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What To Expect Ahead Of The BOJ's Policy Announcement

Takeaway: Wall Street analysts overwhelmingly expect the BOJ to ease monetary policy. But does whatever the BOJ decides to do even matter?

What To Expect Ahead Of The BOJ's Policy Announcement - Kuroda cartoon 02.18.2015

 

Japan's Nikkei soared today, up +1.7%, as the country's Prime Minister Shinzo Abe announced a shockingly large fiscal stimulus package. Adding to all the shenanigans, helicopter money speculation reignited as the Wall Street Journal cited "people familiar with the matter" who said Japan was considering issuing 50-year bonds.

 

"... Every morning I wake up to a new headline about the next “yuuuge” fiscal stimulus package in Japan," Hedgeye Senior Macro analyst Darius Dale wrote in today's Early Look. "In a few short weeks, market expectations for the size of the post-election supplementary budget have nearly tripled from an anticipated ¥10T ($95B) to ¥28T ($260B)."

 

Meanwhile, the BoJ heads into its July 28-29 meeting with peak expectations of incremental monetary easing (22 of 28 analysts according to the latest Nikkei survey expect easing).

 

Some of that easing is already being priced-into Japanese equity and currency markets. The month-over-month performance numbers are as follows:

  • Nikkei: +8.9%
  • Yen (USDJPY): +3.7%

 

As we noted in today's Chart of the Day, "if you thought Japan's two lost decades were bad, just wait until the next ten year of what we'll affectionately term 'plunging into the abyss' happens." Japan's core consumption cohort, the 35-54 year old popultion, will decline over the next ten years. To which we ask:

 

Does whatever the BOJ decides to do even matter?

 

Bottom Line: If the policy board sticks with traditional QQE expansion, we would expect a short-lived JPY sell-off and Nikkei pop, but if the #BeliefSystem (that policymakers can prevent economic reality from occuring) in Japan was still intact then 10Y JGB Yields wouldn’t have come in by -9bps with 5Y5Y Forward Breakeven Rates declining -17bps MoM, according to our Macro team.

 

What To Expect Ahead Of The BOJ's Policy Announcement - jgb mom 7 27

 

What To Expect Ahead Of The BOJ's Policy Announcement - 5y5y forward japan 7 27

 

The #BeliefSystem is breaking down.


There May Be No Bottom In Sight For Twitter

Takeaway: There isn't any clear way to fix TWTR's model. There might not be any bottom in sight outside potential take-out value.

This is a brief excerpt from our Internet & Media analyst Hesham Shaaban's note to institutional subscribers on Twitter's (TWTR) lousy earnings report which has sent shares down over -10%. He’s been bearish on TWTR and remains so. Send an email to sales@hedgeye.com for more information on our institutional research.

 

...We’re lucky TWTR isn’t down near LNKD-4Q15 levels off this print, especially considering TWTR's +30% rally since the LNKD-MSFT deal.  So we may get another shot at the short, which we had covered prematurely thinking TWTR may have bottomed out.  But considering that there isn't any clear way to fix TWTR's model, it may just mean there isn't a bottom in sight outside potential take-out value, which we doubt would be anywhere near its $10B EV when both its revenues and users are trending toward decline.  

 

2-minute clip ahead of TWTR's print where Hesham outlines his concerns.

 

Where's the bottom for shares of Twitter? Anyone's guess.

 There May Be No Bottom In Sight For Twitter - Twitter cartoon 5.7.2014


Ouch! Durable Goods: Neither Durable Nor Good

Takeaway: Headline Durable Goods fell -4.6% sequentially in June and declined to -6.4% YoY.

Ouch! Durable Goods: Neither Durable Nor Good - The Cycle cartoon 05.12.2016

 

While aggregate household spending remains relatively healthy, the trend in domestic durable goods orders continues to prove neither durable nor good, according to Hedgeye U.S. Macro analyst Christian Drake.  Headline Durable Goods fell -4.6% sequentially in June and declined to -6.4% YoY. 

 

The -60% decline in private sector aircraft orders weighed on the headline, Durables ex-Defense and Aircraft – which aligns most closely with what actual households buy – remained negative year-over-year (-1.8%) for a 4th consecutive month. 

 

Meanwhile, Core Capital Goods Orders fell -3.7% YoY, extending its epic run of negative capital spending growth to 17 of the last 18 months = the most dismal non-recession/peri-recession streak basically ever.

 

Here's the detailed Durable goods breakdown (as you can see, it's a sea of red):

 

Click image to enlarge

Ouch! Durable Goods: Neither Durable Nor Good - durable goods 7 27


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 80.65%
  • SHORT SIGNALS 78.63%

Daily Market Data Dump: Wednesday

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, key currency crosses, and commodities. 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: Wednesday - equity markets 7 27

 

Daily Market Data Dump: Wednesday - sector performance 7 27

 

Daily Market Data Dump: Wednesday - volume 7 27

 

Daily Market Data Dump: Wednesday - currencies 7 27

 

Daily Market Data Dump: Wednesday - rates and spreads 7 27

 

Daily Market Data Dump: Wednesday - commodities 7 27


CHART OF THE DAY: Can The BOJ Save Japan From Economic Reality?

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye Senior Macro analyst Darius Dale. Click here to learn more.

 

"... So as the BoJ heads into its July 28-29 meeting with peak expectations of incremental monetary easing (22 of 28 analysts expect such per the latest Nikkei Quick survey), we must ask ourselves one very simple question:

 

“Does whatever they do even matter?”

 

CHART OF THE DAY: Can The BOJ Save Japan From Economic Reality? - 7 27 16 Chart of the Day


[From The Vault] Cartoon of the Day: In Case You Didn't Know

[From The Vault] Cartoon of the Day: In Case You Didn't Know - Fed lady cartoon 06.25.2016  1

 

Our inimitable, in-house cartoonist Bob Rich is on a much-deserved summer vacation. While he kicks back and relaxes, we're going into the Hedgeye Vault and highlighting some of his best work. On that note, ahead of tomorrow's Fed policy announcement, we bring you another audience favorite


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

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