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An audio-only replay is available here.
In this brief excerpt from The Macro Show earlier today, Hedgeye Housing analyst Christian Drake discusses the demographic and structural headwinds facing U.S. housing.
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."
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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%)
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.
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."
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 firstname.lastname@example.org.
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.
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)."
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?
(up +9.5% ytd versus +0.2% for S&P 500)
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