The BS Filter: Socialism, Big Bank Bailouts, & Super Abe To The Rescue

Takeaway: Here's our take on some of today's top financial stories.

The BS Filter: Socialism, Big Bank Bailouts, & Super Abe To The Rescue - Italian bank cartoon

Socialism, Pension Funds & Italian Bank BAILOUTs

According to Reuters, Italian pension funds have agreed to invest in the country's bad bank loans at the insistence of the government. The combined bailout program will be called Atlante 2, a follow up to a previous bailout fund that has already "used more than half of its initial 4.25 billion euro endowment to take over two failing regional banks." Sources familiar with the matter say the government asked for €500 million, as investors have become increasingly concerned about troubled loans totalling €360 billion.


OUR TAKE: "Socializing market risk continues," Hedgeye CEO Keith McCullough wrote earlier today. Italy's stock market crash accelerated this morning, at one point the FTSE MIB was down as much as -1.8% today before ending the day at essentially flat. Still the MIB is down -32% from 2015 top, as the ongoing big bank "rescue" freaks people out.

In other pension fund news...

"Long-term returns for U.S. public pensions are expected to drop to the lowest levels ever recorded, portending deeper pain for states and cities as a $1 trillion funding gap widens," the Wall Street Journal writes. Pension funds are expected to put up twenty-year annualized returns of 7.47%, raising concerns about whether states and cities can continue to afford pension obligations.


OUR TAKE: We've long been concerned about future pension fund returns and the possibility of a coming retirement crisis. Required reading on the subject include Hedgeye Financials analyst Josh Steiner's Early Look, "The Retirement Reality Check," and "Are 10 Million Americans About To Be Screwed Out Of Their Pensions?" by Hedgeye Restaurants analyst Howard Penney.

Freak out & Fire Up The Printing Presses!

"Bank of England policy maker Martin Weale said he’s begun to favor immediate stimulus for the U.K. economy... chang[ing] his mind on the timing of stimulus after purchasing managers’ indexes released July 22 were a lot worse than he had thought," Bloomberg writes.


OUR TAKE: Central Planning Orthodoxy = Print, Print, Print.

Super Abe To the rescue?

"Japan looks to inject 6 trillion yen ($56.7 billion) in direct fiscal outlays into the economy over the next few years, double the amount initially planned," the Nikkei newspaper reports. Meanwhile, the Wall Street Journal writes that Japan's Prime Minister Shinzo Abe is increasingly pressuring BOJ head Haruhiko Kuroda to "coordinate efforts by expanding the central bank’s monetary easing."


OUR TAKE: Even Abe's doubling of fiscal outlays can't stop the economic bleeding in Japan. Investors don't think so either. The Yen strengthened 1.2% today and Nikkei tumbled -1.4%.


Other stories worth mentioning:

  • FT - "Anheuser-Busch InBev has unilaterally raised its offer for rival SABMiller to £79bn to quash an investor rebellion that threatened to disrupt the third-biggest deal in corporate history."
  • Nasdaq - "BP posted its third straight quarterly loss as the British oil giant reels from a two-year crude-price slump and remains haunted by the 2010 Gulf of Mexico spill."
  • MarketWatch - "Royal Bank of Scotland and Natwest could become the first U.K. banks to charge customers to hold their cash if the Bank of England yanks benchmark interest rates below zero in wake of the Brexit vote."

Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more