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.)




1. McCullough: If You Don’t Do Macro, Macro Will Do You (5/20/16)



In this brief excerpt from The Macro Show earlier today, Hedgeye CEO Keith McCullough responds to a subscriber’s question about whether he thinks there will be a “20% or more” drawdown in the S&P 500 from here. Spoiler Alert: He does. 


2. REPLAY | Today's Healthcare Q&A with Tom Tobin | $HCA $AHS $MDRX $ATHN $HOLX $ILMN (5/19/16)


Click here to access the associate slides. 


Earlier this week, our Healthcare analysts Tom Tobin and Andrew Freedman discussed their top ideas and the latest trends in the Healthcare space.


Topics included:

  • #ACATaper thesis update with latest employment and JOLTS reports and implications for HCA Holdings (HCA) and AMN Healthcare Services (AHS)

  • Allscripts (MDRX) earnings recap and latest thoughts on attrition

  • Athenahealth (ATHN) and Hologic (HOLX) tracker updates

  • Illumina (ILMN)…. Throwing our hat into the ring


3. McCullough: History Is An Important Guide To Mr. Market (5/19/2016)



In this brief excerpt from The Macro Show earlier today, Hedgeye CEO Keith McCullough responds to a “fantastic question” about the correlation between the U.S. dollar and Treasuries now that the dollar is getting stronger. 


4. Why The 10-Year Yield May Make All-Time Lows (5/19/2016)



In a brief excerpt from The Macro Show earlier this week, Hedgeye CEO Keith McCullough responds to a subscriber’s question about whether the yield on the 10-year U.S. Treasury note will fall below 1.50%.


5. FLASHBACK | McGough: Target Is A ‘Killer Name On The Short Side’ (5/18/2016)



Earlier today, Target management blamed an “increasingly volatile consumer environment” for its weak earnings and guidance. Its shares fell as much as 9% on the news. In this prescient HedgeyeTV video flashback from last week, our Retail analyst Brian McGough discussed why Target (TGT) was among his top short ideas ahead of today’s earnings release.

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.)




1. Liftoff! (5/20/2016)

This Week In Hedgeye Cartoons - Helicopter money 05.20.2016


After Quantitative Easing and NIRP (negative interest-rate policy) have failed to deliver economic growth, central planners are now talking about helicopter money. Delusional? Yes.


2. Whole Lotta Bull (5/19/2016)

This Week In Hedgeye Cartoons - Usidedown bull 05.19.2016


The S&P 500 is flat year-to-date. That explains a lot. "There's so much whining out there... Stop it. And start winning," Hedgeye CEO Keith McCullough wrote today. In other words, get long our favorite Macro Ideas... Long Bonds (TLT), Utilities (XLU), and Gold (GLD). 


3. Crash Tech Dummies? (5/18/2016)

This Week In Hedgeye Cartoons - NASDAQ cartoon 05.18.2016


"The Nasdaq moved back into full-blown correction mode yesterday (-10% from its all-time bubble high in 2015)," Hedgeye CEO Keith McCullough wrote earlier this morning. It's now down -9.5% from that high today.




"Inclusive of the Buffett-bounce in AAPL," McCullough continues, "the Nasdaq is down -4.8% in the last month alone. Lots of chart chasers are not liking their Tech charts anymore (reminder: at #TheCycle peaks of 2000 and 2008 the Nasdaq put in its YTD highs in MAR-MAY too)."


4. Oh Fudge (5/17/2016)

This Week In Hedgeye Cartoons - FED fudge cartoon 05.17.2016


The biggest risk in macro? Believing the Fed's serially overoptimistic forecast.


5. Cheap, Cheap, Cheap... (5/16/2016)

This Week In Hedgeye Cartoons - Cheap cartoon 05.16.2016


"I still say short what appears to be “cheap” and keep buying what continues to get more expensive," Hedgeye CEO Keith McCullough wrote in this morning's Early Look.

The Week Ahead

The Economic Data calendar for the week of the 23rd of May through the 27th of May is full of critical releases and events. Here is a snapshot of some of the headline numbers that we will be focused on.



The Week Ahead - 05.20.16 Week Ahead

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.43%
  • SHORT SIGNALS 78.34%

Investing Ideas Newsletter

Takeaway: Current Investing Ideas: DE, HBI, LAZ, MDRX, FL, NUS, JNK, TIF, WAB, ZBH, GLD, ZROZ, XLU, MCD, TLT

Investing Ideas Newsletter - Cheap cartoon 05.16.2016


Below are our analysts’ new updates on our fifteen current high conviction long and short ideas. As a reminder, if nothing material has changed in the past week which would affect a particular idea, our analyst has noted this. 


Please note that we added Gold (GLD) to the long side of Investing Ideas. Our Macro team will send out a full stock report on Gold next week. We will send CEO Keith McCullough’s updated levels for each ticker in a separate email.



To view our analyst's original report on Junk Bonds click here, here for Utilities and here for Pimco 25+ Year Zero Coupon US Treasury ETF.


If you haven’t yet, you got another chance to buy long-term Treasuries at lower highs this week. (In Real-Time Alerts, Keith McCullough signaled a good buying opportunity in TLT on Wednesday for those who aren’t already long a continuation in growth slowing.)


If you’re already long of Long Bonds (TLT, ZROZ), stick with it. None of the relevant data released this past week suggests that growth could inflect and trend positive:


  • Thursday’s Jobless Claims Report was the worst print, in Y/Y rate of change terms, since 2012, and it was the fourth consecutive week of increasing jobless claims


Investing Ideas Newsletter - 05.20.16 Chart


  • Industrial Production declined -1.1% Y/Y for April, marking the 8th consecutive month of Y/Y contraction: #IndustrialRecession


Investing Ideas Newsletter - 05.20.16 Industrial Production


Tying together a continued deceleration in growth with policy expectations, the most important callout is that our expectation for growth in Q2 is well below consensus and Fed expectations (which have been horribly inaccurate). When Janet does have to acknowledge deterioration, we expect the policy shift to be dollar bearish on the margin. And, to the contrary, if the Fed RAISES RATES (June) into this slow-down, they’ll be the catalyst for DEFLATION (down yields) again anyway.


And there’s nothing Gold (GLD) likes more than a falling dollar and falling interest rates which is why we added it to the long-side of Investing Ideas this week. Remember, this is the same week various Fed members were in public calling for a rate hike with the worst jobless claims print since 2012. #GoodLuck.


It's clear to us that U.S. growth continues to slow. For this reason, buy more of what’s working: Long Bonds (TLT, ZROZ), Utilities (XLU), Junk Bonds (JNK) and Gold (GLD).


To view our analyst's original report on McDonald's click here


McDonald's (MCD) continues to evolve. The company's latest step is testing never frozen burgers at 14 units in the Dallas, TX area. This initiative could give them the ability to compete with better burger concepts such as Shake Shack, In-N-Out and Five Guys.


Meanwhile, there has been chatter about the lack of identity for their value platform in 2Q16. MCD is truly still in the testing phase as to what their national value message will be. We can appreciate the fact that they are testing multiple formats before fully committing.


In the meantime, the tailwind from all-day breakfast will continue to propel growth going forward, until lapping this initiative in 4Q16. We continue to favor MCD as one of the best LONGs in the market right now, due to actual growth and style factors that are friendly in volatile markets.


To view our analyst's original report on Wabtec click here.


When a bull story hinges on the acquisition of a French manufacturing company, we think investors should recognize a problem. Especially since that acquisition has been postponed to at least the fourth quarter due to further requests from the EU regulators. To make matters worse, the DOJ has not formally weighed in on the proposed acquisition. We think the Faiveley deal is unlikely to be completed in its current form.


So given weak rail volumes, poor railcar and locomotive orders, we continue to see Wabtech (WAB) as a promising short, and expect 2016 EPS ex-Faiveley below $4/share as the company’s core freight market enters a multi-year downturn. 


Investing Ideas Newsletter - wab


To view our analyst's original report on Hanesbrands click here.


We’re hosting an institutional call on Monday, May 23rd to review our thesis on Hanesbrands (HBI).


Here's a synopsis. This HBI short goes beyond the whole ‘peak margins, low cotton cost, in a weak category’ argument. HBI has a management team that was aggressive, but is now behaving in a borderline reckless manner. Management is aggressively selling stock while it uses shareholder capital to accelerate acquisition activity at increasingly high (and potentially deceptive) multiples at the tail-end of an economic cycle, as its own factories operate near peak utilization. These deals are supporting earnings, while the Street looks right through the special charges. Ultimately, we see 40% downside from here.


We’ll be back with updates following the call.


To view our analyst's original report on Nu Skin click here


No update on Nu Skin (NUS) this week but Hedgeye Consumer Staples analysts Howard Penney and Shayne Laidlaw reiterate their short call.


To view our analyst's original report on Zimmer Biomet click here. 


Politico sponsored a webcast this week where Cliff Deveny of Catholic Health said that admissions to nursing homes for patients undergoing joint replacement has dropped -45% under the CCJR. That is an incredible result and points to success for Catholic Health not just in lowering the post-acute care costs (nursing homes are more expensive than home care) but also the other buckets of savings likely to occur under the program in the coming years.  


Click here to view the webcast. 

After the post acute savings on nursing home care, there will be savings from delaying surgery for potentially high-cost patients who have heart disease or obesity, and finally the cost of the implant. We continue to think the fundamentals for Zimmer-Biomet (ZBH) and the ortho sector are going to deteriorate over the coming quarters with the CCJR just one part of the thesis.


*  *  *


On a related note, earlier this week, our Healthcare analysts Tom Tobin and Andrew Freedman were on HedgeyeTV discussing their top ideas, including Allscripts (MDRX), Athenahealth (ATHN), Hologic (HOLX), Illumina (ILMN).


Tobin and Freedman also explained the latest trends in the Healthcare space like their #ACATaper thesis and provided an update on the JOLTS report with implications for HCA Holdings (HCA) and AMN Healthcare Services (AHS)


Click the image below to watch the replay.


Investing Ideas Newsletter - healthcare Q A

Click here to access the associate slides. 


To view our analyst's original report on Allscripts click hereBelow is an excerpt from a research note on Allscripts (MDRX) written by our Healthcare analysts Tom Tobin and Andrew Freedman.



Takeaway: Competitive gap widens as vendors struggle to find their way amid a slowing EHR market; replacement activity driving share to the winners.


Investing Ideas Newsletter - mdrx


We spoke with a former Greenway Salesperson to gauge the current state of the ambulatory market and for any read-through to public peers ATHN, MDRX and QSII. Greenway Health sells EHR and Practice Management solutions primarily to physician offices. Greenway was acquired by private equity firm, Vista Equity, in 2013 for $644 million and subsequently merged with Vista's other portfolio EHR company, Vitera Healthcare. Greenway's three main products are 1) Greenway 2) Sage-Success and 3) Intergy, and combined represent approximately 6% of the ambulatory practice management market today. Below are our key takeaways:


  • Greenway had a very difficult bookings year in 2015, with only 20% of sales reps hitting quota and firm hitting 50% of their revenue target.... "Replacement market never happened". <- Compared to athenahealth who had strong 2015 bookings year, and came in 110% of quota in the comparable small and group segment.
  • Three products are not integrated, and focus was on selling Greenway suite. <- Results in confusion among customers, salesforce and added support costs to vendor.
  • Customer support and system downtime was a big problem, resulting in customer dissatisfaction and retention problems. <- Very hard to recover from, same problems with Allscripts and CareCloud.
  • Contract structure and pricing not competitive, with 3-5 year terms and $700 per doc per month for combined EHR/PM system. <- athenahealth no contract, 90-day cancellation and % of collections model; flexibility is huge value to providers.
  • Never won any business from athenahealth or eClinicalWorks. 10-15% of new business came from Allscripts customers. <- athenahealth's competitive position strengthening relative to MDRX and QSII.
  • Entered RCM market 2-years ago and focus turned to selling RCM due to 3-4x contract size, but with modest success.
  • Health system consolidation and hospital's acquiring independent practices remains a headwind to growth. 

winners and losers

Anecdotes and data continue support our view that in a post-stimulus environment, market share will accrue to the top vendors (ATHN, CERN, eClinicalWorks and Epic) in a market that remains highly fragmented. Replacement purchase decisions will be driven by value, quality and performance, where initial decisions were made in haste to capture stimulus dollars. Additionally, provisions within MACRA support the adoption of open and interoperable systems, which athenahealth is the most favorably disposed, in our view.

  • "Most formidable competitor for us was athena..." <- Integrated Offering, Better Sales Pitch "This is how much money we will make you" and 90-day cancellation policy
  • "...we built that thing together with post-it notes and it is still held together with post-it notes" <- Referencing Allscripts 
  • " one took Allscripts seriously and they were easy to beat." 
  • "Allscripts may have a more pissed off customer base than Greenway."
  • "...hospitals were just gobbling up practices and putting them on Epic."

We would emphasize that athenahealth's core competency, value-prop and competitive advantage remains their revenue cycle management capabilities as part of an integrated clinical solution. RCM is a market that struggling EHR-centric companies have turned too for growth as the core EHR market slows, but have found little success due to their limited track-record. We are seeing this play out across the space based on our checks with PracticeFusion, CareCloud, Greenway, McKesson, GE, NextGen and Allscripts over the last 6-months. 


To view our analyst's original report on Tiffany click here


Tiffany (TIF) reports 1Q earnings on Wednesday, May 25th. Looking at recent data points, it seems that this event is more likely to be negative than positive. 


  • Last week Macy's reported declining 2 year comp trends. Over the last year, comps for TIF Americas have moved relatively in line with Macy's, and both companies have discussed the negative impact of reduced foreign tourist traffic.
  • Ralph Lauren Corp also noted that sales to foreign tourists were down 25% in the quarter, even working against easier compares from tourism weakness in the quarter last year.
  • TIF CFO Ralph Nicoletti notified the company on May 10th that he would leave on May 20th to take a job with a different company. This comes just 1 month after he stood up in front of analysts at their investor day to lay out the companys financial goals. Generally, executives don’t leave when the team is executing and business is accelerating.


This quarter may not reveal a headline miss. 1Q EPS expectations are low, as they should be, since management guided the quarter to be down 15-20% y/y, and sales trends have not shown a bottom. But we believe that the back half acceleration management is hoping for is becoming less and less likely to happen. Translation…earnings expectations need to come down again.


Investing Ideas Newsletter - 5 19 2016 TIF II


To view our analyst's original report on Lazard click here


No update on Lazard (LAZ) this week but Financials analyst Jonathan Casteleyn reiterates his short call.


To view our analyst's original report on Foot Locker click here.


Yesterday’s Foot Locker (FL) earnings call marked the most bearish that management has been on Nike in roughly 56 quarters.


Yes, that’s 14 years…but who’s counting?


No, this is not a clash of the two 800lb gorillas like in 2002 arguing over FL’s order cuts in the wake of the Vince Carter Shox appealing to virtually nobody except Carter himself (not even in the Raptor’s home market of Toronto). But, at least to us, FL management was super cautious on Nike. At first it was the discussion about how Basketball was down mid-single digits in the quarter. And mind you, basketball is 40% of the revenue, and Nike has a 95%+ share of FL basketball. That’s about 38% of FL revenue base that was under pressure. But then we heard CEO Johnson talk of the ‘big turn’ at Adidas, and how he would like more product from both Adidas and UnderArmour.


Then one thing became abundantly clear to us…


As FL took its ‘Nike Ratio’ (the % of product it sells that is Nike) from 40% to 73% over this economic cycle, it lost the ability to think and act on its own. You heard it in management’s tone “we WANT more Adidas and UnderArmour, but Nike won’t let us.” Our sense is that FL wants maybe 50% of its store to be Nike, but unfortunately it has to take a lot of Nike’s junky product (yes, Nike makes some junk) and excess inventory in order to be assured premium allocation of the good stuff.


But, Nike stuffing FL with swooshes is absolutely NOT ok, when comps decelerate, FL’s most profitable business is down, it’s missing out on hot product from other brands that are gaining momentum, expenses pick up – causing FL to delever SG&A in a 1Q for the first time since the Great Recession – and EPS growth slows to the lowest rate since 4Q09.


Even though we think FL is a solid short, we absolutely believe that the company has a good management team. A good management team, however, will look at its brand portfolio, and take action when 72% of its business belongs to a brand that is changing up the footwear distribution paradigm. It’s got to be clear to FL management that this dependence on a single brand is no longer working – at least if it wants to accelerate growth and returns. The risk there is that FL cuts 2-3% of expected sales, and then Nike responds by cutting 10% – and giving the increment to DKS in order to stabilize that part of the wholesale channel.


All in, we give FL all the credit in the world for its comments. But the reality is that it sticks with 70%+ Nike and faces an eroding earnings algorithm, or it diversifies away from Nike and faces potential business risk. Sure, FL is down today in an up tape. But this short call is far from over. Estimates remain too high, and we think we’ll see multiple compression repeatedly over the next year.


To view our analyst's original report on Deere & Company click here.


We will let others summarize Deere & Company's (DE) quarter, but we want to lay out what we think longs are missing in Deere. DE is and will remain a value trap.  We expect the P/E ratio, which was <9x on peak FY13 in early 2014, to steadily expand as the shares underperform and earnings drop faster than the share price.


While there is often an urge to call the cycle turn, particularly in a larger index weight, those bottom callers typically become bag holders. Given the large used equipment overhang, excess capacity, competitive pressure, and deteriorating farm credit, we don’t think the risk of missing the next Ag upturn should be a concern, even for very long-term investors. 


Investing Ideas Newsletter - de

A LOT Happened Across Asia, LatAm and EEMEA This Past Week…

With the confluence of the late-April FOMC minutes and various regional Fed heads floating policy trial balloons having stolen the show this week, it’s easy to forget that the rest of the world still exists. As such, we thought you’d find the following detailed synopsis of we thought were the key developments from the RoW (ex-Europe) helpful. As always, please feel free to email us with any follow-up questions.


Key Takeaways:


Emerging Markets: Given especially easy base effects, we find it somewhat shocking that key high-frequency growth metrics continue to broadly decelerate across the preponderance of emerging market economies in the MAR/APR timeframe (refer to the “Magical Data Dump” section at the conclusion of this note for more details). Moreover, the vast majority of data showing acceleration remains in contraction territory. We are not truly surprised, however, given that we remain the authors of the most thoughtful long-term bear case on EM from here – which we are keen to reiterate amid our structurally bullish bias on the USD. Refer to our 3/23 note titled, “Is the EM Relief Rally Nearing Its [Eventual] End?” for more details on the looming EM bankruptcy cycle.


A LOT Happened Across Asia, LatAm and EEMEA This Past Week… - DXY 35 54 Year Old Spead


A LOT Happened Across Asia, LatAm and EEMEA This Past Week… - Why Do 35 54 Year Olds Matter


China: Save for the housing sector, Chinese economic growth has clearly faltered here in APR amid tighter administered policy and increasingly hawkish policy expectations, at the margins. Per our 5/2 note titled “Post Stabilization, Are You Now Too Sanguine On China?” this is right in line with our expectations and we expect such dynamics to remain ongoing. All told, we reiterate our structural bearish bias on China amid what is quite possibly the world’s longest list of secular headwinds – not the least of which is demographics.


A LOT Happened Across Asia, LatAm and EEMEA This Past Week… - CHINA M PMI


A LOT Happened Across Asia, LatAm and EEMEA This Past Week… - CHINA S PMI


A LOT Happened Across Asia, LatAm and EEMEA This Past Week… - China Fiscal Expenditures YoY


A LOT Happened Across Asia, LatAm and EEMEA This Past Week… - China 1Y OIS Spread


A LOT Happened Across Asia, LatAm and EEMEA This Past Week… - China


Japan: Japanese economic growth is faltering across a variety of key high and low-frequency metrics, prompting a renewed push for expansionary fiscal policy out of Abe’s Diet. Elsewhere in Japan, there appears to be a growing rift between U.S. and Japanese officials over yen intervention. BoJ governor Kuroda came out ahead of this weekend’s G20 summit in Sendai Japan pledging to ease monetary policy if JPY strength interfered with the BoJ’s goal of achieving its +2% inflation mandate. Separately, as senior U.S. Treasury official warned against yen intervention, stating: “there is no disorderly trading in the yen that would justify intervention”. This divergence highlights the risk that Europe and Japan may soon exit what may have been a global FX détente initially outlined at the late-February Shanghai G20 summit. Recall that we first discussed this risk in our 4/28 Early Look titled, “Positioning and Sentiment” and subsequently detailed it in our 5/9 note titled, “Reflation Reversal Risk Part II”. The ultimate impact of the ECB and BoJ refocusing their priorities on domestic outcomes in lieu of global matters is #StrongDollar deflation. We reiterate our negative bias on Japan, but that view may be starting to become stale in the context of higher-lows in the USD and lower-highs in the JPY. Trade the respective ranges accordingly.


A LOT Happened Across Asia, LatAm and EEMEA This Past Week… - Japan YTD Return


A LOT Happened Across Asia, LatAm and EEMEA This Past Week… - Japan


India: Subramanian Swamy – a rising star in the ruling BJP – has allegedly secured a critical mass of support among party leaders to eschew RBI governor Raghuram Rajan when his term ends in September. Recall that many investors credit Rajan with taming one of Asia’s fastest inflation rates, stabilizing the rupee and moving to clean up 8 trillion rupees ($120B) of stressed assets in the financial system. Additionally, Rajan was a key public advocate for fiscal discipline. While 90% of Indian CEOs polled this week by The Economic Times newspaper back Rajan for a 2nd term, any increase in support for a “no” vote risks catalyzing incremental stress in Indian financial markets. Elsewhere in India, upper house elections were positive, on the margin, for Prime Minster Narendra Modi’s reform agenda, but meaningful hurdles remain with the BJP holding only 27.3% of total seats. All told, we reiterate our negative bias on India amid #Quad3 stagflation.


A LOT Happened Across Asia, LatAm and EEMEA This Past Week… - INDIA




Taiwan: Disastrously weak export orders for the month of April may portend incremental bad news for AAPL investors. We don’t have a directional investment bias on Taiwan the current juncture.


A LOT Happened Across Asia, LatAm and EEMEA This Past Week… - Taiwan Export Orders


A LOT Happened Across Asia, LatAm and EEMEA This Past Week… - Taiwan


Brazil: Brazilian financial markets have finally started to [aggressively] price in what we thought was a dramatically limited scope for fiscal retrenchment and economic reform as detailed in our 4/19 Early Look titled, “What Did You Buy?, as well as Brazil’s ongoing economic collapse – which itself is deteriorating per the latest data. All told, reiterate our structural bearish bias on Brazil, as outlined in our 3/16 presentation titled, “Is This a Generational Buying Opportunity in Emerging Markets?


A LOT Happened Across Asia, LatAm and EEMEA This Past Week… - Brazil Economic Activity Index


A LOT Happened Across Asia, LatAm and EEMEA This Past Week… - Brazil


Turkey: Binali Yildirim – a close ally of Turkish president Recep Tayyip Erdogan – is set to become the country’s new prime minister after current PM Ahmet Davutoglu steps down in the coming weeks. The change will significantly strengthen Erdogan’s grip on power as he seeks to dramatically elevate the status of what has historically been a largely ceremonial post. Recall that Erdogan and Davutoglu frequently butt heads over the former’s consistent overreach during the latter’s 14-month stint as prime minster. In a backdrop of a marginally hawkish Fed, Turkish financial markets are responding quite poorly to the specter of an authoritarian regime: the Borsa Istanbul 100 Index is down -10% and the TRY has declined -6% vs. the USD over the past three weeks, respectively. We don’t have a directional investment bias on Turkey at the current juncture.


A LOT Happened Across Asia, LatAm and EEMEA This Past Week… - Turkey YTD Return


A LOT Happened Across Asia, LatAm and EEMEA This Past Week… - Turkey


Magical Data Dump (color coding):

  • Growth Accelerating/Inflation Decelerating/Deflation Receding/Monetary or Fiscal Easing
  • Growth Decelerating/Inflation Accelerating/Deflation Deepening/Monetary or Fiscal Tightening




  • Growth:
    • APR Total Social Financing: 751B CNY vs. 2.336T CNY
      • New Loans: 555.6B CNY vs. 1.37T CNY
    • APR Money Supply:
      • M0: 6.0% YoY from 4.4%
      • M1: 22.9% YoY from 22.1%
      • M2: 12.8% YoY from 13.4%
    • APR Industrial Production: 6.0% YoY from 6.8%
    • APR Retail Sales: 10.1% YoY from 10.5%
    • APR Fixed Assets Investment: 10.5% YoY from 10.7%
    • APR Real Estate Indicators Summary:
      • Sentiment:
        • Real Estate Climate Index: 94.4 from 94.2
      • Credit Availability:
        • Sources of Funds in Real Estate Development: 16.8% YoY from 14.7%
      • Supply:
        • Housing Starts: 21.4% YoY from 19.2%
        • Housing Construction: flat at 5.8%
        • Housing Completions: 21.1% YoY from 17.7%
        • Land Area Purchased: -6.5% YoY from -11.7%
      • Demand:
        • Value of Buildings Sold: 55.9% YoY from 54.1%
        • Volume of Buildings Sold: 31.5% YoY from 29.5%
      • Price:
        • APR New Home Prices (70 Cities): 6.2% YoY from 4.9%First Tier Cities: 31.5% YoY from 29.5%
        • Second Tier Cities: 5.2% YoY from 3.7%
        • Third Tier Cities: -0.1% YoY from -0.9%
        • Prices rise in 65 cities in April vs. 62 in March
    • Banking regulator reports rise in Q1 nonperforming loans (CBRC 5/13):
      • In a statement, the China Banking Regulatory Commission notes that at the end of Q1, nonperforming loans at China’s commercial banks rose 9.2% q/q to CNY1.39T ($213B).
      • The NPL ratio was 1.75%, up 7 bps q/q. The CBRC also noted that commercial banks posted a cumulative net profit of CNY471.6B, up 6.32% q/q.
      • Meanwhile their weighted average CET1 ratio was 10.96%, up five basis points from the previous quarter.
    • Chinese companies facing CNY1.7T in maturing debt this month (Economic Information Daily 5/11):
      • Economic Information Daily cited WIND data, which showed CNY1.7T of Chinese corporate bonds are due to mature this month, a significant step up from the CNY764B that came due in May 2015.
      • Of the amount due in May 2016, CNY1.2T was classified as junk with a number of these issues yielding more than 10%.
  • Inflation: 
  • Policy:
    • APR YTD Central Government Expenditures: 12.4% YoY from 15.4%
    • Chinese Rate Swaps Rise to Two-Week High as Loosening Bets Wane (Bloomberg 5/18):
      • China’s interest-rate swaps rose to a two-week high amid concern hawkish comments from Federal Reserve officials will limit the room for monetary easing in Asia’s largest economy. The onshore yuan declined to a two-month low.
      • The cost of one-year swaps, the fixed payment to receive the floating seven-day repurchase rate, rose two basis points to 2.59 percent at 4:31 p.m. in Shanghai, data compiled by Bloomberg show. Two regional Fed bank presidents said at least two interest-rate increases may be warranted this year as reports showed the cost of living in the U.S. climbed in April by the most in three years and residential starts increased.
      • A potential U.S. rate rise may exacerbate Chinese capital outflows, while signs of faster inflation in China may also hamstrung efforts to boost the slowing economy through lower borrowing costs. The nation’s consumer-price index grew in April at the fastest pace since mid-2014, while the government increased fuel prices for a second time in a month last week.
    • China stepping up efforts to control shadow banking growth (Reuters 5/18):
      • Citing a copy of the draft rules, Reuters reported the Asset Management Association of China will require fund houses to manage at least CNY20B in assets before applying to set up a subsidiary, and must also have a minimum of CNY600B in assets.
      • The rules will also use capital ratios to limit the subsidiaries' ability to expand businesses.
    • Premier Li says country able to keep economic growth within reasonable range (Reuters 5/18):
      • Reuters cited remarks by Chinese Premier Li Keqiang, who says the country will be able to keep its economic growth within a reasonable range, even as it faces difficulties and challenges.
      • The article cited a comment posted on the government's website, in which Li says overall debt levels remained under control and the government will be able to ward off systemic financial risks.




  • Growth:
    • APR Bank Lending Including Trusts: 2.2% YoY from 2.0%
    • MAR Corporate Loans and Discounts: 2.6% YoY from 2.3%
    • APR Machine Tool Orders: -26.4% YoY from -21.2%
    • 1Q Real GDP:  0.0% YoY from 0.7%
      • QoQ SAAR: 1.7% from a downwardly revised -1.7% (by -60bps)
      • C: -0.6% YoY -1.0%
      • I-Residential: 2% YoY from 4.8%
      • I-Business: -0.9% YoY from 4.1%
      • G: 2.1% YoY from 1.7%
      • NX: -3.5% YoY from -3.9%
      • Deflator: 0.9% YoY from 1.5%
    • APR Economy Watcher’s Survey:
      • Current: 43.5 from 45.4
      • Outlook: 45.5 from 46.7
    • 1Q Mortgage Debt Outstanding: 1.9% YoY from 2.2%
    • MAR Machine Orders: 3.2% YoY from -0.7%
    • APR Dept. Store Sales: -3.8% YoY from -2.9%
    • APR Convenience Store Sales: 0.9% YoY from -0.1%
  • Inflation:
    • APR PPI: -4.2% YoY from -3.2%
  • Policy:
    • Abe Lurches to Economic Left to Broaden Appeal Before Poll (Bloomberg 5/12):
      • Japanese Prime Minister Shinzo Abe is shifting his economic policies to the left in a bid to broaden his appeal ahead of a key election this summer.
      • In stark contrast to his opening Abenomics salvo three years ago that weakened the yen and boosted corporate profits and stock prices, the premier is now poised to unveil policies more attractive to poorer voters than big business. He’ll unveil this package, called “a plan to promote dynamic engagement of all citizens,” later this month.
      • Likely to be included is a proposal to mandate wage increases for part-time and temporary workers, scholarships for less wealthy students and improvements to child care and conditions for nursery-school teachers. The policies initially were part of the platform of the main opposition Democratic Party, whose leader Katsuya Okada told reporters Wednesday that Abe opposed these policies until about a year ago.
      • The shift comes as the stock market declines and wages remain stagnant amid few signs that the world’s third-largest economy will snap out of its deflationary malaise. Abe must secure a two-thirds majority in the upper-house election slated for July for him to push on toward fulfilling his dream of revising the nation’s post-war pacifist constitution.
    • BoJ not to stand pat until policy effects can be confirmed (Research Institute of Japan 5/13):
      • In a speech to the Research Institute of Japan, BoJ Governor Haruhiko Kuroda clarified that he is not saying that the bank will stand pat until the policy effects can be confirmed, and stated a commitment to take monetary policy measures in a timely, forward-looking manner.
      • Kuroda said the QQE with negative rates is an extremely powerful policy scheme and there is no doubt that ample space for additional easing is available.
    • NIRP private-sector impact inconclusive (Nikkei):
      • Citing a Teikoku Databank survey, the Nikkei reported only 10.9% of companies reported a positive impact from the BoJ's negative rate policy, 10.5% said there was a negative impact, and 78.6% said there was no impact or did not notice any impact.
      • According to the report, positive effects were most felt in the real estate sector, while financial firms reported a negative impact.
    • BoJ's ETF position risks becoming too large (Bloomberg):
      • Citing an interview, Democratic Party member Tsutomu Okubo told Bloomberg that the central bank must drastically lower its presence in the stock market to keep an exit strategy viable.
      • Okubo suggests the BoJ should stop buying ETFs with current ownership at an estimated 58% in April according to Bloomberg data.
    • Japan Lawmakers Discuss Big Stimulus to Offset 2017 Tax Hike (Bloomberg):
      • Japan’s debate over whether to go ahead with a 2017 sales-tax increase is shifting in the wake of stabilization in global financial markets and signs of resilience in its economy.
      • While a soaring yen, falling stocks and indications of yet another Japanese recession spurred recommendations earlier this year to put off the April 2017 tax hike, those dynamics have now changed. Some ruling-party lawmakers are instead proposing to let the scheduled boost in the consumption levy to 10 percent from 8 percent proceed, and to address any hit to the economy through an enlarged fiscal package.
      • One senior Liberal Democratic Party legislator who has advised Prime Minister Shinzo Abe plans to submit a proposal Friday for as much as an extra 30 trillion yen ($273 billion) in supplementary fiscal measures over the 2016 and 2017 fiscal years. The presentation from Kozo Yamamoto and his group of LDP supporters is designed to enable the tax rise go ahead, and address damage from this year’s earthquake in southern Japan.
    • BoJ Governor Kuroda vows to ease more if yen moves hurt price target (Reuters):
      • Reuters cited comments by BoJ Governor Kuroda, speaking ahead of the G7, reiterating that it would not hesitate easing policy if market moves, including a spike in the yen, threatened prospects for achieving its 2% inflation target.
    • Senior Treasury official warns Japan against yen intervention (FT):
      • FT reports that as G7 finance ministers begin their meeting in Japan, a senior US Treasury official said there is no disorderly trading in the yen that would justify intervention.
      • The official suggested that if one country was perceived to be intervening for its own benefit, it may lead to other countries doing the same.
      • The official also said that conditions after the Tohoku earthquake in 2011 were genuinely disorderly and the G7 had collectively agreed on intervention at the time, but that there should be a distinction between such events and normal market fluctuations.




  • Growth:
    • MAR Industrial Production: 0.1% YoY from 2%
    • APR Imports: -23.1% YoY from -21.6%
    • APR Exports: -6.7% YoY from -5.5%
  • Inflation:
    • APR CPI: 5.4% YoY 4.8%
    • APR WPI: 0.3% YoY from -0.9%
  • Policy:
    • Rajan Rate Cuts Nearing End Spur Flight From Indian Gilt Funds (Bloomberg 5/16):
      • Indian mutual funds targeting government debt are losing appeal on bets the central bank has little ammunition left after the most aggressive monetary easing since 2009.
      • So-called gilt plans saw a third month of outflows in April, the longest stretch in almost two years, Association of Mutual Funds in India data show. Reserve Bank of India Governor Raghuram Rajan will cut the benchmark repurchase rate just once more this year, to 6.25 percent, and hold it there until the end of 2017, according to the median estimate in a Bloomberg survey.
      • A three-month rally in government bonds has stalled as inflation accelerated at a faster-than-estimated pace in April amid higher food and oil prices. Investors are shifting focus to the June-September monsoon rains, forecast to be above-normal this year after two successive droughts. The seasonal showers could boost farm output, raise incomes and spur demand, limiting the extent to which economic growth relies on central bank stimulus.
    • Modi Boosted as Gandhi Slide Continues in India State Polls (Bloomberg):
      • Prime Minister Narendra Modi’s main national opponents lost control of two Indian states on Thursday, diluting their ability to thwart legislation that’s key to his reform agenda.
      • The once-mighty Congress party lost to Modi’s Bharatiya Janata Party in Assam, ending its 15-year rule in the northeastern state. The Gandhi dynasty’s political organization also dropped the southern state of Kerala and was only ahead in Puducherry, a former French colony that has a quarter-million people -- some 40 times less than Delhi, the capital.
      • The results in five states accounting for a fifth of India’s population were as good as Modi could hope for: His party only had a real shot of winning in Assam, reflecting its struggles to expand outside of Hindi-speaking areas. Two non-aligned regional power brokers -- Mamata Banerjee in West Bengal and J. Jayalalithaa in Tamil Nadu -- were both poised to hold onto power.
      • Still, the Congress party’s losses are good for Modi: They will reduce its ability to block his reform measures in the upper house of parliament, where members are determined by state election results. While the body’s composition won’t change immediately because current members need to serve out fixed terms, the long-term trend favors Modi.
      • After Thursday’s results, Congress will control outright just six of India’s 29 states, down from 15 in 2013. Modi’s party would hold power in 10 states, with regional parties and unwieldy coalitions leading the rest.
      • Congress is “losing its relevance” with the losses in Assam and Kerala, said U.R. Bhat, director at Dalton Capital Advisors India Pvt., a unit of U.K.-based Dalton Strategic Partnership LLP. Modi’s party has a good working relationship with regional leaders and will seek to woo them to isolate Congress to pass the goods-and-services tax and other reforms.
      • West Bengal’s Banerjee -- whose party has won or is leading in 215 of 294 seats -- is one of the regional leaders with a swing vote on economic reforms. On Thursday she reiterated support for Modi’s goods-and-services tax even though her party, which is backed by one of India’s largest Muslim populations, has accused Modi’s Hindu nationalist BJP of policies that stoke social strife.
      • "We have differences in ideology with BJP which is why we cannot be with them," Banerjee said at a briefing in Kolkata. "We will support GST and anything that benefits people."
      • For more than a year, the upper house -- known as the Rajya Sabha -- has blocked passage of a national sales tax, which aims to unify more than a dozen levies that hinder trade across state lines. Modi has been more successful with other measures, including an overhaul of bankruptcy laws that passed this month.
    • Modi Ally Says India Ruling Party Backs Efforts to Oust Rajan (Bloomberg):
      • The Indian lawmaker leading a charge to oust central bank Governor Raghuram Rajan says he’s backed by the “overwhelming majority" of Prime Minister Narendra Modi’s party, raising risks for investors in Asia’s third-largest economy.
      • Subramanian Swamy, a member of Modi’s ruling Bharatiya Janata Party and a rival to Finance Minister Arun Jaitley, wrote a letter to the prime minister earlier this week calling for Rajan to either be fired or dismissed when his term ends in September. The subsequent silence of Modi and his party indicates tacit support, Swamy said in an interview in New Delhi on Friday.
      • "Nobody has said a word against what I have said," said Swamy, 76, who formerly taught classes at Harvard University. “It’s an overwhelming majority. Even the intellectuals in the party are in full support." He didn’t name anyone specifically or elaborate on how he drew that conclusion.
      • The uncertainty over Rajan’s reappointment is a key risk for investors who credit him with taming one of Asia’s fastest inflation rates, stabilizing the rupee and moving to clean up 8 trillion rupees ($120 billion) of stressed assets in the financial system. Rajan has been a key advocate of fiscal discipline and has called macroeconomic stability India’s “single most important strength" in a time of global market turmoil.
      • While Swamy holds no formal position in Modi’s government, his outspoken attacks against political foes, lawsuits to expose corruption and large Twitter following make him an influential player in Indian politics. Last month he was nominated for a position in India’s upper house of parliament, indicating his rising clout within Modi’s party.
      • Swamy said Rajan’s push for a consumer-price inflation target -- which was adopted by Modi’s government last year -- has hurt the economy. He said India should get rid of it and move toward an employment target instead.
      • Business groups this week started to push back against Swamy. Ninety percent of chief executive officers polled this week by The Economic Times newspaper said Rajan should get a second term when it expires in September -- a view shared by many economists.




  • Growth:
  • Inflation:
    • APR PPI: -3.1% YoY from -3.3%
  • Policy:
    • BoK held its Benchmark 7-Day Repo Rate flat at 1.5%
      • South Korea’s won fell for the first time in three days on speculation the central bank will still cut the key interest rate this year, despite keeping it unchanged at a record-low 1.5 percent on Friday.
      • Bank of Korea Governor Lee Ju Yeol said in a briefing the rate is not “insufficient to support the economy.” But he cautioned against interpreting his comments as a signal for future policy decisions and indicated that the board has lowered the rate in the past to make it even more accommodative. Two-year bond yields are already reflecting investor perceptions for a reduction in borrowing costs, while the Federal Reserve is moving in the opposite direction. (Bloomberg)




  • Growth:
    • APR New Motor Vehicle Sales: 2.4% YoY from 4.2%
    • 1Q Wage Price Index: 2.1% YoY from 2.2%
    • APR Payrolls: 10.8k from 25.7k vs. 12k Bloomberg Consensus
    • APR Unemployment Rate: flat at 5.7%
  • Inflation:
    • MAY Consumer Inflation Expectation: 3.2% YoY from 3.6%
  • Policy:
    • RBA Says Broad-Based Inflation Weakness Helped Spur Rate Cut (Bloomberg 5/16):
      • A “broad-based” weakening of inflation pressures helped persuade Australia’s central bank that the economy would be assisted by an interest-rate cut even as the growth outlook remained steady.
      • While Reserve Bank of Australia board members considered holding the cash rate unchanged so they could await more information, policy makers on May 3 opted to cut the benchmark by a quarter point to 1.75 percent, according to the minutes of its latest policy meeting.
      • Governor Glenn Stevens’s first interest-rate cut in a year came after a report last month showed that some of the disinflationary pressures weighing on economies from Japan to Europe have arrived in Australia. The consumer price index dropped for the first time since 2008 in the first quarter, while annual core growth slowed to the weakest on record, prompting the central bank to slash its inflation forecasts.
      • The Australian dollar rose 1 percent following the release of the minutes and was at 73.64 U.S. cents as of 12:30 p.m. in Sydney. The benchmark three-year bond yield was at 1.62 percent, up 7 basis points since Monday.




  • Growth:
    • APR Export Orders: -11.1% YoY from -4.7%
  • Inflation:
  • Policy:
    • BoT held its Benchmark Interest Rate flat at 1.5%





  • Growth:
    • APR Exports: -12.6% YoY from -13.4%
    • APR Imports: -14.6% YoY from -10.4%
  • Inflation:
  • Policy:
    • BI held its benchmark Lending Facility, Deposit Facility, Reference and Reverse Repo rates flat at 7.25%, 4.25%, 6.75% and 5.5%, respectively
      • Indonesia’s central bank kept its benchmark interest rate unchanged for the second straight month, signaling it’s in no hurry to adjust policy until it adopts a new framework in August.
      • Governor Agus Martowardojo and his board left the reference rate at 6.75 percent on Thursday, in line with the forecasts of all 19 economists surveyed by Bloomberg. The seven-day reverse repo rate, which becomes the new benchmark rate in three months’ time, was kept at 5.5 percent.
      • Policy makers cut interest rates three times this year in an attempt to revive growth in Southeast Asia’s largest economy. The door may be open for more easing later this year after inflation slowed to 3.6 percent in April and gross domestic product data disappointed last quarter.
      • “We can ease monetary policy if the room is available and supported by data,” Martowardojo said, adding the stability of the economy needed to be maintained.
      • Growth slowed to 4.92 percent in the first quarter, a setback for President Joko Widodo as he vows to spur investment and implement reforms. With exports and commodity prices under pressure, the government has been urging Bank Indonesia to join its regional and global counterparts to add more monetary stimulus. Malaysia’s central bank also held interest rates steady on Thursday.
      • Bank Indonesia cut its forecast for economic growth this year to between 5 percent and 5.4 percent, from a previous estimate of 5.2 percent to 5.6 percent, due to a weak global economy. It sees inflation at the mid-point of its 2016 target of 3 percent to 5 percent. (Bloomberg)




  • Growth:
    • 1Q Real GDP: 3.2% YoY from 2.8%
      • QoQ: 0.9%  from 0.8%
  • Inflation:
  • Policy:




  • Growth:
    • MAR Industrial Production: 2.8% YoY from 3.9%
    • MAR Manufacturing Sales Value: 0.6% YoY from -1.4%
    • 1Q Real GDP: 4.2% YoY from 4.5%
  • Inflation:
    • APR CPI: 2.1% YoY from 2.6%
  • Policy:
    • BNM held its benchmark Overnight Policy Rate flat at 3.25%
      • Malaysia’s central bank held interest rates steady at Governor Muhammad Ibrahim’s first policy meeting as chief, refraining from immediately adding stimulus to an economy that could need it in coming quarters.
      • Bank Negara Malaysia kept the overnight policy rate at 3.25 percent for an 11th meeting, it said in a statement in Kuala Lumpur Thursday. The decision was predicted by all but one of 21 economists surveyed by Bloomberg News.
      • With an economy that’s forecast to expand at the slowest pace in seven years, and loan growth rates easing to levels not seen since at least 2008, the case is starting to build in Malaysia for an easing in policy. The collapse in oil prices has hurt government finances over the past two years, exports and private investment have faltered, while consumers and businesses are still contending with rising costs. (Bloomberg)




  • Growth:
    • 1Q Real GDP: 6.9% YoY from 6.5%
      • QoQ: 1.1% from 2.1%
  • Inflation:
  • Policy:




  • Growth:
    • MAR Retail Sales ex Autos: -2.2% YoY from -9.5%
    • APR Non-Oil Domestic Exports: -7.9% YoY from -15.7%
  • Inflation:
  • Policy:


Hong Kong:


  • Growth:
    • 1Q Real GDP: 0.8% YoY from 1.9%
      • QoQ: -0.4% from 0.2%
  • Inflation:
  • Policy:




  • Growth:
    • MAR Retail Sales:
      • Nominal: -5.7% YoY from -4.2%
      • Real: -7.9% YoY from -5.6%
    • MAR IBGE Services Sector Volume Index: -5.9% YoY from -3.9%
    • MAR Economic Activity Index: -6.3% YoY from -4.7%
    • MAY CNI Industrial Confidence Index: 41.3 from 36.8
  • Inflation:
    • MAY mid-month CPI reading: 9.6% YoY from 9.3%
  • Policy:
    • Senate Votes to Oust Rousseff, Ushering in New Government (Bloomberg 5/12):
      •  Brazil’s Senate voted to suspend President Dilma Rousseff from office, ushering in a new government after months of political turmoil in the recession-wracked country.
      • Legislators agreed on Thursday after a marathon session that lasted 21 hours to try the president on allegations she illegally doctored fiscal accounts to mask the size of the budget deficit. The vote was 55 to 22. She will now face an impeachment trial in the Senate.
      • Rousseff, a one-time guerrilla fighter, now must step down and stand trial in the Senate, a process that could wrap up by September, according to the head of Brazil’s largest party, the PMDB. She will maintain some presidential privileges such as an official residence, a salary, a security detail and personal staff. Vice President Michel Temer, 75, will take over as interim president. Many expect the switch to be permanent.
      • Investors are split over whether Temer, a career politician and constitutional lawyer, can unify Brazil and revive growth. While they welcome his plan to downsize government and to make more room for the private sector, some also fear political turmoil could persist and even intensify as critics challenge his legitimacy and try to block his proposals.
      • Leading members of Temer’s Brazilian Democratic Movement Party are under investigation in the country’s sweeping corruption probe known as Carwash. Sixty-two percent of respondents in an Ibope poll last month said new elections rather than impeachment would have been the best solution to the political crisis. Backers of Rousseff’s Workers’ Party, which has strong ties to unions and protest movements, have already pledged to stage demonstrations and work stoppages to push for his ouster.
      • "Temer is going to face enormous polarization and a very angry and incredibly mobilized opposition," said Matthew Taylor, associate professor at American University’s School of International Service and former instructor at the University of Sao Paulo. "The Workers’ Party will make the current opposition look like a bunch of teddy bears."
      • Thursday’s vote capped nearly six months of political uncertainty since then-lower house speaker Eduardo Cunha accepted the impeachment request. Rousseff’s chances of surviving declined rapidly in recent months as the Carwash probe encroached on her inner circle and the recession eroded many of the gains that Brazilians enjoyed during the 13 years of rule by her leftist political party. "It’s difficult to see a situation where Rousseff would be able to come back," said Trinkunas at Brookings.
    • Brazil’s Stocks Advance as New Government Fuels Growth Optimism (Bloomberg 5/12):
      • Brazilian stocks extended one of the world’s biggest rallies after the Senate voted to suspend President Dilma Rousseff, clearing the way for a new government investors are wagering will be better able to pull the country out of its worst recession in a century.
      • The Ibovespa index rose 0.9 percent to 53,241.32 at the close of trading in Sao Paulo, led by gains in companies that benefit from consumer demand. Drugstore chain Raia Drogasil SA rose to a record. Lenders Itau Unibanco Holding SA and Banco Bradesco SA were among the biggest contributors to the gauge’s advance.
      • The benchmark equity index Ibovespa has risen 23 percent in 2016, with energy companies and banks leading the advance, as the process to impeach Rousseff for allegedly breaking budget laws gained momentum. After the Senate this morning voted to suspend her from office, investors’ attention now turns to Vice President Michel Temer, who took over as interim president and moved swiftly to form his cabinet, appointing former central bank chief Henrique Meirelles as finance minister.
      • Most of the Brazilian companies that have already reported first-quarter results posted sales and earnings that trailed analysts’ estimates, according to data compiled by Bloomberg. Gross domestic product is forecast to shrink 3.86 percent this year after contracting 3.8 percent last year.
      • "The Ibovespa is testing a strong resistance at 53,700 points, which is a watershed," Figueredo said from Sao Paulo. "One stage of the reform process is over, but now the investor is looking for more clues on Temer’s handbook."
      • The Ibovespa is trading at 12.6 times estimated earnings. That’s 13 percent above its three-year average and 11 percent more expensive than the MSCI Emerging Markets Index.




  • Growth:
    • MAR Industrial Production: -2% YoY from 2.6%
    • MAR Manufacturing Production: -1.5% YoY from 3.9%
  • Inflation:
  • Policy:




  • Growth:
    • APR Light Vehicle Car Sales: -8% YoY from -10%
    • 1Q Real GDP: -1.2% YoY from -3.8%
    • APR Industrial Production: 0.5% YoY from -0.5%
  • Inflation:
    • APR PPI: 0.9% YoY from 0.8%
  • Policy:




  • Growth:
  • Inflation:
  • Policy:
    • Erdogan Tightens Grip on Turkey as Loyalist Set to Be Premier (Bloomberg):
      • Binali Yildirim, a close ally of Turkish leader Recep Tayyip Erdogan, is set to become the country’s new prime minister -- an appointment that will significantly strengthen the president’s grip on power.
      • Yildirim, who is being elevated from transport minister, is the only candidate for the job and his nomination will be put to an extraordinary convention of the ruling Justice and Development Party, or AKP, on Sunday, party spokesman Omer Celik said at a press conference in Ankara. Current Premier Ahmet Davutoglu will formally resign once results of the party vote are official.
      • Davutoglu’s abrupt decision this month to step down came after he lost a struggle over preeminence and policy with Erdogan, who has sought to transform his traditionally ceremonial office into the nation’s power center since taking the job in 2014. Yildirim, 61, is expected to lobby for a transition to a presidential system, undermining his own authority as prime minister and reducing the powers of parliament.
      • "This is really a significant step towards the personalization of power in the hands of Turkey’s most powerful president,” Soner Cagaptay, director of the Turkish Research Program at the Washington Institute for Near East Policy, said in an interview with Voice of America on May 13. Erdogan is on course to be the “most powerful person ever since Turkey became a multi-party democracy in 1950. He would be head of government, head of state, head of ruling party, pretty much head of everything in Turkey," he said.
      • Yildirim’s rise would remove one of the biggest obstacles to Erdogan’s plan to shift Turkey away from the parliamentary system of government. The president publicly criticized Davutoglu for not making that change a bigger priority, and tensions between the two simmered over Davutoglu’s 20 months in office.


South Africa:


  • Growth:
    • MAR Manufacturing Production: -2% YoY from -2.2%
    • MAR Real Retail Sales: 2.8% YoY from 4%
  • Inflation:
    • APR CPI: 6.2% YoY from 6.3%
    • APR Core CPI: 5.5% YoY from 5.4%
  • Policy:
    • SARB left its Benchmark Policy Rate unchanged at 7%
      • The pause in the South African central bank’s policy tightening cycle may be short-lived as it forecast increasing risks for inflation from a weaker rand and food prices.
      • The repurchase rate was left unchanged at 7 percent, Governor Lesetja Kganyago told reporters on Thursday in the capital, Pretoria. Nineteen of the 25 economists in a Bloomberg survey predicted no change to borrowing costs. Five of the six members Monetary Policy Committee members preferred to keep the rate unchanged and one favored a quarter percentage point increase, Kganyago said.
      • The MPC has raised interest rates by 125 basis-points since July to control inflation even as the economic outlook worsened and the nation’s debt risks being downgraded to junk. The bank’s task has been made more difficult by weakening investor confidence since December, when President Jacob Zuma unexpectedly fired his finance minister, followed by a power struggle between the president and current Finance Minister Pravin Gordhan over control of the National Treasury. (Bloomberg)


Have a wonderful weekend,




Darius Dale


Cartoon of the Day: Liftoff!

Cartoon of the Day: Liftoff! - Helicopter money 05.20.2016


After Quantitative Easing and NIRP (negative interest-rate policy) have failed to deliver economic growth, central planners are now talking about helicopter money. Delusional? Yes.

the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.