Dear President Obama: Who's 'Peddling Economic Fiction' Now?

Takeaway: US growth continues to slow from 3% to 0.5%, while President Obama claims our Macro team's #GrowthSlowing call is "peddling fiction."

Dear President Obama: Who's 'Peddling Economic Fiction' Now? - obama


“I actually compare our economic performance to how, historically, countries that have wrenching financial crises perform. By that measure, we probably managed this better than any large economy on Earth in modern history." -President Obama, New York Times Magazine, 4/28/16 




In case you missed it, yesterday's Q1 2016 GDP reading came in at 0.5%.


Yes, 0.5%. Meanwhile...



That's why President Obama's New York Times victory lap is a bit of a headscratcher considering first quarter growth was the worst it's been in two years. As we reminded subscribers yesterday, "We Called The U.S. Growth Slowdown (And Believe The Worst Is Yet To Come)." (Click here to read more about what we expect for growth in Q2 2016.)


Dear President Obama: Who's 'Peddling Economic Fiction' Now? - GDP cartoon 10.29.2015


To be clear, we've heard It all before.


Earlier this year, in his final State of the Union address, President Obama told the nation that anyone "claiming that America's economy is in decline is peddling fiction."


Meanwhile, U.S. growth has continued its downward descent, from 3% to 1.4% to 0.5%, so who's "peddling fiction" exactly? Now to be fair to President Obama, unaccountable Wall Street economists and unelected Fed bureaucrats completely missed U.S. #GrowthSlowing too.


So, no worries.


But we didn't.



We've taken President Obama to task for these kinds of statements before (see "7 Key Economic Talking Points For Serious Contenders at Tonight's #GOPDebate"). And considering yesterday's lackluster GDP report coupled with today's data on waning U.S. consumption and another declining PMI reading, we're sticking with the call that's been right for over a year now...

U.S. growth slowing

Are You Bullish? A Brief Update On The No Volume "Rally"

Takeaway: Volume was up +22% on yesterday's selloff.

 Are You Bullish? A Brief Update On The No Volume "Rally" - volume cartoon 5.20.2014 normal


The lack of conviction in the recent "rally" is obvious.


While exchange volume has dried up to a meager drip since the February 11 bottom, that all changed yesterday with a shocking flood of activity ... on a Down Day.


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


"Algos/quants lifting little offers on up days; liquidation on the big down days – we still think this is a Liquidity Trap. Total U.S. Equity Volume ramped +22% vs. its 1-month average yesterday (SPX -0.92%, Nasdaq -1.2% on the day)."



For More...


Watch Hedgeye CEO Keith McCullough in the video below entitled, "You’re ‘Crazy’ Buying Stocks Now."


Washington Needs to Wake Up! Strong Dollar = Strong America

Takeaway: Down Dollar, Bailouts, Reflation? That’s not an America anyone should be proud of,. That's the 'Inequality' standard.

Washington Needs to Wake Up! Strong Dollar = Strong America - dollar cartoon 07.02.2014 large 


The Purchasing Power of The People (for Americans, US Dollars) is being burned for the sake of Wall Street and The Election. For those of you who aren't paid to be willfully blind, this is how it works:


US GDP Slows -> Yellen Burns The US Dollar -> Gas Prices Rise


Now, that might be good for propping up the stock market (U.S. Dollar index -0.88 correlation to S&P 500) but it's not good for the purchasing power of everyday Americans. In effect, if Yellen can't keep Oil Up (Dollar Down), she can't keep the stock market up - screw The People.


It's not a partisan issue either. Remember Ronald Reagan and Bill Clinton? Republican and Democrat? #StrongDollar, Strong America?


That’s what all Americans (not just the 1% of us “making money” on Wall St.) had in the 1980s and 1990s. That’s what allowed their purchasing power to manifest into everything that was not US Dollar Devaluation by the Federal Reserve. That was awesome.


Washington Needs to Wake Up! Strong Dollar = Strong America - strong dollar strong america




Every time the GDP cycle slows (and profit growth slows in conjunction with that), what do both Republicans and Democrats (Bush and Obama Administrations) beg for? Same thing Nixon and Carter did => Down Dollar, Bailouts, Inflations/Reflations, etc.


Not good.


That’s not an American Standard anyone in this profession should be proud of. That’s the “Inequality” standard. And, until a legitimate leader figures this out, we’re heading down history’s littered path of failed monetary policies. Sadly, if an un-elected Fed is allowed to devalue the Dollar into the US election… rising gas, rent, and food prices will most definitely be the struggle for both the American People and their economy.


Washington Needs to Wake Up! Strong Dollar = Strong America - Fed Up cartoon 03.22.2016


You see, inasmuch as Down Dollar asset “reflation” is a windfall for us “rich people,” it’s a passive aggressive consumption tax on the rest of the country (who these politicians patronize as “folks”).


As Senior Macro analyst Darius Dale pointed out recently  (see chart below), the Fed's massive monetary policy experiment to reflate asset prices was undoubtedly pocketed by the wealthiest (top 10%) of Americans. Meanwhile, Bernanke eroded the purchasing power of every working class Americans to 40 year lows.


In other words, Fed policies paid the few ... and crushed the many.


Washington Needs to Wake Up! Strong Dollar = Strong America - dale inequality


Maybe one of these big time “for The People” candidates should figure this out. For people with non-partisan standards, it’s really not that complicated. So while everyone on Wall Street is begging for Yellen to devalue the U.S. Dollar, I can draw only one conclusion and it looks like this:



Sadly, Old Wall has always found novel ways to line its pockets.


How much longer will working class Americans stand for it?

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  • Bullish Trend
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  • Neutral

10-Year U.S. Treasury Yield
1.90 1.70 1.84
S&P 500
2,060 2,093 2,076
Russell 2000
1,115 1,155 1,140
NASDAQ Composite
4,781 4,869 4,805
Nikkei 225 Index
16,101 17,602 16,666
German DAX Composite
9,971 10,408 10,321
Volatility Index
13.69 17.94 15.22
U.S. Dollar Index
93.43 95.11 93.73
1.12 1.14 1.13
Japanese Yen
107.01 110.59 108.11
Light Crude Oil Spot Price
41.24 46.60 45.88
Natural Gas Spot Price
1.88 2.30 2.06
Gold Spot Price
1,230 1,277 1,268
Copper Spot Price
2.13 2.31 2.23
Apple Inc.
93 103 95
590 680 602
McDonald's Inc.
125 130 128
Utilities Select Sector SPDR
46.43 49.90 48.13
Alphabet Inc.
692 740 705
Facebook Inc.
111 120 117


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. 


"... Why does the Fed have to keep making up new policies? That’s simple. It’s because they keep getting their growth and inflation forecasts wrong. Since the Fed is un-elected and un-accountable, they tend to corroborate a view from the highest office in the land, where Obama was allowed to call people like me “peddlers of economic fiction” in his State of The Union Address."


CHART OF THE DAY: Fed Forecast = WRONG - 4 29 cod

My Thoughts On This Lousy GDP Report

Takeaway: We're the only firm to have called the slow-down from its 2015 cycle peak.

This morning's bad 0.5% US GDP report didn't surprise us. It didn't surprise the Long End of The Curve (Long Bond) either. We're the only firm to have called the slow-down from its 2015 cycle peak.

My Thoughts On This Lousy GDP Report  - GDP cartoon 10.29.2015


Macro markets have been discounting GDP #GrowthSlowing for months now. That's why the Fed has pivoted back to dovish, devaluing the Dollar, in a last gasp hope to "reflate" asset prices. 


In the next 3 months, we think the probability is at its highest point that US GDP goes negative sequentially (Hedgeye Predictive Tracking Algo is currently forecasting +0.3% QoQ SAAR for Q2). While many are trying to make the argument (Bloomberg, CNBC, etc.) that GDP "doesn't matter" like it used to ... we've never traveled with that conflict of interest crowd, and we won't this time either. (See Shame On You Mark Zandi for more on this).


Instead, we'll remind you that there is an epic amount of credit cycle risk associated with the profit cycle going to negative on a year-over-year basis. And tell you to short both Junk and High Yield (again).


As my colleague Darius Dale wrote in a note to institutional subscribers today,


Assuming Q1 isn’t revised in any material way, our forecast for 1H16E represents the slowest pace of domestic economic growth on a multi-quarter basis since 2H12. Any downside surprises from there will surely translate to renewed recession fears.


Stay long The Long Bond, Utilities, Gold, MCD, etc.

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