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What Wall Street Missed About Friday’s Jobs Report

In this brief excerpt from The Macro Show earlier today, Hedgeye CEO Keith McCullough and Senior Macro analyst Darius Dale discuss Friday’s Jobs Report. Spoiler alert: #EmploymentSlowing.

Fed Perpetuated Problem? Fed Study Finds Many Americans Have Negative Wealth

Takeaway: Fed policies boosted asset prices to the benefit of the super rich while devaluing the American people's purchasing power.

Fed Perpetuated Problem? Fed Study Finds Many Americans Have Negative Wealth - Fed Up cartoon 03.22.2016


In a late 2010 Washington Post op-ed entitled "Aiding the Economy: What the Fed Did and Why," then Fed chairman Ben Bernanke defended the FOMC's zero interest rate policy and quantitative easing saying:


"[Fed policies] had eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate this additional action. Easier financial conditions will promote economic growth... And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion." (Emphasis added)


Nearly six years have passed since Bernanke wrote those fateful words. The supposed "wealth effect," brought on by super easy Fed policy, has failed to "boost consumer wealth" for a significant number of Americans.


According to a recently released Federal Reserve Bank of New York study, 15.1% of households in the U.S. population have either zero or negative net wealth. The authors find that Americans plagued by negative wealth are more likely to be female; from single parent households; or from a minority group (either African American or Hispanic). These households are riddled with credit card debt, student debt and mortgage debt (with "some 7 percent of home-owning households in our survey report being underwater on their mortgage," the survey finds).


With the Fed's balance sheet comfortably above $4 trillion and so much promise from omnipotent central bankers, why are so many Americans still struggling? The S&P 500 is up 170%+ since the market bottomed in 2009. In short, what gives?


Here's the key chart showing the breakdown of total wealth in the U.S. and the ownership of U.S. financial assets by wealth distribtuion from our 99-page Q3 2016 Macro themes presentation. As you can see the top 10% of Americans own 84.5% of U.S. financial assets. In other words, debt-ridden families weren't able to participate in the Fed-stoked asset price boom. (To access our institutional research email sales@hedgeye.com.)


So much for the wealth effect...


Fed Perpetuated Problem? Fed Study Finds Many Americans Have Negative Wealth - wealth 8 8 16 


Meanwhile, during Bernanke's reign, the Fed devalued the U.S. Dollar to a 40-year low, in 2011-2012, thereby devaluing the purchasing power of the American people. Then again currency devaluation, asset price inflation in central planning 101. Note: This policy doesn't help the bottom 50% of Americans who own 1% of U.S. financial assets and are paid in U.S. dollars.


Unfortunately, the Fed's policies have helped lined the pockets of the rich and inflated "one of the top-three stock market bubbles in history" all at the expense of average Americans. 


Fed Perpetuated Problem? Fed Study Finds Many Americans Have Negative Wealth - Fed  Haven t a clue  cartoon 07.13.2016

EVENT | Healthcare Earnings Recap

Thursday, August 11th at 11:00AM ET

Watch a replay below. 


CLICK HERE to access the associated slides.



Attention Students...

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433 of 500 S&P companies have reported an aggregate EPS decline of -4.3% y/y...

Client Talking Points

US Dollar

Next to Gold, USD remains our favorite currency right now after closing up another +0.7% last week taking it’s 3-month run to +2.6%; Euro (vs. USD) down -0.8% last wk (-2.8% in last 3 months) still favorite short in our Q3 Macro Themes.


Headline jobs # “good” (rate of change in NFP slowed again to 1.72% vs. 2.10% in JUL 2015) and that got UST 10yr to tap the top-end of my 1.45-1.60% risk range; signal says that’s probably it w/ 1% GDP being goldilocks, for now.


Globally, straight up this am (Nikkei loved the Up Dollar, Down Yen move) and this rarely happens all on the same day but SPY, DAX, Nikkei are all signaling immediate-term TRADE overbought this morning - everything is awesome at all-time highs.

Asset Allocation

8/7/16 64% 4% 6% 6% 10% 10%
8/8/16 66% 3% 3% 8% 12% 8%

Asset Allocation as a % of Max Preferred Exposure

8/7/16 64% 12% 18% 18% 30% 30%
8/8/16 66% 9% 9% 24% 36% 24%
The maximum preferred exposure for cash is 100%. The maximum preferred exposure for each of the other assets classes is 33%.

Top Long Ideas

Company Ticker Sector Duration

See update on TLT/UUP


Back to growth ... we’ll refrain from commenting on Friday’s headline non-farm payrolls number in isolation, and rather offer some perspective on the cyclical nature of the non-farm payroll data series (you’ve heard it before):

  • On a Y/Y rate of change basis, Non-Farm Payrolls peaked in February of 2015;
  • Once growth in this series peaks and rolls over, it doesn’t return and we move toward economic contraction on the margin. Read: Bullish for Long Bonds (TLT);
  • A print of +282K jobs was needed for July to avoid another Y/Y sequential deceleration in the series. NFP additions were +255K. While this beat expectations of +180K (which was cheered by just about every mainstream media outlet), the TREND in this series remains slow-moving, predictable, and most importantly past peak

Our team’s macro process is both fundamental and top-down, and we get the top-down signals in real-time. The bottom-line is that both the CRB Commodities Index and crude oil have recently broken down from a quantitative risk management perspective. While this is a key factor contributing to our recent addition of the PowerShares DB US Dollar Index Bullish Fund (UUP), it also signals that TIP does not have as much upside as we thought. As Keith McCullough wrote to subscribers this week:


“Changing my mind on longer-term longs has happened infrequently this year, but it should happen. That’s how the game goes.”

Three for the Road


Daily Market Data Dump: Monday app.hedgeye.com/insights/52944… cc @KeithMcCullough #Stocks #Bonds #FX #Commodities $SPY $USD



“The world breaks everyone, and afterward, some are strong at the broken places.”  

–Ernest Hemingway


Michael Phelps has won the most Olympic medals with 23 (19 gold, 2 silver, 2 bronze).

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, 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




Daily Market Data Dump: Monday - equity markets 8 8


Daily Market Data Dump: Monday - sector performance 8 8


Daily Market Data Dump: Monday - volume 8 8


Daily Market Data Dump: Monday - rates and spreads 8 8


Daily Market Data Dump: Monday - currencies 8 8


Daily Market Data Dump: Monday - commodities 8 8

August 8, 2016

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  • Bullish Trend
  • Bearish Trend
  • Neutral

10-Year U.S. Treasury Yield
1.60 1.45 1.59
S&P 500
2,148 2,188 2,183
Russell 2000
1,198 1,236 1,231
NASDAQ Composite
5,101 5,228 5,221
Nikkei 225 Index
16,036 16,798 16,254
German DAX Composite
10,080 10,515 10,367
Volatility Index
11.29 15.16 11.39
U.S. Dollar Index
94.60 97.51 96.17
1.09 1.12 1.11
Japanese Yen
99.42 103.93 101.79
Light Crude Oil Spot Price
39.13 43.37 41.80
Natural Gas Spot Price
2.59 2.93 2.77
Gold Spot Price
1,315 1,385 1,344
Copper Spot Price
2.15 2.23 2.15
Apple Inc.
100.62 109.95 107.48
Amazon.com Inc.
734 778 766
Netflix Inc.
89.84 97.88 97.03
J.P. Morgan Chase & Co.
62.26 66.86 66.30
Priceline Group
1338 1426 1414
Tesla Motors
215 237 230
SPDR S&P Oil & Gas Explore
32.33 35.39 35.05

Hedgeye's Daily Trading Ranges are twenty immediate-term (TRADE) buy and sell levels, along with our intermediate-term (TREND) view.  Click HERE for a video from Hedgeye CEO Keith McCullough on how to use these risk ranges.

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This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.