Where We Are

“The task of the leader is to get his people from where they are to where they have not been.”

-Henry Kissinger


Where we are from a US stock market perspective is not that complicated. With the SP500 and Russell 2000 closing at 1848 and 1171, respectively yesterday, we are at all-time highs.


Yes, all-time is a long time. And, yes, when I say “we”, I’m not talking about them. While my views might rub them the wrong way sometimes (them being the other team, or the other side of the trade), that means I’m just doing my job. I don’t play for them.


The aforementioned quote comes from page 59 of Unusually Excellent. The chapter is called “Being Compelling – The Commitment To Winning.” In spite of my many human flaws and countless mistakes, that is my commitment to both you and my team.


Back to the Global Macro Grind


Winning in this game (or in life for that matter) doesn’t start and end with feeling like we’re winning an argument. I personally have too many silent arguments in my head throughout a week to count – and if I’m not losing some of those, I’m not growing.


Arguing with the score of the game is harder to do than simply dismissing the other side of what you think. I just read an article about a hedge fund in Greenwich, CT that got smoked last year (and closed the fund). The head of the firm blamed a macro market that was “dislocated from fundamentals.” I guess that was easier than blaming himself.


This, of course, has been one of the best 13-14 month periods to be invested in “growth”, as an investment style factor, ever. Particularly if you are a macro guy (or gal) who was net long growth equities and short slow-growth yielding bonds (or stocks like Kinder Morgan (KMI), which missed last night, that look like bonds). #Fundamental, it was. Indeed.


But that is yesterday’s news…


Where we go today, tomorrow and the next day are places we have never been.  My job is to help both you and my firm get there without having to make excuses for wrong turns along the way


So let’s start with what matters most about where we are – our position:

  1. CASH = 27%
  2. Foreign Currencies = 27% (we still like the Euro, Pound, Kiwi, etc.)
  3. International Equities = 20% (we still like most of Europe, especially Germany and the UK)
  4. US Equities = 18% (Tech, Healthcare, Financials, Industrials, and Materials)
  5. Commodities = 8% (Coffee, Cattle, Copper – and maybe some Gold)
  6. Fixed Income = 0%

Explaining 1-6 in reverse is pretty straightforward:

  1. Fixed Income 0% allocation for 184 days (73% of the time in last 12 months - net short via sovereigns, long corporates)
  2. CRB Commodities Index signaled don’t short last month – still a Bernanke Bubble that popped, but one we can risk manage
  3. US Equities is where we made a Sector Style Shift away from Consumption and Into Inflation (see Q1 Macro Themes deck)
  4. International Equities is the easiest to stick with because the slope of European #GrowthAccelerating is the most obvious
  5. Foreign Currencies will only be easy to stick with if EUR/USD and GBP/USD hold $1.35 and $1.63 TREND supports
  6. Cash, when you are knowingly buying-the-damn-bubble #BTDB in US Equities, is still King at my house

In order to expand on how we think about asset allocation, country and sector/style picking, etc. we do our Global Macro Themes deep dives. If you’d like to review that slide deck, ping us at and you’ll see us refresh our risk management themes on our disruptor (to consensus TV) video platform @HedgeyeTV.


One of the videos our all-star offensive line analyst, Darius Dale, and I did this week walks through why we A) like Yen Down, Nikkei Up’s intermediate-term TREND, but B) wouldn’t be aggressive in allocating capital to Japanese Equities on pullbacks until we see some of our key lines of support (for the Nikkei) and resistance (for the Yen vs USD) confirm.


Here’s the video link.


Where we are from an immediate-term TRADE perspective sometimes deviates from our intermediate-term TREND views. That’s just the way markets (and life) work. Why else would I subject myself to getting up at this un-godly hour to hand bomb immediate-term TRADE lines in my notebook?


The alternative to being committed to winning is accepting mediocrity. The Manifestation of Mediocrity in America is something I think I could write a book about. So I’ll end that prickly point with a period. Because, to get a certain kind of person from where they are to somewhere better, sometimes feels like just that. Capitalizing on their frustration wins too.


Our immediate-term Global Macro Risk Ranges are now (TREND in brackets):


UST 10yr Yield 2.79-2.92% (bullish)

SPX 1 (bullish)

VIX 11.84-13.35 (bearish)

USD 80.74-81.31 (neutral)

Brent 106.12-108.66 (bearish)

Gold 1 (bearish)


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Where We Are - Chart of the Day


Where We Are - Virtual Portfolio

January 16, 2014

January 16, 2014 - Slide1



January 16, 2014 - Slide2

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January 16, 2014 - Slide9

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January 16, 2014 - Slide11
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According to a spokesperson, the Macau government is unaware of any changes to the individual visa scheme for mainlanders visiting Macau.  The spokesperson said so after the Hong Kong government announced a freeze on expansion of the scheme.  The scheme gives citizens of 49 mainland cities visas to travel to Macau or Hong Kong as individuals rather than as members of tour groups, who travel on collective visas.  Hong Kong chief executive Leung Chun-ying said the central government had agreed on a temporary freeze on the number of cities covered by the scheme.



 TODAY’S S&P 500 SET-UP – January 16, 2014

As we look at today's setup for the S&P 500, the range is 17 points or 0.72% downside to 1835 and 0.20% upside to 1852.           










THE HEDGEYE DAILY OUTLOOK - 10                                                                                                                                                                  



  • YIELD CURVE: 2.49 from 2.50
  • VIX closed at 12.28 1 day percent change of 0.00%

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: CPI m/m, Dec., est. 0.3% (prior 0.0%)
  • 8:30am: Init. Jobless Claims, Jan. 11, est. 328k (prior 330k)
  • 8:45am: Bloomberg U.S. Economic Survey, Jan.
  • 9am: Total Net TIC Flows, Nov. (prior $194.9b)
  • 9am: Fed’s Williams speaks in Washington
  • 9:45am: Bloomberg Economic Expectations, Jan. (prior -11)
  • 10am: Philly Fed Biz Outlook, Jan., est. 8.6 (pr 7, rev 6.4)
  • 10am: NAHB Housing Market Index, Jan., est. 58 (prior 58)
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas storage change
  • 11:10am: Fed’s Bernanke speaks in Washington


    • Greek Deputy PM Evangelos Venizelos meets with Sec. of State John Kerry at State Dept
    • 9am: President Obama hosts event with college, university presidents and leaders from nonprofits, foundations, state governments, private-sector on expanding college opportunity
    • 9am: House Science, Space and Technology Cmte hearing on identity theft through
    • 9:15am: EPA’s McCarthy testifies at Senate Environment and Public Works Cmte hearing
    • 9:30am: House Energy and Commerce subcmte hears from Gary Cohen from CMS on health-care overhaul
    • 10am: Senate Finance Cmte holds hearing on advancing Congress’s trade agenda
    • 10am: National Transportation Safety Board unveils 2014 Most Wanted list of safety improvements
    • 11:30am: House Speaker Boehner, R-Ohio, holds press briefing


  • House passes $1.1t spending bill in shift from discord
  • J.C. Penney closing 33 stores, cutting 2,000 jobs
  • Yahoo’s Mayer said to have fired COO Henrique de Castro
  • Microsoft CEO list said to include Ericsson’s Vestberg
  • Citigroup sells servicing to Fannie Mae on $10b loans
  • Big banks face sharper risk-management focus in OCC policy shift
  • J&J said to agree to sell Ortho unit to Carlyle for $4b
  • Apollo buys Chuck E. Cheese in near $1b deal, FT says
  • Currency traders told Bank of England of fix practices in 2012
  • AOL gives up control of money-losing local news division Patch
  • Citibank to reissue debit cards after target hack: NYT
  • China’s Treasury holdings rose to record in November
  • ECB said to favor 6% capital requirement in stress test
  • Spain auctions 3Y notes at record-low yield of 1.595%
  • Ahold says 4Q U.S. same-store sales decline


    • BB&T (BBT) 5:45am, $0.72
    • BlackRock (BLK) 5:30am, $4.33
    • Charles Schwab (SCHW) 8:45am, $0.21
    • Citigroup (C) 8am, $0.95 - Preview
    • First Republic (FRC) 7am, $0.75
    • Goldman Sachs (GS) 7:35am, $4.18 - Preview
    • Huntington Bancshares (HBAN) 5:55am, $0.17
    • PNC Financial (PNC) 6:24am, $1.64
    • PPG Industries (PPG) 8:11am, $1.73 - Preview
    • UnitedHealth Group (UNH) 6am, $1.41 - Preview


    • American Express (AXP) 4:01pm, $1.25
    • Capital One Financial (COF) 4:05pm, $1.55
    • Intel (INTC) 4:01pm, $0.52 - Preview
    • People’s United Financial (PBCT) 4:03pm, $0.20
    • Skyworks Solutions (SWKS) 4:30pm, $0.66
    • SLM (SLM) 4:15pm, $0.73


  • Sugar Falls to Lowest Since 2010 on India Subsidy; Cocoa Gains
  • JPMorgan Leads Mining Loan Rebound Amid Price Slump: Commodities
  • India Spurring Sugar Exports Sends Global Prices to 43-Month Low
  • WTI Crude Advances to Two-Week High as U.S. Inventories Decline
  • Soybeans Climb for a Sixth Session on Sustained Chinese Demand
  • Gold Declines for Worst Run in Four Weeks as Dollar Strengthens
  • Nickel Advances for Fifth Day on Speculation Supply to Tighten
  • Natural Gas Rebounds on Forecast for Record Drop in U.S. Supply
  • Rebar Falls From One-Week High Amid China’s Lower Credit Growth
  • Gold to Trade in Range for StanChart’s East as Asia Counters Fed
  • Singapore Exchange to Stop Trading, Clearing LME Futures
  • U.S. Corn Exports Seen in Peril as China Mops Domestic Glut
  • China to Cut Sugar Imports as Premium Narrows: Chart of the Day
  • Richest Coffee Takeover in Asia Seen With Super Group: Real M&A


























The Hedgeye Macro Team














Ask For The Truth

This note was originally published at 8am on January 02, 2014 for Hedgeye subscribers.

“If any man seeks for greatness, let him forget greatness, and ask for the truth – and he will find both.”

-Horace Mann


There’s a blizzard rolling in on the East Coast this morning and they’ll be legally selling pot in Colorado today. Welcome to 2014.


Last year I had a well known pundit tell me I wasn’t being “truthful” about US #GrowthAccelerating. The truth is US growth accelerated from +0.14% in Q412 to +4.12% by Q313. So I thought I’d start with the weather this morning. It’s tougher to obfuscate.


One thought I’ll share with our team in this morning’s New Year’s meeting will be to Breathe and Be Yourself. That’s a subtitle to a solid chapter in Unusually Excellent titled “Being Authentic” where John Hamm reminds us that “authenticity is the first step of leadership… because it is the basis for the kinds of trusting relationships with followers…” (pg 27). Ask yourself for the truth, every day.


Back to the Global Macro Grind


While we may not always be positioned for it, in this game last price is truth. We can argue with it, twist it, call it names – but that won’t change what it is. It’s the score.


Check out some of this morning’s Day 1 of 2014 scores:

  1. Thailand’s stock market -5.2%
  2. South Korea’s stock market -2.2%
  3. India’s stock market -1.3%
  4. Greece’s stock market +2.6%
  5. United Arab Emirates stock market +3.0%

#Fun. We call this a big macro day of #Divergence in Global Equities.


In commodity land, there are some interesting price % moves as well:

  1. Silver +3.2%
  2. Platinum +1.6%
  3. Wheat +0.8%

In other words, 3 of the commodities that experienced the biggest crashes in their 2013 prices are up more than mostly every commodity and stock market in the world today. We call this a nice bounce (to lower-highs).


Then alongside the #PotShops thing in Denver, you have some other social truths to consider in Japan this morning:

  1. Japan’s population growth (lack thereof) showed its largest decline on record in 2013 (-244,000)
  2. Japanese births were -6,000 y/y and deaths were -19,000 y/y in 2013, allegedly (hard for us to get to these #s)

But don’t worry, after opting for the Burning of The People’s Purchasing Power (their hard earned currency was -17% in 2013), the Japanese stock market was +59.3%. So some people crushed it in Japan; some people got crushed.


What do all these truths mean? And are they in fact truths? What if the birth/death calculation in Japan is as suspect as it is here in the US? However suspect the data, our working assumption here @Hedgeye is it’s apples to apples, suspect vs suspect.


Accepting the last market price as truth is a lot easier than taking conflicted and compromised government data at face value. The aforementioned 8 price moves in global equities and commodities, combined with what was already starting to move COUNTER-TREND in December, leads my macro craw to the same potential Global Macro Theme: Inflation Expectations Rising.


Stay tuned for our Q1 2014 Global Macro Themes call in the coming weeks where we’ll try our best to contextualize a developing truth (last price vs. market history) and what it could mean for your asset allocation and positioning.


Our immediate-term Global Macro Risk Ranges are now as follows (bullish or bearish TREND duration in brackets):


UST 10yr yield 2.97-3.07% (bullish)

SPX 1830-1858 (bullish)

Gold 1180-1223 (bearish)


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Ask For The Truth - Chart of the Day


Ask For The Truth - Virtual Portfolio

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