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Howe: Why U.S. Election ‘Venom’ = Indictments & Gridlock

 

In this excerpt from The Macro Show earlier today, Hedgeye Demography Sector Head Neil Howe discusses his post-election outlook. It’s pretty grim.

 

Howe expects:

 

  1. Hillary Clinton will win the White House
  2. The Senate will tip in favor of Republicans
  3. Republicans will hold the House

 

This will incite gridlock and Clinton won’t be able to get anything done, he says. “The loser of the [White House], in 2016, will feel like an enemy occupied country and will behave accordingly,” Howe says. This will have implications for the Supreme Court, tax reform, and proposed infrastructure spending.

 

Other questions remain. What happens if U.S. economic growth slips? Or maybe there’s a foreign crisis? “It’s going to get really nasty and I expect the markets to reflect that,” Howe says.


Cartoon of the Day: Turning A Blind Eye

Cartoon of the Day: Turning A Blind Eye - White House economist cartoon 10.14.2016

 

Jason Furman, chair of the White House Council of Economic Advisers, actually said last week, "I don't think you're late cycle... I just don't believe in the concept of late cycle." We crowned that statement "the most glaringly irresponsible statement" of the day.


The Wall Street Journal Misses the Mark On Deteriorating Retail Sales

Takeaway: The reality is that things aren't as good, underneath the hood.

The Wall Street Journal Misses the Mark On Deteriorating Retail Sales - retail cartoon 05.13.2016

 

 According to the Wall Street Journal:

 

The Wall Street Journal Misses the Mark On Deteriorating Retail Sales - z wsj

 

We disagree.

 

This story misses the mark on a number of levels. That supposed "rebound" in retail sales was on the headline number, +0.6% month-over-month. Auto sales were a major contributor to the uptick, +5% on a month-over-month basis. 

 

This only scratches the surface. What investors need to watch is the so-called "Control Group" within retail sales. This is the *all-important data set* that is a proxy for what's input into GDP. On that score, the data was decidedly bad.

 

  • The Retail Sales "control group" came in at +3% y-o-y, down from the peak of nearly 5% in 2015.
  • Meanwhile, the annualized quarterly average was remarkably slow, at +0.3%, down from 6.8% in the second quarter.

 

This amounts to a sizeable decline in a large GDP contributing data point. In other words... 

There's no "rebound" to be found.

 

The Wall Street Journal Misses the Mark On Deteriorating Retail Sales - retail sales  2  10 14 16

 

The Wall Street Journal Misses the Mark On Deteriorating Retail Sales - retail sales 10 14


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Poll Of The Day: Which College Football Nickname BEST Represents the U.S. Economy?

Takeaway: What do you think? Cast your vote. Let us know.

Poll Of The Day: Which College Football Nickname BEST Represents the U.S. Economy? - poll of day 10 14

 


Global Economic Growth Has Not "Bottomed"

Takeaway: Many contended China's economy "bottomed" around April. We disagreed. Still do.

Global Economic Growth Has Not "Bottomed" - z china

 

Ugly import and export data in China triggered a global equity market selloff yesterday as investors feared a slowdown in global growth.

 

Now let's back up a bit. This past April China announced growth of 6.8% for the first quarter, down slightly from 2015's 6.9% reading. A slew of headlines and analysts came out of the woodwork arguing "targeted stimulus" would be the panacea helping to stabilize growth. The China "bottom is in," they proclaimed.

 

 

Contrary to mainstream media views, Hedgeye Senior Macro analyst Darius Dale wrote (on 5/2/2016),

 

"Our analysis renders us firmly on the other side of such hope that China accelerates from here and effectively resuscitates global demand growth enough to stave off continued macroeconomic and microeconomic deterioration in the U.S."

 

Here's China's (abysmal) trade data reported yesterday for September: 

 

  • Exports -10% 
  • Imports -1.9%

 

On the news, Dr. Copper (a commodity-market proxy for global demand) resumed its long-term bear market, trading back down to $2.11/lb (see chart below). Meanwhile, China's Shanghai Composite is down -13% year-to-date.

 

We reiterate our call that Global GDP (and cyclical demand) is entering its slowest part of the cycle (Q4 and Q1). In other words...

 

the bottom is not In. Not Yet.

 

Global Economic Growth Has Not "Bottomed" - copper 10 14 166


PREMIUM INSIGHT

CHART OF THE DAY: Wealth vs. Leverage: The Subprime Resurgence

CHART OF THE DAY: Wealth vs. Leverage: The Subprime Resurgence - credit cards info

Rising leverage is a massively underappreciated risk. In 2015, it was the fastest year ever in the number of credit cards issued to deep sub-prime and traditional sub-prime borrowers.


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