Capital Brief: Donald Under Duress? ... & Rubio Reconsiders

Editor's Note: Below is a brief excerpt from Hedgeye Potomac Chief Political Strategist JT Taylor's Capital Brief sent to institutional clients each morning. For more information on how you can access our institutional research please email


Capital Brief: Donald Under Duress? ... & Rubio Reconsiders - JT   Potomac under 1 mb


I'm not the smartest fellow in the world, but I can sure pick smart colleagues.”



After the IN primary six short weeks ago, Donald Trump was atop some national polls and riding a high wave of Republican endorsements on his way to unifying the party, while Hillary Clinton was left to battle an insurgent and struggling to unite her own party.  After two tumultuous weeks of picking fights with everyone in his path, Trump has found himself alone and losing momentum faster than ever.


Republicans have had a knee jerk reactions to criticizing the nominee early and often in the past, but the frequency with which they’re doing it now is different and more problematic. With less than a month before the convention, he hasn’t won endorsements from many of his former primary opponents, has yet to put together a core finance team and is creating tension with the RNC - his only (and largest) organizational back up for the next five months. Does this guy really want to win?


Our nation’s gun laws have many Democrats up in arms and now Trump - who throughout his campaign has expressed his opposition to gun control - has been prompted to meet with the National Rifle Association over the issue in the wake of the Orlando massacre. Trump has backed a no-buy list for FBI watch list members and the NRA has opposed the measure concerned that Americans wrongfully placed on list were being stripped of their constitutional rights to due process.


Tensions have emerged on Capitol Hill after a 15-hour filibuster by Senate Democrats has forced Republicans to hold votes on two separate gun measures - with PA Senator Pat Toomey being one of few Republicans willing to cross party lines on the issue.


When Senator Marco Rubio launched his presidential campaign, he made the bold promise of winning the White House or bust - but a lot has changed since then especially with Trump at the top of the ticket. Holding onto the Senate was always going to be a challenge for Republicans given the number of seats they had to defend and now with the political winds changing, Senate Majority Leader Mitch McConnell and his colleagues feel Rubio is their best hope to keep FL in the red column.


As the Democratic frontrunner, Rep. Patrick Murphy has been the beneficiary of the party’s growth in registration and fundraising in the state making him the early favorite…if Rubio doesn’t run. Rubio has exactly one week to decide if he’ll throw his hat in the ring.

Cartoon of the Day: Bear Grillz

Cartoon of the Day: Bear Grillz - gold cartoon 06.17.2016


For investors bearish on U.S. economic growth, like us, Gold is having an amazing run this year. Year-to-date, Gold (GLD) is up 21.7% versus up just 1.4% for the S&P 500.

McGough: 8 Retail Stocks With Credit Cycle Risk

In this excerpt from The Macro Show earlier today, Hedgeye Retail analyst Brian McGough explains why certain retailers are overexposed to a rollover in the credit cycle.

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 80.47%
  • SHORT SIGNALS 78.68%

INSTANT INSIGHT | Brexit, #GrowthSlowing & European Equities Still Crashing

Takeaway: The Brexit vote is a coin toss and, despite today's pop, European equities remain in crash mode.

INSTANT INSIGHT | Brexit, #GrowthSlowing & European Equities Still Crashing - bear chart 02.26.2016


Here's analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers earlier today:


"BREXIT – coin toss? I’d say so. And since I don’t make calls on coin tosses, I’ll just give you both bearish intermediate-term TREND signals in FTSE (6388 resistance) and Pound ($1.47 vs. USD) with an intermediate-term risk range of $1.39-1.47 – in other words, even if they don’t exit, odds are both remain bearish TREND (because the UK economy is slowing regardless vs. last year’s cycle peak)"


INSTANT INSIGHT | Brexit, #GrowthSlowing & European Equities Still Crashing - Brexit cartoon 06.16.2016


"DAX – more definitively bearish TREND than FTSE, but that’s because DAX remains in crash mode (-22% from last year’s cycle high); reminder that we still have the Street low forecasts for both Eurozone and German GDP in 2H of 2016 – #GrowthSlowing is the tail wagging the political dog, and it’s not just the UK who has political risks accelerating in kind."


INSTANT INSIGHT | Brexit, #GrowthSlowing & European Equities Still Crashing - Europe Japan cartoon 04.04.2016

A Humbling Moment For St. Louis Fed Head James Bullard?

A Humbling Moment For St. Louis Fed Head James Bullard? - Fed cartoon 05.04.2016


Even the hawks are "cooing" these days.


St. Louis Fed head James Bullard has finally acknowledged that the U.S. economy is slowing. The eye-opening part of Bullard's Friday morning admission is this: He now says the U.S. economy's growth is so underwhelming that we may need no more than a single additional rate hike for the next 2.5 years.


As we've pointed out before, Bullard joins San Francisco Fed head John Williams in dialing back prior rate hike expectations. (Williams was perhaps the most ardent hawk, yearning for as many as five rate hikes in 2016.)


Oh how the mighty have fallen...


In a shocking mea culpa though, Bullard released a statement today about Fed forecasting and the U.S. economy saying:


"We are backing off the idea that we have dogmatic certainty about where the U.S. economy is headed in the medium and longer run. We are trying to replace that certainty with a manageable expression of the uncertainty surrounding medium- and longer-run outcomes."


A Humbling Moment For St. Louis Fed Head James Bullard? - Fed grasping cartoon 01.14.2015


Bullard now predicts that, “Output grows at a trend pace of 2%, but the unemployment rate remains quite low and inflation remains at 2%” over the next two-and-a-half years.


He even brought up the dreaded "R-word":


"We are currently in a no recession state, but it is possible that we could switch to a recession state. If such a switch occurred, all variables would be affected but most notably, the unemployment rate would rise substantially. Again, the possibility of such a switch does not enter directly into the forecast because we have no reason to forecast a recession given the data available today. The possibility of recession is instead a risk to the forecast."


And here's another interesting admission about the Fed's concern about "asset price bubble risk":


"The approach presented here also says little about asset price bubble risk, a factor that often enters the actual policy discussion."


Bullard's statement is an interesting read. Hopefully, we're moving toward a Fed that puts humility before dogma. 


Time will tell.

CHART OF THE DAY: The First Shot Fired Across The Credit Cycle Bow

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye Financial analyst Josh Steiner. Click here to learn more.


"... Synchrony fired a shot across the credit cycle bow on Tuesday by raising its guidance for expected net charge offs from a range of 4.3-4.5% to a range of 4.5-4.8%. SYF shares reacted by dropping ~14%, while the rest of the card space followed suit: Capital One (COF) was down ~5%, Discover (DFS) was down ~3% and so on...


I think Synchrony’s announcement Tuesday will prove to be one of the early timestamps used in the future to mark the end of the current credit cycle. Incidentally, many of the lender stocks peaked in mid-2015." 


CHART OF THE DAY: The First Shot Fired Across The Credit Cycle Bow - 06.17.16 EL Chart

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