“New Year's Day is every man's birthday.”

-Charles Lamb


For Wall Street, and many people around the world, the New Year is a big deal.  The New Year offers a chance to leave behind the past and focus on our goals going forward.  While every new day, technically, offers us the same opportunity, no other time of year inspires the same level of introspection and resolution as early January. 


After the excesses of the Holiday season, such a mood can seem particularly apropos.  Along those lines, in Christian tradition, the Tuesday before Ash Wednesday and the beginning of the Lenten season is typically an indulgent time.  Whether this day is referred to as Mardi Gras in New Orleans or Pancake Tuesday in London, the idea is generally the same: enjoy this day before Lent begins – a time of soul searching and repentance.


While some may ridicule others for using New Year’s or Lent as catalysts for self-improvement, the fact is that every year occasions such as this offer valuable reminders for people not to live an unexamined life, a life that Socrates would say is not worth living.  Are you convinced that Wall Street follows a similar process of self-examination and reflection?  Have the Old Wall Street follies of times past been faced up to following hours of soul-searching?  Or is Old Wall Street simply unwilling or unable to learn new tricks?


One trick that these Old Dogs love to perform is year-end S&P 500 targets and targets for U.S. GDP growth.  We wake up every morning trying to embody our vision of what Wall Street 2.0 is all about.  Taking pot shots at numbers (made up in the case of GDP) a year out is not what we do because it is not helpful for our clients, which is our number one priority.  We focus on shorter durations based on scenarios, probabilities and ranges.  In doing this, we offer our clients more than just a “target”; over time they develop an understanding of our process and incorporate it into their own.  So, before anyone else asks: we don’t do full year targets – let the Old Dogs perform Old Tricks. 


One of the classic Old Dogs doing the same Old Trick is Byron Wien of the Blackstone group with his 10 surprises.  The inception of 10 surprises for the New Year came nearly three decades ago.  Right on time, Bloomberg reported the 2012 predictions despite a less-than-stellar showing from Wien in his 2011 predictions (S&P 1500, Real GDP growth of 5%).  While we did not make similar predictions, we were early in stating our view that U.S. growth would slow in 2011 – at a time when consensus was calling for accelerating growth.


One of his 10 surprises of 2012 might not have made it to January 4th; “Spain/Ireland will strengthen finances in 2012.” Well unfortunately today the new Spanish government has warned the 2011 deficit could top 8% of gross domestic product, versus a target of 6%. In addition, Spanish Prime Minister Mariano Rajoy’s is considering applying for loans from the European Union’s rescue fund and the International Monetary Fund to finance the restructuring of the ailing banks. There are 361 more days to go, but that particular “surprise” is one that I think seems unlikely to win Wien any plaudits in a year’s time. 


What are the implications for GDP growth if Byron’s prediction that the “yield on the 10-year Treasury will go to 4%?”  Unfortunately, the Old Dogs of Washington continue performing their same old tricks coming into the New Year!  According to the U.S. Treasury, America ended 2011 with debt at an all time record $15.2T, with the implications being now the U.S. debt-to-GDP ratio is over 100%.  The USA cannot afford to pay a 4% yield; the implications to the debt and deficits are staggering not to mention it will stifle US GDP growth.  Furthermore, Wien’s prediction is based on China shifting investment from bonds into hard assets and raw materials.   Given that the country holds roughly $1.5 Trillion in American government debt, an investment so great that there is little else China can do but continue to support the value of Treasury bonds.


We like to say that Hedgeye is redefining how the investment community operates and we are defining Wall Street 2.0.  Thus, it is not surprising that we continue to get questions from clients asking us to conform to the old mentality of year end predictions.  Clearly, our goals are going to take time to achieve but we are heartened by the feedback we have received from our hard-won clients at this early stage.  In our view, any parties claiming to be able to accurately forecast, rather than guess, Real GDP growth a year out is not being entirely honest.  


Rather than waste people’s time with Old Tricks, we prefer to offer up themes quarterly that are relevant to the investing landscape that is in front of you.  Our 1Q12 MACRO Themes call will be held on January 13th, 2012.  We will be sending out details of the themes in due course, but avid readers of the Early Look will know our view on “King Dollar” and the implications for consumption in the USA.  Bernanke staying out of the way and allowing the Greenback to appreciate has boosted the U.S. Consumer and the Macro Team will be sharing its thoughts on this trend in 2012 a week from Friday.  Our immediate-term support and resistance ranges for Gold, Oil (brent), EUR/USD, Shanghai Composite, France’s CAC40, and the SP500 are now $1, $111.26-112.13, $1.29-1.31, 2157-2219, 3149-3276, and 1, respectively.


Function in Disaster; Finish in style



Howard Penney
Managing Director


OLD DOGS - Chart of the Day


OLD DOGS - Virtual Portfolio

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

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more

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