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Christman: What Comes Next After The Failed Coup In Turkey

Editor's NoteBelow is a complimentary research note written over the weekend by Hedgeye Potomac National Security analyst LTG Dan Christman USA Ret. 

 

Christman: What Comes Next After The Failed Coup In Turkey - erdogan

 

The coup attempt to oust President Erdogan has clearly failed; clashes evidently are still occurring at some naval bases, but plotters and insurgents have either been arrested, died in the attempt, or are fleeing to nearby countries (Greece) and are seeking asylum.

 

The White House, Secretary Kerry, Chancellor Merkel, and the EU's leadership all aligned reasonably early in the crisis to signal support for Erdogan; and the Turkish president also quickly won the support of "Turks in the street." As much as some U.S. analysts last evening were breathlessly hoping for the coup to succeed, it seemed poorly planned and lacked substantial support even within the military; it also failed to reckon with the fact that, despite the increasingly authoritarian behavior of Erdogan, his muzzling of the press and key opponents, and his creeping Islamization, he was (in the words of Fareed Zakharia) the most popular Turkish politician since Ataturk.

 

What next?

 

First and most obviously, US support for the government in terms of foreign military sales (FMS) and broader security and economic assistance will continue; Turkish bases are simply too important for the US in its fight against ISIS to be put at risk.

 

Second, however, the coup will play into Erdogan's increasing paranoia will do nothing to arrest the Putin-like moves of the Turkish president to assert even greater executive authority, at the fringes of constitutionality. Initial statements from the president and his AK party highlight this; they blame the entire episode last night on the "Pocono imam," Fethullah Gulen, a former ally of Erdogan who is now a vocal critic and living in Pennsylvania. 

 

Finally, and related, expect a harsh crackdown, not just on the military, but on domestic critics as well, as order is restored. 

 

All of this complicates the anti-ISIS coalition and the war against Islamic extremism; it may however, give the US and the EU an opportunity to encourage Erdogan to bridge his differences with the Kurds. Their separatist party, the PKK, was, ironically, amongst the first of the opposition parties to voice their support for the embattled president last night. Hard to figure.


McCullough: Buy The All-Time High?

In this excerpt from The Macro Show this morning, Hedgeye CEO Keith McCullough cautions subscribers and advises what investors should consider as U.S. equities hit an all-time high.


INSTANT INSIGHT: An Update On Our #CreditCycle Call

Takeaway: At the current default rate, 2016 is on track to surpass the 2009 all-time corporate bankruptcy high.

INSTANT INSIGHT: An Update On Our #CreditCycle Call - The Cycle cartoon 05.12.2016

 

As U.S. equity markets hit all-time highs, subtly simmering beneath the surface, the bond market is telling an entirely different story about the state of the U.S. economy.

 

According to the Financial Times:

 

"Global defaults hit the milestone century mark last week, a 50% jump from the number of delinquencies at the same point last year and the highest level since the US emerged from recession in 2009.

 

The number rose by four to 100 in the first full week of July, as defaults in the US oil and gas sector ratcheted higher, according to Diane Vazza of S&P Global Ratings.

 

That brings the amount that has been defaulted on to $154 billion."

 

(**S&P Global Ratings now predicts the default rate by junk-rated companies in the U.S. will climb to 5.3% by March 2017, up from 3.8% a year earlier.)

 

More disconcerting still, at the current default rate, 2016 is on track to surpass the 2009 all-time corporate bankruptcy high. 

 

INSTANT INSIGHT: An Update On Our #CreditCycle Call - global corp defaults

Meanwhile...

 

"The asymmetry between Rising Stars (potential for upgrade) & Fallen Angels (downgraded to Junk) in U.S. Credit continues," Hedgeye Financials analyst Jonathan Casteleyn wrote earlier today.

 

INSTANT INSIGHT: An Update On Our #CreditCycle Call - rising star fallen angel

More to be revealed.

 

**To read more of our #CreditCycle work check 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.

Daily Market Data Dump: Monday

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, rates and bond spreads, and key currency crosses. 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: Monday - equity markets 7 18

 

Daily Market Data Dump: Monday - sector performance 7 18

 

Daily Market Data Dump: Monday - volume 7 18

 

Daily Market Data Dump: Monday - rates and spreads 7 18

 

Daily Market Data Dump: Monday - currencies 7 18


QUICK TAKE: What's Ahead For Oil Prices

QUICK TAKE: What's Ahead For Oil Prices - oil cartoon 03.29.2016

 

Below is analysis from Hedgeye CEO Keith McCullough in a note sent to subscribers earlier this morning: 

 

"Stronger Dollar = weaker reflation returns… no follow through to Oil being +1.2% (WTI) last week as it’s still -5% in the last month and trading below @Hedgeye TREND resistance of $47.37/barrel."

 


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


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