US STRATEGY – THE FED IS TELLING US SOMETHING

Most people believe that the initial estimate of GDP is the most heavily rigged and politicized data point put out by the government.  Knowing this do you think tomorrow’s GDP number is going to be better or worse than consensus?  Yes, the FED is trying to tell us something. 

 

A day before the government reports 4Q09 GDP, the Federal Reserve declared that the U.S. economy is in “recovery” mode.  Yet it maintains a monetary policy that was put in place during the “great recession.”  As of tomorrow, by definition the recession is over as the US economy will have posted two straight quarters of GDP growth. 

 

What are the markets doing with this information?  As of 5am, stocks around the world are rallying the futures in the U.S. are indicated higher.  The VIX is down 5% and the Dollar index is flat on the day. 

 

Yesterday, the S&P 500 US equities finished higher on accelerating volume.  Early in the day a negative tone was set by tightening concerns that drove a fourth consecutive downturn in China stocks.  Last night China was up slightly, while the rest of Asia rebounded nicely.

 

On the MACRO front yesterday, new home sales fell 7.6% month-over-month to a seasonally adjusted annualized pace of 342,000, compared with consensus estimate of 366,000.  The median home price in December declined by 3.6% year-over-year, while the months' supply of new homes for sale rose to 8.1 from 7.6, but remained below the 12.4 months seen in early 2009. 

 

Yesterday, news flow also helped fuel a continued bounce in the dollar, which was up 0.31% yesterday and 1.04% year-to-date.  The VIX has seen a three day correction declining 5.74% yesterday, following a nearly 3.38% decline Tuesday.   

 

After being the worst performing sector on Tuesday, the Financials (XLF) outperformed the S&P 500 by 190bps on Wednesday.  Yesterday’s outperformance was driven by the BKX, which was up 2.9%.  Within the banking sector the regional names were the best performers. 

 

The RECOVERY trade got hammered again for the second day in a row.  Yesterday the Materials sector was the worst performing sector, declining 0.98%.  No surprise that the tightening concerns out of China, sovereign credit concerns and the accompanying bounce in the dollar are putting pressure on the RECOVERY trade. 

 

The CRB declined 1.8% yesterday and now declined 5 out of the last 6 days.  Since the beginning of last week the CRB has declined 5%.

 

Howard Penney

Managing Director

 


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more