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The Good Stuff: Reports and News Articles you May Have Missed This Week

Takeaway: The best of the best: our favorite reading material from the week of May 30th.

Happy Friday. Each week we read a lot of stuff so you don't have to. Below is our list of the best of the best this week and a final word from Jeff Buckley for those of you that love a little guitar artistry.

 

The Affordable Care Act

In a Secret Meeting, Revelations on the Battle Over Health Care, New York Times, May 30, 2016

  

Drugs

The FDA isn't listening to patients pleading for drug approvals. Nor should it. Stat News, June 2, 2016

Sharp Rise in Cancer drug Spending Forecast, but Access remains a Problem, Stat News, June 2, 2016

Fearing Drugs’ Rare Side Effects, Millions Take Their Chances With Osteoporosis, June 1, 2016

Judge orders Washington Medicaid to provide hepatitis C drug, Modern Healthcare, May 30, 2016 <GLD>

 

Health Care Services:  

Does The Site Of Care Change The Cost Of Care?, Health Affairs, June 2, 2016

Nonprofits' Tax-Exemption Battle Moves to the Courts, Governing, June 2, 2016

Unpaid, stressed, and confused: patients are the health care system's free labor, Vox, June 1, 2016

The U.S. Health Disadvantage And The Role Of Spending, Health Affairs, June 1, 2016

After prompting from high-profile docs, CMS opens up CPC+ to ACOs, Mobihealth News, May 31, 2016 

 

Health Care IT

ONC and CMS: We're at a critical inflection point for EHRs, interoperability, HealthcareIT News, May 31, 2016 <ATHN> <CERN>

Athenahealth seeks to "unbreak" healthcare with the help of humor, MedCity News, June 1, 2016 <ATHN>

 

Insurance

Why lower ACA exchange enrollment may not be a bad thing, Modern healthcare, june 2, 2016 <All Health Insurers>

Health insurance mega-deals aren't winning over a key party: large employers, Modern Healthcare, June 1, 2016 <HUM> <AET> ATHM> <CI>

Advanced Analytics: A Triple Win for Payers, Healthcare Finance, June 1, 2016

UnitedHealth To Exit California’s Obamacare Market, California Healthline, May 31, 2016 

 

Random Miscellany

Scientists name praying mantis species after Ginsburg, The Hill, June 1, 2016

 

Shameless Sell Promotion

Maternity Tracker Update, June 2, 2016

HOLX 3D Update Falling Short QTD, June 1, 2016

 

Last week we asked if we could have an Hallelujah. This week we are giving you one. In memory of the late, great Jeff Buckley who died 19 years ago this week in Memphis:

 

 

Follow me on Twitter for more throughout the week


Cartoon of the Day: Sputtering

Cartoon of the Day: Sputtering - jobs cartoon 06.03.2016

 

Today we learned that the U.S. economy added a paltry 38,000 jobs in the month prior. Our Macro team nailed it.

 

#EmploymentSlowing


Does a Third-Party Candidate Derail Trump?

 

In this edition of Washington To Wall Street, Hedgeye Potomac Chief Political Strategist JT Taylor and Director of Research Daryl Jones discuss what a third-party Libertarian presidential bid may mean for Donald Trump’s Oval Office aspirations.


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5 Charts: Why Today's Jobs Report Confirms The Past-Peak Trend (Yet Again)

5 Charts: Why Today's Jobs Report Confirms The Past-Peak Trend (Yet Again) - jobs cartoon 10.05.2015

 

"Less than six months into the year, the Fed has been hawkish, pivoted to dovish, pivoted to hawkish and will now pivot to dovish," Hedgeye Senior Macro analyst Darius Dale wrote on Twitter earlier today.

 

#Truth

 

Today's #JobsBomb spells trouble for those flippant Fed heads. Here's why.

 

Stepping back a moment to better contextualize today's Jobs Report in both delta and differential terms, here are two charts from Dale:

 

5 Charts: Why Today's Jobs Report Confirms The Past-Peak Trend (Yet Again) - nfp 6 3

 

5 Charts: Why Today's Jobs Report Confirms The Past-Peak Trend (Yet Again) - nfp 6 3  2

 

Meanwhile...

 

"If you think this heinous Jobs Report is a one-off, you are literally paid to be willfully blind to #TheCycle," Dale writes. Take a look at what Jobless Claims data has long been signaling (i.e. we're about 3-6 months of improving claims data away from recession).

 

5 Charts: Why Today's Jobs Report Confirms The Past-Peak Trend (Yet Again) - nfp 6 3  3

 

And here's the KEY chart that shows Non-Farm Payrolls rolling off the February 2015 cycle peak in rate-of-change terms (i.e. #NotGood). 

 

5 Charts: Why Today's Jobs Report Confirms The Past-Peak Trend (Yet Again) - nonfarm payroll 6 3

 

In other words, as the linear, labor economists at the Fed continue to witness deteriorating jobs data, it will become increasingly difficult to sell the "all is good" U.S. economic narrative.

 

In fact, the market is already pricing in a more dovish Fed. Look at the latest implied rate hike probability reading versus where it was yesterday (note the probability of a July rate hike was nearly cut in half in the matter of a day):

 

5 Charts: Why Today's Jobs Report Confirms The Past-Peak Trend (Yet Again) - rate hike prob 72

 

We'll take this time to reiterate what we've been saying for a while now...

#EmploymentSlowing


HEDGEYE Exchange Tracker | Second Derivative Rate of Change Second to None

Takeaway: Volume was light in the holiday shortened week, but equities and futures volume remain +11% and +6% higher Y/Y, solid growth for Financials.

Weekly Activity Wrap Up

Volume in the holiday shortened week was lower than the 2Q16TD quarterly average, however cash equities and futures maintained good year-over-year volume growth. Cash equities came in at 6.7 billion shares per day, bringing the 2Q16TD average daily volume (ADV) to 7.0 billion, +11% higher year-over-year. Futures came in at 18.3 million contracts per day this week, bringing the quarter's ADV to 18.8 million, +6% higher than the year-ago quarter.  Additionally, CME's open interest currently tallies 114.1 million contracts, +25% higher than the 91.3 million pending at the end of 2015. This compares to ICE's OI growth of just +5% YTD.  Meanwhile, options volume of 12.8 million was low enough that it dragged down the 2Q16TD ADV  to 15.2 million, -1% lower than the 2Q15 ADV. 

 

HEDGEYE Exchange Tracker | Second Derivative Rate of Change Second to None - XMon16

  

U.S. Cash Equity Detail

U.S. cash equities trading came in at 6.7 billion shares per day this week, bringing the 2Q16TD ADV to 7.0 billion. That marks +11% Y/Y growth. The market share battle for volume is mixed. The New York Stock Exchange/ICE is taking a 25% share of second-quarter volume, which is +95 bps higher Y/Y, while NASDAQ is taking a 17% share, -132 bps lower than one year ago.

 

HEDGEYE Exchange Tracker | Second Derivative Rate of Change Second to None - XMon2

 

HEDGEYE Exchange Tracker | Second Derivative Rate of Change Second to None - XMon3

 

U.S. Options Detail

U.S. options activity came in at a 12.8 million ADV this week, bringing the 2Q16TD average to 15.2 million, a -1% Y/Y contraction. In the market share battle amongst venues, NYSE/ICE's 17% share of 2Q16TD volume is +41 bps higher than one year ago. Additionally, NASDAQ's 22% share is +27 bps higher year over year. BATS has also been taking share from the competing exchanges, up to an 11% share from 10% a year ago. Meanwhile, CBOE's 26% market share of 2Q16TD is down -123 bps Y/Y. Finally, ISE/Deutsche's 14% share is -153 bps lower than 2Q15.

 

HEDGEYE Exchange Tracker | Second Derivative Rate of Change Second to None - XMon4

 

HEDGEYE Exchange Tracker | Second Derivative Rate of Change Second to None - XMon5

 

U.S. Futures Detail

14.7 million futures contracts per day traded through CME Group this week, bringing the 2Q16TD ADV to 14.4 million, +8% higher Y/Y. Additionally, CME open interest, the most important beacon of forward activity, currently sits at 114.1 million CME contracts pending, good for +25% growth over the 91.3 million pending at the end of 4Q15, an expansion from the previous week's +24%.

 

Contracts traded through ICE came in at 3.6 million per day this week, bringing the 2Q16TD ADV to 4.4 million, a +3% Y/Y expansion. ICE open interest this week tallied 66.9 million contracts, a +5% expansion versus the 63.7 million contracts open at the end of 4Q15, consistent with the previous week.

 

HEDGEYE Exchange Tracker | Second Derivative Rate of Change Second to None - XMon6

 

HEDGEYE Exchange Tracker | Second Derivative Rate of Change Second to None - XMon8

 

HEDGEYE Exchange Tracker | Second Derivative Rate of Change Second to None - XMon7

 

HEDGEYE Exchange Tracker | Second Derivative Rate of Change Second to None - XMon9 

 

Monthly Historical View

Monthly activity levels give a broader perspective of exchange based trends. As volatility levels, measured by the VIX, MOVE, and FX Vol should rise to normal levels after the drastic compression this cycle, we expect all marketplaces to experience higher activity levels.

 

HEDGEYE Exchange Tracker | Second Derivative Rate of Change Second to None - XMon10

 

HEDGEYE Exchange Tracker | Second Derivative Rate of Change Second to None - XMon11

 

HEDGEYE Exchange Tracker | Second Derivative Rate of Change Second to None - XMon12

 

HEDGEYE Exchange Tracker | Second Derivative Rate of Change Second to None - XMon13

 

HEDGEYE Exchange Tracker | Second Derivative Rate of Change Second to None - XMon14

HEDGEYE Exchange Tracker | Second Derivative Rate of Change Second to None - XMon15

 

 

Please let us know of any questions,

 

Jonathan Casteleyn, CFA, CMT 

  

  

 

 Joshua Steiner, CFA

 

 

 

 


Hedgeye Guest Contributor | Thornton: Is the Fed Waking Up To Reality?

Editor's NoteBelow is a Hedgeye Guest Contributor research note written by Dr. Daniel Thornton. During his 33-year career at the St. Louis Fed, Thornton served as vice president and economic advisor. He currently runs D.L. Thornton Economics, an economic research consultancy. 

 

Please note that while the views expressed in this column do not necessarily reflect the opinion of Hedgeye, Thornton's analysis is hard-hitting and provocative. A must-read for thoughtful investors.

 

Hedgeye Guest Contributor | Thornton: Is the Fed Waking Up To Reality? - Fed grasping cartoon 01.14.2015

 

In a speech on May 26, Fed Governor Jerome Powell noted that “A long period of very low interest rates could lead to excessive risk-taking and, over time, to unsustainably high asset prices and credit growth.”

 

One cannot help but wonder what Governor Powell considers to be a “long period.” The federal funds rate quickly headed to zero when the Fed increased the monetary base by making loans to financial institutions following Lehman Bros. bankruptcy announcement on September 15, 2008. The Federal Open Market Committee (FOMC) slowly reduced its target for the funds rate from 2% to effectively zero by December 15, 2008, in spite of the fact that the funds rate was already near zero, see "Requiem for QE."

 

The funds rate target remained at this level for SEVEN years before the FOMC increased the target to between 25 and 50 basis points on December 16, 2015. So the funds rate has been excessively low for nearly 7.5 years. This is unprecedented, and an extremely long period.


I am also struck by Powell’s suggestion that “very low interest rates could lead to excessive risk-taking and, over time, to unsustainably high asset prices and credit growth.” It’s already happened! The FOMC’s low rate policy has already led pension funds and retirees to take excessive risks.

 

It has also produced unsustainably high asset prices as evidenced by this graph from "My Scary Chart." The figure shows household net worth as a percent of disposable income. The first two peaks were due to unsustainable increases in assets prices: The first, to equity prices, the second to home prices.

 

Hedgeye Guest Contributor | Thornton: Is the Fed Waking Up To Reality? - waking up

 

The third is due to a combination of equity and home prices. This rise in household wealth also seems to be unsustainable. The question is: Does it decline slowly to the trend line or does it fall precipitously like the previous two?

 

The FOMC’s policy has already caused banks to make an extraordinary quantity of loans in a slow growth economy and has caused the M1 money supply measure to more than double since Lehman’s announcement, see Excess Reserves and Excessive Risk Taking.


Powell appears to be waking up to the consequences of the FOMC’s policy. He concluded his speech with, “My view is that a continued gradual return to more normal monetary policy settings will give us the best chance to continue to make up lost ground.” However, he is yet to come to the realization that the return to “normalcy” needs to happen quickly not gradually. Waiting two or more additional years won’t improve the economy; it can only cause further harm.


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