We don't believe the permabull's "all is good" narrative about the U.S. economy. Our forecast for the 1st half of 2016 represents the slowest pace of US domestic economic growth since the back half of 2012.
In this brief excerpt from The Macro Show, Hedgeye CEO Keith McCullough and Retail analyst Alec Richards respond to a subscriber’s question about whether companies like Amazon and Facebook can continue to prop up equity markets.
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Takeaway: US growth continues to slow from 3% to 0.5%, while President Obama claims our Macro team's #GrowthSlowing call is "peddling fiction."
“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.)
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.
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...
Takeaway: Volume was up +22% on yesterday's selloff.
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)."
Watch Hedgeye CEO Keith McCullough in the video below entitled, "You’re ‘Crazy’ Buying Stocks Now."
Takeaway: Down Dollar, Bailouts, Reflation? That’s not an America anyone should be proud of,. That's the 'Inequality' standard.
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:
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.
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.
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.
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.
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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