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This Week In Hedgeye Cartoons

Our cartoonist Bob Rich captures the tenor on Wall Street every weekday in Hedgeye's widely-acclaimed Cartoon of the Day. Below are his five latest cartoons. We hope you enjoy his humor and wit as filtered through Hedgeye's market insights. (Click here to receive our daily cartoon for free.)

 

Enjoy!

 

1. Past Peak (4/15/2016)

This Week In Hedgeye Cartoons - the cycle

 

Recent data continues to confirm our bearish thesis on the U.S. economy, like Friday's terrible US Industrial Production report which slowed to -2% year-over-year in March.  

 

2. Look Out Below! (4/14/2016)

This Week In Hedgeye Cartoons - recession cartoon 04.14.2016

 

"Unlike many strategists (who missed calling the cycle top in US Consumption, Employment, and Profits last year), we have stayed with The Cycle call we’ve had all along here in Q2," Hedgeye CEO Keith McCullough wrote recently.

 

3. The Central Bank Of Neverland (4/13/2016)

This Week In Hedgeye Cartoons - Draghi Peter Pan cartoon 04.13.2016

 

Central planners are increasingly pushing on a string as macro markets continue to move in direct opposition to the best efforts of policymakers at the ECB and BOJ.

 

4. Earnings: Dead In The Water (4/12/2016)

This Week In Hedgeye Cartoons - earnings cartoon 04.12.2016

 

In what is already expected to be an ugly quarter for corporate earnings, Alcoa kicked off 1Q earnings season with a bang last night. The aluminum producer missed revenue estimates, earnings fell by 92% and reduced guidance for the year. 

 

5. The Cycle (4/11/2016)

This Week In Hedgeye Cartoons - 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."


The Week Ahead

The Economic Data calendar for the week of the 18th of April through the 22nd of April is full of critical releases and events. Here is a snapshot of some of the headline numbers that we will be focused on.

 

CLICK IMAGE TO ENLARGE.

The Week Ahead - 04.15.16 Week Ahead


McMonigle: A Freeze Is Not A Freeze Without Iran

Takeaway: "We believe there is no chance Saudi Arabia reverses its position and agrees to freeze production on Sunday," McMonigle writes.

Editor's Note: Below is a prescient research note published yesterday on the oil industry and ongoing OPEC developments from Potomac Research Group Senior Energy analyst Joe McMonigle. As you can see in this Bloomberg story from last night, McMonigle continues to stay ahead of the consensus herd. To access McMonigle's institutional research ping sales@hedgeye.com.

 

McMonigle: A Freeze Is Not A Freeze Without Iran - oil image

 

Oil prices have experienced a moderate rally over the past two months since the production freeze proposal was unveiled in Doha on February 16 by Qatar, Russia, Saudi Arabia and Venezuela. So they will try to do it again on Sunday with about a dozen other producers attending the meeting.

 

One hitch: Saudi Arabia agreed to a production freeze only if all other producers agreed to participate, including and most especially Iran.  

 

On Friday, Iran's oil ministry released a statement saying the Iranian oil minister will not attend the Doha meeting but will instead send a delegation "to explain situation of Iran" that "it cannot join the plan to stabilize oil prices."

 

That is why Saudi Arabia's oil minister, when asked this week by a reporter about the freeze, he replied, "forget about it." Saudi Arabia's Crown Prince also very publicly declared in an extensive Bloomberg News interview that the Kingdom would not freeze production unless Iran did as well. We believe there is no chance Saudi Arabia reverses its position and agrees to freeze production on Sunday.

 

The freeze would only be meaningful with Iran's participation, which is the only producer capable of ramping up production. But Iran has made it clear that it won't participate and even freeze proponents now concede that any agreement will exclude Iran. Therefore, despite the freeze marketing, there is no control over production.

 

OPEC and Russia are currently producing near-record amounts of crude. OPEC members Qatar, UAE, Iraq, Nigeria and Ecuador are at maximum production; Saudi Arabia, Kuwait and Angola are at near maximum production. Therefore, a freeze will only continue the supply glut and add to record crude inventories.  

 

What we do expect to see in Doha is great public relations: positive talk about cooperation to stabilize oil prices. With a June 2 OPEC meeting just 45 days away, we suspect many speculators will be swayed by the Doha public relations. But we are highly skeptical that any meaningful agreement will be reached or that it changes the outlook for oil markets.

 

So what is the goal of the freeze talks?  You may recall that in a March 29 note to clients, we said the goal of the production freeze proposal is to establish an artificial price floor. Our assessment was confirmed on Thursday by an invitation letter to oil ministers sent by Qatar's oil minister. The letter dated March 23 said the freeze proposal "has changed the sentiment of the oil market" and "has put a floor under the oil price." The letter was obtained by Bloomberg news under a Freedom of Information request to Norway's petroleum ministry.

 

June OPEC Meeting - Don't Expect a Production Cut

 

In a little more than a month after the freeze meeting on April 17, OPEC will meet for its regularly scheduled meeting on June 2 in Vienna. Many observers point to cooperation on the freeze as setting the predicate for action at the OPEC meeting. We see it differently.

 

We are not expecting any change in production from OPEC at the next regularly scheduled meeting in June . We maintain our investment thesis that Saudi Arabia believes its market share policy is winning. Therefore, it's still too soon for a production cut that only serves to throw a lifeline to U.S. shale and other non-OPEC producers to increase production. The next meeting of any consequence will be the year-end OPEC meeting in December when there may be the first serious consideration of a production change. However, it is still too early to forecast any policy changes. We would expect the picture to be clearer in late summer after non-OPEC production declines are evident. 


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Cartoon of the Day: Past Peak

Cartoon of the Day: Past Peak  - the cycle

 

Recent data continues to confirm our bearish thesis on the U.S. economy, like Friday's terrible US Industrial Production report which slowed to -2% year-over-year in March.  


Dale: ‘What Are You Buying’

In this excerpt from The Macro Show, Hedgeye Senior Macro analyst Darius Dale discusses the recent reflation rally and provides critical context about why we remain bearish.


Dem's Brooklyn Brawl... & What Happen's To Rubio's Delegates?

 

Below is a brief excerpt from our Potomac Research Group colleague and Chief Political Strategist JT Taylor's Morning Bullets sent to institutional clients each morning. For more information on how you can access our institutional research please email sales@hedgeye.com.

BROOKLYN BRAWL:

 

Dem's Brooklyn Brawl... & What Happen's To Rubio's Delegates? - tyson

 

We never said the Democratic primary and corresponding debates were going to be a picnic in the park, but we never thought it would get this ugly. From opening salvos on qualifications/judgement to be president, Wall St. banks and the minimum wage to the Iraqi war, guns and Israel, Hillary Clinton and Bernie Sanders came out swinging and the punches continued throughout night.

 

On debate points, the edge may go to Sanders, but he was unable to land the knockout blow he desperately needs to overtake her lead in the delegate race - and the trajectory of the race continues in her favor only to be cemented by a win in NY next week. Clinton and Sanders clearly don't like each other and their contest hasn't reached the level of vitriol that we've seen on the Republican side - but the recent downturn in tenor may make unity harder to attain in Philly this summer.

RUBIO'S RELEVANCE?:

 

Dem's Brooklyn Brawl... & What Happen's To Rubio's Delegates? - rubio

 

Senator Marco Rubio won 172 bound delegates before suspending his campaign in March, but with the growing possibility of an open convention, he's making to bid to hold onto them for at least the first ballot, in an attempt to go to Cleveland with some leverage in tow.

 

It appears most of these delegates will be bound to him, but at least 34 are up for grabs - setting the stage for another behind-the-scenes battle for them. Will Donald Trump be ready this time around?


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