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PREMIUM INSIGHT

Can The Fed Smooth The #CreditCycle?

Can The Fed Smooth The #CreditCycle? - dollar cartoon 07.02.2014

If you believe this ends well, you also have to believe the Fed’s next ease will involve buying of corporate bonds and monetization of debt.


PREMIUM INSIGHT

1 Chart: Why Wall Street's Earnings Estimates Defy Common Sense & Rationality

1 Chart: Why Wall Street's Earnings Estimates Defy Common Sense & Rationality - earnings cartoon 07.18.2016

Given the nasty reality of underperforming corporate earnings, Wall Street's earnings estimates for coming quarters look downright ridiculous.


Daily Market Data Dump: Friday

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: Friday - equity markets 8 12

 

Daily Market Data Dump: Friday - sector performance 8 12

 

Daily Market Data Dump: Friday - currencies 8 12

 

Daily Market Data Dump: Friday - commodities 8 12


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Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

A Closer Look At Europe's (Still Slowing) Economic "Growth"

Takeaway: European economic growth data disappoints (again).

A Closer Look At Europe's (Still Slowing) Economic "Growth" - Draghi cartoon 03.09.2016

 

Got GDP Slowing? Yes! Inline with our #EuropeSlowing theme, Q2 preliminary GDP slowed across the Eurozone, to 0.3% vs 0.6% in the prior quarter. Specific country results: Germany (0.4% vs 0.7% in the prior quarter); France (0.0% vs 0.7%); and Italy (0.0% vs 0.3%). Our bearish bias on the Eurozone remains intact.

 

Below is the country-by-country breakdown.

 

Click image to enlarge

A Closer Look At Europe's (Still Slowing) Economic "Growth" - eurostat

 

Editor's Note: The snippet above is from a note written by the Hedgeye Macro team and sent to subscribers this morning. Click here to learn more.


Got GDP Slowing? Yes!

Client Talking Points

EUROZONE

Got GDP Slowing? Yes! Inline with our #EuropeSlowing theme, Q2 preliminary GDP slowed across the Eurozone, to 0.3% vs 0.6% in the prior quarter. Specific country results: Germany (0.4% vs 0.7% in the prior quarter); France (0.0% vs 0.7%); and Italy (0.0% vs 0.3%). Our bearish bias on the Eurozone remains intact.

#CREDITCYCLE

Looking at corporate credit there is a large divergence between different issues. Despite corporate bankruptcies on a pace not seen since 2009, credit spreads have tightened meaningfully. High-yield energy spreads have been more than cut in half since February from +1600 to +718 this morning. Resource high-yield spreads have reverted nearly back to trade at the same spreads as high yield broadly since the U.S. dollar broke out in July of 2014. Corporate leverage broadly (median debt/ EBITDA) reached record highs this week as reported by S&P, so if you believe this ends well, you also have to believe the fed’s next ease will involve buying of corporate bonds and monetization of debt

#VOLATILITYASSYMETRY

Once again vol. is for sale at all-time highs. In the summer of 2014, we introduced our #volatilityassymetry theme at all-time lows in cross asset volatility. While a number of indices haven’t quite reached those level, the VIX is looking to test its YTD low from last week, trading at 11.59 this morning – still a handle off all-time lows. The MOVE Index is at a level not seen since December 2014 which has helped drive corporate spreads lower.

Asset Allocation

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
8/11/16 61% 3% 3% 10% 14% 9%
8/12/16 61% 3% 3% 10% 14% 9%

Asset Allocation as a % of Max Preferred Exposure

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
8/11/16 61% 9% 9% 30% 42% 27%
8/12/16 61% 9% 9% 30% 42% 27%
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
GLD

See update on TLT/UUP.

TLT

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.

UUP

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

TWEET OF THE DAY

**NEW VIDEO Van Sciver: I’m Pretty Excited About The $CAT Short Call https://app.hedgeye.com/insights/53050-van-sciver-i-m-pretty-excited-about-the-cat-short-call … @KeithMcCullough

@Hedgeye

QUOTE OF THE DAY

"When nothing is sure, everything is possible."

-Margaret Drabble

STAT OF THE DAY

Ay 41 years old, Oksana Chusovitina is the oldest female gymnast in Olympic history. She is competing in her seventh Olympics for Uzbekistan. 


CHART OF THE DAY: The Gig Economy is Alive and Growing

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye Managing Director Neil Howe. Click here to learn more.

 

"... One is part-time workers, who have grown as a share of the workforce by about 2 percentage points since the Great Recession. Another is independent digital contractors, who—while still few in number—are surging. JPMorgan Chase finds that, as of August 2015, 1 percent of adults make money in the “online platform economy” each month (as Uber drivers, Airbnb renters, etc.)—a tenfold increase from October 2012. During the same time period, the share of Americans who report ever having worked in the online platform economy exploded 47-fold to 4.2%."

 

CHART OF THE DAY: The Gig Economy is Alive and Growing - neil 6


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