CHART OF THE DAY: It's Just Math...

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.


"... In the Chart of the Day below we show the spread between Nominal GDP growth and Nominal Wage Growth (aggregate wage income). The intuition for understanding the profitability implications comes from viewing the macroeconomy as you would a company or household. At the aggregate level, Nominal GDP equals National Income or Total Revenue. Aggregate Wages represent Costs (labor costs are typically the biggest input costs for firms).


If costs are growing faster than revenue - which is the case currently and is represented by a negative spread in the chart below – margins and earnings growth becomes increasingly challenged. If labor growth continues to grow at a premium to output growth and if aggregate wages continue to grow at a positive spread to revenues (nominal GDP) then productivity will remain negative and the corporate earnings recession will remain more-or-less the prevailing reality."


CHART OF THE DAY: It's Just Math... - Nominal GDP less Nominal Wage Growth CoD

Peterson: How to Successfully Trade Sentiment

Behavioral finance expert Dr. Richard Peterson, a board-certified psychiatrist and CEO of MarketPsych, sits down with Hedgeye CEO Keith McCullough in this edition of Real Conversations. An expert on financial market psychology, Peterson discusses how to potentially time stock market turns by analyzing investor behavior and social media. His firm produces sentiment and macroeconomic indices derived from language analysis of global news and social media. His latest book Trading on Sentiment digs underneath technicals and fundamentals to explain the primary mover of market prices - the global information flow and how investors react to it.

Cartoon of the Day: GDP Report Preview

Cartoon of the Day: GDP Report Preview - GDP cartoon 09.28.2016


"US GDP is going to be reported tomorrow and it’s closer to 1% y/y than it’s been all year," Hedgeye CEO Keith McCullough wrote in this morning's Early Look note. U.S. #GrowthSlowing continues.

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McMonigle's Quick Take On Today's OPEC Oil "Freeze" Headline

Takeaway: Let's wait and see the details about this OPEC oil production "freeze."

McMonigle's Quick Take On Today's OPEC Oil "Freeze" Headline - OPEC cartoon 08.24.2016

Oil is up 5% today... WHY?


According to Reuters' two OPEC sources, the organization:


"... Agreed on Wednesday to reduce its oil output to 32.5 million bpd from the current production levels of around 33.24 million bpd. The producing group will agree concrete levels of production by each country at its next formal meeting in November, the sources said.


One source also said that once production targets were reached, OPEC would reach out to non-OPEC producers for cooperation."

Our Quick Take?


Here's Hedgeye Potomac Senior Energy Policy analyst Joe McMonigle who has been spot-on about all the OPEC oil production "freeze" rumors all year.



Here's McMonigle's recent take on an OPEC "freeze" from earlier this month.

An Update On Canada’s Housing Bubble

Takeaway: Vancouver home sales are still getting slammed, with the Y/Y growth rate further deteriorating to -26% in September from -18.9% in August

An Update On Canada’s Housing Bubble - z cana


Earlier this week Hedgeye Financials analyst Josh Steiner released his proprietary Hedgeye Canada Tracker to keep tabs on what he sees as an “ongoing housing bubble” in the economy.


As Bloomberg reported earlier this month:


“A tax on foreign homebuyers in Vancouver cut luxury purchases in Canada’s priciest housing market by more than half last month, according to a brokerage report. Meanwhile, high-end sales in Toronto surged.

Transactions in Vancouver of at least C$1 million ($759,000) slid 65 percent from a year earlier to 95 units in August, the month that a 15 percent transfer tax on deals by non-Canadian homebuyers took effect, according to Sotheby’s International Realty Canada. At the same time, luxury-home sales in Toronto and its suburbs doubled to 1,459 units, the high-end brokerage said.”


In particular Steiner’s Canada Tracker is picking up a more broad-based slowdown in Vancouver’s housing market.


Here’s Steiner’s analysis:


“Vancouver home sales are still getting slammed, with the Y/Y growth rate further deteriorating to -26% in September from -18.9% in August… Teranet data still shows Vancouver home price growth accelerating, to 24% YoY. However, the deteriorating average home sale price from the Real Estate Board of Greater Vancouver in the chart below makes more sense to us, given the disaster that home sales in the region have become.”


An Update On Canada’s Housing Bubble - canada 1

The BS Filter: 4 Takeaways From This Week's Central Bank Nonsense

Takeaway: Here's our take on some of today's top financial stories.

The BS Filter: 4 Takeaways From This Week's Central Bank Nonsense - central bankers cartoon 06.29.2016 

1. Fed

San Francisco Fed head John Williams kicked off a loaded week of central planning with this gem:


"It is getting harder and harder to justify interest rates being so incredibly low given where the U.S. economy is and where it is going. I would support an interest rate increase. I think that the economy can handle that. I don’t think that would stall, slow or derail the economic expansion."


The sentiment was reiterated by Fed Chair Janet Yellen in today's testimony before the House Financial Services Committee:



OUR TAKE: The Fed is obscuring reality for convenient (false) narratives about the U.S. economy. The data will win.

2. European Central Bank

This is the latest nugget from ECB President Mario Draghi in a speech to German Parliament today:


The BS Filter: 4 Takeaways From This Week's Central Bank Nonsense - draghi quote


OUR TAKE: A more clear summation of what Draghi actually meant would be: "Yes, ECB policies have gouged European bank profitability but some banks are still profitable." Not exactly a resounding defense of the ECB's unprecendented policies. 

3. Bank of japan

In BoJ Govenor Haruhiko Kuroda's first speech since the central bank's radical new proposals last week, he said the BoJ stood "ready to use every available tool to achieve its 2% inflation target." Kuroda continued, "There is no better opportunity than now to completely get out of deflation. Talking about the limits of monetary policy does not help at all."

In case you missed it, last week, the BoJ said it would try to keep 10-year JGB yields around 0%, instating what is effectively a ceiling on yields. The IMF gave the policy shift the thumbs up. “The change in the framework has made it clear that there are still tools available that allow monetary policy to be as accommodative as possible for the future and raise inflation expectations,” Luc Everaert, the IMF's chief for Japan, said in an interview in Tokyo on Monday. “We support it and we also find that the framework allows monetary easing to be more sustainable and more effective. New measures allow more flexibility and they can be kept in place for a longer time.”


OUR TAKE: We disagree with the IMF's assessment. The BoJ cannot pull the country out of its protracted multi-decade malaise. Click here to read what Hedgeye Senior Macro analyst Darius Dale has to say about the BoJ's "stench of desperation."

4. Bank of England

Finally, a bit of truth from a central banker. Britain is transitioning from “strong growth to something less than that,” Bank of England governor Mark Carney said earlier today, as individuals and businesses struggle with Brexit-related uncertainty. 


“We had expected in August that the economy would slow materially during the second half of this year, relative to relatively strong growth in the first half of this year,” Mr Carney said in an interview with Herald Scotland. “Broad brush, that is what we are seeing.


OUR TAKE: From Hedgeye CEO Keith McCullough...



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