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CHART OF THE DAY: Do You Believe In (OPEC/Fed) Centrally-Planned Markets?

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.

 

"... There are obviously many reasons (some secular, some cyclical) but the simplest one is that it’s a lot easier to see #GrowthSlowing to its cycle low than it is to believe that central market plans (OPEC, Fed, Banks, etc.) can keep markets believing in an asset inflated tomorrow."

 

CHART OF THE DAY: Do You Believe In (OPEC/Fed) Centrally-Planned Markets? - 10.03.16 EL Chart


REPLAY! This Week On HedgeyeTV

Our deep bench of analysts take to HedgeyeTV every weekday to update subscribers on Hedgeye's high conviction stock ideas and evolving macro trends. Whether it's on The Macro ShowReal-Time Alerts Live or other exclusive live events, HedgeyeTV is always chock full of insight.

 

Below is a taste of the most recent week in HedgeyeTV. (Like what you see? Click here to subscribe for free to our YouTube channel.)

 

Enjoy!   

 

1. ‘Macro Mentoring’ With Hedgeye’s Keith McCullough : Session 4 (10/1/2016)

 

 

In this week’s edition of ‘Macro Mentoring’, Hedgeye CEO Keith McCullough details where we are in the U.S. economic cycle, describes how he uses rate of change to analyze macro data and explains how his process allows him to front-run the emotion of crowds. 

 

2. An Animated Healthcare Outlook (3 Shorts, 1 Long) (9/30/2016)

 

 

In this animated video, Hedgeye Healthcare analyst Andrew Freedman walks through our outlook for the Hospital EHR (“electronic health record”) market with insights on companies such as Epic Systems Corporation, athenahealth (ATHN), Cerner Corp (CERN), Allscripts Healthcare Solutions (MDRX), and Computer Programs & Systems (CPSI).

 

3. Keith McCullough Reveals One Of Our Favorite Market Calls! (9/30/2016)

 

 

In case you missed it. Hedgeye Risk-Manager-In-Chief Keith McCullough really likes this… like a lot. Like a lot, a lot.

 

 

4. Peterson: How Investor Emotion Influences Oil Prices (9/30/2016)

 

 

Dr. Richard Peterson, a board-certified psychiatrist and CEO of MarketPsych, is among the foremost leaders in the area of applied behavioral finance. In this excerpt from that broader interview with Hedgeye CEO Keith McCullough, Peterson explains how his algorithm has been “almost 100% accurate in catching every major monthly move.” He explains why “people talking their book” and “investor chatter” influences where oil prices are headed in the future.

 

5. McMonigle: OPEC’s ‘Risky Gambit’ (What The Media Totally Missed) (9/29/2016)

 

 

In this brief HedgeyeTV video presentation, Hedgeye Potomac Senior Energy Policy analyst Joe McMonigle discusses the underappreciated risks embedded in recent OPEC oil production speculation.

 

6. REPLAY: Demographer Neil Howe & Daryl Jones on The End of Monetary Policy? (9/29/2016)

 

 

In this complimentary edition of About Everything, Hedgeye Demography Sector Head Neil Howe discusses whether central bank monetary policy has finally reached its limits. Howe explains the broader implications for investors.

 

Click here to read Howe's associated About Everything written piece. 

  

7. Peterson: How to Successfully Trade Sentiment (9/28/2016)

 

 

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.

 

8. UberPOOL: The Future Of Public Transportation (& WAB Short Call Catalyst)? (9/27/2016)

 

 

Is uberPOOL a major technological event that will alter public transportation forever? And did Wabtec (WAB) just pay a premium to acquire Faiveley ahead of this revolutionary new change? Below is a brief excerpt from an institutional research note written by Hedgeye Industrials analyst Jay Van Sciver discussing uberPOOL and its implications for his WAB short call.

 

Click here to read it.

 

9. Understanding ‘The Biggest Number In All Of Retail’ (In 30 Seconds Or Less) (9/27/16) 

 

 

In this brief excerpt from The Macro Show earlier today, Hedgeye Retail analyst Alec Richards explains the investing implications behind “the biggest number in all of retail.”

 

10. Nike: What Investors Are Missing & Why We’re Bullish (9/26/2016)

 

 

In this brief excerpt from a HedgeyeTV video presentation, our Retail team explains why Nike remains a Best Idea Long heading into tomorrow’s earnings report. Analysts Brian McGough and Alexander Richards discuss an underappreciated bullish catalyst.

 

11. Van Sciver: My Favorite Short Right Now Is… (9/26/2016)

 

 

In this brief excerpt from The Macro Show, Hedgeye Industrials analyst Jay Van Sciver responds to a subscriber’s question about his favorite short in the sector.

 

Click here to subscribe for free to our YouTube channel.


Early Look

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Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

Guest Contributor | O'Rourke: The Most Dangerous Woman in the World

Editor's Note: This is a special Hedgeye Guest Contributor note written by Mike O'Rourke. Mike is the Chief Market Strategist at JonesTrading where he advises institutional investors on market developments. He publishes "The Closing Print" on a daily basis in which his primary focus is identifying short term catalysts that drive daily trading activity while addressing how they fit into the “big picture.”

Guest Contributor | O'Rourke: The Most Dangerous Woman in the World - Yellen bubbles 07.29.2014

Is it a James Bond femme fatal? No.  A US presidential candidate?  No.  

 

With her comments today during a video conference with minority bankers after the close, Fed Chair Janet Yellen proved she is the most dangerous woman in the world.  At the conference, a participant posed this question –“If the Fed had legal authority to purchase equities how would that option impact monetary policy if at all?” 

 

Here is Yellen’s response in its entirety:

 

 “Well that’s a great question because I did mention in my remarks at Jackson Hole that the Federal Reserve is more restricted in what assets it can purchase than many central banks around the world.  For example, now the Bank of Japan is purchasing equities and corporate bonds and the European Central Bank is also purchasing corporate bonds. So these purchase programs work by trying to produce a more accommodative set of financial conditions that will improve spending. In our case when we buy what are long term safe assets, long term treasuries and long term mortgage backed securities, we’re directly pushing down longer term interest rates.  We want to make sure borrowers generally face more accommodative conditions and that would include corporate borrowers.  Now because Treasury securities and corporate securities and equities are substitutes in the portfolios of the public.  When we push down yields let’s say on Treasuries there is often and typically spillover to corporate bonds and to equities as well that those rates fall or that equity prices rise stimulating investment.  But we are restricted from investing in that wider range of assets and if we found, I think as other countries did that they reached the limits in terms of purchasing safe assets like longer term government bonds it could be useful to be able to intervene directly in assets where the prices have a more direct link to spending decisions.  Now, I don’t think this is something we need now.  When I raised it back in Jackson Hole it was speculative but we do find ourselves now in a slower growing global economy.  One where unfortunately productivity growth has been slow and economists are coming to the conclusion that the general level of interest rates going forward is likely to be lower than it has been historically and that means if our economy were hit by a negative shock and the Fed needed to intervene to stimulate the economy we have less room using our conventional overnight interest rate tool to do that.  So many researchers are thinking about what other tools might be useful to have on the shelf for the future in case we need a wider range of tools. While it is a good thing to think about it is not something that is a pressing issue now.  I should emphasize that while there could be benefits to the ability to buy equities or corporate bonds there would also be costs as well that would have to be carefully considered in deciding if that is a good idea.”

 

That long winded response is a world apart from the concise answer she provided lawmakers on Capitol Hill yesterday when she noted the Fed could not purchase equities.  Today’s comments sound like the words of a Central Banker who would like to have this authority.  Despite this being a relatively low profile event, the gravity of her words are on par with Ben Bernanke’s 2002 speech “Deflation: Making Sure "It" Doesn't Happen Here” which set the stage for the Quantitative Easing response to the crisis in 2008


Guest Contributor | O'Rourke: The Most Dangerous Woman in the World - z ro ro

Yellen's rationale for such power defies logic and reality.  Her case is so poorly constructed that it is easy to dismantle almost line by line.  Since when are the Bank of Japan, and European Central Bank the standard for superior monetary policy?  Even more remarkable is that those economies serve as examples of this policy failing.  She mentioned the need to make sure corporations have accommodative credit conditions.  Credit conditions for corporations cannot get much more accommodative than they are today in the United States. 

 

Yellen once again admits to fueling the bubble in financial markets including equities when she said “When we push down yields let’s say on Treasuries there is often and typically spillover to corporate bonds and to equities as well that those rates fall or that equity prices rise stimulating investment.”  The spillover created is not fundamental improvement, it is simply pushing up the asset prices.  It may stimulate stock market purchases, but it does not stimulate investment in the real economy.  The type of real investment that Fed officials are always pining about having disappeared. 

Guest Contributor | O'Rourke: The Most Dangerous Woman in the World - Three central bankers cartoon 07.06.2016

She sticks with the bubble theme admitting the Fed is simply hoping for a wealth effect “... it could be useful to be able to intervene directly in assets where the prices have a more direct link to spending decisions.”  This could be one of the most irresponsible statements ever spoken by a central bank head.  In essence, she is saying that when the chips are down and the economy is in a bad way, the Fed’s last hope is that a wealth effect leads to increased spending.  Chair Yellen, markets don’t work that way.  They will play along with your games when things are going good, but they will unmercifully punish you when the environment weakens to the point where your game can’t be sustained. 

 

Recall that the S&P 500 dropped an additional 25% in the little more than 3 month period after QE was launched.  Yellen then refers back to Jackson Hole and how economic conditions have changed.  “When I raised it back in Jackson Hole it was speculative but we do find ourselves now in a slower growing global economy.”  Jackson Hole was a month ago, and the only thing that has changed is the view of Federal Reserve officials.  The rest of us have been well aware how slow the economy is, both in the US and abroad.  Those policies at the BOJ and ECB must be working great ...  She notes “…economists are coming to the conclusion that the general level of interest rates going forward is likely to be lower than it has been historically.” Once again, this is the view of Fed officials changing, not the reality of the economy or the market changing. 

Guest Contributor | O'Rourke: The Most Dangerous Woman in the World - z roc ro

What is clearly lost is that the US currently has all of these conditions that Chair Yellen desires.  Credit conditions are accommodative for corporations.  Stock prices are approximately 2% from their all-time high and bond yields are near an all-time low.  The wealth effect has been both historic and massive.  Household Net Worth is up more than 30% from its 2007 peak and more than 60% from its 2009 low. 

 

Despite having all of these qualities that such a policy would deliver, we do not have the economic growth the Fed or anyone else seeks. 

 

Furthermore, Yellen just warned that the environment is much worse than she and her colleagues at the Fed previously believed.  We have not even gone down the path of highlighting the dangers that occur when you crowd private investors out of the markets and they choose to cash in their chips rather than participate in crony capitalist fictitious markets.  These words have the tenor of a Central Banker who knows she has created multiple bubbles and is desperate to have tools to respond when the bubble pops.  

 

And we all know that a desperate person is a dangerous person. 

 

Guest Contributor | O'Rourke: The Most Dangerous Woman in the World - o ro


‘Macro Mentoring’ With Hedgeye’s Keith McCullough: Session 4

In this week’s edition of ‘Macro Mentoring’, Hedgeye CEO Keith McCullough details where we are in the U.S. economic cycle, describes how he uses rate of change to analyze macro data and explains how his process allows him to front-run the emotion of crowds.


This Week In Hedgeye Cartoons

Our cartoonist Bob Rich captures the tenor on Wall Street every weekday in Hedgeye's widely-acclaimed Cartoon of the Day. Below are his five latest cartoons. We hope you enjoy his humor and wit as filtered through Hedgeye's market insights. (Click here to receive our daily cartoon for free.)

 

Enjoy!

 

1. Stampede! (9/30/2016)

This Week In Hedgeye Cartoons - Wells Fargo cartoon 09.30.2016 


Wells Fargo CEO John Stumpf was grilled by Washington lawmakers earlier this week after the bank paid a $185 million settlement and entered into an enforcement action for allegedly “widespread illegal” sales tactics. The bank opened as many as two million fabricated or unauthorized customer accounts. 

 

2. Draghi's Ducks (9/29/2016)

This Week In Hedgeye Cartoons - Draghi DAX cartoon 09.29.2016

 

Fears over Deutsche Bank's financial health have moved into the German political arena as Berlin was forced to deny it was preparing a rescue and ECB head honcho Mario Draghi was grilled by the Bundestag over the future of the bank.

 

3. GDP Report Preview (9/28/2016)

This Week In Hedgeye Cartoons - 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.

 

4. Yellen's Arcade (9/27/2016)

This Week In Hedgeye Cartoons - Yellen   toy animals 09.27.2016

 

The Fed isn't "data dependent." It's S&P 500 dependent and will do anything to keep the bull market going. 

 

5. Snail's Pace (9/26/2016)

This Week In Hedgeye Cartoons - growth slowing cartoon 09.26.2016

 

Why did the Fed put rate hikes on hold yet again? U.S. #GrowthSlowing.

 

Click here to receive our daily cartoon for free.


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Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

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