Gordon Brown's Losing Game

Position : Long Germany (EWG); Short Spain (EWP); Short Euro (FXE)


We’ve been vocal on rising inflation globally, a theme we’ve named Inflation's V-Bottom and outlined in our recent Q2 Themes call.  Certainly, today’s CPI reading out of the UK confirms as much, up +3.4% in March Y/Y, and is also a mark against Gordon Brown’s insistence that “staying the course” of Labour’s economic policy will bring prosperity.


The inflation print, which is up from an annual 3.0% rate in February, is now above the government’s soft cap limit of 3%, which itself was upwardly revised from 2%. As we noted in recent work, the UK economy continues to have its hands tied, struggling off its bottom, and we expect to see inflation continue to rise as commodity prices are up significantly over the previous year, nearing the prospect for stagflation. 


As the General Election approaches on May 6th, we continue to believe that party victory will hinge on the economic policy debate (it’s the economy, stupid!). Does Brown’s “stay the course” message have a chance?


Recent daily tracking polls show that the Liberal Democrat Clegg gained significant approval following last week’s initial political debate, one that set a historical precedent as the first political debate of its kind hosted on live television in the UK. While Clegg’s positive showing was a surprise, the recent average of most daily polls tracking the candidates shows a tight spread (YouGov for instance has a 6 point spread in conservative Cameron’s favor over Brown, or 33% to 27%, versus the Liberal Democrats at 31%), however Intrade, typically a stealth indicator in our opinion, would suggest that the favored candidate is Cameron, with a lead of over 70%.


While last Thursday’s debate focused on domestic issues, we’d expect the two subsequent Thursday night debates to cover such topics as banking issues (Goldman likely debated this Thursday) as well as the UK’s relationship to the EU, a position that especially pits Cameron’s Euro-skepticism against Clegg’s support.


Matthew Hedrick



Gordon Brown's Losing Game - 1

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

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

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more