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Einhorn's Table

This note was originally published at 8am on May 09, 2013 for Hedgeye subscribers.

“Don't blindly follow me or anyone else into a stock.”

-David Einhorn


Yesterday was a great day for transparency in our profession. Some of the world’s best players stepped up to the podium at the Ira Sohn Foundation’s Conference in NYC and dealt the investing community their best card. Well, sort of.


First, there was Bloomberg Messaging, then there was AOL Instant Messenger, and now there’s Twitter. If you didn’t know that Twitter Is The New Tape, now you know. Watching the #Sohn2013 handle yesterday made you feel like you were right there at the poker table.


If you’ve played the game, you get it. If you haven’t, watching the game and all its subtleties helps. Were these guys throwing up aces, kings, or bluffs? What was already on the table before the game even started? These guys (yes, they were all guys) had to show something. Don’t underestimate the peer pressure to not look dumb. That’s the ante.


Back to the Global Macro Grind


I love this game, so watching the game within the game like that while the market’s macro clock is ticking is about as exciting as my day in this business can get. I know, nice life.


With the SP500 up for the 5th consecutive day, hitting another all-time (which is a long-time) record closing high of 1632 (+14.4% YTD), I was selling all day as I watched the #Sohn2013 ideas roll onto the new tape.


#TimeStamps: 3 days ago I had 18% Cash in the Hedgeye Asset Allocation Model – this morning I have 32%. In other words, from a gross exposure perspective, we are raising some cash now. In terms of a measurable hybrid net exposure, I’ve gone from 12 LONGS, 5 SHORTS (Monday) to 9 LONGS, 7 SHORTS @Hedgeye as of yesterday’s close.


But let’s get real here, who cares about my hand? I don’t run a real-fund anymore. I just run my mouth. So here’s my synthesis of what 5 players at the big boy table (Einhorn’s Table) were doing – what my team would act on, and why:


1.   Kyle Bass – pitched a small cap ($284M) stock (DXM) that had already moved (annoying). Then he told some great jokes about the Japanese as he re-hashed what we have been saying since September 2012 when we started shorting the Yen (see our #QuadrillYen Global Macro Theme, it’s hash tagged). The Yen is up this morning; JGBs doing nothing; no impact.


2.   Bill Ackman – put in the least impressive performance of the day re-pitching a very well known big cap stock (Procter & Gamble, PG) that hurt him in April (PG went straight down on its earnings report from $82 to $76). He reminded us that it’s a great company. Thanks. Stock acted like market beta on the day. No impact.


3.   Stan Druckenmiller – finally brought the thunder with the best macro presentation of the day (because his Global Macro call is the exact same as ours, of course). Long US Stocks. Short Commodities. And Short Ben Bernanke. Druckenmiller’s retirement account (his own money) is bigger than most funds, and he is clearly having a great year. Loves GOOG still – stock looks great.


4.   David Stemerman – did two things that we like: 1. Played a short idea (Short South African Retailers) and 2. Played a short idea that is not a consensus amongst hedge funds. If we’re right on #StrongDollar and Down Gold, short South African Equities scores very well. So did Stemerman in taking his first seat at the big boy table. #impact


5.   Jim Chanos – Doc brought the thunder for the hedge fund brothers and played the hand we all want to see – a full house idea that you can get big and liquid in (short legacy Personal Computers, Components, etc.). When Seagate (STX) opens this morning, you’ll see why Chanos remains The Man on well researched, high conviction, short selling.


Jacobson (Highfields) said he likes an idea we have been very vocal on (Kevin Kaiser’s Short/Sell call on Linn Energy – LINE, LINCO, BRY). Gundlach said short a stock that we’ll probably buy today if it hits our signal level (Chipotle, CMG – we made that short call last year, it’s stale) and Einhorn played a hand that everyone loves (a value stock that is starting to trade like a bull market momentum stock, in OIS).


All-in it was a great event for a great cause (pediatric cancer). Twitter didn’t sponsor the event, but the transparency/accountability pipe for #WallSt2.0 certainly helped bring the event’s profile to new heights (next to #Bengahzi, #Sohn2013 was the Top Trending Handle in the USA yesterday). That’s cool, and so is any opportunity the world has to eavesdrop on the table of some of the world’s best players.


Our immediate-term Risk Ranges for Gold, Oil (Brent), US Dollar, USD/YEN, UST 10yr Yield, VIX, and the SP500 are now $1441-1489, $99.39-106.19, $81.51-82.92, 97.89-99.94, 1.73-1.86%, 12.06-14.01, and 1605-1639, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Einhorn's Table - Chart of the Day


Einhorn's Table - Virtual Portfolio


The Macau Metro Monitor, May 23, 2013




Bob McBain, CFO of SJM, urged the government to require casino operators to provide a minimum number of low-bet live-dealer gaming tables.  McBain said most of Macau casinos today charge at least a HK$500 (US$64) minimum bet.  “If it were up to me, if I were advising the government, I would say ‘Why don’t you require some HK$50 tables?’ They want to build general tourism after all,” he stated.


He added that what was good for all operators’ profitability – high minimum wagers in the high-margin premium mass market – wasn’t necessarily good for Macau as a holiday destination.



MGM Cotai on track to be complete in mid-2016 said CEO Grant Bowie.  “We’ll have the foundations finished by the end of this year… and with the contractor now on board we can obviously start building the infrastructure in 2014," he added.

China State Construction International Holdings Ltd has signed a HK$10.5-billion (US$1.35-billion) deal to act as the main contractor for the project.  Bowie said there was no need to again revise the resort’s US$2.6-billion budget.


Macau visitor arrivals totaled 2,398,340 in April 2013, up slightly by 0.7% YoY.  In April 2013, visitors from Mainland China increased by 10.4% YoY to 1,536,262, mainly coming from Guangdong Province (647,340) and Fujian Province (65,463); Mainland visitors traveling under the Individual Visit Scheme (IVS) totaled 613,876.  Visitors from the Republic of Korea (30,616) and Thailand (27,173) increased by 8.9% and 20.0% YoY, while those from Hong Kong (538,663) and Taiwan (81,607) decreased by 17.7% and 4.8% YoY, respectively.


The average length of stay of visitors stood at 1.0 day in April 2013, down by 0.1 day YoY.





Singapore 1Q GDP rose an annualized 1.8% in the three months through March from the previous quarter, when it grew 3.3%, the Trade Ministry said in a statement today, revising an earlier estimate for a 1.4% contraction last quarter.  The median in a Bloomberg News survey was for a 1.2% decline.


On a YoY basis, GDP expanded 0.2%, better than the 0.6% contraction estimated previously.  The Trade Ministry reiterated its forecast for a 1-3% expansion in 2013.

Sovereign Yield Risk

This note was originally published May 14, 2013 at 07:38 in Early Look

“Risk happens fast, and slow.”



I’m always looking for someone more intelligent than me to preface the Early Look with a quote that encompasses what I am thinking that day. It’s called validation theory. Especially in our group-thinking profession, it’s usually easier to convince people a new idea is a good one if someone else came up with it.


I also enjoy making stuff up. Today’s quote is a play on the title of one of my favorite investing books of the last 5 years, Thinking, Fast and Slow, by Daniel Kahneman. What I liked most about Kahneman’s thought process (and it’s really embedded in the title of his book) is that it’s Duration Agnostic. In a world where everyone wants certainty about timing risks, I say you embrace uncertainty instead.


One framework to apply to a duration agnostic risk signaling process is Chaos Theory. Think multi-duration, multi-factor. “The interplay between random factors (at the bifurcation point) and deterministic factors (between bifurcations) not only guides the systems from their old states into new configurations, but also specifies which new configurations are realized.” (Cosmic Evolution, pg 54)


Back to the Global Macro Grind


So how do you know which factors are random and which ones are deterministic? Can a random factor start to become deterministic? Oh, and how the hell do we know when we are at the bifurcation point?


Welcome to my thick mind staring into at a massive correlation matrix… It can be boring as the day is long, but it sure beats trading on inside information. It’s only when something really new begins that I get really excited. Sometimes that happens fast – sometimes it’s slow.


Whether you are looking at a market system or a physical one in nature, patterns have a not so ironic way of re-appearing. “… biological systems do change in response to an unpredictable mixture of randomness…” too (Cosmic Evolution, pg 54).


We’re just trying to adapt as the market’s ecosystem is telling us to…


So why rant about this today instead of yesterday? Well, the answer is pretty simple – and it’s born out of everything I just wrote. Something just jumped off my page as new – JGB Yields.


JGB, yeah you know me – as in the most asymmetrically depressed live market quote in all of Global Macro – as in Japanese Government Bond Yields:

  1. 10yr JGB Yields +10bps day-over-day to 0.84%
  2. 10yr JGB Yields are now +23bps month-over-month
  3. 10yr JGB Yields just jumped above my long-term TAIL risk line of 0.82%

Oh yes, darkness my old friend, I have been waiting for you. But for how long will you stay? I have never shorted you before. Are you toying with my emotions this morning, or are you for real? If you are for real, what will central planners in Japan do to tone you down?


Consensus has spent most of the last 6 months looking for a crisis that never happened. If and when this one happens, it will matter. And the if part isn’t the question in my mind. It’s the when that really matters – when will Japanese and US Government Bond Yields stop baking in that they’ll never go up?


Now that the Greenspan/Bernanke Top 3 (major bubbles) have popped (Tech, Housing, and Commodities), this is really the last of the mega bubbles left – the Bubble in Super Sovereign Debt.


I don’t like shorting a bubble until that bubble starts:

  1. Making lower all-time highs
  2. Confirming those lower-highs at what I define as my bifurcation point (my TREND line)

In terms of signaling Sovereign Yield Risk, measuring and monitoring the bubble happens upside down. Which is kind of cool; especially versus the alternative (i.e. being levered long US and Japanese Sovereign Debt for May 2013 to date).


In terms of big bang risk, the 2 most important live quotes on my risk management screens next to the US Dollar Index are:

  1. US Treasury 10yr Yield of 1.82%
  2. Japanese 10yr Government Bond Yield of 0.82%

These are what I call my long-term TAIL risk lines. And they matter – big time; especially when A) they continue to confirm (becoming less random) and B) have causal research (deterministic) factors explaining their confirmations.


What’s causal in driving our call for a continued #StrongDollar and higher-lows in UST bond yields? That’s easy – employment, housing, and consumption #GrowthAcellerating as the Fed is forced to tone down bond purchases.


What’s causal in driving higher JGB Yields? That’s less easy – credit risk is as likely as a growth scare. Since one or the other can really get bond yields to move, which one will it be? The only thing we know is that there has never been a country with its debt and deficit positions (as a % of GDP) that has burned its currency and not ended up in crisis.


So we’ll see. These Japanese risks can happen fast, or slow. They may not happen at all. But, on my risk signaling scorecard, the improbable risk of rising Yield Risk in both US and Japanese Sovereign Debt just went up in the last 2 weeks, not down.


Our immediate-term Risk Ranges for Gold, Oil (Brent), US Dollar, USD/YEN, UST 10yr Yield, VIX, and the SP500 are now $1421-1459, $100.35-103.99, $82.63-83.56, 99.61-102.53, 1.82-1.96%, 11.74-14.24, and 1618-1650, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Sovereign Yield Risk - Chart of the Day


Sovereign Yield Risk - Virtual Portfolio

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TODAY’S S&P 500 SET-UP – May 23, 2013

As we look at today's setup for the S&P 500, the range is 37 points or 2.14% downside to 1620 and 0.10% upside to 1657.     










  • YIELD CURVE: 1.76 from 1.80
  • VIX closed at 13.82 1 day percent change of 3.37%

MACRO DATA POINTS (Bloomberg Estimates):

  • 6:05am: Fed’s Bullard speaks on monetary policy in London
  • 8:30am: Init Jobless Claims, May 18, est. 345k (prior 360k)
  • 8:30am: Continuing Claims, May 11, est 3m (prior 3.009m)
  • 8:58am: Markit US PMI Preliminary, May
  • 9am: House Price Index M/m, March, est. 0.8% (prior 0.7%)
  • 9am: House Price Purchase Index Q/q, 1Q (prior 1.4%)
  • 9:45am: Bloomberg Consumer Comfort, May 19 (prior -30.2)
  • 10am: New Home Sales, April, est. 425K (prior 417K)
  • 10am: New Home Sales M/m, April, est. 1.9% (prior 1.5%)
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas storage change
  • 11am: Fed to buy $3.0b-$3.75b notes in 2019-2020 sector
  • 11am: Kansas City Fed Manuf Act, May, est. -4 (prior -5)
  • 1pm: U.S. to sell 10Y TIPS (reopening)
  • 3:30pm: ECB’s Draghi speaks in London
  • 8pm: St. Louis Fed dialogue on household finl stability
  • 10:55pm: Bank of Japan’s Kuroda speaks at Nikkei Conf


    • 9am: House meets to consider H.R.1911, the “Smarter Solutions for Students Act”
    • 9:30am: House Fin. Svcs. panel hearing on regulatory burdens, focused on Data Collection Relief Act (H.R. 1135); Small Business Capital Access and Jobs Preservation Act (H.R. 1105); Audit Integrity and Job Protection Act (H.R. 1564); proposal to amend Section 913 of Dodd-Frank Act on fiduciary duty for broker-dealers
    • 9:30am: House Judiciary Cmte Chairman Bob Goodlatte, R-Va., Rep. Darrell Issa, R-Calif., introduce high-skilled immigration bill
    • 10am: Senate Foreign Relations Cmte hears from Treasury Undersec. for Intl Affairs Lael Brainard, others, on U.S.-EU Economic relations
    • 10am: Senate Energy and Natural Resources Cmte forum on best practices, environmental concerns in shale development; Noble Energy CEO Charles Davidson to speak
    • 11am: Senate Commerce Cmte hears from Commerce sec. nominee Penny Pritzker
    • 11am: API conf. call on gas prices ahead of Memorial Day, summer driving season
    • 1pm: NTIA holds mtg on privacy, mobile app. transparency
    • 1pm: NOAA issues Atlantic Hurricane Season Outlook
    • 1:30pm: President Obama speaks on al Qaeda, drones, Guantanamo
    • 1:30pm: NASA media event on private sector space exploration, w/ Bigelow Aerospace President Robert Bigelow


  • Sprint’s sweetened offer for Clearwire fails to sway opponents
  • China manufacturing unexpectedly shrinks in blow to growth
  • Lloyds said to plan $8.7b auction of U.S. mortgage bonds
  • Blackstone, Prologis said to buy warehouses for $960m
  • Euro-area services, output rises more than forecast
  • Ford will quit making cars in Australia after 91 years
  • Packer’s Crown said to sell Echo stake for A$264m
  • Qinetiq puts U.S. services unit under review on sales slump
  • Norton Gold may seize on gold’s slump to make acquisitions
  • Wall Street seeks to change Dodd-Frank through trade talks


    • Children’s Place Retail Stores (PLCE) 6am, $0.61
    • Hormel Foods (HRL) 6:30am, $0.49
    • Toronto-Dominion Bank(TD CN) 6:30am, C$1.91
    • Patterson (PDCO) 7am, $0.62
    • Buckle (BKE) 7am, $0.82
    • Alkermes (ALKS) 7am, $0.15
    • Signet Jewelers (SIG) 7:08am, $1.12
    • Apollo Investment (AINV) 7:30am, $0.22
    • Dollar Tree (DLTR) 7:35am, $0.57 - Preview
    • Ralph Lauren (RL) 8am, $1.29
    • Ship Finance International (SFL) 8:24am, $0.29
    • Advance Auto Parts (AAP) 8:30am, $1.62
    • Toro (TTC) 8:30am, $1.17
    • GameStop (GME) 8:30am, $0.40
    • Gap (GPS) 4pm, $0.69
    • Ross Stores (ROST) 4pm, $1.07
    • Aeropostale (ARO) 4:01pm, $(0.17)
    • Pandora Media (P) 4:02pm, $(0.10)
    • Marvell Technology (MRVL) 4:03pm, $0.14
    • Williams-Sonoma (WSM) 4:05pm, $0.37
    • Salesforce.com (CRM) 4:05pm, $0.11
    • Infoblox (BLOX) 4:05pm, $0.06
    • Mentor Graphics (MENT) 4:15pm, $0.05
    • Sears Holdings (SHLD) 4:15pm, $(0.59)
    • Nordson (NDSN) 4:30pm, $0.84


  • Commodities Drop on Double Blow of China Data, Bernanke Remarks
  • French Wheat Premium Seen Erased by Russia Rebound: Commodities
  • Soybeans Touch Six-Month High on Lack of Supply Before Harvest
  • Brent Declines to Three-Week Low as China Manufacturing Shrinks
  • Gold Gains on Demand for Protection as Stocks Drop on China PMI
  • Freeport Says Grasberg’s Copper Can Last Days Following Accident
  • Palm Oil Advances to Six-Week High as Production Seen Declining
  • Sugar Imports by India May Jump as Prices Plunge on Global Glut
  • China Rule Changes May Halt Copper-Financing Deals, Goldman Says
  • Rebar Drops After China’s Manufacturing Unexpectedly Contracts
  • Oil Revolt Generates $35 Billion as Icahn-Singer Agitate: Energy
  • Fuel Oil Viscosity Gap Widens; Gasoil Crack Falls: Oil Products
  • Mine Tragedy Jogs Memories of Supply Shortfall: Chart of the Day
  • Non-OPEC Output Cost May Drive Up Crude Prices, Bernstein Says






















The Hedgeye Macro Team











Trade of the Day: LEN

Takeaway: Keith sold shares of Lennar (LEN) this morning for a tidy +2.39% profit.

Keith sold shares in Lennar (LEN) at 9:47am today at $43.35. Miami-based Lennar is one of America’s largest new home builders.


Keith writes of his sale of LEN stock, “Backcheck. Forecheck. Paycheck. Continue to fade the bears on housing, trading the builders with a bullish bias. #HousingsHammer”


Keith now has three winning trades on the long side of LEN since March.


Trade of the Day: LEN - LEN

The Dollar Is En Fuego

Takeaway: It’s no secret that we like #StrongDollar. #StrongDollar equals Strong America.

This note was originally published May 17, 2013 at 14:17 in Macro

It’s no secret that we like #StrongDollar.  Historically, strong dollar periods have been characterized by lower commodity inflation, low energy prices, rising confidence and strong consumption growth. 


The Dollar is a causal factor in our model and our StrongDollar call over the last 5 months has backstopped our expectation for Gold and Commodity deflation and rising consumption as purchasing power benefits and discretionary share of wallet gets a boost. 


Year-to-date, we’ve seen the $USD march interminably higher alongside declining federal profligacy, improving domestic macro data, increasingly marginalized Fed policy, slower EM growth, emergent European dovishness and explicit Yen debauchery.  We expect the dollar to continue to benefit from a further perpetuation of these dynamics. 


Currently, the $USD remains in Bullish formation (Bullish TRADE/TREND/TAIL) and U.S. dollar correlations to the SPX (+) and Oil, Gold & Commodities (-) remain strong across durations.   


Now, we’re beginning to see confidence chase the dollar higher as consumer confidence measures begin a nascent break out of their 4 year slumber.   This morning’s University of Michigan Consumer confidence reading accelerated to 83.7 in May from April’s final reading of 76.4, posting it’s highest reading since July 2010.  


The acceleration in the Univ. of Michigan confidence reading agrees with recent breakout to new 5Y highs observed in the Bloomberg Consumer Comfort Index and the steady advance in the Conference Board’s measure of consumer confidence. 


Longer-term, outside of the last four years in which confidence readings essentially flat-lined, consumer confidence has been highly correlated with accelerating economic activity.  A sustained breakout in confidence alongside ongoing housing and labor market improvement represents a fertile factor cocktail capable of catalyzing positive economic reflexivity.    



#StrongDollar = Strong America.



Enjoy the weekend,

Hedgeye Macro


The Dollar Is En Fuego - U.S. Dollar


The Dollar Is En Fuego - Consumer Confidence vs DXY 051813


The Dollar Is En Fuego - Bloomberg Consumer Comfort 051713


The Dollar Is En Fuego - U.S. Dollar  Gas  GDP by Pres


Christian B. Drake

Senior Analyst 


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