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Cartoon of the Day: Employment Growth Slowing

Cartoon of the Day: Employment Growth Slowing - jobs cartoon 08.08.2016


While Wall Street trumpeted Friday's headline 255,000 jobs number as "good," the year-over-year rate of change continues to slow from 2.3% in February of 2015 to last week's reading of 1.72%.

ICYMI | Bloomberg: Tallgrass CEO Slams Hedgeye Analyst Who Asks, ‘You Mad Bro?’

Takeaway: Tallgrass Energy CEO David Dehaemers accused Hedgeye Energy analyst Kevin Kaiser of libel saying that he fabricated information in a note.

ICYMI | Bloomberg: Tallgrass CEO Slams Hedgeye Analyst Who Asks, ‘You Mad Bro?’ - tallgrass


Via Bloomberg:


"Tallgrass Energy Partners LP Chief Executive Officer David Dehaemers had more on his mind than earnings during the company’s quarterly call with analysts on Wednesday.


Dehaemers took a break from talking strategy to accuse Hedgeye Risk Management analyst Kevin Kaiser of libel. Ripping into what he described as “people who act like analysts,” Dehaemers said Kaiser falsely reported on Aug. 1 that Tallgrass faces a potential contract restructuring with Bonanza Creek Energy Inc. Dehaemers said Bonanza is not a shipper on the company’s Pony Express oil pipeline. Kaiser lashed back on Twitter, citing Bonanza filings that appeared to back up his report.


On Thursday, James Edwards, Bonanza’s investor relations director, said by phone the oil explorer uses the pipeline through a third party."


**Click here to read the entire BLOOMBERG story. 


Below are the key excerpts from Bonanza (BCEI) filings cited by Kaiser: 



... And here's Tallgrass CEO David Dehaemers' comments about Kaiser's research from the conference call transcript:


"And you probably wonder now what am I talking about; well I'm going to tell you specifically what I'm talking about. On Monday, July or August 01, at 8.40 p.m. an analyst from Hedgeye Energy [ph] sent an unsolicited email to, I don't know how many people, but it clearly made its way to us. It went to many of our investors. It went to many of the regulated analysts or the people that act like analysts that cover our company...

You all know what is funny about this? Frankly, it is not funny. What it is, is libel. And the reason it is libel is because Bonanza Creek is not a shipper on Pony, they have never shipped one barrel on Pony Express. They certainly aren't a committed shipper.

I would suggest to people that write things about our company, be that in social media or as purported analysts, get their facts straight before they go libeling our company because they are liable for that.


I will end with my message being this. We work really hard around here for a lot of people that have a lot of money invested in our future. People are obviously welcome to believe our story, not believe it, buy our stock, sell it short, whatever. What you aren't able and have the right to do is make up your own set of facts and then slander us. If this continues we will have other means for which we will address this in the future."



A Troubling Update On Australia’s Housing Bubble

Takeaway: The housing bubble in Australia is bad news for the country's big banks.

Editor’s Note: Below is a brief excerpt from an institutional research note written by Hedgeye Financials analyst Josh Steiner discussing ME Bank’s semi-annual report called the Household Financial Comfort Report which details the results of a survey that gathers responses from a significant sample size of 1,500 households.


This is an update to a previous piece, “Banks on the Barbie: Four Short Ideas In Australia’s Housing Bubble.” To access our institutional research email sales@hedgeye.com.


A Troubling Update On Australia’s Housing Bubble - Australia housing cartoon


The red line in the chart below represents the portion of the 65% of indedbted households that expect they will be unable to make their minimum payments. After being virtually flat for the entirety of the survey’s life, that line has risen twofold in the last six months from 5% as of December 2015 to 10% as of June 2016. To be clear, that means that 10% of the 65% of Australian households with debt—6.5% of all households—expect to default in the next 6-12 months.


A Troubling Update On Australia’s Housing Bubble - australia manage debt


**To access our institutional research email sales@hedgeye.com.



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Consumption Capacity = Trending Lower | A Few Quick Updates

Takeaway: Credit has supported HH spending in the face of slowing income growth. Credit growth slowed for a 3rd month in June & may now be past peak.

Together with the NFP data for July, the Consumer Credit report for June released on Friday provided notable updates on the capacity for domestic consumerism.   


Because household spending remains the singular GDP support – a reality that is likely to persist given global DM weakness and ongoing recessionary capex spending domestically - the trend and outlook for consumption growth remains of obvious import. 


Aggregate Income | NFP Implied Growth = Flat:   Income growth defines the capacity for sustainable consumption growth for most households. With payroll growth slowing over the last four quarters (YoY growth decelerated  further in July despite the “good” absolute gain) and weekly hours largely flat, the modest acceleration in wage growth has not been enough to offset the deceleration in employment and aggregate income growth has slowed.  Consumption growth, unsurprisingly, has shown a similar deceleration.  *Note: for our purposes here, we are defining aggregate income growth as aggregate private sector salary & wage income. 


The sum of aggregate hours growth + earnings growth in the NFP release offers a preview of the official income and spending data released later in the month.    The NFP implied figures aren’t a precision projection but they do offer an insightful directional signal.  NFP data for July imply flat sequential year-over-year growth in aggregate income.  Assuming static savings and credit (more below) trends, consumption growth should reflect a similar 2nd derivative trend.


Consumer Credit Growth = Past Peak? 

  • Total Consumer Credit:   Total Consumer Credit growth decelerated for a third straight month in June and at +5.77% YoY has now decelerated ~130bps off the rate-of-change peak of +7.1% YoY recorded in October of last year. 
  • Revolving Credit:  Revolving Credit represents the primary means of pulling forward consumption for most households and the trend of the last two years has been one of acceleration.  Indeed, with aggregate income growth slowing we’ve needed to see ongoing acceleration in credit growth just to maintain a flattish trend in nominal household spending.  Revolving Credit growth was flat sequentially at +5.4% YoY in June and has now been slowing for 3 consecutive months off of peak cycle growth (+6.1% YoY) recorded in March.   

Consumption Capacity | Income + Credit = ↓:  Holistically, and over shorter and medium terms, spending capacity is defined by income and credit growth.  With employment growth slowing, wage inflation and credit growth, collectively, need to rise as fast as payroll growth slows in order to maintain the current pace of household spending growth (again, assuming a roughly flat savings rate).  After supporting spending over the last year and a half in the face of decelerating aggregate income growth, revolving credit growth has now been trending lower for the last three months.   


Employment growth will continue to slow and if wage inflation continues to show only crawling improvement, consumption growth will not be able to maintain its current pace if credit growth continues to decelerate – particularly with consumption facing its toughest compare of the cycle in 3Q16. 


Consumption Capacity = Trending Lower | A Few Quick Updates - Reported   Implied Income


Consumption Capacity = Trending Lower | A Few Quick Updates - Consumption Capacity 1


Consumption Capacity = Trending Lower | A Few Quick Updates - Consumption Capacity 2


Consumption Capacity = Trending Lower | A Few Quick Updates - Revolving Credit Growth


Consumption Capacity = Trending Lower | A Few Quick Updates - Consumer Credit Revolving   Total


Consumption Capacity = Trending Lower | A Few Quick Updates - PCE YoY


Consumption Capacity = Trending Lower | A Few Quick Updates - PCE Comps



Christian B. Drake


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

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