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Takeaway: Structural economic adjustment is a painful process.

Recent trends across China’s monthly economic indicators, including today’s June credit data, suggests a flat-to-slightly-down 2Q GDP print Sunday night. Consensus is at 7.5%, which has trended down from an estimate of 8.2% at the start of the 2nd quarter.


MARKET EYES CHINA GDP PRINT - Expectations Management


Another sharp immediate-term relief rally from oversold lows could occur Monday if the numbers are doctored up to come in ahead of bombed-out consensus expectations.


Looking out further, however, Finance Minster Lou Jiwei’s commentary yesterday afternoon all but confirms our TREND and TAIL duration expectations for the Chinese economy. The fact that the sell-side and Western financial media outlets are overly focused on the 2013 GDP growth target (is it 7% or 7.5%?) reminds us that consensus doesn’t understand the secular nature of China’s downshifting economy.


Like Lou Jiwei, we also want to emphasize that structural economic adjustment is a painful process.

Q3 2013 Macro Themes Conference Call

Q3 2013 Macro Themes Conference Call - 3Q13themesdialb


Hedgeye's Macro Team, led by CEO Keith McCullough and DOR Daryl Jones, is hosting its highly anticipated Quarterly Macro Themes conference call with a presentation and a live Q&A session for participants. The presentation highlights the THREE MOST IMPORTANT MACRO TRENDS that our team has identified for the quarter, analyzing potential impacts across multiple scenarios and identifying investment opportunities. The Q3 2013 Macro Themes Call will be held Monday, July 15th at 11:00am EDT.              




  1. #RatesRising: The 30Y bull cycle in bonds is over.  We'll discuss the cross-asset class implications of the reversal and how to be positioned for the ongoing deflation of Bernanke's last (and largest) bubble.  
  2. #DebtDeflation:With total outstanding debt equal to three times equity, we give caution to the impact of debt deflating and offer investment vehicles to play this theme.
  3. #AsianContagion: China sneezes and the rest of Asia catches the flu. #RisingRates and #StrongDollar continue to perpetuate #EmergingOutflows across the developing Asia region while a likely resurgence of positive sentiment surrounding the Abenomics agenda and continued yen weakness should help Japanese equities continue to outperform the region.  



  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 317583#
  • Materials: CLICK HERE (Slides will download one hour prior to the start of the call)



Please email if you have any questions. 



Morning Reads on Our Radar Screen

Takeaway: A quick look at some stories on Hedgeye's radar screen.

Keith McCullough – CEO

30yrs old, giving up $77M > NJ Devils star Kovalchuk announces retirement (via ESPN)

China Can Endure Growth Slowdown to 6.5%, Finance Chief Says (via Bloomberg)

Treasury Secretary says China to hand audit work to SEC (via Reuters)

Egypt prepares for rival Ramadan protests (via BBC)


Morning Reads on Our Radar Screen - asia


Daryl Jones – Macro

China GDP To Hit 6.7% (via Zero Hedge)

ETF Simplicity Betrayed by Volatility in Market Selloff (via Bloomberg)


Tom Tobin – Healthcare

Affordable Care Act insurance unaffordable for college students (via WorldMag.com)

The Affordable Care Act: The key to opening up ‘job lock’ (via The Bay State Banner)


Josh Steiner & Jonathan Casteleyn – Financials

JPMorgan Profit Rises 31% on Trading, Beats Estimates (via Bloomberg)


Matt Hedrick – Macro

European Parliament demands spending increase (via The Telegraph


Todd Jordan – Gaming

Cash declaration idea ‘not targeting’ gaming: Tam (via Macau Business Daily)

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Has the Fed lost its monetary mojo? Hedgeye Risk Management CEO Keith McCullough weighs in on myriad market signals and whether the Bernanke Fed's Monetary Viagra has finally lost its potency. 


Failure of Fed Viagra?

Client Talking Points


Is that all Bernanke’s got? The US Dollar Index holds immediate-term TRADE support of $82.52; Gold fails at my $1312 TRADE line in kind. The Fed Chief's Dollar Devaluation attempts are being met with less and less stamina. I can’t imagine why? The Fed’s Balance Sheet is only at $3.504 TRILLION right now (I guess the +11.4 BILLION it's up week-over-week just doesn’t cut it) Rate of change impotence.


Over in Asia, Chinese stocks, the KOSPI, etc didn’t care much for Bernanke’s monetary escapades. Shanghai and Hong Kong closed down -1.6% and -0.8%, respectively; that's despite the all-time highs in the SP500 and Russell. Don’t forget that every single major Asian Equity market remains bearish on our intermediate-term TREND duration (other than Japan). #GrowthSlowing


The weakest link stops going up first. With the exception of the FTSE and DAX right now (both are only up +1% above their TREND lines), all of Europe is bearish TREND as well. Italy is down small this morning, but notably down post the USA Viagra thing. And it's still down -1.5% year-to-date for the MIB index is the point. 

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.


Gaming, Leisure & Lodging sector head Todd Jordan says Melco International Entertainment stands to benefit from a major new European casino rollout.  An MPEL controlling entity, Melco International Development, is eyeing participation in a US$1 billion gaming project in Barcelona.  The new project, to be called “BCN World,” will start with a single resort with 1,100 hotel beds, a casino, and a theater.  Longer term, the objective is for BCN World to have six resorts.  The first property is scheduled to open for business in 2016. 


Health Care sector head Tom Tobin has identified a number of tailwinds in the near and longer term that act as tailwinds to the hospital industry, and HCA in particular. This includes: Utilization, Maternity Trends as well as Pent-Up Demand and Acuity. The demographic shift towards more health care – driven by a gradually improving economy, improving employment trends, and accelerating new household formation and births – is a meaningful Macro factor and likely to lead to improving revenue and volume trends moving forward.  Near-term market mayhem should not hamper this  trend, even if it means slightly higher borrowing costs for hospitals down the road. 

Three for the Road


TREASURIES: 2.53% 10yr - Bernanke, is that all you got? you need to snap 2.4% to get me to stop shorting bonds



"If the economy is so fragile that the government cannot allow failure, then we are indeed close to collapse."

-- Seth Klarman, Baupost


The Fed's balance sheet is now 25% of US GDP and the Fed is currently in possession of 30% of all 10-Year equivalents. (Zero Hedge)

investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.