• run with the bulls

    get your first month

    of hedgeye free


Just Charts: The Slow Grind Continues

The table below lists our current investment ideas as well as a list of potential ideas we are in the process of evaluating (watch list).  We intend to update this table regularly and will provide detail on any material changes.

Just Charts: The Slow Grind Continues - 1


Consumer Staples outperformed the broader market last week, rising 0.4% versus the S&P500 at -0.1%. XLP is up 1.9% year-to-date vs the SPX at 0.8%. The coming week is marked by a number of earnings releases.



Earnings Calls (in EST):


Tuesday (4/29):  ADM (9am); HLF (11am)


Wednesday (4/30):  ENR (9am); SAM (5am)


Thursday (5/1):  JAH (8:30am); AVP (9am); K (9:30am); CHD (10am); CLX (1:30pm); KRFT (5pm)


Friday (5/2):  NWL (8am); EL (9:30am)



For the last two months, XLP is bullish on immediate term TRADE and intermediate term TREND durations from a quantitative set-up.

Just Charts: The Slow Grind Continues - 2


The Hedgeye U.S. Consumption Model shows a muted outlook over recent weeks, with only 5 of the 12 metrics flashing green (up from only 3 last week). 

Just Charts: The Slow Grind Continues - 3


Despite the bullish quantitative set-up for the sector, we continue to believe that the group is facing numerous headwinds, including:


  • U.S. consumption growth is slowing as inflation rises, in-line with the Macro team’s 1Q14 theme of #InflationAccelerating, and Q2 2014 theme of #ConsumerSlowing
  • The economies and currencies of the emerging market – once the sector’s greatest growth engine – remain weak with the prospect of higher inflation in 2014 eroding real growth
  • The sector is loaded with a premium valuation (P/E of 19.1x)
  • Less sector Yield Chasing as Fed continues its tapering program
  • The high frequency Bloomberg weekly U.S. Consumer Comfort Index has not seen any real improvement over the past 6 months, but improved to -25.4 versus -29.1 in the prior week

Just Charts: The Slow Grind Continues - 4

Just Charts: The Slow Grind Continues - 5

Just Charts: The Slow Grind Continues - 6



Top 5 Week-over-Week Divergent Performances:

Positive Divergence:  SODA 8.3%; HLF 4.9%; MJN 3.1%; AVP 2.3%; MDLZ 2.0%

Negative Divergence:  HSY -4.2%; POST -3.2%; KMB -2.9%; BNNY -2.7%; HAIN -2.7%



Last Week’s Research Notes


Quantitative Setup

In the charts below we look at the largest companies by market cap in the Consumer Staples space from both a quantitative perspective and fundamental aspect where we can offer one.  As you will see over time, sometimes our fundamental view does not align with the quantitative setup (though not often).


BUD – bullish beta chasing in low-beta-slow-growth (as a style factor) continues; TREND support = $104.79

Just Charts: The Slow Grind Continues - 7



DEO – someone forgot to tell DEO about the style factor party; still bearish TREND w/ resistance = $124.76

Just Charts: The Slow Grind Continues - 8



KO – big league bearish to bullish TREND reversal w/ TREND support now = $39.17

Just Charts: The Slow Grind Continues - 9



PEP – bullish TREND remains intact = $83.63 support

Just Charts: The Slow Grind Continues - 10



GIS – still one of the best looking bullish intermediate-term TRENDs on our quantitative signal = $50.11 support

Just Charts: The Slow Grind Continues - 11



MDLZ – finally showing some separation (to the upside) from our TREND support line of $34.15

Just Charts: The Slow Grind Continues - 12



KMB – in spite of this week’s correction, our intermediate-term TREND support line of $107.24 holds

Just Charts: The Slow Grind Continues - 13



PG - bullish beta chasing in low-beta-slow-growth (as a style factor) continues; TREND support = $79.71

Just Charts: The Slow Grind Continues - 14



MO – textbook bearish to bullish TREND reversal (in FEB 2014); TREND support = $36.97

Just Charts: The Slow Grind Continues - 15



PM – grinding hard to earn the style factors the market is bucking up for – TREND line = $83.84

Just Charts: The Slow Grind Continues - 16


Howard Penney

Managing Director


Matt Hedrick



Fred Masotta


The Era of The Common Man?

“One man with courage makes a majority.”

-Andrew Jackson


The broad based economic progress of the 1 period in American free-market-capitalist #history remains unrivaled. In the thick of it, many called Andrew Jackson’s 1828 sweep to become the 7th President of the United States, “the era of the common man…”


Jackson represented the victory of an expanded electorate, a rebuke of the old elite… To many Americans, the president embodied the energy, mobility, and enterprise that they believed defined their nation.” (The First Tycoon, pg 84)


Shocking, I know. The People didn’t need the Federal Reserve to believe. In fact, leaders with courage ran against it; shutting down initial iterations of a US central bank, twice! On Friday, Janet Yellen said there “may be a flaw in how the Federal Reserve forecasts inflation.” Believe her. Until we abandon this un-elected US Policy to Inflate, the common man, woman, and child in America is going to eat it.

The Era of The Common Man? - Yellen03.20.2014


Back to the Global Macro Grind


Eat it? Yep. Chow down, rinse it back with some coffee and OJ, and like it.


If you back out your rent, food, gas, education, etc. (cost of living), you may not have noticed the following last week:

  1. Corn prices up another +2.4% last week to +17.3% YTD
  2. Nickel prices up another +2.4% last week to +31.5% YTD
  3. Coffee prices up another +1.4% last week to +79.8% YTD
  4. Orange Juice up another +1.3% last week to +16.1% YTD

If you want to call that cherry picking, fine. Eat some of those too. But inflation continues to slow US consumption growth. And all 3 major US market intermediate-term TREND signals (currencies, stocks, and bonds) continue to agree with the same. On that score:

  1. US Dollar Index was down -0.1% to -0.4% YTD (and remains well below our long-term TAIL risk line of $81.17 resistance)
  2. US Consumer Discretionary (XLY) and Growth (Russell 2000) stocks were -0.5% and -1.3% last wk to -5.1% and -3.5% YTD, respectively
  3. US 10yr Treasury Bond Yield dropped another 6 basis points on the week to 2.66% (down -37 bps YTD)

Meanwhile everyone and their brother from the #OldWall in NYC to Washington and now California (PIMCO calling for “high 2% US Growth”) continue to confuse nominal growth (inflation) with real (inflation adjusted) growth.


On Wednesday the US will release GDP for the 1st quarter, and it will likely:

  1. Have a 1% handle on it (down hard from the sequential peak of +4.1% in Q413)
  2. See the Deflator (yes, you have to subtract it from nominal GDP) continue to rise from its sequential Q213 low

In other words, on the 2 core factors that matter in our GIP (Growth, inflation, Policy) model:

  1. INFLATION = will be accelerating
  2. GROWTH = will be slowing

More commonly called stagflation, the common man’s wallet gets squeezed when this starts to happen. That’s not my opinion, that’s US economic history in the post Greenspan era (Bernanke and Yellen).


This is the 3rd time Hedgeye has made a big directional call that #InflationAccelerating will slow US consumption growth, with the other two being:

  1. Q1 of 2008
  2. Q1 of 2011

Yep, it’s cyclical. And the ways to measure it in real-time are manifest. But if you want to throw a little Putin on top of your inflated corn flakes this morning (Oil prices accelerating), here are moarrr of them:

  1. US Treasury 5yr breakevens (Bernanke used these until they went against his ideology) +5bps last week and +17bps YTD
  2. CRB Foodstuffs index = +21.5% YTD and Treasury Inflation Protection (TIPs) testing YTD highs
  3. Slow-Growth #YieldChasing sub-sector styles of the US stock market like Utilities +13.5% YTD

What’s really impressive about the inflation-slows-growth trade is how obvious it is at this point. With the biotech and #SocialBubble stocks (FB, TWTR, YELP, etc.) getting pounded again on Friday (Nasdaq down -0.5% on the wk to -2.4% YTD), Utilities (XLU) closed the week up another +1.9%!


Sure, if you’re long Gold (up +0.5% last week to +8.1% YTD), Bonds, or any stock that looks like a bond, you’re having a great year. As you should be. You are in the 20% of America that A) has savings to invest into #InflationAccelerating and B) doesn’t have to eat it like the common man does.


In other news, not only is Bill Gross way late in getting bullish on US Growth, but consensus bear hedge fund bets in the bond market are. Last week’s net short position (CFTC non-commercial net futures/options contracts) in the 10yr Treasury Bond ramped to -93,722 contracts. If you have courage, you’ve been long consensus being wrong on #RatesRising all year long.


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


UST 10yr Yield 2.59-2.71%


Nasdaq 3

WTIC oil 99.98-105.61

Gold 1

Corn 4.98-5.18


Best of luck out there this week,



Keith R. McCullough
Chief Executive Officer


The Era of The Common Man? - Chart of the Day

Pucks To The Head

This note was originally published at 8am on April 14, 2014 for Hedgeye subscribers.

“When you are stuck down a well, someone is bound to throw a rock on your head.”

-Chinese Proverb


So don’t get stuck down a performance well. Rocks to the head hurt. Technically, I’m on vaca with my family this week. But, since I don’t really see what I do (read and write) as a job, I do more of the reading part while I’m watching my kids cannonball one another at the pool.


The aforementioned quote comes from a fantastic Chinese/British economic #history book titled The Opium War. It was describing how English Naval Officer, Charles Elliott, felt after Lin Zexu dumped 20,000 chests of opium into the sea.


This happened in 1839 and became “one of the most celebrated moments in 19th century Chinese history” (pg 69). But it also gave birth to a major economic phase transition. The British found a new island to anchor their opium vessels. It’s called Hong Kong. Changing their position worked.


Back to the Global Macro Grind


The Russell 2000, Nasdaq, and SP500 were down -3.6%, -3.1%, and -2.6% last week to -4.5%, -4.2%, and -1.8% for 2014 YTD. The current “corrections” for the Russell, Nasdaq, and SP500 are -8.0%, -8.2%, and -4.0%. If you are levered long high-multiple growth, those are rocks to the head.


Thankfully, the feedback from our battle tested long-only customers is that they didn’t do that. Instead, they are long of inflation in inflation terms (Food, TIPs, Gold, etc.) and they are long of US #ConsumerSlowing in slow-growth-yield-chasing terms (Utilities, Bonds, etc.).


Feedback from our most astute macro hedge fund subscribers couldn’t be better. Not only can they be long inflation slowing growth, but they can be short of who is taking the brunt of all this (US consumers) in one of the deepest and most liquid markets in the world (US Equities).


Here’s the US Equity Sector Return Score for the YTD:


  1. US Consumer Discretionary Stocks (XLY) down another -3.7% last week to -6.9% YTD
  2. S&P Utilities Sector ETF (XLU) UP another +0.6% in a down tape last week to +9.8% YTD

In other words, as the social media bubbles crash (single stocks down -30-50% from their early March peaks - and we remain The Bears on names like Twitter (TWTR) and YELP), there have been plenty of places to make money, never mind “hide” from US growth beta.


In the face of the US centric bubble popping, check out last week’s top Global Macro performers:


  1. Gold up another +0.6% to +9.6% YTD
  2. Emerging Market Equities (MSCI Index) +1.3% to +1.3% YTD
  3. Emerging Markets LATAM (MSCI) +2.2% to +2.9% YTD

Emerging what?


Yep, lots of our Global Macro value buyers were simply waiting for the rockstar of all Emerging Market Equity catalysts to re-emerge – a Down Dollar. Last week, the US Dollar Index was down another -1.2% to re-test her YTD lows; in kind, Emerging Market Equities hit YTD highs.


I know, so easy a Mucker can do it.


Back to who gets pulverized by an un-elected US Policy To Inflate (courtesy of the Federal Reserve), don’t forget that there are winners who emerge versus US #ConsumerSlowing losers à the countries who get the purchasing power of their people (stronger currencies) back.


To a Keynesian central planner, all of this sounds so 16th century solar system, I am sure. But  reality is that reality is priced in local currency terms – and YTD, for the US consumer at least, reality bites.


Here’s how some commodities (priced in Burning Bucks) did last week:


  1. Coffee up another +8.8% to +76.8% YTD
  2. Natural Gas up another +4.1% to +12.8% YTD
  3. Oil (WTIC) up +2.6% last week to +5.9 YTD

Sure, if you back all that out – and blame the weather (which last I checked is fantabulous)… there is no inflation.


But there is some serious YTD absolute and relative return performance!


Which, at the end of the day is what we are all after, is it not? Why would you pay 20x revenues for anything when 2 of the biggest Macro Risk Factors that matter to any economy (GROWTH and INFLATION) are going the wrong way?


Remember, it’s not about absolutes. It’s about rate of change, and:


  1. US inflation is accelerating
  2. US growth is slowing

Our competition can blame YTD lows in the 10yr bond yield (2.63% = down -39bps YTD) on anything but the most obvious. They can blame me, the weather – or whatever… but they’re stuck in a proverbial well of YTD macro market scores that disagree.


And unless they want to keep taking pucks to the head from a bunch of hockey players, they better find a new narrative come summer time…


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.60-2.72%

SPX 1786-1832

Nasdaq 3953-4158

VIX 14.52-17.99

USD 79.11-80.01

WTIC Oil 101.73-104.99

Gold 1300-1329


Best of luck out there this week,



Keith R. McCullough
Chief Executive Officer


Pucks To The Head - Chart of the Day


TODAY’S S&P 500 SET-UP – April 28, 2014

As we look at today's setup for the S&P 500, the range is 53 points or 1.42% downside to 1837 and 1.43% upside to 1890.                                         













  • YIELD CURVE: 2.25 from 2.23
  • VIX closed at 14.06 1 day percent change of 5.56%

MACRO DATA POINTS (Bloomberg Estimates):

  • Employment Cost Index revisions released
  • 10am: Pending Home Sales m/m, March, est. 0.7% (prior -0.8%)
  • 10:30am: Dallas Fed Mfg Activity, April, est. 6 (prior 4.9)


    • U.S., Philippines to sign defense pact amid China tensions
    • House, Senate return from 2-wk recess
    • Agriculture Sec. Tom Vilsack speaks at Bloomberg Government breakfast, 8:30am
    • Supreme Court Court releases list of cases it plans to consider, 9:30am; hears arguments in Nautilus patent case; 10am


  • Siemens pitches Alstom asset swap, wins France’s support
  • French President Hollande meeting w/GE CEO today; Siemens CEO and chairman also set to meet Hollande
  • ALSTOM STREETWRAP: GE success “better evil” for Siemens
  • Pfizer confirms proposing $98.7b AstraZeneca deal
  • Mylan’s 2nd offer for Swedish drugmaker Meda rejected
  • Merck said near consumer unit sale for $14b: Reuters
  • Bayer said to weigh sale of plastics unit amid health focus
  • Wall Street swap-trading shift abroad draws CFTC scrutiny
  • Apple-Samsung $2b patent case over Google hits last round
  • Charter said to finalize Comcast deal for subscribers: NYT
  • Hartford to sell Japan operation to Orix in $895m deal
  • Och-Ziff African Oil, mining deals probed by SEC, DOJ: WSJ
  • Pimco to BlackRock protest expansion of too-big-to-fail rules
  • Toyota said to plan to shift U.S. sales operations to Texas
  • Putin’s inner circle targeted as U.S., EU prepare sanctions
  • Goodman Fielder rejects $1.2b takeover offer from Wilmar
  • WR Grace said to weigh bid for PQ; Blackstone, KKR drop out
  • Appeals court to weigh Apple bid to delay e-book damages trial
  • General Electric, Metlife strike $1.8b Malaysia deals
  • American Airlines-US Airways merger settlement wins approval
  • China’s largest Bitcoin exchange halts merchants bank deposits


    • Armstrong World Industries (AWI) 7am, $0.44
    • Capitol Federal Financial (CFFN) 9am, $0.13
    • Charter Communications (CHTR) 8am, $(0.09)
    • CNA Financial (CNA) 6am, $0.83
    • CNO Financial (CNO) 7am, $0.27
    • Corning (GLW) 7am, $0.30
    • Ecolab (ECL) 8:30am, $0.74
    • Franklin Resources (BEN) 8:30am, $0.89
    • Laboratory of America (LH) 6:34am, $1.58
    • Loews (L) 6am, $0.70
    • National Oilwell Varco (NOV) 7am, $1.38 - Preview
    • Old National Bancorp (ONB) 9am, $0.26
    • Precision Drilling (PD CN) 6am, C$0.36 - Preview
    • Roper Industries (ROP) 7am, $1.35
    • Tenneco (TEN) 7am, $0.86


    • American Capital Agency (AGNC) 4:01pm, $0.68
    • Ameriprise Financial (AMP) 4:05pm, $1.88
    • Amkor Technology (AMKR) 4:06pm, $0.03
    • CoreLogic (CLGX) 4:10pm, $0.16
    • Crane (CR) 5:48pm, $1.05
    • General Growth Properties (GGP) 4:01pm, $0.05 - Preview
    • Hartford Financial (HIG) 4:15pm, $0.93
    • HealthSouth (HLS) 4:30pm, $0.49
    • Herbalife (HLF) 4:10pm, $1.29
    • Jacobs Engineering (JEC) 8:28pm, $0.89
    • NetSuite (N) 4:05pm, $0.02
    • Norwegian Cruise Line (NCLH) 4pm, $0.22
    • PartnerRe (PRE) 4:15pm, $2.52
    • Plum Creek Timber (PCL) 4:01pm, $0.15
    • Questcor Pharmaceuticals (QCOR) 4:01pm, $1.61
    • Range Resources (RRC) 5:01pm, $0.51
    • Rock-Tenn (RKT) 5pm, $1.53
    • STMicroelectronics (STM IM) 4:46pm, $(0.03)
    • Suncor Energy (SU CN) 10pm, C$0.96 - Preview


  • Nickel at Highest in Almost 15 Months as Sanctions Threat Looms
  • Brent Rises on Ukraine Risk With WTI After Worst Loss in 3 Weeks
  • Gold Bulls Return in Time for Rally on Haven Demand: Commodities
  • Gold Jewelers in India Betting on Festival Rush to Halt Slowdown
  • Crop Futures Climb as Rainy U.S. Weather May Slow Planting Pace
  • Gold Trades Near 1-Week High on Ukraine Crisis as Dollar Slips
  • Arabica Falls for 2nd Session on Profit Taking; Sugar Also Drops
  • Rebar Falls as Iron Ore Drops Amid Reports of Financing Curbs
  • Chavez Food Utopia Withers as Development Plans Left Unfulfilled
  • Hedge Funds Wager on U.S. Gasoline Gains as Exports Rise: Energy
  • Dairy Prices Seen Declining by Rabobank as Chinese Demand Slows
  • Egypt Shariah Loans Rise on Record Sugar Deal: Islamic Finance
  • China Metals Tied Up in Financing Is Mystery Written By Traders
  • China March Gold Imports Drop as Local Discount Curbs Shipments

























The Hedgeye Macro Team














April 28, 2014

April 28, 2014 - Slide1 


April 28, 2014 - Slide2

April 28, 2014 - Slide3

April 28, 2014 - Slide4

April 28, 2014 - Slide5

April 28, 2014 - Slide6 

April 28, 2014 - Slide7

April 28, 2014 - Slide8 



April 28, 2014 - Slide9

April 28, 2014 - Slide10

April 28, 2014 - Slide11
April 28, 2014 - Slide12

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.