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We are hosting a call today at 1pm ET, titled, “An Insider’s Look Into Pricing And The Restaurant Industry”.  Please find the materials, and the dialing instructions, for the call below.


Please CLICK HERE to access the slides for today’s call.


Participant Dialing Instructions:

  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 946362#


Howard Penney

Managing Director


Rory Green

Senior Analyst


TODAY’S S&P 500 SET-UP – February 20, 2013

As we look at today's setup for the S&P 500, the range is 15 points or 0.85% downside to 1518 and 0.13% upside to 1533.           














  • YIELD CURVE: 1.76 from 1.76
  • VIX  closed at 12.31 1 day percent change of -1.20%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, Feb 15. (prior -6.4%)
  • 7:45am: ICSC weekly sales
  • 8:30am: Housing Starts, Jan., est. 920k (prior 954k)
  • 8:30am: Housing Starts M/m, Jan, est. -3.6% (prior 12.1%)
  • 8:30am: Building Permits, Jan., est. 920k (prior 909k)
  • 8:30am: Building Permits M/m, Jan. est. 1.2% (prior 1%)
  • 8:30am: PPI, M/m, Jan., est. 0.4% (prior -0.2%)
  • 8:30am: PPI Ex Food/Energy M/m, est. 0.2% (prior 0.1%)
  • 8:55am: Johnson/Redbook weekly sales
  • 11am: Fed to purchase $2.75b-$3.5b notes in 2020-2023 sector
  • 11:30am: U.S. Treasury to sell 4W bills
  • 2pm: Fed releases minutes from Jan. 29-30 FOMC
  • 4:30pm: API weekly inventories


    • 9:30am: Commerce Dept, Intl Trade Admin. hold meeting of Renewable Energy and Energy Efficiency Advisory Cmte
    • 10:30am: FCC holds open meeting on reqs for signal boosters, boosting amt of unlicensed spectrum available for Wi-Fi
    • 11am: Sec. of State John Kerry’s first foreign policy address
    • 1:30pm: American College of Physicians webinar on state of health care


  • Home construction in U.S. probably cooled from 4yr high
  • BofA increases Moynihan’s compensation 71% to $12m in 2012
  • N.J. casino owner Revel to file for prepackaged bankruptcy
  • Japan trade deficit hits record as yen inflates imports
  • Bank of Korea’s Kim signals no rate cut needed now
  • Boeing averts immediate engineers’ strike as labor peace elusive
  • Malware attack on Apple said to come from eastern European gang
  • Dell sales exceed estimates on business demand ahead of buyout
  • Monsanto gets support from high court justices on seed patents
  • Heinz deal trading anomalies subject of FBI’s criminal probe
  • Apple victory in Google case to be reviewed by U.S trade agency
  • Wal-Mart sales slump may signal U.S. consumer spending to cool
  • Sony expected to unveil new PS4 at New York media event, 6pm


    • Dish Network (DISH) 6am, $0.51
    • EchoStar (SATS) 6am, $0.02
    • Six Flags Entertainment (SIX) 6am, $(0.58)
    • Cinemark Holdings (CNK) 6:36am, $0.39
    • Government Properties Income (GOV) 7am, $0.53
    • Lumber Liquidators Holdings (LL) 7am, $0.42
    • Dentsply International (XRAY) 7am, $0.55
    • DTE Energy (DTE) 7am, $0.86
    • MGM Resorts International (MGM) 7am, $(0.22)
    • Vantiv (VNTV) 7am, $0.34
    • Garmin (GRMN) 7am, $0.73
    • Lithia Motors (LAD) 7:30am, $0.66
    • Sonic Automotive (SAH) 7:30am, $0.51
    • Clean Harbors (CLH) 7:30am, $0.40
    • Devon Energy (DVN) 7:30am, $0.75
    • Owens Corning (OC) 7:30am, $0.16
    • Medicines Co (MDCO) 8am, $0.27
    • Iconix (ICON) 8am, $0.38
    • Ameren (AEE) 8am, $0.16
    • PVR Partners (PVR) 8:30am, $0.14
    • Eaton Vance (EV) 8:39am, $0.52
    • Acadia Healthcare (ACHC) 4pm, $0.19
    • Equity One (EQY) 4pm, $0.21
    • HomeAway (AWAY) 4pm, $0.13
    • Boston Beer (SAM) 4pm, $1.25
    • Walter Energy (WLT) 4pm, $(0.92)
    • Crocs (CROX) 4pm, $0.00
    • InterDigital (IDCC) 4:01pm, $0.06
    • Polypore International (PPO) 4:01pm, $0.52
    • Trinity Industries (TRN) 4:01pm, $0.84
    • Jack in the Box (JACK) 4:01pm, $0.39
    • Sunoco Logistics Partners (SXL) 4:01pm, $0.91
    • Williams Cos (WMB) 4:01pm, $0.25
    • Williams Partners (WPZ) 4:01pm, $0.48
    • MedAssets (MDAS) 4:04pm, $0.28
    • LaSalle Hotel Properties (LHO) 4:04pm, $0.45
    • Waste Connections (WCN) 4:04pm, $0.38
    • Clearwater Paper (CLW) 4:05pm, $0.75
    • Franklin Electric (FELE) 4:05pm, $0.54
    • acquarie Infrastructure (MIC) 4:05pm, $0.21
    • RealPage (RP) 4:05pm, $0.14
    • EXCO Resources (XCO) 4:05pm, $0.16
    • Fluor (FLR) 4:05pm, $0.97
    • Questar (STR) 4:05pm, $0.35
    • Synopsys (SNPS) 4:05pm, $0.55
    • Tesla Motors (TSLA) 4:06pm, $(0.57)
    • KBR (KBR) 4:09pm, $0.02
    • KAR Auction Services (KAR) 4:15pm, $0.19
    • STAG Industrial (STAG) 4:15pm, $0.30
    • Cheesecake Factory (CAKE) 4:15pm, $0.52
    • Concho Resources (CXO) 4:15pm, $1.00
    • Heico (HEI) 4:26pm, $0.40
    • Sauer-Danfoss (SHS) 4:30pm, NA
    • Yamana Gold (YRI CN) 4:30pm, C$0.26
    • Regency Energy Partners (RGP) 4:45pm, $0.07
    • Energy Transfer Equity (ETE) 4:45pm, $0.60
    • Energy Transfer Partners (ETP) 4:45pm, $0.40
    • Mullen Group Ltd (MTL CN) 5pm, C$0.38
    • Orient-Express Hotels (OEH) 5pm, $(0.03)
    • Healthcare Realty Trust (HR) 5:01pm, $0.32
    • SM Energy Co (SM) 5:30pm, $0.23
    • Helix Energy Solutions Group (HLX) 6pm, $0.36
    • Avista (AVA) 7:05pm, $0.45
    • Centerra Gold (CG CN) Post-Mkt, C$0.42
    • Curtiss-Wright (CW) Post-Mkt, $0.93
    • First Industrial Realty Trust (FR) Post-Mkt, $0.23
    • Healthcare Trust of America (HTA) Post-Mkt, $0.14
    • Hersha Hospitality Trust (HT) Post-Mkt, $0.10
    • Pan American Silver (PAA CN) Post-Mkt, $0.36
    • HudBay Minerals (HBM CN) Post-Mkt, C$0.03
    • Iamgold (IMG CN) Post-Mkt, C$0.25
    • Tronox Ltd (TROX) Post-Mkt, $(0.13)


  • World’s Biggest Wheat Buyer Steps Down From Egyptian Authority
  • No Women on Glencore’s Board Marks Mining Imbalance: Commodities
  • Copper Swings Between Gains and Declines as Inventories Expand
  • Gold Declines to Six-Month Low on Signs of Economic Improvement
  • WTI Crude Slips, Discount to Brent Narrows on Seaway Pipe Flows
  • Soybeans Reach One-Week High on Increasing Demand From China
  • Robusta Coffee Rebounds Amid Lack of Vietnam Sales; Sugar Falls
  • Egypt’s Wheat Tender Said to Get Offers From Only U.S. Supplies
  • BHP Names Mackenzie to Succeed Kloppers as Profit Declines
  • Harvesting Sewage Signaling Boon for Utilities to Skiers: Energy
  • U.S. to Ask China to Delay New Rules on Pork Imports, Group Says
  • Rebar Declines Amid Concern China May Curb Property Prices
  • Oil Inventories Climb for Fifth Week in Survey: Energy Markets
  • Copper Volatility Falls to 10-Year Low Amid ‘Super Cycle’ Debate


















The Hedgeye Macro Team






The Macau Metro Monitor, February 20, 2013




Macau casinos recorded a 3.9% drop in gross gaming revenue during the Lunar New Year holidays in comparison with the same festive period one year before, Lusa news agency reports.  Quoting unidentified sources in the gaming industry, Lusa reports that during the first seven days of the Year of the Snake (February 10 to February 16), Macau casinos recorded gross gaming revenue of MOP7.2 billion (US$900 million), down from the MOP7.5 billion recorded in the first seven days of the Year of the Dragon.


Gross gaming revenue dropped despite the city having recorded 937,000 visitor arrivals from February 9 to February 15 (including non-resident workers and students), marking a growth of 15.4% compared with last year’s holiday period, according to the Macau Government Tourist Office.  Among those, close to 630,000 visitors came from the mainland, marking an increase of 25.5%.



Manila-listed Manchester International Holdings Unlimited Corp is raising its capital stock to P5.9 billion (US$1.16 billion) from P900 million, with a unit of MPEL subscribing to 2.85 billion shares or 56.9% out of the total increase.  This is part of the move for Melco Crown to take control of the firm, as a vehicle for a backdoor listing in Manila and also as a vehicle for its planned investment in Belle Grande Manila Bay.

Manchester International Holdings has also announced it plans to further sell up to 1.2 billion shares.  The company will also be renamed Melco Crown (Philippines) Resorts Corp.  



Singapore's Changi airport passengers rose 1.9% YoY in January to 4,325,530.  The slower growth reflects the difficult comparisons from last year's Chinese New Year which occurred in January.



“We have shut the entertainment bar. We are investigating it and, so far, it looks like they have violated their operating regulations,” Chen Guangfa, the deputy director of the Sanya Culture and Sports Bureau, told Reuters.  “When we approved it, the regulations and the certificate said its operations would be entertainment in nature, but inside the bar there are some games, and they’ve gone beyond the scope of the regulations, so we closed it down,” the official said, without disclosing further details.  The local police are now conducting an investigation.


The casino bar had 50 gaming tables with minimum bets from RMB20 (MOP26) to RMB100,000.  The punters at the casino bar played with cash but could not win it back; they could only get points that could be used to pay for accommodation and luxury goods on sale at the resort.

real-time alerts

real edge in real-time

This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.

Don't Hurry Mistakes

“Let’s not make our mistakes in a hurry.”

-Dwight D. Eisenhower


The 34th President of the United States was a process guy. He was also a world class Risk Manager. Getting the US out of Korea, averting the French invitation to Vietnam (1953), and avoiding the ongoing threat of engaging China or Russia in nuclear war is his legacy now. If you are a Portfolio Manager in this game, your legacy is your track record – and it’ll be the mistakes you don’t make that matter most.


But what kind of team culture should you foster to ensure you aren’t missing something? Do you accept the blame for your team’s mistakes, or do you point fingers? Is there an open forum for people who report to you to disagree with your position? If they do so and have sloppy reasoning, do they expect to be taken to task in front of their peers in kind?


I’m an athlete who believes in transparency, accountability, and trust. I have biases. But they are based on experience. There are a lot of great players – and even more good teams. But only few Championship Teams can repeat. To do that, your players can’t be scared to make a mistake. At the same time, they have to be disciplined so that their mistakes don’t blow up everything the team has worked for.


Back to the Global Macro Grind


Particularly when a market is in a Bullish Formation (Bullish on all 3 of our core risk management durations: TRADE, TREND, and TAIL), not getting squeezed (on the short side) can save the team from having a lot of losses.


If you accept that bullish and bearish formations (Gold is in a Bearish Formation, so is the Japanese Yen) can get immediate-term TRADE overbought and oversold, at a bare minimum you won’t be making the same mistakes over and over again in a hurry. You’ll wait.


It’s taken me at least 13-15 years to learn this the hard way. Getting squeezed is part of a short seller’s life. And guess what, I still have to re-learn the same lesson, weekly. This game isn’t easy. That’s why I try my best to make decisions on the signal now, instead of the noise.


To simplify what I mean by making high-probability decisions:


  1. Don’t be in a hurry to sell something until you get an immediate-term TRADE overbought signal
  2. Don’t be in a hurry to buy something until you get an immediate-term TRADE oversold signal
  3. Don’t eat yellow snow


Or, as President Eisenhower used to tell his brother Milton, “Never get in a pissing match with the skunk.” (Ike’s Bluff, pg 57)


Yes, I am sure there are some really smart people out there who have found a way to not have to deal with process, real-time decision making , etc. But I can almost guarantee you that what they do ends up having a higher realized level of volatility than what we do.


To put some meat on this bone, here are some immediate-term TRADE overbought signals in our models this morning:


  1. SP500 is immediate-term TRADE overbought at 1533
  2. Russell2000 is immediate-term TRADE overbought at 934
  3. Consumer Staples Sector ETF is immediate-term TRADE overbought at $38.06
  4. Kimberly Clark (KMB) is immediate-term TRADE overbought at $92.31
  5. Fedex (FDX) is immediate-term TRADE overbought at $107.39


First, note that I have no immediate-term TRADE overbought signals to act on in any of our long Asian Equities positions. Singapore (EWS) has immediate-term upside, and so does China (which we bought via CAF on an immediate-term TRADE oversold signal yesterday).


Second, I am agnostic on the direction of the signal. It works the same way for both my longs and shorts. Yes, we like and are long of Fedex (FDX), but A) that’s not new (we bought it when we went bullish on US Equities in late November) and B) what is new is that it gave me its first immediate-term TRADE overbought signal in at least the last few weeks.


Third, using immediate-term TRADE overbought signals is another way to hedge market (beta) risk. So, I can be bullish on US Equities on my intermediate-term TREND duration and A) realize I might get an overbought signal in SPY this morning but B) not force myself to short something consensus like SPY, and stock and sector pick on a better signal instead (shorting XLP and KMB into yesterday’s close).


I am certain that there are better ways to do this – and I assure you that before I retire, I will find better ways. But for now, this is how my team rolls because this process is both repeatable and helping us not hurry mistakes.


Our immediate-term Risk Ranges for Gold, Oil (Brent), US Dollar, USD/YEN, UST 10yr Yield, and the SP500 are now $1 (Gold remains in a Bearish Formation but is immediate-term TRADE oversold), $116.51-118.71, $80.25-80.83, 92.63-94.49, 1.97-2.05% and 1, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Don't Hurry Mistakes - Chart of the Day


Don't Hurry Mistakes - Virtual Portfolio

Happy Veggies

This note was originally published at 8am on February 06, 2013 for Hedgeye subscribers.

“Should I be turned into a vegetable or a happy imbecile?”

-Nassim Taleb


That’s a quote from Chapter 3 of Taleb’s book, Antifragility, where he discusses everything from “Crimes Against Children” to the misguided interpretation of “equilibrium” by social scientists.


Clearly, Taleb doesn’t like social scientists. There’s a little bit more than a little anger in some of what he writes, but there’s also plenty of truth. Sometimes the truth makes some people angry.


Personally, I like socially oriented scientists. I just don’t want them running my money. For that, I don’t need a philosopher either. I need a real-time Risk Manager.


Back to the Global Macro Grind


The thing that non-market people generally don’t get about risk is that it works both ways. There is no such thing as risk “on” and “off” inasmuch as there is no Mr. Miyagi running the Bank of Japan (yet) either.


Risk is always on. It can squeeze you to the upside as fast as it can crash on you to the downside. There is no better example than that in the Land of The Rising Sun itself. Since Bernanke’s Top (September 2012) where he completed his US Dollar Debauchery, the Japanese Yen is down approximately -17%. Since US stocks stopped going down on #GrowthSlowing (mid November), the Nikkei is up +32.4%!


The Nikkei (for all the social scientists out there still trying to prove out their Ph.D in Keynesian Economics) isn’t something you can export. During today’s Currency War, it’s what squeezes (and pleases) politicians in the short-term (the stock market), while it impales their people’s purchasing power for the long-term.


Enough about that.


Why do I keep buying the damn dip?

  1. Fundamental Research: Macro Economic Data in Asia and in the USA continue to improve
  2. Quantitative Signals: my model continues to signal higher-lows of support and higher-highs of resistance

Why make it any more complicated than that?


I used to.


Then I started reading a lot of books and realized how much I do not know.


That’s why the best fundamental framework I can find right now is grounded in Chaos Theory. No, that doesn’t mean I am a philosopher. Neither does it mean I’m turning into a happy bullish imbecile. It simply means I fully Embrace Uncertainty.


What does the mean?

  1. I obey the signal, not the noise (Quantitative Signals)
  2. I then attempt to confirm or disprove the signal alongside my team (Fundamental Research)

I know, I keep saying the same thing, over and over and over again. I guess that might make me somewhat antifragile, for now. Then I’ll get clocked, and I will feel shame – then it will be time to evolve my process all over again.


As US and Asian Equity markets (our 2 largest allocations in the Hedgeye Asset Allocation Model) move back to immediate-term TRADE overbought, here are some mixed signals to consider amidst your daily noise from the #OldWall:

  1. SP500 immediate-term Risk Range remains tight and trade-able (for now) = 1502-1516
  2. US Equity Volatility remains bearish and breaking down relative to 5yr lows; TRADE support = 12.15
  3. US Equity Market Volumes are now trending bullish on up days and bullish (down volume) on down days
  4. US Dollar Index continues to make higher long-term lows, holding its TAIL of $78.11 support
  5. Chinese Equities (Shanghai Composite) are crashing to the upside into a Bullish Formation (2274 TAIL support)
  6. Both our Hong Kong (EWH) and Singapore (EWS) long ETF positions aren’t as overbought as the SPY at 1516
  7. Japan’s Nikkei flashed an immediate-term TRADE overbought signal overnight at the Yen signaled oversold
  8. KOSPI continued to diverge, like Brazil’s Bovespa has, breaking its TRADE and TREND lines of support
  9. EuroStoxx600 was down -0.5% last wk and is confirming an immediate-term TRADE breakdown again today
  10. France, Italy, and Spain have all seen their respective stock markets snap TRADE lines of support
  11. CRB Commodities Index failed, again, at its long-term TAIL risk line of 306 so far this week
  12. Gold continues to look like Treasury Bonds, awful relative to US and Asian stocks
  13. Oil remains the biggest NEW headwind to our Fundamental Research call on global #GrowthStabilizing
  14. US Treasury Yields (10yr) are now confirming a Bullish Formation (bullish TRADE, TREND, and TAIL)
  15. Yield Spread (10s minus 2s) is plenty wide at +174bps this morning; bullish for the Financials (XLF)

There is no “equilibrium” in a multi-factor, multi-duration, Global Macro risk management model. There is no happy place either. Like in any dynamic, non-linear ecosystem, what you want to embrace is the uncertainty of time and space.


So eat your veggies, buy red, sell green, and keep moving out there as risk factors do.


Our immediate-term Risk Ranges for Gold, Oil (Brent), US Dollar, EUR/USD, USD/YEN, UST 10yr Yield, and the SP500 are now $1651-1681, $114.96-117.41, $79.11-79.94, $1.34-1.36, 91.63-94.33, 1.91-2.10%, and 1502-1516, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Happy Veggies - Chart of the Day


Happy Veggies - Virtual Portfolio

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