CHART OF THE DAY: A Closer Look At Retail Sales

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. 


"... A few points on why we’ve been revising GDP higher throughout the quarter:

  1. The government has been understating “inflation” in both GDP and PCE Consumption reports
  2. When you understate inflation, you can overstate “real” consumption and GDP growth

A real-world example of this is Retail Sales. Because it’s reported nominally, lower gas prices actually drag on reported growth while higher prices – despite acting as a tax on real consumption – actually manifest as stronger reported growth."


CHART OF THE DAY: A Closer Look At Retail Sales - 07.18.16 EL Chart

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.)




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.)




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.

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 80.52%
  • SHORT SIGNALS 78.67%

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.



The Week Ahead - 07.15.16 Week Ahead

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.

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.