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Cartoon of the Day: Freezing?

Cartoon of the Day: Freezing? - OPEC cartoon 08.24.2016


Oil prices popped yesterday on rumors that Iran might support an OPEC oil production freeze. "In our view it is still too soon for any change in OPEC production policy," Hedgeye Potomac Senior Energy analyst Joe McMonigle wrote yesterday. Shortly thereafter, a spokesman for the Iranian Oil ministry said the country hadn't even decided whether to attend OPEC talks next month. Oil prices quickly faded and are down almost -3% today. 

Japan: A Case Study In The Folly Of Central Planning & Dogmatic Economic Thinking

Takeaway: As the BOJ takes extraordinary measures to save its flagging economy, macro markets continue to confound conventional economics.

Japan: A Case Study In The Folly Of Central Planning & Dogmatic Economic Thinking - Japan cartoon 05.02.2016


Since Japan is the playground of central planners and economic orthodoxy, here's some of the more interesting recent developments out of Japan that should give pause to any honest economist (oxymoron?) or investor.


"Japanese companies are expected to issue 3.3 trillion yen ($32.9 billion) worth of bonds during the three months ending in September, double the amount from the year-earlier quarter, as businesses capture demand from yield-hungry investors to finance growth spending," Nikkei reports. 


Clearly, Japanese companies are taking advantage of the country's interest rates hanging out near record lows. Take a look at Japan's steadily pancaking yield curve. 

Got #GrowthSlowing?


Japan: A Case Study In The Folly Of Central Planning & Dogmatic Economic Thinking - japan jgb

The Failure of Central Planning...


A survey of Japanese companies conducted after Prime Minister Shinzo Abe announced the 13.5 trillion yen fiscal stimulus package reveals unsurprisingly underwhelming expectations:


"Less than 5 percent of companies believe the steps will boost the economy near-term or raise its growth potential, according to the Reuters Corporate Survey, conducted August 1-16... Corporate Japan was also cautious about fresh monetary stimulus, with over 60 percent saying the BOJ should not ease further or should even start to wind down its massive stimulus."


Interestingly, in the open-ended portion of the survey, one general machinery firm wrote: "Helicopter money must be avoided." Clearly, Japanese companies aren't as sanguine as the hopes and dreams put forth by the country's central planners.


Macro markets have already sniffed out the folly of central planning. Pick your indicator...

The NIKKEI Crash Continues...


Japan: A Case Study In The Folly Of Central Planning & Dogmatic Economic Thinking - nikkei 8 24

Or Yen strength...

(which according to economic orthodoxy should weaken with more stimulus)


Japan: A Case Study In The Folly Of Central Planning & Dogmatic Economic Thinking - yen 8 24


How this ends is anyone's guess but one thing is clear, the Japanese people aren't happy with all of this meddling. And yet, the cries for more stimulus keep flowing. 

More to come.

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 80.35%
  • SHORT SIGNALS 78.44%

McMonigle: Sell the OPEC Oil Production Freeze Nonsense

Does the OPEC rumormongering have you confused? Hedgeye Energy Policy analyst Joe McMonigle sifts through the rumors and speculation on The Macro Show today. He provides clarity on what's really going on and what likely lies ahead for oil prices.


Subscribe to The Macro Show today for access to this and all other episodes. 


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In Honor Of #NationalWaffleDay...

We can't confirm the rumor yet. But word on the street is Waffle House has officially named Janet Yellen its national spokesperson. According to unnamed sources, regional Fed Heads including San Francisco's John Williams and St. Louis' James Bullard have been offered similar positions at Denny's and IHOP, but are waffling on whether to accept their respective offers.


Happy Waffle Day amigos.


In Honor Of #NationalWaffleDay... - fed waffle

Sarcasm Alert: The U.S. Economy Is Absolutely Killing It! (A Peek Inside Existing Home Sales)

Takeaway: Existing Home Sales were down 1.6% year-over-year for the month of July.

Sarcasm Alert: The U.S. Economy Is Absolutely Killing It! (A Peek Inside Existing Home Sales) - existing home sales 8 24


Today's Existing Home Sales data showed July down -1.6% year-over-year. That's the worst level of demand since November. That matters because EHS makes up 90% of total transaction volume.


We're not surprised by this month's EHS downside and were largely expecting a July slowdown. Here's what Hedgeye Housing analysts Josh Steiner and Christian Drake in an institutional research note on July 21 following the much ballyhooed June data (which was largely the result of a holiday distortion):


"In aggregate, growth in EHS slowed to +3.0% YoY but made a new cycle high at 5.57M units. The gain wasn’t particularly surprising given the trend in PHS and noise in the relationship between the two series (PHS vs EHS) stemming from the March Easter distortion.  We’re more interested in next week’s Pending Home Sales data for June. Absent a moderate pickup and/or positive revision to May, the risk to EHS for July is to the downside."

In other words...



Additional thoughts...


QUESTION: How does declining Existing Home Sales fit into the hawkish Fed's rate hike calculus? Could they raise rates with 90% of the U.S. Housing market down 1.6% year-over-year?


ANSWER: Sure. They've been known to obfuscate the truth before.

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