What Have You Learned?

“Wealth actually springs from the expansion of information and learning.”

-George Gilder


And here we were all thinking that innovation, growth, and wealth depended on what the Fed says next. Silly boys and girls of Keynesian academic dogmas we are sometimes…


In Chapter 5 of Knowledge & Power (pg 38), George Gilder nails something my Canadian craw has had a hard time articulating to both my partisan Democrat and Republican friends:


Believing that a weaker dollar is just the thing to spur a sluggish economy… they miss the consequent devaluation of all the assets of the country… abashed by Ivy League expertise, the great peril of establishment Republicans from the time of both Bushes… all cherish the illusion that leading Yale, Harvard, and Princeton economists possess vital wisdom about the economy. They generally don’t. Their preoccupation with static macroeconomic data blinds them to the actual life and dynamics of entrepreneurship.


Back to the Global Macro Grind


To learn (from new information channels) or not to learn, remains the question. Those of us building businesses on the back of our own risk capital actually have no other choice. It’s all about learning.


How quickly can we learn from our mistakes, biases, and dogmas? How flexible are we in implementing the constant change that we need in order to be successful? How readily do we dismiss perceived wisdoms for our visions of that change?


Sounds like the process of economic maestros in the Republican and Democrat parties, no? How about the “economists” of the #OldWall who Bush and Obama lovers cite as having “blue chip estimates” on the economy, markets, and #EOW (end of the world) risks?


On January 1st, 2013 here were #OldWall’s year-end (2013) forecasts for the SP500 and US GDP:

  1. Goldman (David Kostin): SPX 1575 on GDP of 1.9%
  2. Morgan Stanley (Adam Parker): SPX 1434 on GDP of 1.4%
  3. JP Morgan (Tom Lee): SPX 1580 on GDP of 1.8%

Now, to be fair, most buy-siders who get it would call Parker a perma-bear and Lee a perma-bull, so to see their views diverge is no surprise. What was surprising to me was that the most bullish guy on #OldWall (Tom Lee) wasn’t in the area code of what we call Bullish Enough.


Fast forward to this past weekend’s Barron’s forecasts (don’t laugh), here are the “revised” #OldWall forecasts:

  1. Goldman (Kostin): SPX 1750 on GDP of 2.2%
  2. Morgan Stanley (Parker): SPX 1600 on GDP of no one is sure
  3. JP Morgan (Lee): SPX 1775 on GDP of 2.5%



All these Keynesian “certainty” models do is anchor on the most recent SPX high and GDP report. Christie and Clinton better sign all these dudes up to advise them alongside Larry Summers (whose economic forecasting track record rivals Parker’s).


Stop it. I’m not trying to be mean. I’m an ex-athlete who is humbly trying to be one of your coaches. I’m just a little voice of annoyance in your ear so that you don’t get run over (I’ve never had a great coach who didn’t make me want to punch him every once in a while, fyi).


As a country (and a profession), after the mother of all global economics crises, what have we learned? Mr. Market helps us all learn in a hurry. Here are the main lessons of 2013:

  1. Be long growth (US growth stocks)
  2. Be short slow-growth (Gold, Bonds, MLPs, etc)

And that makes sense because, as the score board shows, even the most bullish of perma bulls weren’t Bullish Enough on US GDP Growth at the beginning of the year. Bears have been fighting the #GrowthAccelerating data since December. The best growth data of the 2013 (JUL-AUG) has coincided with the highest 10yr bond yields. That’s not Mucker’s genius. That’s just called an economic cycle.


Now you might say that the sell-side is “too bullish” because:

  1. The average SPX “target” has gone from 1531 to 1708
  2. The average GDP “target” has gone from 1.8% to 2.3%

But, if you are me, you’re saying who cares?


The consensus “forecast” by the sell-side only matters when it’s way outside of what your process says could happen. That’s already happened this year. Old News. The new news is that #OldWall’s latest forecast isn’t a forecast – it’s literally the last report:

  1. SPX closing high for the YTD = 1709
  2. US GDP Growth for Q213 = 2.4%



At the same time:

  1. VIX just failed @Hedgeye TREND resistance of 18.98 (again) = down -11% for SEP to-date
  2. II Bull/Bear Survey just clocked the lowest reading of “Bulls” since November 2012 at 37.1%

And that’s all I have to say about that.


Our immediate-term Risk Ranges are now (you can get all 12 Big Macro ranges in our new Daily Trading Range product):


UST 10yr Yield 2.74-2.94%


Nikkei 139

VIX 14.96-17.81

USD 81.81-82.67

Yen 98.49-100.12


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


What Have You Learned? - Chart of the Day

What Have You Learned? - Virtual Portfolio


After a long steep climb, the MPEL engine may be slowing down.



We're still positive on Macau so it’s difficult to be negative on MPEL.  However, MPEL’s recent share losses in the Junket segment are a little disconcerting and could continue.  Moreover, MPEL’s Mass share could be at risk as Sands Cotai Central begins its push into Premium Mass next year.  So while not negative, it’s probably safe to say we've pushed MPEL to the bottom half of attractive Macau operators, behind LVS, MGM, and Galaxy.


As seen in the following chart, MPEL’s 3 month average Rolling Chip share has fallen almost 200bps from its May high.  We do think it is possible that some of the drop could be conversion of Junket players to Direct VIP and Premium Mass.  Indeed, MPEL’s Mass share has held up well and VIP Revenue share (which includes Direct Play) has dropped 160bps - less than its Junket volume decline.  




However, our research indicates that competitive forces are probably playing a bigger role.  From the next chart, it appears that Galaxy, SJM and Wynn have gained the most share since May.  Galaxy recently moved 12 Junket tables from the Grand Waldo to the much more alluring Galaxy Macau.  We’re pretty sure Galaxy was able to attract at least one new junket.  Galaxy may also be offering a more attractive junket credit package.  We know SJM added a few new junkets this year as did Wynn.




In the future, LVS could be the market share gainer MPEL should fear, not only in Premium Mass but also in VIP.  With conservative COO David Sisk out of the picture, look for more aggression on the Junket side in terms of credit and commission advancement packages.  We already know that Sands Cotai Central will be opening new Premium Mass facilities which should grow the market but also take share from the Cotai Premium Mass leader, MPEL’s City of Dreams.


If Macau keeps growing in the mid to high teens rate, all the Macau stocks should do well.  Our view is that after a long and strong run, a few fundamental risks could derail MPEL’s momentum.  Other Macau stocks such as LVS look more protected, and thus attractive, at this point.


TODAY’S S&P 500 SET-UP – September 5, 2013

As we look at today's setup for the S&P 500, the range is 25 points or 0.61% downside to 1643 and 0.90% upside to 1668.                  










  • YIELD CURVE: 2.45 from 2.43
  • VIX  closed at 15.88 1 day percent change of -4.39%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: Bank of England seen maintaining bank rate of 0.5%
  • 7:30am: Challenger Job Cuts Y/y, Aug. (prior 2.3%)
  • 7:30am: RBC Consumer Outlook Index, Sept. (prior 49.4)
  • 7:45am: ECB seen maintaining benchmark rates at 0.5%
  • 8:15am: ADP Employment Change, Aug., est. 180k (prior 200k)
  • 8:30am: ECB’s Draghi holds news conference
  • 8:30am: Nonfarm Productivity, 2Q final, est. 1.6% (pr 0.9%)
  • 8:30am: Init Jobless Claims, Aug. 31, est. 330k (pr 331k)
  • 9am: Fed’s Kocherlakota speaks in La Crosse, Wis.
  • 9:45am: Bloomberg Consumer Comfort, Sept. 1
  • 10am: Factory Orders, July, est. -3.4% (prior 1.5%)
  • 10am: ISM Non-Manufacturing, Aug., est. 55 (prior 56)
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas storage change
  • 11am: DoE energy inventories
  • 11am: U.S. to announce plans for sale of 3Y notes, 10Y notes, 30Y bonds
  • 1:30pm: Fed’s Fisher speaks in economy in Dallas


    • G-20 Leaders Summit begins in St. Petersburg, Russia
    • 2pm: Members of Congress receive classfied briefing on Syria


  • Microsoft wins jury trial over Google patent licensing tactics
  • Aug. U.S. Retail Sales Seen Hurt by Delayed School Shopping
  • SKF to buy Kaydon for $1.25b to expand U.S. business
  • sells rest of its Facebook stake for $525m
  • Sprint raises $6.5b in biggest junk sale since 2008
  • Otsuka Holdings offers to buy Astex for up to $886m
  • Fed’s Kocherlakota says U.S. economy needs more accommodation
  • LinkedIn boosts offering to $1.2b after share rally
  • Liberty Media’s Malone said to plan for succession: NY Post
  • G-20 draft calls for more job training, infrastructure spending
  • Dominion bids $1.6m for offshore Virginia wind project
  • Nasdaq, SIP outline proposed actions after Aug. 22 glitch
  • Kuroda says Japan can roll out stimulus if needed after tax rise
  • Samsung $299 Galaxy Gear tests consumer smartwatch demand
  • Focus Media owners seek up to $500m dividend recap: Reuters


    • Conn’s (CONN) 7am, $0.60
    • Cooper Cos (COO) 4:01pm, $1.72
    • Finisar (FNSR) 4pm, $0.31
    • Infoblox (BLOX) 4:05pm, $0.09
    • Jos A Bank Clothiers (JOSB) 6am, $0.52
    • Quiksilver (ZQK) 4pm, $0.04
    • Smith & Wesson (SWHC) 4:05pm, $0.36
    • VeriFone Systems (PAY) 4:01pm, $0.20


  • WTI Rises From One-Week Low as Senate Panel Backs Syria Strike
  • Steel Rallying With Chinese Builders Beating Mills: Commodities
  • Tin Heads for Four-Month High on Concern About Limited Supply
  • Sugar Surplus Shrinks on Quickening Demand in China to Indonesia
  • Rubber Advances on Thai Farmer Protests, U.S. Car Sales Gains
  • Rebar Futures Drop to Lowest in a Month as Premium Lures Sellers
  • Palm Oil Climbs as Crude-Price Gain Increases Appeal of Biofuel
  • Gold Rises as Investors Seek Haven Amid Syrian Strike Debate
  • Gold Imports to China From Hong Kong Climb on Physical Demand
  • Libya Propels Sweet African Oil Toward 2011 High: Energy Markets
  • Oil Puts at 18-Month Low as U.S. Prepares Syria Strike: Options
  • Iron Ore Supply of Up to 830 Million Tons May Be Added by 2020
  • Asia Fuel Oil Viscosity Spread at Two-Month High: Oil Products
  • World Food Prices Fell Fourth Month in August on Cheaper Grains


























The Hedgeye Macro Team













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Stick It to Putin: Here’s How

Takeaway: The best way for Obama to pulverize Putin in St. Petersburg would be to stick a weapon of “Mass Currency Appreciation” in his grill.

In case you missed it, House Speaker John Boehner’s intraday comments yesterday mattered to the market. A lot. His (highly questionable) decision to support a strike on Syria spooked investors and sent what was a promising stock rally into the tank.


Why? Two words: Oil prices.


Stick It to Putin: Here’s How - oil99


Boehner stoked the flames of fear to the number one economic risk we currently face here in the United States. It’s called an Oil Tax at the pump. In other words, Boehner painted a bull’s-eye on what has been strong, recent US consumption growth.


The fact is that weakness in the greenback pushes prices for oil and other dollar-denominated commodities higher. All of this uncertainty over Syria has driven oil prices to fresh highs in recent weeks. Over the past month alone, the price of Brent crude oil has risen five dollars to $115 a barrel. Boehner basically poured a barrel of gas on the flames.


Bad for growth. Bad for consumers. Bad for America.


And guess what? Vladimir Putin likes it.


Now, I don’t know about you, but I’ve about had it with Putin.


Here’s a novel thought: The best way for President Obama to pulverize Mr. Putin in St. Petersburg this week would be to stick a weapon of “Mass Currency Appreciation” in his grill. You want to get Mr. Putin’s attention?  Obama should channel Clint Eastwood and make Putin eat a strong U.S. Dollar. Shove it down his throat.


Stick It to Putin: Here’s How - poot88


Look, if I was advising the President, I would have him hide a #StrongDollar ace up his sleeve at the G-20 poker table – and maybe say something like this:


“Hey Vlad. We’ve had it with you. We’ve had it with your bluster. So, let me tell you what I’m going to do if you don’t tone it down. First, I am going to taper. Big-time. Then I’m going to tighten. And if you don’t think I can get Larry Summers to do it, you just go ahead and try me. Your little Petro-Dollar power problem will look like Fukushima. Fast.”


But that’s just me – I’m a doer type of a guy. I like to make decisions without asking the weak-kneed  bureaucracy of the world for its opinion. And I sure as hell don’t like to watch second-rate dictators shove it in America’s face. We are better than that. Bullies like Putin need to be broken.


Stick It to Putin: Here’s How - strongdollar


It’s time. We desperately need a US President to get solidly behind and build a #StrongDollar. Not just with words, we’ve had enough of that over the years. I’m talking action. Big action. Bold action. Strong America revolution on the back of your hard earned currency.

McCullough's Morning Macro Note

Takeaway: There’s a big difference between consensus being bearish and Mr. Market’s bullish opinion.

(Editor's note: What follows below is a complimentary excerpt from Hedgeye CEO Keith McCullough's "Morning Newsletter." If you would like more information on how you can start receiving these newsletters delivered to your inbox before 9:00am every weekday morning, click here. It's the best $29.95 you'll ever spend.)


McCullough's Morning Macro Note - bu1


After another shatteringly strong string of US economic data points (starting last Thursday with US roiling jobless claims hitting another YTD low and culminating with a blockbuster New Orders component of yesterday’s ISM report for August), yesterday’s US stock market ripped a +1% morning move to the upside and Treasury bonds continued to collapse.


Up for the 4th consecutive week, another #StrongDollar move was nipping on the heels of #RatesRising too. Consensus isn’t positioned for that, so I loved it. Then, all of a sudden, the most bearish catalyst of all hit the tape – a US politician’s opinion.


In the last year, there have been very few market risks that have scared me more than US central planners intervening during critical periods of market entropy. Going back to November of 2012 (when bond yields bottomed), Boehner’s voice was as market bearish as any you could find. He was the bearish factor yesterday too – the whole thing is just plain sad to watch.


Back to the economic gravity part…

  1. New Orders (in the ISM report for August) hit a monster shot of 63.2! yesterday (vs 58.3 in July)
  2. Go back to 2003 (see Chart or The Day) and look at how quickly economic gravity shocked growth bears to the upside
  3. Not unlike 2000-2002, consensus has become shatteringly bearish about growth; it’s a lagging indicator

To be clear, there’s a big difference between consensus being bearish and Mr. Market’s bullish opinion. While yesterday’s intraday gains in the SP500 were cut in half, the decliners were led by the slow-growth sectors (gainers were once again all about growth):

  1. Slow-Growth Utilities (XLU) got smoked again (after being down -5% for AUG), leading losers on the day at -1.2%
  2. Dividend Yield Chasing Consumer Staples (XLP) were down -0.1% in an up market as well (XLP -4.5% in AUG)
  3. Nasdaq (QQQ) +0.63% and Financials (XLF) +0.9% led gainers, as they have throughout 2013

In other words, if you are bummed out about Kimberly Clark (KMB) or Kinder Morgan (KMP) not getting you paid on the principal appreciation side of the equation, that’s just too bad. This Bernanke Yield Chaser style factor was as much a bubble as Gold was.


#RatesRising for the right reasons (growth expectations rising), is public enemy #1 for overvalued, slow-growth, securities. Whether it feels right or not, money chases positive returns. It flows away from draw-down risks.


Since I’m already out of everything Commodities, Fixed Income, and Emerging Markets (0% asset allocations), I have had relatively low stress on the draw-down risk side of big macro asset class moves in 2013 (Gold bounced, but is still -17% YTD and bonds are getting smoked), but that doesn’t mean I can afford to give up a lead for the sake of being beholden to this great growth data.


There are 3 big Macro things that would get me out of being long growth equities:

  1. If #StrongDollar snaps its long-term TAIL risk line of $79.11
  2. If #RatesRising stops and the 10 yr UST Yield breaks 2.44% @Hedgeye TREND support
  3. If #GrowthAccelerating Style Factors (like Nasdaq diverging from the Dow) reverse and break TREND

Johnny one-time Boehner’s intraday comments mattered because they kept the #1 risk to what’s been strong US consumption growth in play. It’s called an Oil tax at the pump. And Putin likes it.


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Conference Call Invite: Are Energy Drinks Harmful? A Debate with Dr. Deborah Kennedy

Conference Call Invite: Are Energy Drinks Harmful? A Debate with Dr. Deborah Kennedy -


On Wednesday, September 11th at 11:00am EDT, we will be hosting an expert conference call titled "Are Energy Drinks Harmful?  A Debate with Dr. Deborah Kennedy".  


On the call we will host a lively debate with Dr. Deborah Kennedy about energy drinks and what may be looming for energy drink producers in the future.  A live Q&A session will be held directly after the call for all listeners. 




  • What's the science behind caffeine consumption?
  • Where does the medical community stand on energy drinks and caffeine in foods?
  • What legal action has been taken against energy drink makers?
  • How have energy drinks been regulated and what could the future hold?




Dr. "Deb" is the founder of Build Healthy Kids and has been at the forefront of nutritional studies and consumer awareness for almost two decades. Her experience ranges from pediatric nutrition and nutritional oncology to product development and kids' education programs.


Dr. Deb made national headlines from a March 2013 Build Healthy Kids newsletter in which she warned her subscribers that energy drinks can be dangerous, and told kids to "Never drink energy drinks: They can harm you" (alongside a cartoon skull 'n" crossbones and a generic energy drink can). Monster (MNST) took issue with Dr. Deb's language, and demanded that she retract the "defamatory statements" and correct them or else Monster would draw a legal suit. Following the action, she gained the support of Senator Richard Blumenthal (alongside Senator Richard Durbin and Congressman Edward Markey), who addressed Monster CEO Rodney Sacks in a letter stating that it's unclear why Monster would single out Build Healthy Kids since the company was never named and considering that Monster does not target the Build Healthy Kids demographic. To date, there is no formal legal suit against Dr. Deb or Build Healthy Kids.    


Dr. Deb has worked at Yale, Columbia, Tufts and Cornell University. She is a coauthor of Beat Sugar Addiction Now! for Kids and author of Nutrition Bites. She is currently working on her third book which deals with children's eating personalities. 





Please email if you would like some more information.

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