Hedgeye 2012 Recommended Reading List

“No matter how busy you think you are, you must find time for reading, or surrender yourself to self-chosen ignorance.”



Please find attached Hedgeye’s reading list for 2012. There was no science in the construction of this list, we simply surveyed our colleagues at Hedgeye for their favorite reads in the last twelve months. We hope you will enjoy digging into these books as much as our team did.




Daryl G. Jones

Director of Research


“High Financier” by Niall Ferguson


Niall Ferguson's biography of Siegmund Warburg is a great read. Warburg was the architect of the post-WWII re-globalization of financial services after a period of profound retrenchment during and immediately following the war.  The context Ferguson provides around banking pre and post WWII seems invaluable given the parallels to the challenges facing Europe today.


“Sam Walton, Made in America: My Story” by Sam Walton and John Huey


This is the story of Sam Walton, who parlayed a single dime store in Newport, Arksas into Wal-Mart, now the largest retailer in the world. Part of the magic of Walton was that he never lost the common touch and developed one of the most loyal, and thrifty, employee bases in the history of commerce.


“Greater Than Yourself” by Steve Farber


In Greater Than Yourself Steve Farber proves them wrong: in this powerful and inspiring story, Farber shows that the goal of a genuine leader is to help others—teammates, employees, and colleagues—become more capable, confident, and accomplished than they are themselves. Through the actions of a forward-thinking and extraordinarily successful CEO, Farber reveals the three keys to achieving this: Expand Yourself, Give Yourself, and Replicate Yourself.


“Lean Thinking” by James P.  Womack and Daniel T. Jones


Expanded, updated, and more relevant than ever, this bestselling business classic by two internationally renowned management analysts describes a business system for the twenty-first century that supersedes the mass production system of Ford, the financial control system of Sloan, and the strategic system of Welch and GE. It is based on the Toyota (lean) model, which combines operational excellence with value-based strategies to produce steady growth through a wide range of economic conditions.


“The Information: A History, A Theory, A Flood" by James Gleick


Gleick starts off thinking about information as a concept, and how human society shifted as it developed the idea of information. He walks through fascinating history and anecdotes from the talking drums of Africa (for a while, the most sophisticated long-range communications system in existence) to the microprocessor, with a very approachable background on the study of Information Theory along the way.


“The Talent Code: Greatness Isn't Born. It's Grown. Here's How." by Daniel Coyle


What is the secret of talent? How do we unlock it? In this groundbreaking work, journalist and New York Times bestselling author Daniel Coyle provides parents, teachers, coaches, businesspeople, and everyone else with tools they can use to maximize potential in themselves and others.


"How to Stay Alive in the Woods: A Complete Guide to Food, Shelter, and Self-Preservation That Makes Starvation in the Wilderness Next to Impossible " by Bradford Angier


It was originally published in the mid 1950s when wilderness was really The Wilderness in much of the United States. The book describes practical solutions to survival in the woods. Not that I plan to be lost in the woods (although that happened recently on a hike in Vermont with my wife and kids) and driven to some of the techniques described by Angier, but it was fascinating to see the vast possibilities he presents for food, shelter, and navigation. It took a landscape which I thought I was intimately familiar with, and showed me how to look at things in a completely new way. This is a good exercise in any endeavor.


“Moby Dick” by Herman Melville


It's a classic for a reason.  It was my first read of Moby Dick which I chose to read in preparation for the lauded The Art of Fielding by Chad Harbach, which is based on Mellville's classic. Moby Dick offers a detailed account, often times cinematic, of a time and place of transition of the American Narrative.  Melville's personal crisis of faith comes through the layered tapestry he has woven here.  It has been particularly interesting and fun to analyze the text and many subtexts while also sifting through the ample literary criticism and essays available. 


“The Art of Fielding” by Chad Harbach


First, it's a novel, not a non-fiction book. That said, it uses sports - in this case, baseball - as a vehicle to talk about ambition, teammates, friends, and loyalty.  It's eminently readable if you like baseball.


“The Medici Effect” by Frans Johansson


Why do so many world-changing insights come from people with little or no related experience? Charles Darwin was a geologist when he proposed the theory of evolution. And it was an astronomer who finally explained what happened to the dinosaurs. Frans Johansson’s The Medici Effect shows how breakthrough ideas most often occur when we bring concepts from one field into a new, unfamiliar territory, and offers examples how we can turn the ideas we discover into path-breaking innovations.


"Don't Make Me Think: A Common Sense Approach to Web Usability, 2nd Edition" by Steve Krug


Five years and more than 100,000 copies after it was first published, it's hard to imagine anyone working in Web design who hasn't read Steve Krug's "instant classic" on Web usability, but people are still discovering it every day.  In this second edition, Steve adds three new chapters in the same style as the original: wry and entertaining, yet loaded with insights and practical advice for novice and veteran alike.  Don't be surprised if it completely changes the way you think about Web design.


"The Man in the Rockefeller Suit: The Astonishing Rise and Spectacular Fall of a Serial Imposter" by Mark Seal


The story of Clark Rockefeller is a stranger-than-fiction twist on the classic American success story of the self-made man because Clark Rockefeller was totally made up. The career con man who convincingly passed himself off as Rockefeller was born in a small village in Germany. At seventeen, obsessed with getting to America, he flew into the country on dubious student visa documents and his journey of deception began.


"December 1941: 31 Days That Changed America and Saved the World" by Craig Shirley


This book examines the critical days leading up to Pearl Harbor. Analyzes the Japan relationship, Japan's decision to attack and the warning signs we missed but also paints a picture of what it was like to live in the United States at that time.


"Winner-Take-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class " by Jacob Hacker and Paul Pierson


There's a reason this book is not on the Wall Street Journal's Christmas reading list. Hacker and Pierson reconstruct with chilling and profound detail the intertwining sequence of legislative and presidential actions and targeted neglect, starting in the 1970's and continuing to this day, that have actively redistributed the risk-reward in America's economic system. The book argues quite convincingly, backed by scholarship and meticulous documentation, that the widening inequality gap in our economy is the result of decades of deliberate policy decisions. If you didn't get why the folks in Guy Fawkes masks camped out at Zuccotti Park, you should read this book.

“Debt: The First 5,000 Years” by David Graeber


An internationally recognized academic who is also an avowed anarchist and card carrying member of the IWW, Graeber is the intellectual father of Occupy Wall Street and was instrumental in creating the first general assembly in August of this year. Debt traces the link between war, slavery, enforced prostitution, coinage and credit, and positively shreds the accepted basis of Smithian market theory that money and markets "evolved" to replace barter. The book is a fundamental challenge to all the mainstream pablum in favor of today's brand of free market capitalism, and is a real argument for the power of the written word to change society. If you read no other book this year, read this one.


"Unbroken: A World War II Story of Survival, Resilience, and Redemption" by Laura Hillenbrand


On a May afternoon in 1943, an Army Air Force bomber crashed into the Pacific Ocean and disappeared, leaving only a spray of debris and a slick of oil, gasoline, and blood. Then, on the ocean surface, a face appeared. It was that of a young lieutenant, the plane’s bombardier, who was struggling to a life raft and pulling himself aboard. So began one of the most extraordinary odysseys of the Second World War.


“The Gap in the Curtain” by John Buchan


In an experiment that allows for a glimpse into the future, a group of friends get a look at a newspaper one year from the current date. Two of the men read their own obituaries. The story chronicles how each spends his next year, trying to take advantage of, or change what they know of the future; such foresight turns out to be more of a curse than a blessing.


“Thinking, Fast and Slow” by Daniel Kahneman


This book gives a practitioner’s view of how both intuitive and deliberate thought impacts our daily lives as well as exploring and challenging the assumption of rationality in economics. Among the book's many pursuits is an intriguing look into loss aversion and the role it plays in our industry. This a terrific book that sheds new light on the way people think. It has dramatic implications not just for everyday decision making, but also how investors approach decisions about the markets.


“Inside the House of Money” by Steven Drobny


It's an interesting read for any of the young analyst-types who want to learn more about what actually happens on the buy-side. While admittedly macro-oriented, it does offer some perspective on how various buy-siders develop and execute on their own investment processes.


"A Whole New Mind: Why Right-Brainers Will Rule the Future" by Daniel H. Pink


Pink discusses the importance of right-brain thinking in society, providing thought-provoking examples of how left-brain thinking is becoming highly automated (outsourced) and how right-brain thinkers at least in highly developed countries like the U.S. will excel and be coveted by employers. Pink ties in examples of ways to better activate right-brain thinking in this fast pace, dynamic book. 


“Willpower, Rediscovering the Greatest Human Strength” by Roy F. Baumeister and John Tierney


Willpower, manifested in both the individual and the collective, has been credited with and blamed for some of the most important global events in history. Such a distinctive human trait deserves thorough investigation and, in my view, this book does it justice. Baumeister and Tierney explain the phenomenon of willpower through a scientific lens while also contextualizing shifting attitudes towards willpower between different eras and cultures. More narrowly, the authors offer a digestible and engaging tool for understanding a key facet of human behavior offering, at the same time, a compelling case for self-control over self-esteem as an avenue to success in all areas of life.


“Ghost Rider: Travels on the Healing Road” by Neil Peart


This is a story of a physical and philosophical journey - and ultimate rehabilitation -- after a tremendous personal tragedy. In less than a year, Neil Peart lost both his 19-year-old daughter, Selena, and his wife, Jackie. Faced with overwhelming sadness and isolated from the world in his home on the lake, Peart was left without direction. This memoir tells of the sense of loss and bewilderment that led him on a 55,000-mile journey by motorcycle across much of North America, down through Mexico to Belize, and back again.


“Death of Salesman” by Arthur Miller


Arthur Miller's 1949 Death of a Salesman has sold 11 million copies, and Willy Loman didn't make all those sales on a smile and a shoeshine. This play is the genuine article--it's got the goods on the human condition, all packed into a day in the life of one self-deluded, self-promoting, self-defeating soul. It's a sturdy bridge between kitchen-sink realism and spectral abstraction, the facts of particular hard times and universal themes.

SP500 Levels, Refreshed: Bite the Bullet

The Thunder Bay Bull, our CEO Keith McCullough, is on the road in New York meeting with subscribers and walking them through our Q1 2012 investment themes.  Accompanying him is our Asia Analyst, Darius Dale, more of a bear, at least in body type, given that he is a former Yale offensive lineman.  (Unfortunately for him, he is also a Seahawks fan.)  As it relates the stock markets, we are neither bearish nor bullish, but merely trying to play the game in front of us. 


So, what has lead to this bullish shift.


1. Employment is improving on the margin – The most recent data point supporting improving employment is the regional and state employment survey from the BLS, which was released earlier today.  In aggregate versus the September data, 37 states saw their unemployment rates decline and 10 states saw their unemployment rates stay flat.  The national rate is 8.5% and 0.9% less than December 2010.


2. Europe is stabilizing – The key risk to global markets and global economic growth in 2012 was Europe’s deteriorating sovereign debt situation.  Clearly, Europe is not out of the woods, but the credit and intra-bank markets are much less stressed in Europe than they were a month ago.  The data point we highlighted this morning on our morning call (ping if you don’t have dial in information) was that the most recent Spanish 3 to 6 month bill auction was completed at an average yield of 1.847%.  This was a dramatic improvement from the last auction on December 20th that was completed at a yield of 2.435%.


 3. Growth is bottoming – A key data point for us in this regard is the price of copper, which we consider a leading indicator for global growth.  The price of copper is up 10.90% YTD and now bullish TRADE and TREND in our models.  The most critical factor driving copper pricing has been the acceleration of copper imports to China, which hit a new monthly high in December (up more than 70% year-over-year).


Clearly, many risks remain, but as the other eponymous Ontario native titled one his songs, sometimes you just have to “bite the bullet” and play the game in front of you.


Our updated SP500 levels are in the chart below.



Daryl G. Jones


Director of Research



  SP500 Levels, Refreshed: Bite the Bullet - sp.01.24



The Street should've known about the ugly slot sales and share loss. After today, we'll get more positive as the Sell Side gets more negative.



As we telegraphed in our 12/02/11 post, “Replacement Reversal” and reiterated in our IGT earnings preview, industry replacement demand was likely down in CYQ4, compounded by IGT losing share.  That was certainly confirmed by IGT’s earnings release this morning. 


IGT’s quarter was pretty terrible and to be honest, we thought the stock would be down in the AM consistent with the 8% pre-market drop.  However, given the bright outlook for the rest of the year, investors seem to be taking the bad news as ‘old news’ and in stride.  In retrospect, IGT’s stock has massively underperformed the gaming sector since we put that post out – the worst performing stock in our universe – and experienced almost a 5% reversal late in the day yesterday.  Bad news leak out early.


While this quarter’s results were just plain bad, CY2012 is likely to be a strong year for the slot guys.  Unit shipments were pulled forward by IGT and WMS into CYQ3 so the CYQ4 slowdown is not indicative of a trend.  In fact, we think the catalysts are there for significant growth in slot trends in 2012:

  • The Big Four slot operators – BYD, CZR, MGM, and STN – are in much better shape financially
    • They’ve all refinanced recently
    • 2012 trends on the LV Strip and LV locals are looking much better than expectations so cash flows should be better (we still like BYD and MGM on the long side)
    • STN could go public
    • CZR likely to up their $50MM IPO since online poker, given the recent DoJ opinion and CZR’s ownership of the World Series of Poker brand
    • Remember that these are the largest slot operators and each has significantly under spent on slot CapEx for four straight years
  • 17 year current replacement cycle unsustainable from a physical perspective
  • Replacement demand growth has been positive for three quarters until Q4 (we’ve explained it) so the trend even outside the above factors has been positive
  • Significant new openings/expansion should make 2012 the first real growth year in slot sales in a couple of years

BYI’s stock has significantly outperformed IGT recently, and WMS still has a few more ugly quarters so IGT may be the best way to play improving 2012 trends over the near and intermediate term.  We’d like it cheaper – like $15, where it was trading pre-market – and maybe we’ll get a downgrade or two.



Q1 FY2012 Details:


The Bad

  • Product revenues and margins
    • We knew that replacements were going to have a 3’ handle but we hoped for high 3’s. I guess we confirmed what we already knew – IGT lost a lot of share.
    • IGT claims to have gotten 30% replacement share this quarter which would imply a replacement market of just 9.3k units and total NA shipments of 12.4k in the quarter.  That would suggest huge misses for all the manufacturers.  We’ll take the under on 30% and guess that IGT’s replacement share was somewhere between 20-25%.  We’re fairly confident that the NA shipments will be at least 14.5k this December and probably closer to 15.5k.  That said, we agree with IGT’s statement that their ship share will increase for the balance of the year…how can it get any worse?
    • IGT blamed low profit margins on product mix and lower conversion/parts revenue.  There is some operating leverage so fewer units do not help margins.  It’s no secret that IGT had been offering their customers various discount packages that included free upgrades and conversion kits over the last year or so. While some of that shows up as lower pricing/discounts in the quarter, as one of our clients pointed out, some of it shows up as forgone conversion kits/upgrade revenues in future quarters as clients exercise their free options rather than making new purchases.
  • Gaming operations revenues:
    • Gaming operations revenue was a little lower than we estimated due to lower yield per day but IGT also blamed product mix.  We expected a little more 'juice' from the install base growth, organic and acquired growth in interactive, and higher MegaJackpots yields. It appears that the YoY yield growth trends that we've seen over the last 3 quarters 'decelerated' this quarter.
  • SG&A was a lot higher than we expected – especially given the lack of top line production.  Some of that was blamed on the Entraction acquisition (which apparently didn’t bring much revenue).  However, the high SG&A was offset by lower R&D and D&A.  We’re not sure if that’s a good thing though.
  • Since IGT likes to point out cash flow metrics, here are a few of our observations:
    • On a 4% decline in revenues YoY, cash flow from operations declined 37% or $38MM\
    • Inventory build only accounted for $8MM of the decline
    • Cash flow before financing activities/buybacks/dividends declined 64% YoY 

The Better

  • ASPs were much higher both domestically and internationally.  It’s possible that discounting slowed this quarter in NA.  International price lift was attributed to a decrease of lower-priced shipments to Mexico.
  • Gaming operations margins were better than we expected.  Some of this is mix related but who really knows since the disclosure is terrible. 

Other stuff


We won’t harp on this point too much since IGT will be providing better disclosure next quarter, however, we must point out that average revenue per unit in gaming operations is becoming an irrelevant disclosure.  According to IGT, the numerator in this calculation includes a small but rapidly growing amount of revenues from the interactive division which have nothing do to with the install base.  The average revenue per unit that IGT provides for product sales is also a completely worthless metric since the numerator includes systems sales, parts, used units sales (including trade-ins) and systems revenue which also have nothing to do with the number of units sold in the quarter.  

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Comments from CEO Keith McCullough


Chasing fire engines in Europe is over. Back to capitalizing on a process that absorbs globally interconnected risk:


  1. JAPAN – been a while since Japan was #1 in my morning macro grind, but this country’s failed Keynesian Experiment doesn’t cease to exist – the Yen getting spanked this morning after the Japanese announced they’ll miss both their topline (growth) and bottom line (budget) goals, again. Don’t forget Japan has to roll over 31.2% of its sov debt in 2012. That’s a lot of yens (231T).
  2. GREECE – the Athex Index is down -2.6% to 724 after going parabolic to the upside for the YTD. What’s next? News-flow is setting this up for central planners to come say they saved the day again – we’re all saved if this thing just goes away – funny how the dudes in Davos said Greece was a “one-off” just about now at this time LY. Greece’s TREND line = 709 on the Athex, watching that.
  3. GOLD – both Gold and Silver backing off at their intermediate-term TREND lines of $1688 and $32.69 resistance this morning. We’re short Silver as of Friday’s rip and looking to get back on the short side of Gold (and Gold related stocks). The critical signal in our model is a breakout in 10yr UST yield > 2.03% (TREND line). Gold has to compete w/ absolute levels of “risk-free” yield.


SP500’s immediate-term range = 1. Managing gross and net exposure to Global Equities w/ that in mind.





THE HBM: MCD, EAT, CAKE - subsector fbr





MCD: McDonald’s reported 4Q11 EPS of $1.33 versus consensus of $1.29.  December comps came in strong, at +9.8%, +10.8%, and +6.5% for the U.S., Europe, and APMEA, respectively.






THE HBM: MCD, EAT, CAKE - mcd apmea dec





EAT: Brinker reported 2QFY12 EPS of $0.47 versus consensus $0.45.  Margins came in at +17.9% versus consensus +16.9%. Despite this beat, Chili’s comps came in lighter than we or the Street had expected and the stock is trading down on that data point.


Chili’s sales are losing momentum.  The $6 price point at lunch is no longer new news to most consumers.  We are on the conference call listening for any clues as to what could bring around a pickup in same-store sales trends.


THE HBM: MCD, EAT, CAKE - chili s pod1


THE HBM: MCD, EAT, CAKE - eat quadrant





CAKE:  The Cheesecake Factory traded down -2.1% on accelerating volume.  The company reports February 2010.



THE HBM: MCD, EAT, CAKE - stocks


Howard Penney

Managing Director


Rory Green




The Street should've known about the ugly slot sales and share loss. After today, we'll get more positive as the Sell Side gets more negative.


"We anticipate revenues and profit margins strengthening throughout the year and we remain on track to meet our fiscal year 2012 operating goals."

- Patti Hart, CEO of IGT




  • Continue to benefit from the improvements that they have made in their gaming operations business.  Continue to make placements in MegaJackpots and see higher yields.
  • Expect to gain momentum throughout the new year in NA sales due to more openings and a pickup in replacements
  • Inventory increase was due to a ramp up in production of new units in anticipation of new openings coming in the next few quarters
  • Anticipate coming back to their normal share buyback plan in the coming quarters
  • Double Down
    • Adds new distribution of their game content through Facebook
    • Will be in the gaming operations business with the rest of their interactive division
    • Will increase disclosure of interactive in the coming quarters
  • This quarter, they saw the largest sequential increase in their MegaJackpots install base in four years
    • Anticipate average revenue per day to increase for the remainder of 2012
  • Received sizable orders in Macau, Panama, and Argentina
  • Anticipate units and revenues to be up double digits for international for the rest of the year
  • Think that Cloud will be adding to their systems revenue early next year
  • Anticipating improving NA volume and pricing over the next few quarters.  Ship share is improving. 
  • While we are off to an "expected measured start," we remain on track for the year
  • Their reiterated guidance doesn't include any impact from the Double Down acquistion



  • Return of capital to shareholders?
    • Their plan is to buy back $100MM/year of stock.  They were restricted for most of the quarter due to the Double Down acquisition.
  • Gaming operations
    • Lower yields sequentially was driven by normal seasonality.  Expect a lift in the coming quarters with September being the strongest.
  • Expect that they will give more visibility of Double Down when they consolidate the business in April
  • Continue to have confidence that they will maintain and grow share over the coming quarters. They will grow with the market. 45-50% for new openings ship share (driven by their poker platform) and mid 30's for replacement share.
    • Part of the shortfall they saw in the quarter was the recognition of Cosmo last year
    • Last year they had 27% share of NA replacements and expect to be 30% this year
      • If that's true, then every supplier will miss the quarter because that would imply a very large YoY increase
  • They are comfortable based on their backlog and customer feedback that their for sale units will increase
  • Macau's sales were to LVS's Sands Cotai Central. All of the uptick in Asia Pacific was due to the order in Macau. Their market share is still low - sub 20%.
  • March replacement units will be 'headed North" from December - question of how far North and how fast
    • Expect a nice step up in the March quarter, then a steady increase in the June with the best quarter in September
  • Expect more convergence in technology in the gaming space. Their core business is being redefined as a result. Game content development is and will continue to be their core business.
  • They saw weakness generally in the NA replacement market in December
  • Margins in gaming operations
    • All about impact of interest rate on jackpot expenses
  • Assumptions for Double Down DCF approach
    • More aggressive discount rate but high growth rates
    • Paid a higher multiple too
    • Think that they got a good deal compared to the comps - aka Zygna
    • Transaction was evaluated assuming no I-poker in the US
  • R&D: they have been very focused on R&D efficiency
  • SG&A was up primarily due to purchase of the Entraction platform - although they lost a lot of revenue in jurisdictions that they didn't want to serve
  • R&D is flat at about $200MM and the split of it among their products is due to the needs of the businesses each quarter
  • Which new openings did they ship to this quarter?
    • Miami Jai Lai
    • Northern Edge Navajo casino in NM
    • Sands Cotai Central
    • Panama, Argentina, Uruguay
    • Small increase to Europe YoY
  • Gross Margin on product sales
    • Universal Slant has lower margins despite higher pricing because it's a new product for them
    • Lower parts and conversion sales which are higher margin
    • Last year IGT benefited from a significant sale into Mexico in a 90% margin range 
      • Sold low price depreciated units into that market
  • Think that they will come in below $200MM for R&D for the year. 



  • EPS outlook of $0.93 to $1.03 was reiterated
  • Gaming Operations revenues of $265MM, gross margin of 61% and 55.6k install base
    • Increase in install base due to Resorts World NYC units and international lease operations in Latin America (CAGE)
    • Revenue growth due to interactive, NA Megajackpots, and international lease operations
  • Product sales of $181MM and gross margin of 51%
    • Increase in NA ASP due to higher mix of Universal Slant and G23 MLD sales
    • International ASP increase due to lower mix of Mexican units and "due to the prior year's conversion of lower-priced Mexico lease units to for-sale units."
    • Lower gross profit "primarily due to lower North America machine, part, and conversion sales" and lower margins primarily from product mix
  • Higher SG&A due to Entraction acquisition
  • "During the first quarter, the company repurchased 0.3 million shares of common stock at an average price of $16.74 per share for a total cost of $4 million."



TODAY’S S&P 500 SET-UP – January 24, 2012

As we look at today’s set up for the S&P 500, the range is 22 points or -1.14% downside to 1301 and 0.53% upside to 1323. 











  • VOLUME: NYSE 722.90 (-22.04%)
  • VIX:  18.67 2.13% YTD PERFORMANCE: -20.21%
  • SPX PUT/CALL RATIO: 2.35 from 2.54 (-7.48)


  • TED SPREAD: 52.45
  • 3-MONTH T-BILL YIELD: 0.03%
  • 10-Year: 2.04 from 2.05
  • YIELD CURVE: 1.81 from 1.82

MACRO DATA POINTS (Bloomberg Estimates):

  • 9am: FOMC begins 2-day meeting on interest rates
  • 10:00am: Richmond Fed, Jan., est. 6 (prior 3)
  • 11:30am: U.S. to sell 4-week bills
  • 7:45am/8:55am: ICSC/Redbook weekly retail sales
  • 1:00pm: U.S. to sell $35b 2-yr notes


  • State of the Union speech
  • Romney attacked Newt Gingrich as an “influence peddler in Washington” and a failed leader whose party ousted him as U.S. House speaker in Florida debate
  • Mitt Romney paid effective tax rate of 13.9% on income of $21.6m in 2010, according to a tax return his campaign showed reporters last night and will release today
  • House, Senate in session:
    • 1:30pm: Republicans on House Oversight panel to question Consumer Financial Protection Bureau Director Richard Cordray
    • 10am: House Judiciary Committee marks up H.R. 1433, the “Private Property Rights Protection Act of 2011”
    • 10am: Congressional Services Caucus holds discussion on Census employment data, broken down by congressional district
    • 2:30pm: House-Senate Conference Committee meets on H.R.3630, the “Temporary Payroll Tax Cut Continuation Act of 2011”


  • President Obama to give 3rd State of the Union Speech, focusing on economic concerns
  • Oil traded near $100/barrel in New York on concern that Iran may respond to European crude-export embargo by disrupting shipping in Persian Gulf
  • FOMC begins two-day meeting
  • Apple reports earnings
  • William Ackman says he will shield his choice to run Canadian Pacific Railway against possible loss of benefits after the retired executive’s former employer suspended pension and other payments
  • Blackstone Group said to secure more than $6b of pledged capital for a new real estate fund that will buy mainly distressed-property assets
  • The Earth will be bombarded today by strongest solar radiation storm in six years, with limited potential to affect satellites and power grids
  • Oscar nominations to be announced ~8.30am


      • Ashland (ASH) 6am, $1.00
      • EI du Pont de Nemours & Co (DD) 6am, $0.33
      • Baker Hughes (BHI) 6am, $1.32
      • Air Products & Chemicals (APD) 6am, $1.36
      • Key (KEY) 6:20am, $0.21
      • Travelers Cos (TRV) 6:30am, $1.52
      • Quest Diagnostics (DGX) 6:45am, $1.06
      • EMC (EMC) 7am, $0.46
      • Coach (COH) 7am, $1.15
      • MGIC (MTG) 7am, $(0.89)
      • Regions Financial (RF) 7am, $0.06
      • Waters (WAT) 7am, $1.50
      • Harley-Davidson (HOG) 7am, $0.22
      • Kimberly-Clark (KMB) 7:30am, $1.30
      • Verizon Communications (VZ) 7:30am, $0.52
      • Johnson & Johnson (JNJ) 7:45am, $1.09
      • Brinker International (EAT) 7:45am, $0.45
      • McDonald’s (MCD) 7:58am, $1.30
      • Rayonier (RYN) 8am, $0.49
      • Peabody Energy (BTU) 8am, $1.30
      • Cooper Industries PLC (CBE) 8am, $0.95
      • AK Steel Holding (AKS) 8:30am, $(0.39)
      • Commerce Bancshares (CBSH) 9am, $0.70
      • RF Micro Devices (RFMD) 4pm, $0.03
      • Stryker (SYK) 4pm, $1.02
      • Total System Services (TSS) 4pm, $0.31
      • Norfolk Southern (NSC) 4:01pm, $1.40
      • Canadian National Railway Co (CNR CN) 4:01pm, $1.25
      • CA (CA) 4:02pm, $0.54
      • Fusion-io (FIO) 4:05pm, $0.04
      • Yahoo! (YHOO) 4:05pm, $0.24
      • Altera (ALTR) 4:15pm, $0.42
      • Advanced Micro Devices (AMD) 4:15pm, $0.16
      • International Game Technology (IGT) 4:15pm, $0.22
      • Apple (AAPL) 4:30pm, $10.12



GOLD – both Gold and Silver backing off at their intermediate-term TREND lines of $1688 and $32.69 resistance this morning. We’re short Silver as of Friday’s rip and looking to get back on the short side of Gold (and Gold related stocks). The critical signal in our model is a breakout in 10yr UST yield > 2.03% (TREND line). Gold has to compete w/ absolute levels of “risk-free” yield.

  • Record U.S. Beef Sales Seen as Japan Reviews Curbs: Commodities
  • Oil Fluctuates as Iran Responds to European Crude Import Embargo
  • Gold Declines as Rally to Six-Week High Spurs Investor Sales
  • Copper Declines as Prices Near Four-Month High Prompt Selling
  • Sugar Climbs a 13th Session as Mexico Output Falls; Cocoa Falls
  • Soybeans Decline as Biggest Gain in Two Weeks Prompts Selling
  • India Cuts Cotton Production Estimate as Disease Hurts Crop
  • Natural Gas Rises a Third Day on Chesapeake Plans to Cut Output
  • Oil-Embargo Rally Muted by Saudi Pledge, Libya: Energy Markets
  • JBS Sale Shows Rising Demand for High-Yield Debt: Brazil Credit
  • Sieminski to Leave Deutsche Bank to Head U.S. Energy Agency
  • Cabot Production Growth Seen Cut as Gas Hits 10-Year-Low: Energy
  • Detroit Aluminum Use Means New Muscle for Cars: Chart of the Day
  • COMMODITIES DAYBOOK: Record U.S. Beef Sales Seen on Japan Review
  • LME Copper Stockpiles at Two-Year Low Signal Falling Supplies
  • West Europe Aluminum Output May Fall 500,000 Tons, Goldman Says










GREECE – the Athex Index is down -2.6% to 724 after going parabolic to the upside for the YTD. What’s next? News-flow is setting this up for central planners to come say they saved the day again – we’re all saved if this thing just goes away – funny how the dudes in Davos said Greece was a “one-off” just about now at this time LY. Greece’s TREND line = 709 on the Athex, watching that.




JAPAN – been a while since Japan was #1 in our morning macro grind, but this country’s failed Keynesian Experiment doesn’t cease to exist – the Yen getting spanked this morning after the Japanese announced they’ll miss both their topline (growth) and bottom line (budget) goals, again. Don’t forget Japan has to roll over 31.2% of its sovereign debt in 2012. That’s a lot of yens (231T).










The Hedgeye Macro Team

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.43%
  • SHORT SIGNALS 78.35%