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Call Today at 11:00am - U.S. Economic Update: What Is Priced In?

Call Today at 11:00am - U.S. Economic Update: What Is Priced In? - usclient


We will be hosting a flash call updating our U.S. Economic Thesis today at 11:00am EST.


  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 944389#
  • MaterialsCLICK HERE (slides will be available approximately one hour prior to the call time)

We'll provide an update to our 1Q14 Macro Investment Themes of #GrowthDivergences and #InflationAccelerating, while highlighting the current quantitative setup for domestic equities, bonds, and the $USD. We will review how to be positioned for slowing growth and rising inflation as well as host a live Q&A Session at the end of the call.


  • #GrowthDivergences:  Since our call on 1/9/14, the incremental fundamental data has continued to reflect a deceleration in the slope of domestic growth.  We'll survey the latest income, housing, manufacturing and consumption data and the implications for equity and asset class positioning. 
  • #InflationAccelerating:  Long inflation expectations and #GrowthSlowing has been the positioning playbook YTD with the CRB commodities index accelerating, Utilities and Healthcare leading sector performance and low short interest, low Beta, and large Cap style factors driving relative equity out-performance. We'll discuss whether to remain long this trend.     


Please email for details.


Only 7% growth for January is disappointing but anecdotal evidence suggests strong Mass start to February.



More likely than not, low VIP hold played a role in the soft January that saw GGR grow only 7.3%.  Street consensus was for +13% and we were much higher earlier in the month.  So what are the explanations?

  • Low hold – we had heard even before the last week of January that some operators had experienced some bad luck
  • The placeholder strikes again – as we wrote about on 1/27/14 “MACAU WEEKLY PLACEHOLDER REEMERGES?”, the reported HK$775 million average daily table revenues for the 3rd week of January may have been a placeholder for incomplete data.  We’ve seen that number used many times with the following week as the catch up week.  For January, if the HK$775 was the correct number, that would imply the last 5 days of January generated an insanely low ADTR of HK$545. 
  • Macau volumes just fell off the cliff ahead of the Chinese New Year celebration

We think that a combination of low hold and slow volumes for the last 2 weeks of January contributed to the disappointing YoY growth.  While it’s possible that the last week was that bad, it is more likely the HK$775m reported as daily table revs in the 3rd week was indeed a placeholder.


So where does that leave Macau going forward?  If February bounces back to up 20% - our projection – not many will care that the pre-Chinese NY was softer than usual and VIP held low.  Why do we think February could be up 20%?

  • Our model predicts it – we quantitatively look at volume trends sequentially and seasonally and calendar adjust to project monthly revenues.  February faces a relatively easy comp at 12% last year.  Rolling Chip volume actually declined slightly last year.
  • Contacts suggest Mass is off the charts here in February.  Table minimums are higher and some casinos may have opened more than tables temporarily - surely the Cotai properties because they have the space. 
  • Junket biz is expected to accelerate later this week.

The disappointing January growth reported today will no doubt pressure the stocks.  Not sure they need to be bought today as the sentiment could linger until the next data point.  Upcoming data points should be the release of the January detail (later this week) which could reveal a low hold percentage and the first February weekly table revenues (Monday). 

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CHART OF THE DAY: GDP: Easy Comps vs. Hard Comps


CHART OF THE DAY: GDP: Easy Comps vs. Hard Comps - GDP Comps

Do You Wish To Find Out?

“What we need is not the will to believe, but the wish to find out.”

-William Woodsworth


I know. I’m going all #behavioral on you this year. When combined with #history and #math, it gives me an edge. And god knows, I’m not the smartest player in this league – so I need one!


The aforementioned quote comes from the introduction in the latest #behavioral book we’ve been discussing in the office, Counterclockwise, by Harvard Applied Psych professor, Ellen Langer.


Langer’s research is unique in that she was really one of the first women (1st woman to ever get tenure in Psychology @Harvard) to break the ice on a lot of topics that make us think about how we think. Her most popular book was Mindfulness in 1989. She wrote Counterclockwise in 2009 and it’s relevant to how you think about your risk management day.


Back to the Global Macro Grind


Do you wish to find out why almost every major macro position that was working for you last year sucks for 2014 YTD? If I needed to believe that the Japanese-burning-currency thing was going to work, I could – but I’d be losing a lot of money on that.


Last night’s pathetic bounce in Japanese Equities (Nikkei +1.2% to -12.9% YTD) tells you all you need to know about Japanese consensus – all the locals (brokerage clients getting margin calls) were short Yen and long Mothers (as in the index Japanese dudes lever up on).


Most of Wall Street was in the same trade too. It was only 1 month ago today that the CFTC (futures and options) net short position in Japanese Yen hit all-time highs (-135,000 net short position in terms of contracts). This morning that net short position is -89,420 contracts.


Next to short Yen, what have been the other major consensus long/short positions in Global Macro options?

  1. LONG Oil – 3 month average = +363,977 net LONG contracts
  2. LONG SP500 (Index + E-mini) – 3 month average = +78,356 net LONG contracts
  3. SHORT US Treasuries – 3 month average = -115,078 net SHORT contracts

And how’s that going YTD?

  1. Brent Oil = DOWN -4.2% YTD (vs the CRB Commodities Index +2.5%)
  2. SP500 = DOWN -5.0% YTD
  3. 10YR US Treasuries = UP (with yields -13%, or 40 bps YTD)

Why? Do you want the answer that consensus needed to believe on December 31, 2013, or do you wish to believe what Mr. Macro Market is telling you about growth (hint: on the margin, with #InflationAccelerating, US growth is slowing)?


And it’s not just a USA thing. As you can see in our Chart of The Day (where we show “Hard Growth Comps” for countries versus “Easy Comps”), Japan and the United States were setting up to slow from their 2013 momentum peaks irrespective of this US weather.


Oh, and by the way, the weather on the Merritt in Connecticut this morning isn’t what the dude in Tokyo is dealing with via his margin calls. Japan actually just reported a 16 year low in wages. When his government has a Policy To Inflate the dude’s cost of living, that is not good!


How does the Burning Your Currency thing work again?

  1. Government prints lots and lots of moneys
  2. Currency goes down, and purchasing power of The People goes down
  3. Real (inflation adjusted) consumption growth slows

Then pop a “consumption tax” on your people (Japan’s is pending) and what people who need to believe about “Abenomics” (that it’s good because the stock market was going up) isn’t aligned with what politicians “wish to find out” about economic reality.


Back to the wage inflation (or deflation) thing, I’ll show you what’s going on in the USA on our US Economics Flash Call this morning at 11AM EST. After seeing big time pressure on wages throughout the 2008 crisis, aggregate private sector wages are actually tracking up +5% on a 2-yr comp basis. .  If you need dial in details for the call, email .


I know your run of the mill academic doesn’t model the US economy how we do (we model it on a 1, 2, and 3 yr comparative basis so that we don’t get run-over by changes on the margin in trends), but that’s cool. It seems to work.


What seems to be a developing bearish to bullish reversal in a @Hedgeye TREND may not turn out to be a long-term reality. But can you afford to miss 3, 6, and 12 month accelerations and decelerations in big macro stuff like growth and inflation?


We can’t. And that’s all I have to say about that.


Our immediate-term Global Macro Risk Ranges are now (with intermediate-term TRENDs, bullish or bearish, in brackets):


SPX 1 (bearish)

Nikkei 14036-15004 (bearish)

VIX 15.49-21.63 (bullish)

USD 80.78-81.43 (neutral)

Gold 1 (bullish)


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Do You Wish To Find Out? - GDP Comps


Do You Wish To Find Out? - 556


TODAY’S S&P 500 SET-UP – February 5, 2014

As we look at today's setup for the S&P 500, the range is 47 points or 1.15% downside to 1735 and 1.53% upside to 1782.                       










THE HEDGEYE DAILY OUTLOOK - 10                                                                                                                                                                  



  • YIELD CURVE: 2.31 from 2.32
  • VIX  closed at 19.11 1 day percent change of -10.87%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, Jan. 31 (prior -0.2%)
  • 8:15am: ADP Employment Change, Jan., est. 187k (prior 238k)
  • 10am: ISM Non-Mfg Composite, Jan., est. 53.7 (prior 53)
  • 10am: Fed’s Tarullo testifies on Volcker Rule to House Financial Services Committee
  • 12:30pm: Fed’s Plosser speaks in Rochester, N.Y.
  • 1:40pm: Fed’s Lockhart speaks in Birmingham, Ala.


    • 9:30am: House Energy and Commerce panel meets on protecting consumer data, with Neiman Marcus and Target executives and FTC Chairwoman Edith Ramirez
    • 9:30am: House Ways and Means panel hears from IRS Commissioner John Koskinen on issues including agency’s targeting of some tax-exempt organizations
    • 10am: House Financial Services Cmte meets on Volcker Rule, with witnesses from Fed, SEC, FDIC, CFTC
    • 10am: House Budget Cmte hears from CBO Director Doug Elmendorf on economic outlook
    • 2pm: House Financial Services panel holds hearing on annual report from Office of Financial Research


  • JPMorgan joins Morgan Stanley in settling U.S. mortgage suits
  • Sony said in talks to sell Japan PC unit to investor group
  • Apple joins Google in pressing high court to curb patent abuse
  • Gilead profit tops analysts’ ests. on Hepatitis C drug sales
  • 2nd storm strikes Northeast grounding planes, closing schools
  • Eurozone Dec. retail sales down 1.6% m/m; est. down 0.7% m/m
  • ICAP says rev. slipped 6% in final 3 mos. of 2013
  • AIG asks for delay in $8.5b Bank of America settlement
  • Sands leads Macau casino slump as Jan. rev. growth slowed
  • Goldcorp to delay buying shares in Osisko until judgment
  • Panasonic jumps most since 1974 after profit beats estimates
  • Swatch 2013 profit rises 17% on compensation from Tiffany
  • Dutch lender Rabobank said to consider sale of U.S. retail bank
  • Volcker Rule unity is implementation goal of interagency group
  • Buffett Railroad’s $5b investment plan tops Union Pacific
  • Blavatnik sued for $2b over TNK energy venture’s sale
  • "House of Cards" maker MRC said to get Guggenheim as owner
  • CtW presses Yahoo to revise hiring, compensation, WSJ reports
  • Goldman Sachs, Texas Pacific consider IPO for Ontex, Tijd says


    • Allergan (AGN) 9am, $1.34 - Preview
    • Arrow Electronics (ARW) 8am, $1.62
    • Automatic Data Processing (ADP) 7:30am, $0.77
    • Brookfield Infrastructure (BIP) 7:30am, $0.35
    • Coca-Cola Enterprises (CCE) 7:30am, $0.52
    • Cognizant Technology (CTSH) 6am, $1.15 - Preview
    • Estee Lauder (EL) 7:30am, $1.06 - Preview
    • Humana (HUM) 6am, $0.92
    • Intact Financial (IFC CN) 6am, C$1.21
    • Lazard (LAZ) 7am, $0.60
    • Level 3 Communications (LVLT) 8am, $0.13
    • Magellan Midstream (MMP) 8:02am, $0.82
    • Merck (MRK) 7am, $0.89 - Preview
    • Nasdaq OMX (NDAQ) 7am, $0.67
    • Radian Group (RDN) 7am, $0.02
    • Ralph Lauren (RL) 8:01am, $2.51 - Preview
    • Time Warner (TWX) 7am, $1.15 - Preview


    • Akamai Technologies (AKAM) 4:01pm, $0.52
    • Allstate (ALL) 4:05pm, $1.37
    • Atmel (ATML) 4:05pm, $0.10
    • CBRE Group (CBG) 4:05pm, $0.66
    • Cincinnati Financial (CINF) 4:05pm, $0.73
    • Credicorp (BAP) 6pm, $2.33
    • Everest Re Group (RE) 4:05pm, $5.06
    • Fiserv (FISV) 4:01pm, $0.81
    • FleetCor Technologies (FLT) 4:01pm, $1.06
    • FMC (FMC) 4:30pm, $0.92
    • Green Mountain Coffee Roasters (GMCR) 4pm, $0.90
    • IAC (IACI) 4:05pm, $0.91
    • Kimco Realty (KIM) 4:01pm, $0.13
    • Lincoln National (LNC) 4:10pm, $1.28
    • Marathon Oil (MRO) 4:03pm, $0.71
    • NXP Semiconductor (NXPI) 8pm, $0.95
    • O’Reilly Automotive (ORLY) 6:30pm, $1.32
    • Pandora Media (P) 4:01pm, $0.07
    • Plains All American Pipeline (PAA) 4:05pm, $0.70
    • Prudential Financial (PRU) 4:07pm, $2.23
    • SolarWinds (SWI) 4pm, $0.34
    • Standard Pacific (SPF) 4:02pm, $0.14
    • Stericycle (SRCL) 4:02pm, $0.96
    • Tesoro (TSO) 4:40pm, $0.31
    • TriQuint Semiconductor (TQNT) 4:02pm, $0.13
    • Twitter (TWTR) Aft-Mkt, $(0.02) - Preview
    • Walt Disney (DIS) 4:15pm, $0.91 - Preview
    • XL Group (XL) 4:01pm, $0.82
    • Yelp (YELP) 4pm, $(0.03)


  • WTI Rises a Second Day as U.S. Freeze Seen Curbing Fuel Supplies
  • Mitsui Mining Boosts Zinc Fee 70% as China Consumption Rises
  • Sugar Prices Post Longest Rally in Five Months on Supply Concern
  • Rubber Seen Needing Further 20% Drop to Drain Global Stockpiles
  • Korean Coffee Lovers Luring Brazilian Arabica Sales: Commodities
  • Wheat Slides Amid Speculation Snow Cover Will Shield U.S. Crop
  • Gold Gains as Investors Weigh Economy Concerns, Physical Demand
  • Natural Gas Retreats After Gains; CME Raises Margins for Trading
  • NYSE Liffe Said to Review Cocoa, Coffee Trade as Prices Diverge
  • India Said to Consider 75% Increase in Sugar Export Subsidy
  • French Refiners Lost 700 Million Euros in 2013 as Margins Shrank
  • Rubber Declines to 17-Month Low Amid Chinese Demand Concerns
  • Copper Smelters Win Amid Mine Production Glut: Chart of the Day
  • Zinc Rebounds From Longest Slump in 25 Years on Supply Outlook


























The Hedgeye Macro Team














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