“Superlative performance is really a confluence of dozens of small skills or activities, each one learned or stumbled upon, which have been carefully drilled into habit and then are fitted together in a synthesized whole.”
-Dan Chambliss from “The Mundanity of Excellence”
We’ve been enjoying reading a book recently called, “Grit: The Power of Passion and Perseverance”, which analyzes the roots of success. As you guessed from the title, the book postulates that the single most important factor in determining whether an individual will be successful is whether they are “gritty”.
For those of you that have been subscribing to Hedgeye, you know full well this idea of grit is basically our mantra.. We are pretty comfortable that we aren’t the smartest or most talented in the room, but we think we can be the hardest working and most passionate.
The author of the aforementioned book, Angela Duckworth, attempts to quantify grit and in doing so has shown it predicts very effectively which cadets at West Points will succeed or fail, what inner city high school students will go on to higher academic levels, and what elementary school students will win spelling bees, among other things.
Interestingly, and apropos to today, the author also discusses Bill and Hillary Clinton and pans this idea that he is a natural and gifted politician and she will never be his equal. Setting aside your view of her politics, it is very difficult to disagree with the idea that she is one of the grittiest of modern political figures. These traits have rewarded her with many political victories and finally she has become her party’s nominee for President.
Settings aside something coming from left field (or an errant email server), this race is down to The Donald versus Hillary. As of this morning and as you can see in the Chart of the Day, the pollsters are basically showing it to be a statistical tie. To the chagrin of many, the Donald is in it to win it and has a real chance to do so. The next 5 months may have to be the grittiest and most determined of Hillary Clinton’s political life.
Back to the Global Macro Grind…
Yesterday in the Early Look, Keith wrote that subscribers he is speaking to on the road are extolling the fact that the SP500 is now back to flat on the year. In fact, as of this morning, over the last year the SP500 is up +1.58%. If you were able to get positive absolute equity alpha in the last 12-months, congrats on the grinding! It hasn’t been easy.
In Europe this morning, the central bankers are persevering with their dovishness and the ECB’s corporate bond buying program kicks off. According to reports, the buying will be broad based with a focus on utility, insurance and telecom bonds. Someone should let Draghi know we have some “great” MLP paper he can buy in the U.S...
The implementation of corporate bond purchasing this morning dovetails with the latest poll from Pew ahead of the June 23rd Brexit vote. According to the poll, Europe, not surprisingly, is very much split with 47% of nations holding an unfavorable view of the EU and 51% in favor. Not surprising, support for the EU is lowest in these nations – Greek at 27%, France at 38%, UK at 44%, and Spain at 47%. Meanwhile, majorities in all countries except Germany and Poland also disapproved of the EU’s handling of the economy.
On the topic of Brexit, we will be doing a call this morning with Alexander Nicoll from the International Institute for Strategic Studies. He will be joined by Hedgeye Potomac’s Managing Director JT Taylor and our Senior Defense Policy Analyst Lt. General Emo Gardner. In a nutshell, the view is that we think Brexit will not occur and we’ll present the framework for why we believe this is the case. The call will occur today at 11am ET, please email for details.
Employment data from Britain this morning reinforces the view that Brexit is unlikely to occur. According to data from the Recruitment and Employment Confederation, UK firms increased staff numbers at the lowest rate in eight months due to “worries about the EU referendum”. Ironically, many UK firms are seeing candidate shortages, but due to the economic uncertainty around the referendum are unwilling to make hiring decisions. The economy still does matter, stupid.
Speaking of grinding, the PBOC ground out some new economic projections this morning. The Chinese central bank kept GDP unchanged at +6.8%, revised up CPI to +2.4%, revised up fixed asset investment growth to +11.0%, and revised down export growth to -1%. The World Bank also offered a new global growth projection that reduced growth to +2.4% for 2016, which was a 0.5% reduction from January.
Hmmm, global growth rates reduced by 20% and exports and the world’s second largest economy turning negative? Maybe those muckers and grinders at Hedgeye are on to something with their #GrowthSlowing view.
Our immediate-term Global Macro Risk Ranges are now:
UST 10yr Yield 1.64-1.79%
Oil (WTI) 47.59-51.09
Keep your head up and stick on the ice,
Daryl G. Jones
Director of Research