• run with the bulls

    get your first month

    of hedgeye free


Back To The Future

This note was originally published at 8am on March 13, 2014 for Hedgeye subscribers.

“The future is here. It’s just not evenly distributed yet.”

-William Gibson


While you might think it’s 1999. It’s not, yet. According to the Wall Street Journal yesterday, 74% of companies that have come public in the last 6 months don’t make money. So it’s not the mother of all bubbles, yet – because in 2000, that percentage was 80%.


The aforementioned quote comes from the beginning of chapter 1 of a fantastic book I reviewed in the Early Look a few years ago titled, The World in 2050Four Forces Shaping Civilization’s Northern Future, by Laurence C. Smith.


My defense partner, Daryl G. Jones, will be hosting Mr. Smith on an Institutional Conference Call at 1PM EST today. Please ping Sales@Hedgeye.com if you’d like access. Global water shortages and NORCs (Northern Rim Countries) will be focus topics, not Candy Crush’s pending $7 billion dollar back-to-the-future-bubble IPO.


Back To The Future - earth


Back to the Global Macro Grind


The Dow Jones Index is -1.4% YTD and Gold is ripping (+14.1% YTD). The US Dollar is being burnt to a crisp (fresh YTD lows) this morning too. Calling the froth in the US equity market (companies trading at 20x revenues with no earnings) is getting easier, by the day.


But have no fear, the future of America is here.


And it’s definitely not evenly distributed. That’s why the politicians who have devalued America’s currency are focused on whining about the “inequality” that their policies created. That’s what Policies to Inflate do. They pay the bailed out banker who is bringing Crush public, and they pulverize the poor.


But everyone reading this rant is rich, right? So just suck it up and buy inflation protection (TIP) or Gold (GLD) or anything that looks like a bond (Utilities, XLU) as you try to keep up with Elmer Fudd’s pesky wabbit (inflation).


But, but, the SP500 rallied into the close yesterday (on no-volume), and is up +1% YTD:

  1. Yep, who cares?
  2. It was led by Utilities (XLU) which ripped a +1.3% move for the home team on the day (+6.1% YTD)
  3. And Consumer Discretionary (XLY) stocks closed down -0.15% to -0.16% YTD

That’s right, “Duck Wabbit, Duck!”


You can go back to the future and remind yourself that this happened in both Q1 of 2008 and 2011. If you’re American, your economy is now the rabbit. You have to burn your savings and just buy whatever you can that will inflate at a faster rate.


Cool, eh? Go flip a house before prices crash again.


Larry Smith will walk through the nonsense of all this groupthink on our conference call today, but here’s the upshot about civilizations who starve long-term investment for the sake of short-term-pay-me-now-Kinder-Morgan-dividend pops….

  1. They create unintended consequences (i.e. underinvestment in long-term fixed capital projects that have positive ROIC)
  2. Which, in turn, create shortages in critical capacity
  3. Which then perpetuate #InflationAccelerating

I know, paying $2.89 for a bottle of water isn’t inflationary. Eat an iPad.


And if you’re not into the whole Republican/Democrat, Nixon-Carter, Burning Buck and US Debt Monetization thing, move to a country that gets what both Reagan and Clinton did – like New Zealand!


BREAKING NEWS: New Zealand Raises Key Rate to Become 1st Developed Nation To Tighten


Love that.


Oh, and the New Zealand stock market must have gotten crushed on #RatesRising, right?



  1. New Zealand raised rates on savings accounts with a +25 beep bump to 2.75% on its base rate
  2. The New Zealand Kiwi (it’s currency) strengthened alongside interest rates
  3. The New Zealand stock market closed UP on the day to +7.9% YTD

So why bang your head against a wall trying to call the Dow “cheap” when its down YTD and you can buy a country’s currency and stock market that is emulating the best of the best in American pro-growth 1980s and 1990s policy history?


As Marty (Michael J. Fox) said in Back To The Future, “maybe you weren’t ready for that… but your kids are going to love it.”


Our immediate-term TRADE risk ranges across Global Macro are now as follows:


UST 10yr Yield 2.60-2.80%

SPX 1845-1888

VIX 13.18-15.75

USD 79.31-80.11

Brent 106.37-110.44

Gold 1342-1375


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Back To The Future - NZD


Back To The Future - rt7

ICI Fund Flow Survey - Equity Funds Showing Signs of Weakness

Takeaway: In the most recent week, domestic equity mutual funds had drawdowns with fixed income taking the baton as the more stable asset class

Investment Company Institute Mutual Fund Data and ETF Money Flow:


In the most recent week, while fixed income inflow wasn't historically impressive considering the significant inflows in the beginning of last year, bonds have clearly been the more stable asset class year-to-date considering declining equity trends especially within domestic equity funds recently:


Total equity mutual funds produced the first week of net outflow in 6 weeks with $968 million of net redemptions, a deceleration from the $3.1 billion inflow the week prior. The $968 million outflow was caused by domestic fund losses during the most recent 5 day period ending March 19th, with $3.8 billion flowing out of U.S. equity funds versus $2.8 billion that flowed into international stock funds. The 2014 running weekly average inflow for equity mutual funds is now $4.3 billion, an improvement from the $3.0 billion weekly average inflow for 2013. 


Fixed income mutual funds continued improving fund flow trends for the week ending March 19th with $2.4 billion flowing into all fixed income funds. The breakout of improving bond fund inflow amounted to $2.2 billion into taxable products and a $237 million inflow into tax-free or municipal products. The inflow into taxable products this week was 6th consecutive week of positive flow and the inflow into municipal or tax-free products was the 10th consecutive week of positive subscriptions. The 2014 weekly average for fixed income mutual funds now stands at a $1.5 billion weekly inflow, an improvement from 2013's weekly average outflow of $1.5 billion but a far cry from the $5.8 billion weekly average inflow from 2012 (our view of the blow off top in bond fund inflow).


ETFs experienced positive trends during the week, with a very strong week of subscriptions into stock ETFs with $10.1 billion in net inflow with bond ETFs experiencing a slightly above average inflow of $1.3 billion for the 5 day period. The 2014 weekly averages are now a $620 million weekly inflow for equity ETFs and a $926 million weekly inflow for fixed income ETFs. 


The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a positive $5.4 billion spread for the week ($9.2 billion of total equity inflow versus the $3.8 billion inflow within fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52 week moving average has been $7.2 billion (more positive money flow to equities), with a 52 week high of $31.0 billion (more positive money flow to equities) and a 52 week low of -$37.4 billion (negative numbers imply more positive money flow to bonds for the week). 


Mutual fund flow data is collected weekly from the Investment Company Institute (ICI) and represents a survey of 95% of the investment management industry's mutual fund assets. Mutual fund data largely reflects the actions of retail investors. Exchange traded fund (ETF) information is extracted from Bloomberg and is matched to the same weekly reporting schedule as the ICI mutual fund data. According to industry leader Blackrock (BLK), U.S. ETF participation is 60% institutional investors and 40% retail investors.   



ICI Fund Flow Survey - Equity Funds Showing Signs of Weakness - ICI chart AA


ICI Fund Flow Survey - Equity Funds Showing Signs of Weakness - ICI chart BB



Most Recent 12 Week Flow in Millions by Mutual Fund Product:



ICI Fund Flow Survey - Equity Funds Showing Signs of Weakness - ICI chart 1


ICI Fund Flow Survey - Equity Funds Showing Signs of Weakness - ICI chart 2


ICI Fund Flow Survey - Equity Funds Showing Signs of Weakness - ICI chart 3


ICI Fund Flow Survey - Equity Funds Showing Signs of Weakness - ICI chart 4


ICI Fund Flow Survey - Equity Funds Showing Signs of Weakness - ICI chart 5



Most Recent 12 Week Flow Within Equity and Fixed Income Exchange Traded Funds:



ICI Fund Flow Survey - Equity Funds Showing Signs of Weakness - ICI chart 6


ICI Fund Flow Survey - Equity Funds Showing Signs of Weakness - ICI chart 7



Net Results:



The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a positive $5.4 billion spread for the week ($9.2 billion of total equity inflow versus the $3.8 billion outflow within fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52 week moving average has been $7.2 billion (more positive money flow to equities), with a 52 week high of $31.0 billion (more positive money flow to equities) and a 52 week low of -$37.4 billion (negative numbers imply more positive money flow to bonds for the week).



ICI Fund Flow Survey - Equity Funds Showing Signs of Weakness - ICI chart 8 




Jonathan Casteleyn, CFA, CMT 




Joshua Steiner, CFA



TODAY’S S&P 500 SET-UP – March 27, 2014

As we look at today's setup for the S&P 500, the range is 36 points or 0.57% downside to 1842 and 1.37% upside to 1878.                                   










THE HEDGEYE DAILY OUTLOOK - 10                                                                                                                                                                  



  • YIELD CURVE: 2.25 from 2.25
  • VIX closed at 14.93 1 day percent change of 6.49%

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: GDP q/q, 4Q final, est. 2.7% (prior 2.4%)
  • Personal Consumption, 4Q, est. 2.7% (prior 2.6%)
  • GDP Price Index, 4Q, est. 1.6% (prior 1.6%)
  • Core PCE q/q, 4Q, est. 1.3% (prior 1.3%)
  • 8:30am: Fed’s Pianalto speaks in Dayton, Ohio
  • 8:30am: Jobless Claims, March 21, est. 323k (prior 320k)
  • Continuing Claims, March 14, est. 2.882m (prior 2.889m)
  • 9:45am: Bloomberg Consumer Comfort, March 23 (prior -29.0)
  • 10am: Pending Home Sales m/m, Feb., est. 0.2% (prior 0.1%)
  • Pending Home Sales y/y, Feb., est. -9% (prior -9.1%)
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas storage change
  • 11am: Kansas City Fed Manufacturing, March, est. 5 (prior 4)
  • 9:30pm: Fed’s Evans speaks in Hong Kong


    • FY2015 budget hearings/panels:
    • 10am: House Appropriations panel: Army Sec. John McHugh, Army Chief of Staff Raymond Odierno
    • 10am: House Appropriations panel EPA Administrator Gina McCarthy
    • 10am:House Appropriations panel: FDA Commissioner Margaret Hamburg
    • 1:30pm: House Appropriations panel:VA Sec. Eric Shinseki
    • 10am: Senate Judiciary Cmte marks up S. 1720, Patent Transparency and Improvements Act
    • 12:30pm: Zillow CEO Spencer Rascoff at Advisory Cmte to the Congressional Internet Caucus
    • Obama meets Pope Francis in Vatican City, President Giorgio Napolitano, Prime Minister Matteo Renzi of Italy in Rome
    • *U.S. ELECTION WRAP: Democrats’ Senate Playbook; GOP Strategy


  • Citigroup fails Fed’s stress test as BofA gets div. boost
  • Fed Capital Wrap: Who boosted dividends?
  • RBS stress test failure may hinder sale of U.S. unit
  • UBS said to suspend FX traders in New York, Zurich, Singapore
  • Yahoo Japan to buy EAccess from SoftBank for $3.17b
  • IMF announces staff level pact on Ukraine bailout loan
  • Malaysian air tragedy families seeking data from airline, Boeing
  • Babcock to buy helicopter provider Avincis for $1.52b
  • Facebook seen struggling to win developers for virtual plans
  • Sprint planning to offer low-cost airwaves to rural users
  • Boeing splits new ANA plane order with Airbus
  • Twitter preparing new music strategy, WSJ says
  • Tencent leads Asian internet shr drop; off most since 2011
  • Essex Property to replace Cliffs Natural in S&P 500
  • Microsoft to unveil Office for iPad program today
  • ProSiebenSat.1 buys 20% of YouTube video maker for web growth


    • Accenture PLC (ACN) 7am, $1.04
    • Commercial Metals Co (CMC) 7am, $0.10
    • Conn’s (CONN) 7am, $0.78
    • Fred’s (FRED) 7:45am, $0.15
    • GameStop (GME) 8:30am, $1.93 - Preview
    • Leidos Holdings (LDOS) 6am, $0.45
    • Lululemon Athletica (LULU) 7:15am, $0.72 - Preview
    • Signet Jewelers (SIG) 6:30am, $2.15
    • Winnebago Industries (WGO) 7am, $0.30
    • Worthington Industries (WOR) 8:30am, $0.58


    • Oxford Industries (OXM) 5:30pm, $0.86
    • Progress Software (PRGS) 4:15pm, $0.28
    • Red Hat (RHT) 4:04pm, $0.37 - Preview
    • Restoration Hardware Holdings (RH) 4:02pm, $0.83


  • Gold Declines to Six-Week Low on Outlook for Less U.S. Stimulus
  • Top Emerald Miner Targets Colombia Grappling With Gemstone Mafia
  • Chinese Pigs Eating Soy Cut U.S. Supply to 1965 Low: Commodities
  • WTI Near One-Week High as Cushing Inventories Fall; Brent Steady
  • Sugar Output in India Seen Jumping as Subsidy Boosts Exports
  • Copper Rises as Investors Unwinding Quarterly Bets: LME Preview
  • Sugar Rises for Fourth Session on El Nino Worries; Cocoa Falls
  • Rusal Wins U.K. Lawsuit Challenging LME Warehousing Rules
  • Soybeans Climb to One-Week High as U.S. Reserves Seen Declining
  • Gold Imports by India Seen Rebounding by Billionaire Jeweler
  • Soros-Endorsed Sale of U.S. Oil Reserves Seen as Russian Penalty
  • Oil-Price Gains Seen by Investors Shifting Cash Into Energy ETFs
  • Iraq Oil Income to Jump on Decades-High Output: Chart of the Day
  • Singapore Exchange Said to Plan Starting Physical Gold Trade

























The Hedgeye Macro Team














the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

Today at 11am EST: Call With LOGIC President on E-Cigs

Today at 11am EST we continue our Speaker Series on electronic cigarettes with Miguel Martin, President of leading e-cig manufacturer LOGIC.


LOGIC, a closely held company, is an industry leader and has the #2 national brand in unit and dollar share for C-Stores in the United States, according to Nielsen data.


Please send any questions for Miguel to  and he will answer them following his prepared remarks.



  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 951384#
  • Materials: CLICK HERE (materials will be available approximately one hour prior to the start of the call)



  • Key industry developments and trends
  • What the regulatory outlook looks like in the U.S. and abroad
  • LOGIC’s market share and product offering



Martin began his career at Philip Morris USA and over the course of 18 years served in various sales and marketing roles. He is the former senior Vice President and General Manager of Altria Sales & Distribution, where he led all merchandising and distribution services for Philip Morris USA, U.S. Smokeless Tobacco Co. and John Middleton. He joined LOGIC as President in July 2013.



LOGIC began distribution in 2010, and as of March 2014, is available in more than 50,000 retail outlets in the United States. The privately held company began in Livingston, New Jersey and is now based out of a new headquarters in Pompano Beach, Florida.


Please email  for more information.


March 27, 2014

March 27, 2014 - Slide1



March 27, 2014 - Slide2

March 27, 2014 - Slide3

March 27, 2014 - Slide4

March 27, 2014 - Slide5

March 27, 2014 - Slide6



March 27, 2014 - Slide7

March 27, 2014 - Slide8

March 27, 2014 - Slide9

March 27, 2014 - Slide10

March 27, 2014 - Slide11
March 27, 2014 - Slide12

Retail Callouts (3/27): TGT, WMT, KSS, M, ADIBOK/NKE, COST

Takeaway: TGT declaring victory prematurely. WMT last in grocery survey. Levi’s cuts 5% of workers. Brookstone preps Ch11. KSS $175 price point?



    RH - Earnings Call: Thursday 3/27, 5:00pm


  • FINL - Earnings Call: Friday 3/28, 8:30am




TGT - Target, Visa Say Fraud Limited in Wake of Data Breach



  • "Target Corp. said it has seen relatively little fraudulent activity on its cards following a massive data breach over the holidays...Target Chief Financial Officer John Mulligan, speaking at a Senate Commerce Committee hearing Wednesday, said there has been $2 million in fraud on the Visa credit cards it issues and none on Target's store-issued debit cards."
  • "Ellen Richey, chief legal officer at Visa Inc., said the percentage of cards stolen during the Target breach that have been used for fraud is much lower than the 2% to 5% rate that the card issuer normally sees in such circumstances due to the relatively quick notification of the breach."


Takeaway: The actual degree of fraud probably does not matter as much to consumers as the simple fact that their data was unknowingly handed out to people intending to do harm. The bottom line is that Target might be breathing a mini sigh of relief here -- which might be warranted as it relates to its own liability for damages done. But the big challenge is regaining customer trust. We still think that will take upwards of 2-years.


LS&Co. - Levi's Restructuring Will Cut 800 Jobs



  • "Levi Strauss & Co. said it is restructuring operations — resulting in the loss of 800 jobs — through a global productivity initiative to occur in phases over the next 12 to 18 months."
  • "The initiative to streamline operations, when complete, is expected to result in an annualized cost savings of $175 million to $200 million."
  • "This first phase will result in the elimination of 800 positions, or 20 percent of Levi’s nonretail and nonmanufacturing staff. The cuts will eliminate management layers and remove duplicative roles, plus regroup country clusters and incorporate other structural changes, the company said...the company said it employed 16,000 people globally as of Nov. 24, when its last fiscal year ended."


Takeaway: This is a big deal for Levi's. 800 employees might not seem like a huge deal for most companies, but this is 5% of the company's workforce. There's got to be something other than just employee cuts at play here, because the math suggests that the average employee cost is $250,000, which is way too high given that most of the cuts will be administrative.


WMT - Wegmans, Trader Joe's top supermarket ratings; Walmart at bottom



  • "Thousands of subscribers to the world's largest independent product-testing organization weighed in on grocery shopping via Consumer Reports’ latest survey – and gave Wegmans, Trader Joe's, Publix, Costco and Sprouts the highest scores overall among 55 of the nation's major grocery stores."
  • "Walmart landed at the bottom of the ratings, based on a survey of the 27,208 subscribers."
  • "The biggest gripe overall: Not enough open checkouts (cited by 19% of shoppers), followed by congested aisles, out-of-stock advertised specials, and lack of choice."


Takeaway: Not a surprise that Trader Joe's is near the top of the list. Though notable that Whole Foods is nowhere to be found. While we always look at these surveys with a very critical eye, if there's one organization we'll always give the benefit of the doubt, it's Consumer Reports.  Wal-Mart bringing up the rear is simply embarrassing. Lack of checkouts, out of stocks, lack of choice -- not the factors WMT wants to see cited by its customers.



ADDYY - Pharrell to Collaborate With Adidas



  • "...Williams today will reveal that he has been tapped as Adidas’ newest collaborator."
  • "Following in the footsteps of Raf Simons, Yohji Yamamoto and Rick Owens, Williams will launch his new line of products for Adidas Originals later this summer. The Simons, Yamamoto and Owens collaborations continue, meanwhile."
  • "The collection will be the latest in a string of fashion tie-ups for the 40-year-old producer, singer and fashion designer — who already is working with G-Star, Comme des Garçons on a fragrance line, Moncler on sunglasses and Uniqlo on a shirt collaboration. That is on top of his own collection, Billionaire Boys Club, and in the wake of past collaborations with brands such as Louis Vuitton."


Takeaway: Hardly a threat to Nike. Adidas has been doing these celebrity endorsements for years, and it's taken them into product areas where Nike simply does not belong. If Pharrell could dunk, throw a 95mph fastball, or run a sub-4-minute mile, then Nike might go there. The endorsement strategies for these two companies could not be more different.


KSS - Elie Tahari to Partner with Kohl’s for Next DesigNation Collection



  • "Kohl’s Department Stores today announced Elie Tahari will design the retailer’s fifth DesigNation limited-edition collection...The capsule ...will feature apparel for her and will be available exclusively at Kohl’s and Kohls.com beginning fall 2014."
  • "His DesigNation collection will...include dresses, sweaters, knit tops and bottoms in shades of blue, black and ivory, all at an incredible value. Retail prices for the collection will range from $40 to $175."


Takeaway: $175 price point seems a little steep for KSS - even if it's for Elie Tahari. We wonder what the shopper profile looks like for these DesigNation capsules.




M - Tony Spring Shapes Bloomingdale's Team



  • "WWD has learned that [Tony Spring, the new chairman and chief executive officer of Bloomingdale’s] has just triggered his first management changes involving reorganizing responsibilities at the highest rung. Along with the team, he’s identifying categories and services the company could develop to broaden the offering and further the store’s growth — from food to electronics to additional customer services."
  • "Among the management shifts, Francine Klein has been promoted to vice chairman, from executive vice president and general merchandise manager."
  • "Now reporting to Klein are two senior vice presidents: Arnie Orlick, outlets, and Anne Bridges, omnichannel experience and technology."
  • "Frank Doroff, vice chairman, will add new businesses and concessions to his current responsibilities for ready-to-wear and bloomingdales.com. Patricia Chadwick continues as senior vice president for new businesses and concessions, and will now report directly to Doroff."
  • "Charles Anderson, executive vice president and director of stores, will add store operations to his duties. Jay Fogg, senior vice president of store operations, will report to Anderson."


Brookstone - Brookstone, Specialty Retailer, Preparing For Bankruptcy Filing



  • "Brookstone Inc...is preparing to file for bankruptcy protection as early as Sunday, with a plan in place to be bought by another specialty retailer, people familiar with the matter said."
  • "...Spencer Spirit Holdings Inc., which owns Spencer's and costume retailer Spirit, has been in discussions with Brookstone for weeks, the people said, as Brookstone battles disappointing sales, weak liquidity and a hefty debt load. The two parties are hoping to finalize sale paperwork over the weekend leading up to a bankruptcy filing, they said."
  • "Spencer Spirit Holdings is expected to pay around $120 million for Brookstone, the people said. Brookstone has about $140 million in debt."

Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.