prev

Déjà Vu: Stocks Higher On Bone-Dry Volume

Takeaway: Volume dries up on up days. Down days? An entirely different story.

A lack of conviction in stock "up" days? Yes.

 

Total U.S. market volume was bone dry yesterday. More specifically, it was down -12% versus the 1-month average and down -13% versus 3-month average. Contrast this with the post-Brexit selloff two weeks ago when total equity market volume ripped. It was up 65% versus the one month average.

 

Déjà Vu: Stocks Higher On Bone-Dry Volume - volume 7 7

 

Déjà Vu: Stocks Higher On Bone-Dry Volume - volume 6 27

 

Not a good sign for stock bulls.

Déjà Vu: Stocks Higher On Bone-Dry Volume - Volume cartoon 08.12.2014


CHART OF THE DAY | #ProfitCycle: Consensus Estimates Vs. Reality

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.

CHART OF THE DAY | #ProfitCycle: Consensus Estimates Vs. Reality - top three

 

CHART OF THE DAY | #ProfitCycle: Consensus Estimates Vs. Reality - 07.07.16 EL chart


Cartoon of the Day: Wise Guys, Eh?

Cartoon of the Day: Wise Guys, Eh? - Three central bankers cartoon 07.06.2016

 

How long can these central planners keep this charlatan charade going?


GET THE HEDGEYE MARKET BRIEF FREE

Enter your email address to receive our newsletter of 5 trending market topics. VIEW SAMPLE

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.

35 Years Later ... From Simon & Garfunkel to Bieber Fever and All-Time Lows For Treasury Yields

Takeaway: What a long, strange trip it's been.

September 30, 1981...

 

Treasury yields peaked at 15.84% ... Ronald Reagan was in the early innings of his 1st term ... Simon & Garfunkel performed in Central Park for 500,000 people ... Home Depot had its IPO eight days earlier ... and the U.S. debt ceiling was raised to one trillion dollars for the first time.

 

35 years later ... we're saddled with over $19,000,000,000,000 in debt, Hillary Clinton vs Donald Trump, NIRP, Kim Kardashian and Justin Bieber.

 

35 Years Later ... From Simon & Garfunkel to Bieber Fever and All-Time Lows For Treasury Yields - ust 7 6


Lazard Has Additional Downside Says Bearish Analyst Who Nailed -40% Move

Takeaway: M&A is past peak, restructuring won't bail the company out and emerging market exposure continues to weigh on shares.

Lazard Has Additional Downside Says Bearish Analyst Who Nailed -40% Move - lazard 7 6

 

LAZARD SHAREHOLDERS HAVE HAD A ROUGH YEAR. 2016 WASN'T MUCH BETTER. 

 

Market fallout post-Brexit triggered an -11% selloff in Lazard (LAZ) the Friday following the UK referendum. Investors were selling due to its significant European exposure (25% of global advisory revenues) and as concerns mounted about slowing M&A activity industrywide. 

 

Hedgeye Financials analyst Jonathan Casteleyn first recommended institutional subscribers short LAZ on February 12, 2015. Since then, the stock is down -42% versus +0.3% for the S&P 500.

 

Casteleyn thinks Lazard has additional downside. During an updated Black Book presentation back in January, Casteleyn reiterated his short call. In it, he outlined unrecognized risks and complacency in this highly cyclical company.

 

Below are the three key takeaways:

 

1. M&A Set to Fall

After a new high water mark in global mergers and acquisitions in 2015, the Street is still unrealistic about the opportunity for activity into '16. Estimates are still 20% too high based on "flat to up" activity levels for the New Year which ignore various warnings in the data. Our research shows with corporate funding costs on the rise, that every 100 bps rise in credit costs has historically impacted M&A activity by -20%. Thus the backup in credit spreads that started in 1Q15 all but guarantees a negative comp for mergers in '16. In addition, rising private equity percentages in global announcements and also record highs in consideration values signal an exhausted M&A marketplace.


2. Restructuring Won't Bail Them Out

Complacency is also being sourced by "hopeful" insulation that the firm's restructuring business can plug any gap as the revenue opportunity in M&A slows. Historically, the restructuring business has had a 2 year lag after M&A peaks before contributing to results but restructuring cycles have just half the duration of M&A cycles and never fully cover the lost revenue. At just 15% of total advisory revenues across cycle, restructuring is a mild insulation at best.


3. EM/Non U.S. Asset Mgmt Exposure

The firm's most profitable business, asset management, has unfavorable Emerging Market exposure and total non-US exposure sits at over 50% of AUM. The ongoing elevated levels of the U.S. dollar and investments in petro-oriented economies has historically weighed on demand for institutional exposure to non-developed domiciles. We will flesh out what a reasonable yield on Lazard's AUM business is. 

Lazard Has Additional Downside Says Bearish Analyst Who Nailed -40% Move - lazard

 

For more information on Jonathan's Casteleyn's research email sales@hedgeye.com


Too Late to Buy Gold and Treasuries?

 

In this excerpt from The Macro Show today, Hedgeye CEO Keith McCullough answers a subscriber’s question about whether it’s too late to buy the long bond (TLT), Utilities (XLU) TIPS and Gold (GLD).

 

Subscribe to The Macro Show today for access to this and all other episodes. 

 

Subscribe to Hedgeye on YouTube for all of our free video content.


Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

next