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An Update On The Great Debate: Deflation Vs. Reflation

Takeaway: Next catalyst in the #Reflation vs. #Deflation debate? Fed head Janet Yellen will give an update on the FOMC's latest thinking on Wednesday.

An Update On The Great Debate: Deflation Vs. Reflation - Deflation cartoon 11.10.2015

 

Got #Deflation?

 

That's the latest macro market read through, explaining why equity markets in Australia and Russia puked and the 10yr Treasury yield headed lower. In other words, it was a classic Dollar Up, Rates Down day.

 

Where do we go from here?

 

Is the evolving trend #Deflation or #Reflation? That's the question of the month...

 

On an immediate-term trade basis, yesterday's selloff triggered oversold in a number of shorts in Real-Time Alerts. Here's additional insight via Hedgeye CEO Keith McCullough in a note sent to subscribers earlier today:

 

"U.S. Treasury 10yr yield at 1.57%. Yep. Closing in on 2015 lows but rates are oversold ahead of Yellen’s 4th pivot (hawkish to dovish to hawkish to dovish) in 6 months as #EmploymentSlowing becomes obvious."

 

Take a look at a chart of the tumbling 10yr Treasury yield. (Note: At the start of 2016, the 10yr Treasury yield was 2.25%.)

 

Click to enlarge. 

An Update On The Great Debate: Deflation Vs. Reflation - 10yr yield 6 14

 

Meanwhile in equity markets... 

 

"Dollar Up, Rates Down – that is the #Deflation Risk On – and that’s a big reason for the oversold signal in Global Equities this morning – Reflation sensitive countries (Russia -3%, Australia -2%) and Reflation Risk sector exposures have corrected, hard, from our USD oversold (Energy Overbought) signal last week."

 

 

Next catalyst in the #Reflation vs. #Deflation debate? Fed head Janet Yellen will give an update on the FOMC's latest thinking on Wednesday...

 

It's perverse, but it's reality. The Fed's pivots from hawkish to dovish throughout the year have perpetuated either reflation or deflation. 

 

More to be revealed.


Iran's Oil Production Is “Confounding Experts and Beating Expectations” – Incorrect

Takeaway: Our energy policy analyst Joe McMonigle made a big, non-consensus call on Iranian oil production. He was right. Credit where credit's due.

Iran's Oil Production Is “Confounding Experts and Beating Expectations” – Incorrect - z joem

 

A reality check is in order.

 

NPR ran a segment over the weekend saying Iran’s dramatic return to crude production and exports is “confounding the experts and beating expectations.” Well, not so much. Iran surprised virtually everyone but us. 

 

As you can see below, Hedgeye Potomac Senior Energy Analyst Joe McMonigle predicted this in his January 17 note, “Iran sanctions relief to trigger crude exports sooner and larger than expectations.” In the note, he advised our subscribers to expect 700,000 barrels per day by March. Iran is now at 800,000 barrels per day and growing.

 

Here's what NPR had to say

“When the nuclear deal between Iran and world powers was implemented in January, it was widely believed it would take at least a year for the country’s oil industry to get back up to speed after years of sanctions. But Iran is confounding the experts and beating expectations.”

 

Here's what we wrote back in January

“The same analysts who were surprised at how quickly sanctions got lifted are now underestimating Iran’s production capabilities, or incorrectly believe Iran will move slowly due to low crude prices. Our view is that Iran will increase production by larger amounts and sooner than most observers think. We anticipate that Iran, by itself, has the capability to produce approximately 700,000 barrels a day of additional crude for export by March 2016.”  

 

“As a result of sanctions, Iran reduced production across the board as opposed to shutting down major upstream fields. Therefore, increasing production in the short-term would be almost like pushing a button. Iran could easily reach 700,000 barrels a day by increasing production by a couple hundred barrels a day at its 2,280 producing wells.”

 

*  *  *  *  *

This is a big deal on an important call that we got right. We were virtually alone in making the call.

 

On a related note, our world-class cartoonist captured our contrarian call later that week on January 22 with this cartoon.

 

Iran's Oil Production Is “Confounding Experts and Beating Expectations” – Incorrect - Iran.Saudi.oil cartoon 01.22.2016

 

 


Daily Market Data Dump: Tuesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, and rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Tuesday - equity markets 6 14

 

Daily Market Data Dump: Tuesday - sector performance 6 14

 

Daily Market Data Dump: Tuesday - volume 6 14

 

Daily Market Data Dump: Tuesday - rates and spreads 6 14

 

Daily Market Data Dump: Tuesday - currencies 6 14


Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

CHART OF THE DAY: Checking-In On Equity Volatility

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.

 

"... Oh, and how about that thing called equity volatility?

 

Front month US Equity VIX just went from 13 to 21-22, in a week. Since both the April and June US stock market “rallies” to lower-all-time-bubble highs came on decelerating volume, should this move surprise anyone other than people who chase charts?

 

Or were people chasing moving monkey averages aware of the causal factor called #TheCycle all along?"

 

CHART OF THE DAY: Checking-In On Equity Volatility - 06.14.16 EL Chart


The Clock Is Ticking: Will Trump Bring The GOP Together?

 

Much is being made of Donald Trump’s inability to unite Republicans at this stage of the campaign. Hedgeye Potomac Chief Political Strategist JT Taylor takes a look and offers some key thoughts on the subject, as well how Hillary Clinton stacks up on the Democratic side.


Cartoon of the Day: Living In A Bubble?

Cartoon of the Day: Living In A Bubble? - Soros cartoon 06.13.2016

 

Last week, hedge fund titan George Soros grabbed headlines after it was announced he had come out of semi-retirement and placed bearish bets, shorting the S&P 500 and buying gold. 


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This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.

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