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REPLAY! This Week On HedgeyeTV

Our deep bench of analysts take to HedgeyeTV every weekday to update subscribers on Hedgeye's high conviction stock ideas and evolving macro trends. Whether it's on The Macro ShowReal-Time Alerts Live or other exclusive live events, HedgeyeTV is always chock full of insight.

 

Below is a taste of the most recent week in HedgeyeTV. (Like what you see? Click here to subscribe for free to our YouTube channel.)

 

Enjoy!   

 

1. My Thoughts On a 'Heartbreaking' Healthcare 'Horror Story' (7/14/2016)

 

 

In this brief excerpt from The Macro Show this week, Hedgeye Healthcare Sector Head Tom Tobin answers a “heartbreaking” question from a subscriber on the collapse of ACA exchanges and the impact it’s having on American families.

 

2. Is Income Inequality Depressing Demand? (7/13/2016)

 

 

In this excerpt from The Macro Show this morning, Hedgeye Demography Sector Head Neil Howe answers a subscriber’s question on how whether income inequality in the U.S. is depressing aggregate demand.

 

3. About Everything | REPLAY: Driverless Cars: Unsafe at Any Speed? (7/12/16) 

 

 

In this complimentary edition of About Everything, Hedgeye Demography Sector Head Neil Howe discusses the future of driverless cars, assessing potential pitfalls that could ultimately delay the adoption of fully-autonomous vehicles.

 

"Yes, the 'low-hanging fruit' of semiautonomous driving has already been plucked," Howe writes. "But full autonomy requires infallible higher-order thinking, a golden apple which will prove difficult—if not impossible—to grasp anytime soon."

 

Click here to read Howe’s associated About Everything piece.

 

4. Penney: The 2 Most Important Things In The Restaurant Space (7/11/2016)

 

 

In this brief excerpt from The Macro Show earlier today, Hedgeye Restaurants analyst Howard Penney explains how slowing restaurant sales and traffic points to a slowing economy.

 

 

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.


This Week In Hedgeye Cartoons

Our cartoonist Bob Rich captures the tenor on Wall Street every weekday in Hedgeye's widely-acclaimed Cartoon of the Day. Below are his five latest cartoons. We hope you enjoy his humor and wit as filtered through Hedgeye's market insights. (Click here to receive our daily cartoon for free.)

 

Enjoy!

 

1. Levitated (7/15/2016)

This Week In Hedgeye Cartoons - why so short 07.15.2016

 

Definition of levitate: "to rise or cause to rise and hover in the air, especially by means of supernatural or magical power."

  

2. Beta Bro (7/14/2016)

This Week In Hedgeye Cartoons - Beta Bro cartoon 07.14.2016

 

We present to you "Beta Bro." The defender of mediocrity in the active management community and all things S&P 500 beta.

 

3. Clueless (7/13/2016)

This Week In Hedgeye Cartoons - Fed  Haven t a clue  cartoon 07.13.2016

 

The Fed-induced bubble in financial markets has undoubtedly made the rich richer while its easy money policies have devalued the purchasing power of average Americans.

 

4. Central Banking 101 (7/12/2016)

This Week In Hedgeye Cartoons - negative interest rates cartoon 07.12.2016

 

According to the Fiscal Times:

 

"Japan's household sentiment soured and inflation expectations hit the lowest since the Bank of Japan adopted its massive stimulus program in 2013, a quarterly central bank survey showed... The ratio of households who said they trusted the Bank of Japan's policy management also hit a seven-year low, with more than half of the respondents doubting whether it was independent from government interference, the survey showed."

 

5. The Italian Job (7/11/2016)

This Week In Hedgeye Cartoons - Italian bank cartoon

 

Deutsche Bank’s chief economist said Europe's banks need a major recapitalization to the tune of €150 billion, as worries about Italian banks continue to make headlines. "And so Old Wall's begging for another bailout begins," Hedgeye CEO Keith McCullough wrote today.


The Week Ahead

The Economic Data calendar for the week of the 18th of July through the 22nd of July is full of critical releases and events. Here is a snapshot of some of the headline numbers that we will be focused on.

 

CLICK IMAGE TO ENLARGE.

The Week Ahead - 07.15.16 Week Ahead


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Cartoon of the Day: Levitated

Cartoon of the Day: Levitated - why so short 07.15.2016

 

Definition of levitate: "to rise or cause to rise and hover in the air, especially by means of supernatural or magical power."


Afraid Of All-Time Highs? WSJ Says Never Fear, Buybacks Are Here!

Takeaway: Companies in the S&P 500 spent $166.3 billion on share buybacks during the first quarter. That marked a new postrecession high.

Afraid Of All-Time Highs? WSJ Says Never Fear, Buybacks Are Here! - wsj never fear

 

The above is the latest permabull headline from the Wall Street Journal arguing that the buyback boom will live on and continue to stoke stocks.

 

Hang on a second...

 

That's worth parsing. The article suggests valuations are cheap and highlights academic studies which show shares of companies that buy back stock outperform the broader market by 12% over the next four years. 

 

so ... Can companies keep this buyback game going?

 

Good question. According to FactSet:

 

"Companies in the S&P 500 spent $166.3 billion on share buybacks during the first quarter, which marked a new postrecession high. Since 2005, only Q3 2007 produced a larger amount of buybacks ($178.5 billion). Dollar-value buybacks in Q1 represented a 15.1% increase in spending from the year-ago quarter, and a 15.6% jump from Q4. This breakout in the first quarter of the year comes amid somewhat of a stabilization period for buybacks since the middle of 2014. With that said, buyback spending still remained at very high levels for the index during this period."

 

Afraid Of All-Time Highs? WSJ Says Never Fear, Buybacks Are Here! - buyback S P

 

Consider peak buybacks in the context of net income and free cash flow...

 

FactSet writes:

 

"At the end of the first quarter, 146 companies in the S&P 500 spent more on buybacks in the trailing twelve months than they generated in earnings. This marked the seventh highest total going back to 2005... At the end of the first quarter, trailing twelve month buybacks made up 59.6% of free cash flow, which was a 6% increase year-overyear."

 

In other words, companies are increasingly buying back stock at the expense of long-term investment in their business. As Hedgeye U.S. Macro analyst Christian Drake points out on The Macro Show yesterday:

 

"If you have record repo activity at all-time highs in equities, pushing on 8 years into an economic expansion maybe you get paid in the short term. But what do you think of that in terms of long-term value creation?"

 

It's a good question to ponder as permabulls shout "buy, buy, buy" the all-time high.

in other words, we're sitting this one out.


The Keynesian Chorus Sings As Krugmania Overtakes Japan

Takeaway: "Krugman calls for 'a big burst of government spending and maybe also cash donations.' Godspeed to free-market capitalists."

The Keynesian Chorus Sings As Krugmania Overtakes Japan - Japan cartoon 05.02.2016

 

The Keynesian chorus is getting awfully Loud these days.

 

Paul Krugman joined Ben Bernanke in calling for helicopter money yesterday. Here's the word via Bloomberg:

 

"Japan should raise its inflation target to 4 percent and embark on a large but temporary fiscal stimulus to boost prices in the economy, Nobel laureate Paul Krugman said.

 

Speaking at a conference on Thursday in Singapore, Krugman called for 'a big burst of government spending and maybe also cash donations,' though authorities don’t necessarily need to adopt a strategy that involves 'helicopter' money, he said.

 

'Japan needs to get that inflation rate convincingly high,' Krugman said, adding that worrying about the 'longer-term budget outlook needs to be put on hold.' The Bank of Japan’s current target is 2 percent and consumer prices excluding fresh food, a key benchmark for the BOJ, have fallen for three straight months."

 

As Hedgeye CEO Keith McCullough wrote earlier today, "Krugman calls for 'a big burst of government spending and maybe also cash donations.' Godspeed to free-market capitalists." In other words, Japan has been pulling out all the stops for some time now to no effect.

 

Investors are voting with their feet. Take a look at the chart of Japanese equities over the past year:

 

 

The central planning #BeliefSystem is breaking down.


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