Companhia de Fomento Predial e Desenvolvimento Kong Sing Ltda won permission to build developer Chan Chor Tung’s 12-storey block of flats at the foot of Mong Ha Hill.  The premium for the 896-square-metre site is MOP23 million (US$2.9 million) with annual rent is MOP2,215.


Oil Likes Putin

Client Talking Points


Yes - oil prices like Putin. Brent Oil broke its immediate-term momentum line of $115.11 last week. But it held our TREND support line and bounced right where it should have. Higher oil prices remain the biggest risk to global consumption growth. There’s only one real way for President Obama to fight Vladimir Putin on this – weapons of mass US currency appreciation. #StrongDollar


It's right back into crash mode for Gold and Silver this morning (Gold is down -20% year-to-date) after Gold saw its highest net long position since January. Remember, these are commodities – people chase price. The TREND resistance is firmly intact up at $1485/oz; TRADE resistance now $1389.


This is the first morning in weeks where Treasuries, Bunds, Gilts, and JGBs all have a bid (at the same time). They havve been getting absolutely killed, so this bounce was inevitable. But it is something to watch as US, German, British, and Japanese stocks all signal immediate-term TRADE overbought within my risk range model.

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.


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.


Financials sector senior analyst Jonathan Casteleyn continues to carry T. Rowe Price as his highest-conviction long call, based on the long-range reallocation out of bonds with investors continuing to move into stocks.  T Rowe is one of the fastest growing equity asset managers and has consistently had the best performing stock funds over the past ten years.

Three for the Road


If there is a sector more universally loved... with more groupthink than MLPs, let me know. I don't think there is. @HedgeyeENERGY


“I would rather be vaguely right than precisely wrong.”

- Keynes


The number of new applications for U.S. jobless benefits fell below 300,000 for the first time since 2006.

Sin's Knowledge

This note was originally published at 8am on August 29, 2013 for Hedgeye subscribers.

“The physicists have known sin; and this is a knowledge which they cannot lose.”

-Robert Oppenheimer


Got introspective accountability? After he (quickly) realized the capacity of the nuclear weapons he helped create, Robert Oppenheimer became very unpopular with the State – primarily because he held both himself and the government to account.


Can you imagine a central planner of the Bernanke epoch holding themselves accountable to the highest levels of food, energy, education, etc. inflation in world history? Nah. That would require un-spinning the truth.


And the truth is that American political scientists who engaged in devaluing the purchasing power of the American people to 40 year lows in Q2 of 2011 know that sin. This is a market knowledge that history will not lose.


Back to the Global Macro Grind


If you’ve sat across the table from me and my macro research team in the last few years, you’ll know that I refuse to have a debate about mean reversion risks without contextualizing the post Nixon low in the world’s reserve currency (see chart):

  1. Got Causality? Of course, when a country cuts rates to zero then whispers to everyone front-running their next move that zero really isn’t zero (for Bernanke 0 = 0 minus 1, 2, 3, 4? QE5?), its currency goes down, hard
  2. Post Nixon (i.e. post his devaluing the Dollar by abandoning the Gold Standard in 1971, purely for political gain), the US Dollar Index has never seen a lower-low versus the 2011 low; that’s also when Gold hit its all-time high

Since most global commodities settle in Dollars, why there’s been raging inverse correlation (Dollar Down = Commodities Inflation Up) alongside causality in this relationship is trivial to everyone other than the people who should be held responsible for it.


What is less trivial is all of the unintended consequences associated with the ultimate central planning sin (an un-elected overlord confiscating the purchasing power of The People). Here are some of the big ones:

  1. Commodity Bubble
  2. Bond Bubble
  3. Emerging Market Bubble

Yep, that’s going to be a lot for Bernanke’s children (and their children) to noodle over for the next century. That is, of course, unless the next guy or gal running the un-elected agency does what no modern Federal Reserve Chairman has ever not done – raise rates.

For the last 6-12 months, I’ve spent a lot of time ranting about these Global Macro Themes:

  1. #CommodityDeflation
  2. #RatesRising
  3. #EmergingOutflows

These are relatively easy long-term TAIL risk calls to make because all 3 of them are basically about unwinding all 3 of the aforementioned bubbles. Once prices stop making all-time highs (commodities, bonds, or currencies), there’s this big little risk management critter Bernanke has never mentioned under oath called asymmetry.


So, alongside an English major who has never traded a macro market in his life being the chief Keynesian access “economist” @CNBC, at this stage of the cycle this is what you get:

  1. US Dollar making a series of intermediate-term TREND higher-lows (off her all-time lows in 2011)
  2. US Interest Rates making a series of intermediate-term TREND higher-lows (off their all-time lows in 2012)
  3. Gold and food prices making a series of intermediate-term TREND lower-highs (off their all-time highs of 2011-2012)

All the while, what we still get from the consensus TV circus that is government #AccessMedia is a bunch of uninformed people begging for more of the drugs that the political scientists got rich selling us.


If I am not clear on my long-term policy view, let me state it plainly – stop devaluing the Dollar and trying to smooth economic gravity. If you ever want to see US growth expectations come back, you have to let the US Dollar come back (and let rates rise alongside her).


Why am I going off on this today? Well America, we’re at The Crossroad. Unwinding the sin embedded in Bernanke’s post 2012 Jackson Hole policy is what markets have been doing for 10 months.


Collectively, we either have the responsibility within all of us to rise up against the tyranny of easy money and currency debauchery, or we do not. At this point, I can only hope the people who voted for this government hold it to account.


Our immediate-term Risk Ranges across 6 Big Macros are now as follows:


UST 10yr Yield 2.72-2.93%

SPX 1628-1665

VIX 15.26-17.04

USD 80.91-81.69

Brent 111.63-115.98

Gold 1347-1428


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Sin's Knowledge - CHART

Sin's Knowledge - vp

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September 12, 2013

September 12, 2013 - dtr



September 12, 2013 - 10yr

September 12, 2013 - spx

September 12, 2013 - dax

September 12, 2013 - dxy

September 12, 2013 - euro

September 12, 2013 - oil 


September 12, 2013 - sensex

September 12, 2013 - VIX

September 12, 2013 - yen

September 12, 2013 - natgas
September 12, 2013 - gold

September 12, 2013 - copper

ICI Fund Flow Survey - Continued Outflows in Bonds But a Slight Improvement

Takeaway: Slightly smaller bond outflows for the week ending Sept 4th but still over $6 billion left fixed income funds. Equity ETFs got hit hard.

Investment Company Institute Mutual Fund Data and ETF Money Flow:


Equity mutual fund inflow accelerated week-to-week to $903 million for the 5 day period ending September 4th, up from the $300 million inflow the week prior


Fixed income mutual fund outflows also improved but still resulted in a $6.7 billion withdrawal by investors, an improvement from the $9.1 billion draw down last week


Within ETFs, passive equity products experienced an outsized redemption of $11.3 billion, the second week in three weeks with over a $10 billion withdrawal. Bond ETF flows snapped into positive territory week-to-week with a $2.4 billion inflow this week compared to the $935 million outflow last week 


ICI Fund Flow Survey - Continued Outflows in Bonds But a Slight Improvement - ICI chart 1 revised



For the week ending September 4th, the Investment Company Institute reported improvements in both equity and fixed income mutual fund flows however with bond trends simply booking a smaller outflow. Total equity fund flow totaled a $903 million inflow which broke out to a $1.5 billion inflow into international equity products and a $694 million outflow in domestic stock funds. These trends were an improvement from the prior week's total equity fund inflow of $300 million. Including this acceleration in stock fund flows, the year-to-date weekly average for 2013 now sits at a $2.6 billion inflow for total equity mutual funds, a substantial improvement from the $3.0 billion outflow averaged per week in 2012.


On the fixed income side, outflow trends continued for the week ending September 4th with the aggregate of taxable and tax-free bond funds combining to lose $6.7 billion in fund flow. The taxable bond category specifically shed $4.7 billion in the most recent period versus the $6.3 billion loss last week. Tax-free or municipal bonds continued their sharp outflow trends losing another $2.0 billion in the week ending September 4th, continuing its trend from last week which experienced a $2.9 billion outflow. Franklin Resources (BEN) continues to have the most exposure in our coverage group to declining Municipal bond trends with over 10% of its assets-under-management in the tax-free category. The 2013 weekly average for fixed income fund flow has now drastically declined from 2012, now averaging a $324 million weekly outflow this year, a far cry from the $5.8 billion weekly inflow averaged last year.


Hybrid funds, or products that combine both fixed income and equity allocation, continue to be the most stable category bringing in another $263 million in the most recent weekly period although dipping below the $1 billion weekly inflow level for the first time in 8 weeks. The year-to-date weekly average inflow for hybrid products is now $1.6 billion for '13, almost a 100% increase from 2012's $911 million weekly average.



ICI Fund Flow Survey - Continued Outflows in Bonds But a Slight Improvement - ICI chart 2

ICI Fund Flow Survey - Continued Outflows in Bonds But a Slight Improvement - ICI chart 3

ICI Fund Flow Survey - Continued Outflows in Bonds But a Slight Improvement - ICI chart 4

ICI Fund Flow Survey - Continued Outflows in Bonds But a Slight Improvement - ICI chart 5

ICI Fund Flow Survey - Continued Outflows in Bonds But a Slight Improvement - ICI chart 6



Passive Products - A Big Equity ETF Outflow versus a Stable Fixed Income Inflow:



Exchange traded funds experienced mixed trends for the week ending September 4th with a massive equity outflow and a stable fixed income inflow. Equity ETFs lost $11.3 billion, the second biggest equity ETF outflow in 5 years next to the $12.9 billion outflow two weeks ago and only the 11th negative week in the 36 weeks of 2013. Despite this week's outflow, 2013 weekly average equity ETF trends are averaging a $2.6 billion weekly inflow, an improvement from last year's $2.2 billion weekly inflow average.


Bond ETFs conversely had an improvement week-to-week with a strong $2.4 billion inflow, the biggest fixed income ETF inflow in 8 weeks, which compared to last week's $900 million outflow. Despite this improvement in the most recent period the 2013 weekly bond ETF average is now just a $345 million inflow for bond ETFs, much lower than the $1.0 billion average weekly inflow from 2012.



ICI Fund Flow Survey - Continued Outflows in Bonds But a Slight Improvement - ICI chart 7

ICI Fund Flow Survey - Continued Outflows in Bonds But a Slight Improvement - ICI chart 8



HEDGEYE Asset Management Thought of the Week - The Bigger Base of Numbers:


Despite the $116 billion fixed income fund outflow that has occurred since the end of May, the largest absolute bond outflow in history, we point out that on a percentage of beginning fixed income assets-under-management that the current 2013 draw down is the smallest in history on a percentage basis. The 2013 running outflow has been just 2.9% of outstanding bond funds, well below the past outflows in 2003-2004 where 5.0% of outstanding bond funds were redeemed and the 14% of bond funds that were drawn down in the 1 outflow. 1 experienced a similar 5.0% redemption of outstanding bond funds, inline with the 2003-2004 fixed income sequence.


In our recent initiation of the asset management sector, we forecasted that a $1 trillion shift out of bonds and into equities could occur (this would include ETFs and single holdings of individual bonds in addition to bond funds) taking in consideration that bond outstandings in the U.S. are at new record highs and that modified duration, the return of volatility in fixed income, and the lack of liquidity in the bond markets would dislodge the asset class. The enclosed links present this initiation again: 



ICI Fund Flow Survey - Continued Outflows in Bonds But a Slight Improvement - ICI chart 9




Jonathan Casteleyn, CFA, CMT



Joshua Steiner, CFA



TODAY’S S&P 500 SET-UP – September 12, 2013

As we look at today's setup for the S&P 500, the range is 33 points or 1.61% downside to 1662 and 0.35% upside to 1695.                                      










  • YIELD CURVE: 2.45 from 2.47
  • VIX  closed at 13.82 1 day percent change of -4.89%

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: Initial Jobless Claims, Sept. 7, est. 330k
  • 8:30am: Cont. Claims, Aug. 31, est. 2.968m (prior 2.95m)
  • 8:30am: Import Price Index M/m, Aug., est. 0.5% (prior 0.2%)
  • 8:45am: Bloomberg Sept. U.S. Economic Survey
  • 9am: Fed’s Dudley speaks on panel on OTC derivatives
  • 9:45am: Bloomberg Consumer Comfort, Sept. 8
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas storage change
  • 11am: Fed to purchase $2.75b-$3.5b in 2020-2023 sector
  • 12pm: Wasde agricultural report
  • 1pm: U.S. to sell $13b 30Y bonds in re-opening
  • 2pm: Monthly Budget Statement, Aug., est. -$147b


    • Sec. of State John Kerry meets with Russian Foreign Minister Sergei Lavrov in Geneva to discuss Syria
    • SEC holds private meeting with heads of exchanges, other self-regulatory organizations to discuss market-data dissemination systems, 3-hour trading halt on Aug. 22
    • CFTC holds meeting of technology advisory cmte that may discuss concept release for regulating high-speed trading, issues related to swaps trading and record-keeping; approval would trigger a public-comment period, 10am
    • Medicare Payment Advisory Commission begins 2-day mtg, 9:30am
    • House, Senate in session
    • Senate Banking Cmte hears from SunTrust Mortgage CEO Jerome Lienhard on housing finance revisions, 10am


  • Michael Dell, Silver Lake poised to clinch $24.9b buyout
  • SEC’s White to push exchange execs for better data backups
  • Umpqua to buy Sterling Financial for about $30.52/shr
  • Vertex, Ametek to replace AMD, SAIC in S&P 500 on Sept. 20
  • Qualcomm plans $5b share buyback to placate investors
  • Gabrielle weakens to tropical depression, Humberto moves north
  • Indonesia unexpectedly raises key rate to stem currency slide
  • Putin appeals to U.S. public before Kerry-Lavrov Syria talks
  • Italy industrial output unexpectedly falls as slump persists
  • Euro-area industrial output drops more than estimated
  • Josef Ackermann said to plan resignation from Siemens board


    • Analogic (ALOG) 4:15pm, $1.35
    • Brady (BRC) 8am, $0.52
    • BRP (DOO CN) 6am, C$0.05
    • Empire (EMP/A CN) 7:03am, C$1.55
    • Hudson’s Bay (HBC CN) 7am, C$0.12
    • Kroger (KR) 8:30am, $0.60
    • Lululemon Athletica (LULU) 7:15am, $0.35
    • Transcontinental (TCL/A CN) 8:52am, C$0.38
    • Ulta Salon (ULTA) 4pm, $0.67
    • United Natural Foods (UNFI) 4:05pm, $0.60


  • Goldman Sees Commodity Demand in China Rebounding to December
  • Deere Lures Africa’s First-Time Buyers of Tractors: Commodities
  • Gold Sinks to Four-Week Low as Silver Declines on Taper Bets
  • Copper Reaches One-Week Low on Concern About Outlook for Demand
  • Cocoa Falls in New York on Prospects Rain Will Benefit New Crops
  • Soybeans Climb for Second Day as USDA Seen Cutting Crop Outlook
  • Mistry Sees Palm Weakening as Prices Set for Worst Run Since ’96
  • IEA Sees Less Need for OPEC Crude in 2014 as U.S. Supply Booms
  • Rebar Drops to Five-Week Low as Property Curbs Weaken Outlook
  • Cocoa Shortage Expanding as Chocolate Sales Climb to Record
  • Vietnam’s Rice Output Faces Slide on Crop Switch: Southeast Asia
  • Polar Sea Lane Finds Favor as Suez Security Doubts Grow: Freight
  • Gold May Fall to $1,270 on Head and Shoulder: Technical Analysis
  • Tropical Depression Gabrielle Keeps Speed, Humberto Moves North            


























The Hedgeye Macro Team













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