• CZR 4Q 2013 conference call:  5 pm
  • STN 4Q 2013 conference call:  4:30 pm  

Monday-Thursday, March 10-13

  • 2014 Cruise Shipping Miami Conference

Tuesday, March 12

  • MTN FY2Q 2014 conference call:  4:30 pm

Friday, March 14

  • Hyatt Investor Day


CZR – a Las Vegas Review Journal story over the weekend was skeptical of CZR’s recently announced strategic asset sales to Caesars Growth Partners and called attention to Caesars Entertainment Corp’s $3.06 billion of maturing debt in 2015 and 2016


Takeaway:  We too were perplexed by the recent announcement...seems like a three card monte car


HOT – announced Sheraton will open 35 hotels during next 12 months with a focus on China and Southwest Asia.

Takeaway:  A little better than we thought. Hopefully, China doesn't blow up.



Number of cruise passengers in Spain +41% YoY in Jan Hosteltur 

According to the monthly report of state ports, Spanish ports in January received a total of 454,040 cruise passengers, representing +41% YoY.  The number of cruise ships that passed were 208, an increase of 21.6% YoY. 


Takeaway:  Positive data point in a market that has struggled the past several years

Massachusetts Update – The Commission will take up the decision of MGM by May 30 if the sole remaining applicant in Western Mass. — MGM Grand — is worthy of a license in Springfield.   The commission will then decide whether the Greater Boston casino license will be issued for Everett or Revere – pitting Steve Wynn against Suffolk Downs.  A decision is expected by June 30.


Takeaway:  Winner's Curse? PENN looks like the highest ROI in MA



Chinese February data

  • Chinese new yuan loans CNY 644.5 bn vs Reuters estimate CNY716 bn
  • Total social financing CNY 958 bn vs CNY 2.58 tn in January

Takeaway:  Macro data from China remains disappointing.  The stock market is at the its lowest point since 2009.


Hedgeye remains negative on consumer spending and believes in more inflation.  Following  a great call on rising housing prices, the Hedgeye Macro/Financials team is turning decidedly less positive. 


Takeaway:  We’ve found housing prices to be the single most significant factor in driving gaming revenues over the past 20 years in virtually all gaming markets across the US.


Golden Defense

This note was originally published at 8am on February 24, 2014 for Hedgeye subscribers.

“All men can see the tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved.”

-Sun Tzu


That’s most likely a familiar quote to any winner in this world – and it should be. Author John Hamm uses it effectively in his intro to chapter 5 of Unusually Excellent (pg 103) in order to link leadership to processes and plans.


As we like to say here @Hedgeye in terms of positioning for new Global Macro Themes, the plan is that the plan is going to change. That’s because real-time prices and market signals do. Our risk management process doesn’t change so much.


Neither did Team Canada’s in this weekend’s Gold medal hockey win at the Olympics. Sure, offense might win shootouts, but defense wins championships. En route to their second consecutive Olympic win, Team Canada shut out both USA and Sweden. It’s really hard to lose if you don’t get scored on (Canada allowed only 3 goals in 6 tournament games). #GoldenDefense


Golden Defense - 44


Back to the Global Macro Grind


Backcheck, Forecheck, Paycheck. That’s another saying meat-head hockey players like me use when we think about grinding out wins. Note that back-checking comes first. Defense always does.


There are obvious ways to apply this mentality to your risk management strategy. In a US stock market that literally went straight up last year, if all you did was not lose money on the short side, you probably won the season for your investors.


Sure, doing crazy stuff (like trading) may look like “short-term” tactics (primarily because they are) but don’t confuse my tactical back-checking  with a lack of a longer-term strategy to win championships.


What is your long-term strategy?


Mine is don’t lose money. That’s why how you did in 2000, 2001, 2002, 2008 and 2011 matters.  That’s also why most of our Global Macro Themes incorporate what to stay clear of (on both the long and short side) if a big macro theme starts to trend.



  1. During #GrowthAccelerating – don’t short high-short interest, high beta, growth stocks that can beat expectations
  2. During #InflationAccelerating – don’t short commodities, breakevens, etc.
  3. During #InflationAccelerating + #GrowthSlowing – don’t short bonds, utilities, or Gold

If you aren’t in the business of shorting things, substitute the word “short” with SELL! Obviously, the other side of “don’t sell” is buy or hold. And I think anyone who has bought and held commodities for the last 3 months is winning YTD too.


Update on our non-consensus 2014 call for #InflationAccelerating:

  1. US Dollar Index is down again this morning and -1.4% in the last 3 months
  2. CRB Commodities Index was up another +2.8% last week and up again this morning to +7.8% YTD
  3. US Consumer Prices (CPI) hit a 4-month headline high of +1.6% year-over-year last week (JAN report)

I know. I know. The government says there’s no inflation, and since they’ve neutered the inflation report so that the headline number can rarely remain above 4% (or below 1%) for long, academics can argue amongst themselves on that.


Reality is that market expectations trade on the rate of change for both GROWTH and INFLATION expectations. And currently the rate of change on both makes our macro call a very easy one to make:

  1. INFLATION: up from its 3yr low of +0.9% y/y CPI in OCT 2013, CPI is going towards 2%, fast, in February
  2. GROWTH: down from its Q313 sequential peak of +4.12% GDP, you’ll probably see a 2% handle in Friday’s GDP report

So, irrespective of your views on how to play Macro Defense, what if?

  1. Inflation doubles (from 1% to 2%)
  2. Growth gets cut in half (from 4% to 2%)

Market #history fans will recall that when inflation slows growth, stock markets get MULTIPLE COMPRESSION. In other words, with the SP500 trading at 16x this year’s #OldWall projection for “earnings”, all you need is 2 points of multiple compression to get you 1638 (14x) at some point this summer. If the “earnings” (and multiple on them) start to fall, it’ll get gnarly out there, faster.


And while I am sure that the “weather will turn” and that some American consumers are dumb enough to go lever themselves up with a few more houses to flip, that doesn’t change the fact that inflation will A) slow real-consumption-growth and B) have a big impact on reported US GDP via a rising “deflator” (note: the deflator, which is subtracted from GDP, hit a 50yr low last yr and is rising).


With Natural Gas (+17.7% last wk to +46.3% YTD) and Coffee price (+19.1% last wk to +50.1% YTD) #InflationAccelerating to 52-week highs last wk, #GrowthSlowing has both Utilities (XLU) and Gold +7% and +11% YTD, respectively. So don’t be short those. Buying and holding them for the last 3 months has been a #GoldenDefense. Being long the American consumer, not so much.


Our immediate-term Macro Risk Ranges are now as follows:


UST 10yr Yield 2.66-2.78%
SPX 1803-1848

VIX 13.44-16.69
USD 79.81-80.41

Brent Oil 108.54-110.69  

Gold 1306-1340


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Golden Defense - Chart of the Day


Golden Defense - Virtual Portfolio

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Punishing Her Currency

“The punishment process is as important as the reward system.”

-John Allison


As I quote one of my favorite post-2008-crash books, The Financial Crisis and The Free Market Cure (pg 177), I’m thinking more about the full body ache I have from our old-man hockey semi-final yesterday than what’s going on in the market. That’s not good.


Neither was the US stock market’s reaction to Friday’s US jobs report that “beat” expectations (must have been the weather). Stocks raged to all-time highs on the open, then got pancaked by midday. Newsflash: the monthly jobs report is a lagging indicator.


I didn’t have a good week, but it could have been worse. With the CRB Commodities Index +9.6% YTD (vs. the Dow -0.7%), this year’s Burning Buck rally in some asset prices has a lot more to do with #InflationAccelerating than anything else.


Back to the Global Macro Grind


While I am certain that if they had @CNBC Kiev, Ukraine would look just fine (Ukrainian currency crash has its stock market +29.8% YTD in Burning Currency terms); it’s not. Especially when a country’s currency is in free fall, her stock market is not the economy.


In Russian terms, Putin’s Ruble is crashing (-10% YTD) and so is his stock market (-24% since OCT and -19.7% YTD). Meanwhile the Chinese just printed a -18.1% year-over-year export disaster for FEB. The Shanghai Composite dropped -2.9% on that to -5.5% YTD.


Argentina’s Burning Currency is -17.1% YTD, but there’s probably nothing to worry about there either. Unless you are an Argentine, that is… Oh, and after trying the whole debt-levered-currency-devaluation thing, Venezuela is about to default on its debt.


In other news last week…


  1. US Dollar Index remained on its YTD lows (below @Hedgeye TAIL risk line of $81.14)
  2. US 10yr Yield popped +14bps to 2.80%, but failed to overcome @Hedgeye TREND resistance of 2.81%
  3. Coffee Prices ripped another +9.2% on the week to +74.3% YTD


No that’s not a typo – up +74.3% is the number, so whatever you do – don’t call that #InflationAccelerating.


With the CRB Foodstuffs Index +14.9% YTD, it’s not just coffee prices that are inflating:


  1. Corn was up another +5.5% last week to +13.7% YTD
  2. Soy was up another +3.1% last week to +14.2% YTD
  3. Lean Hogs were up another +5.8% last week to +24.6% YTD


Yes, basically you’re going to have to back everything out of your breakfast and call eating anything with pig in it “non-core” as the Fed tells you to consume a gluten-free Whatsapp for a buck a day instead.


Have you ever asked yourself why neither the Fed nor Bush/Obama ever talk about America’s currency?


As John Allison points out plainly on page 187 of the aforementioned book, “The fundamental issue underlying the boom-and-bust cycle in the financial industry is the lack of sound money. Unfortunately, the Fed is constantly manipulating the value of the dollar.”


And our profession gets that – or at least the machines do. It’s called Correlation Risk – and this is how it works:


  1. Down Dollar starts to trend as the Fed abandons anything that remotely resembles a two-way policy
  2. “Bad” economic news becomes good for asset price inflation, as the market front-runs the Fed easing
  3. Correlation Risk (asset price inflation trading inversely with US Dollars) starts to dominate


On that last point, here are the 30-day inverse correlations between US Dollar and the big stuff:


  1. Gold -0.88
  2. SPX -0.87
  3. CRB Index -0.75


In other words, the market calls what the Fed is signaling a Policy To Inflate (humans call it a tax). And yes, #InflationAccelerating will slow growth. That’s why you saw me buy bonds on Friday (and anything that looked like a bond, including Utilities, XLU).


Punishing The People with food, energy, rent, etc. inflation can only last for so long. Unless you think America has it in her to become Argentina, she has a tendency to rise up against these types of un-constitutional taxes. So stay tuned on that. History repeats.


The Unites States has already had two failed central banks. Between 1870 and 1913, the US experienced the greatest economic boom in history without a central bank.” –John Allison, pg 187


UST 10yr Yield 2.59-2.81%


Shanghai Comp 1

VIX 12.95-15.64

USD 79.46-80.16

Gold 1


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Punishing Her Currency - Chart of the Day

Punishing Her Currency - Virtual Portfolio

March 10, 2014

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TODAY’S S&P 500 SET-UP – March 10, 2014

As we look at today's setup for the S&P 500, the range is 29 points or 0.96% downside to 1860 and 0.58% upside to 1889.                       










THE HEDGEYE DAILY OUTLOOK - 10                                                                                                                                                                  



  • YIELD CURVE: 2.42 from 2.42
  • VIX closed at 14.11 1 day percent change of -0.70%

MACRO DATA POINTS (Bloomberg Estimates):

  • 6:15am: Fed’s Plosser speaks on panel in Paris
  • 12:40pm: Fed’s Evans to speak in Columbus, Ga.
  • U.S. Rates Weekly Agenda
  • FX Weekly Agenda


    • U.S. hold fourth round of trade negotiations for a Trans-Atlantic Trade and Investment Partnership
    • U.S. Election Wrap


  • SEC said to probe whether forex rigging distorted options, ETFs
  • Chiquita Brands to merge with Fyffes to create banana leader
  • Malaysia jet investigators struggle for clues to air mystery
  • China reports falling exports, drop in producer prices
  • Japan economy expands less than initially estimated in 4Q
  • IBM CEO Rometty says company didn’t meet expectations last yr
  •’s owners said to work with Moelis on sale of website
  • Russell Investments said to lure BX, Bain for $3b sale
  • United Rentals to buy National Pump, Gulfco for ~$780m
  • SoftBank said to ready broadband pitch on merger resistance
  • Fed’s Plosser sees high bar for change in pace of tapering
  • Tesla, Dell supplier Amtek to seek out more acquisitions
  • Ranbaxy falls after second recall of generic Lipitor in U.S.


    • Casey’s General Stores (CASY) 4pm, $0.49
    • Ferrellgas Partners (FGP) 7am, $0.85
    • FuelCell Energy (FCEL) 5:50pm, $(0.04)
    • Globalstar (GSAT) 4:05pm, $(0.05)
    • Novavax (NVAX) 4:10pm, $(0.08)
    • Perfect World (PWRD) 4:35pm, $2.98
    • Resolute Energy (REN) 6am, $0.05
    • United Natural Foods (UNFI) 4:01pm, $0.56
    • Urban Outfitters (URBN) 4pm, $0.55


  • Coutts Adds Gold as Demand in China Climbs With Ukraine Risk
  • Gold Most Bullish Since 2012 as Goldman Sees Slump: Commodities
  • Palm Reserves in Malaysia Shrink Most Since 2009 as Output Drops
  • Ukrainian Impasse Propels Bullish Corn Trades to Record: Options
  • Sugar Rallying With Cooking Oil for Merchant Fund on Less Supply
  • Copper Tumbles to 8-Month Low in London on China Demand Concern
  • Gold Extends Decline as U.S. Jobs Data Back Stimulus Reduction
  • WTI, Brent Crude Fall as China Export Drop Signals Slower Growth
  • Polar Vortex Emboldens Industry to Push Old Coal Plants: Energy
  • Rubber in Tokyo Drops Most in Two Weeks; Shanghai at Five-Yr Low
  • China Gold Demand Seen Falling 17% This Quarter Amid Price Rally
  • Thai Sugar Premium Steady Before Result of State Tender Tomorrow
  • Libya Vows to Block Tanker Attempt to Lift Oil in Rebel Port
  • Corn Extends Drop From Six-Month High as Ukraine Concern Eases

























The Hedgeye Macro Team














Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.