prev

A Truly Mind-Boggling Central Bank Balance Sheet Balloon

Takeaway: This bizarro global central banking experiment will not end well.

Earlier this year, our Macro research team highlighted that shaky investor faith in the global central banking #BeliefSystem was breaking down. That call has been working out well. On a related note, take a couple of seconds to absorb the chart below. It highlights the astronomical, multi-trillion dollar, yen, euro rise in central bank balance sheets. 

 

A Truly Mind-Boggling Central Bank Balance Sheet Balloon - central bank balance sheets

 

Pretty unbelievable right? Question. With trillions already on central bank balance sheets around the world... what more can they possibly do?

 

Not much.

 

We're already beginning to see the cracks in the #BeliefSystem edifice. Nowhere is this more apparent right now than in Japan. Despite the BOJ's best efforts to devalue the currency and prop up equity markets, the USDJPY is down -14.5% and Nikkei has tumbled -18% year-to-date. Meanwhile in Europe, the EuroStoxx 500 is down -12.4% and EURUSD is up +2.2%.

 

A Truly Mind-Boggling Central Bank Balance Sheet Balloon - Central bankers in corner cartoon 04.20.2016

Why Is the #beliefSystem Breaking down?

 

For starters, global #GrowthSlowing continues to confound the plans of the world's omnipotent central bankers. These un-elected bureaucrats have failed to arrest economic gravity since the data started rolling over.

 

Slow growth evidence is everywhere. Setting aside the obvious slowdown in economic data (click here and here for more), check out sovereign bond yields for select countries. The charts below show yield curves for these sovereign bonds today (green line) versus where they were last year (yellow line).  (The red line shows 0%. Notice how much closer all of these yields are to the zero bound.)

 

To be clear, central bankers have manipulated these yield curves using unconventional methods like negative interest rate policies and QE. But that's just the proposed inoculation for the broader disease which is global #GrowthSlowing.

 

A Truly Mind-Boggling Central Bank Balance Sheet Balloon - ust curve 6 30

 

A Truly Mind-Boggling Central Bank Balance Sheet Balloon - german yield curve 6 30

 

A Truly Mind-Boggling Central Bank Balance Sheet Balloon - japan yield curve 6 30

 

In short, pancaking yield curves = #GrowthSlowing in action

 

(And #TheCycle is just getting started)


Not Brexit: European Economies Just Look Terrible

Not Brexit: European Economies Just Look Terrible - Brexit cartoon 06.20.2016

 

"Whatever you do, don't talk about the UK economic growth data slowing this morning," Hedgeye CEO Keith McCullough wrote earlier today. 

 

Here's a look at this morning's UK data:

 

Not Brexit: European Economies Just Look Terrible - uk data

 

None of this Europe #GrowthSlowing data has anything to do with Brexit (we'll get a better understanding of the Brexit impact in coming data releases) and has everything to do with #TheCycle

 

Take a look at recently reported Eurozone data:

 

(No acceleration to speak of)

 

Not Brexit: European Economies Just Look Terrible - euro data

 

What do you do with ugly #EuropeSlowing data? We're watching the Euro. Hedgeye CEO Keith McCullough calls the euro "the main event." In a note sent to subscribers, McCullough writes:

 

"EURO – with the entire edifice of consensus staring at the Pound (which has a crazy wide risk range of $1.30-1.39), the EUR/USD is looking more and more vulnerable by the day; if they can’t break it out > $1.13, $1.05 is in play on the downside – something to seriously consider within the context of more exits and #GrowthSlowing."

 

Not Brexit: European Economies Just Look Terrible - eurusd 6 30

More to come

 


Daily Market Data Dump: Thursday

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: Thursday - equity markets 6 30

 

Daily Market Data Dump: Thursday - sector performance 6 30

 

Daily Market Data Dump: Thursday - volume 6 30

 

Daily Market Data Dump: Thursday - rates and spreads 6 30

 

Daily Market Data Dump: Thursday - currencies 6 30


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.

Crashy: These 4 Stock Markets Are Down Over 20%

Takeaway: Germany's DAX and Japan's Nikkei are still in crash mode while our #GrowthSlowing call, i.e. long the Long Bond (TLT), continues to pay off.

Crashy: These 4 Stock Markets Are Down Over 20% - euro crash

 

"Gotta love the decelerating-volume month and quarter-end markups – economic and profit cycle reality continues tomorrow," Hedgeye CEO Keith McCullough wrote this morning in a note sent to subscribers.

 

Here's more from McCullough:

 

"Germany's DAX is backing off its bear market bounce this morning with both IBEX (Spain) and MIB (Italy) backing off -0.3-0.5% - don’t forget that A) all of these economies were going to slow in 2H 2016 ex-Brexit anyway and that B) all of their stock markets remain in crash mode (DAX -23%, IBEX -32%, MIB -34%) from their 2015 economic cycle peaks."

 

  

 

Meanwhile in Asia...

 

"JAPAN: flat for the Nikkei post a few days of a centrally planned bear market bounce, still -25.4% since July 2015," McCullough writes.

 

Crashy: These 4 Stock Markets Are Down Over 20% - nikkei 6 30

 

But there's always a bull market somewhere...

 

We're the Bulls on #GrowthSlowing. Here's a look at our favorite Macro position, long the Long Bond (TLT) year-to-date:

 

  • TLT: +14.8%

  • S&P 500: +1.3%

 


CHART OF THE DAY: What Establishment Media Has Missed All Year Long

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.

 

"... I get it. Instead of truly trying to understand how we got to now (causal factor analysis across durations), what establishment media needs to do is hurry up some headlines on how they get ad revs up tomorrow.

 

Progress?

 

Nah. This is Wall Street. And while we think we can get away with more and more and more of this behavior, The People are telling us (see equity fund outflows, fee compression, redemptions, etc. for details) that they don’t trust us anymore."

 

CHART OF THE DAY: What Establishment Media Has Missed All Year Long - 06.30.16 EL Chart


Cartoon of the Day: Guru Wisdom

Cartoon of the Day: Guru Wisdom - central bankers cartoon 06.29.2016

 

This one speaks for itself.


investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

next