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[From The Vault] Cartoon of the Day: Choppy Waters

[From The Vault] Cartoon of the Day: Choppy Waters - fed 6 9 14

 

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. Since Yellen & Co. have totally got this (for sure), we bring you another audience favorite.

 

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A Job Cut Spike In The Oil Patch

Takeaway: While claims were fairly unexciting this past week, the Challenger Job Cuts Report showed a fresh round of layoffs in energy.

Editor's Note: Below is a brief excerpt from an institutional research note written by Financials analyst Josh Steiner and Jonathan Casteleyn earlier today. To access our institutional research email sales@hedgeye.com

A Job Cut Spike In The Oil Patch - jobs cartoon 06.03.2016

The Challenger Job Cut Report showed a 17,700 spike in cuts from the energy industry today. That's up from 2,000 in the prior reading. As the Challenger report points out, this was somewhat of a surprise, given recent projections for rising oil prices and labor shortages. 

 

Here's a closer look.

A Job Cut Spike In The Oil Patch - job cut 8 4 16


Caterpillar: 6 Questions & 1 Chart From Our Short CAT Conference Call

Takeaway: Hedgeye Industrials analyst Jay Van Sciver recently added Caterpillar to their Best Ideas Short List

Editor's Note: Our Industrials analyst Jay Van Sciver hosted an in-depth presentation on his Caterpillar short call today. He recently added CAT back to his Best Ideas list. Below are key discussion points he covered during the call. 

Caterpillar: 6 Questions & 1 Chart From Our Short CAT Conference Call - z cat cartoon

KEY DISCUSSION POINTS:

  • Orders vs. Sales: Do order rates support current 2H16 & 2017 consensus estimates?
  • Mutually Exclusive Goals:  Can CAT maintain its dividend and its credit rating?
  • Materials Cost:  What do higher steel prices mean for future manufacturing decrementals?
  • CAT Financial: Is the decline in allowances appropriate and sustainable?
  • Aftermarket Cycle Stability: Do improvements in mining equipment aftermarket move the needle for CAT?
  • Valuation:  Are CAT shares pricing in a cyclical rebound in Mining and Oil & Gas capital spending? 

 

Caterpillar: 6 Questions & 1 Chart From Our Short CAT Conference Call - caterpillar


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 80.45%
  • SHORT SIGNALS 78.37%
PREMIUM INSIGHT

New Potential Risks For Energy Infrastructure Projects From Obama Administration

New Potential Risks For Energy Infrastructure Projects From Obama Administration - z pipe

Below is an excerpt from an institutional research note written by Senior Energy Analyst Joe McMonigle on the Obama Administration’s Council of Environmental Quality (CEQ) rule.


Carney Pounds the Pound

The Bank of England (BoE) met this morning and Governor Mark Carney stepped up to the plate to join his fellow central bankers in cutting the country’s interest rate (by 25bps to 0.25% - the first cut in 7 years) and expanding its quantitative easing program (by £60 billion to £435, including £10 billion corporate purchases). 

 

And so the Currency Wars continue!

 

In the chart below we update our levels on the GBP/USD, currently showing intermediate TREND broken @ $1.39 with an additional -1.8% downside to our immediate term TRADE support level of $1.29.  Following today’s announcement the cross is down -1.5% and counting!

 

Carney Pounds the Pound - Sterling 84

 

BoE Commentary and updated Outlook:

  • The biggest signal to the market in Carney’s remarks is the willingness to do more (rate cuts and QE) if warranted. Carney characterized the economic outlook as changed “markedly”, and the Bank is ready to cut rates to zero if necessary. 
  • Carney’s updated economic forecasts suggest increased downward pressure:
    • 2017 GDP cut to 0.8% from 2.3% in May; 2018 GDP cut to 1.8% from 2.3% (see chart)
    • Inflation at 2.1% in 2017 and 2.4% in 2018
    • Business investment down 3.75% in 2016 vs 2.5% growth in May, and down 2.0% in 2017 vs 7.25% growth in May.
    • Housing investment forecast up 1.25% in 2016 vs 4.0% in May, down 4.75% in 2017 vs 7.25% growth in May.
  • This policy stance should continue to pull the Pound Sterling and gilt yields lower!

 Carney Pounds the Pound - BOE Growth Forecasts

 

Does Brexit matter?  Yes! 

 

While Carney’s commentary may elude linking any economic weakness to the decision to Brexit, the fact remains that Brexit spells great uncertainty to the evolution of trade arrangement with global partners, especially the EU.  While we believe a swift cabinet change is overall positive in terms of market sentiment (vs a lingering David Cameron, for example), we expect Brexit to continue to weigh on consumer and business confidence throughout the year. 

 

In case you missed the call we hosted with the international law firm of Squire Patton Boggs on the implication of Brexit (note, we’ll be continuing in a series of call on the subject), an audio replay is available. 

 

Carney Pounds the Pound - Cartoon Pounded


TIP: We Are Removing Treasury Inflation-Protected Securities

Takeaway: Please note we are removing TIP from Investing Ideas (long side) today.

"With the latest breakdown in both the CRB Index and Oil, I don’t think being long TIP has as much upside (from here) as I originally thought," writes Hedgeye CEO Keith McCullough. "Changing my mind on longer-term longs has happened infrequently this year, but it should happen. That’s how the game goes."

 

TIP: We Are Removing Treasury Inflation-Protected Securities - Inflation cartoon 02.26.2015


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