In "Things" (4/9/2016)

 

 

In this complimentary edition of About Everything, Hedgeye Demography Sector Head Neil Howe discusses why manufacturers and retailers should prepare for the possibility that “goods” aren’t coming back anytime soon. And, even when (and if) the industrial sector emerges from its long-term atrophy, the underlying framework of the “old economy” will look entirely different than what we see today. 

 

Click here to read Howe's accompanying About Everything research note.

 

2. Who Wins In A GOP Contested Convention? (4/8/2016)

 

  

In a brief HedgeyeTV political recap, Potomac Research Group’s JT Taylor and Hedgeye’s Daryl Jones discuss the results of GOP and Democratic primaries in Wisconsin and who will be the likely presidential nominees on each side. 

 

3. Implications Of 2016 Presidential Election On Defense Industry (4/8/2016)

 

 

How will defense companies be impacted by either a Democratic or GOP president? PRG’s Lt Gen Emerson “Emo” Gardner USMC Ret. discusses the Defense budget and what investors should expect out of Congress with Hedgeye Industrials analyst Jay Van Sciver.

 

4. McMonigle: What Lies Ahead For OPEC and Oil Prices (4/7/2016)

 

 

Potomac Energy Policy analyst Joe McMonigle discusses his expectations on an OPEC/Russia production freeze and the outlook for oil prices with Hedgeye Macro analyst Ben Ryan.

 

5. Replay: Healthcare Q&A with Tom Tobin | $ZBH $AHS $MD $HCA $HOLX (4/6/2016)

 

 

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

 

6. Game Over. Central Bankers Can’t Do Anymore (4/5/2016)

 

 

In this brief exchange on The Macro Show, Hedgeye Demography Sector Head Neil Howe and CEO Keith McCullough discuss how global markets are closing in on a critical monetary policy exhaustion end point. “Why don’t people accept that?” Howe asks. “[Central bankers] can’t do anymore!”

 

7. The Case For Shorting Lazard | $LAZ (4/4/2016)

 

 

In this one-minute excerpt from The Macro Show, Hedgeye Financials analyst Jonathan Casteleyn highlights the key short catalyst for shares of Lazard and explains why the company is a compelling short.


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