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No Man's Land

Client Talking Points


One-day down versus the US Dollar does not a Hedgeye TREND make. If the EUR/USD were to snap $1.37 I’d take ECB President Mario Draghi’s comments more seriously. I think he’s just jawboning for the French and Italian bureaucrats, for now.


There was a big standout to the bullish side overnight with the BSE Sensex closing up another +2.5% to +8.4% year-to-date. Under a Down Dollar macro scenario, you want to be buying our favorite Emerging Markets.


I guess consensus bond bears tried to rally the 10-year yield every day this week, and failed. We’re in no man’s land (for US growth equities) if this thing closes and remains under our TAIL risk line of 2.60%. Watch that closely.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

Hologic is emerging from an extremely tough period which has left investors wary of further missteps. In our view, Hologic and its new management are set to show solid growth over the next several years. We have built two survey tools to track and forecast the two critical elements that will drive this acceleration.  The first survey tool measures 3-D Mammography placements every month.  Recently we have detected acceleration in month over month placements.  When Hologic finally receives a reimbursement code from Medicare, placements will accelerate further, perhaps even sooner.  With our survey, we'll see it real time. In addition to our mammography survey. We've been running a monthly survey of OB/GYNs asking them questions to help us forecast the rest of Hologic's businesses, some of which have been faced with significant headwinds.  Based on our survey, we think those headwinds are fading. If the Affordable Care Act actually manages to reduce the number of uninsured, Hologic is one of the best positioned companies.


Construction activity remains cyclically depressed, but has likely begun the long process of recovery.  A large multi-year rebound in construction should provide a tailwind to OC shares that the market appears to be underestimating.  Both residential and nonresidential construction in the U.S. would need to roughly double to reach post-war demographic norms.  As credit returns to the market and government funded construction begins to rebound, construction markets should make steady gains in coming years, quarterly weather aside, supporting OC’s revenue and capacity utilization.


Darden is the world’s largest full service restaurant company. The company operates +2000 restaurants in the U.S. and Canada, including Olive Garden, Red Lobster, LongHorn and Capital Grille. Management has been under a firestorm of criticism for poor performance. Hedgeye's Howard Penney has been at the forefront of this activist movement since early 2013, when he first identified the potential for unleashing significant value creation for Darden shareholders. Less than a year later, it looks like Penney’s plan is coming to fruition. Penney (who thinks DRI is grossly mismanaged and in need of a major overhaul) believes activists will drive material change at Darden. This would obviously be extremely bullish for shareholders and could happen fairly soon driving shares materially higher.

Three for the Road


RUSSIA: now that its not -20% YTD, great spot to re-short $RSX @KeithMcCullough


“It’s easier to go down a hill than up, but the view is from the top.” – Arnold Bennett


The class of 2014 expects to make bigger bucks than those who graduated the year before, but they're already behind in the first step: getting a job. Only 11% secured a job two months before graduation. Nearly 80% of those surveyed are facing at least $10,000 in loans. (CNN)

CHART OF THE DAY: Explain This Chart Without Saying "Valuation"


CHART OF THE DAY: Explain This Chart Without Saying "Valuation" - Chart of the Day

Muscle Hamsters

“Your job is to coach the team I give you.”

-Sonny Weaver Jr.


That’s a Kevin Costner quote from the new NFL movie my wife and I went to see on date night a few weeks back called Draft Day. The movie is somewhat contrived but, at the same time, somewhat real. Sort of like a nickname.


Imagine your nickname was the Muscle Hamster? As I was watching the actual NFL Draft last night with some of Hedgeye’s former college football boys (Casey Flavin, Darius Dale, and Ryan Fodor), they were trying to explain to me why they call him the hamster.


Like most things in life, I don’t totally get it until I see it. One pic of #22 RB for the Tampa Bay Bucs, Doug Martin, says 1,000 words. The dude is 5’9 and weighs 215lbs. He might not like the nickname, but he definitely looks like it.


Muscle Hamsters - 55


Back to the Global Macro Grind


If you’re a levered long high-multiple-growth-momentum-chaser, you may not like the complexion of the US stock market this year, but that doesn’t change what it’s become – a slow-growth-yield-chaser.


If we’ve shown you this pic 100 times in 2014, it probably feels like 1,000:


  1. Utilities (XLU) are +13% YTD
  2. Consumer Discretionary (XLY) stocks are -5% YTD


If you don’t like the Sector Variance that’s developing out there, here’s another pic:


  1. Russell2000 is -9.1% from its all-time-bubble-peak in March…
  2. Whereas the SP500 is only -0.8% from her all-time-twitter-muscles-but-but-the-market-isn’t-down-yet peak


Or you can #SnapChat some of the dirtier growth pics:


  1. Twitter (TWTR) -49%
  2. FireEye (FEYE) -37%
  3. Amazon (AMZN) -28%
  4. Yelp (YELP) -23%
  5. Zulily (ZU) -20%


No one likes to be called dirty. I know. I am sorry. But the truth is that some of these charts are filthy.


In reviewing all the tapes, the Draft Day Hedgeye Playbook remains the same:


  1. A Down Dollar Policy To Inflate ultimately drives #InflationAccelerating
  2. As real-world inflation accelerates, real (inflation adjusted) consumption growth slows
  3. And, as 71% of GDP (consumption) slows, US growth slows


“So”, if you want to win this year, you’re chasing the muscle-hamster-wheel that the Fed has trained you on and praying that no one knocks the entire cage of interconnected risk over. That would suck; especially since we’re all in this #YieldChasing thing together.


Yep, we’re all out in the open doing things we naturally wouldn’t do (hamsters are crepuscular, which means that if they weren’t centrally planned to run around in a cage, they’d stay underground in order to avoid being eaten).


And since doing what you shouldn’t naturally do only works if you genuinely believe that this time is different (try buying the company with no earnings at 15x sales again), you just have to get on that damn performance chasing wheel and run!


Run, muscle hamsters, run!


Because, as long as you can outrun the 80% of funds that can’t beat a bloated SP500 beta anymore, you will live to pay peak cost of living in America for another day!


Our immediate-term Global Macro Risk Ranges are now (today, in brackets I have our intermediate-term TREND signal as well):


UST 10yr Yield 2.56-2.64% (bearish)

SPX 1 (bullish)

RUT 1087-1118 (bearish)

Nikkei 14004-14348 (bearish)


VIX 12.96-14.52 (neutral)

USD 79.01-79.74 (bearish)

EUR/USD 1.37-1.39 (bullish)

Pound 1.68-1.70 (bullish)


WTIC oil 98.99-102.27 (bullish)

NatGas 4.52-4.81 (bullish)

Gold 1 (bullish)

Corn 5.05-5.25 (bullish)


Best of luck out there today,



Muscle Hamsters - Chart of the Day

Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

Harmonious Submission?

This note was originally published at 8am on April 25, 2014 for Hedgeye subscribers.

“Confucius preached a philosophy of harmonious submission.”

-Julia Lovell


The Chinese world, he believed, would prosper not through violence, but through careful maintenance of hierarchy” (The Opium War, pg 84). Putin is not Chinese. And most American patriots don’t harmoniously submit to class hierarchy or what the government tells them about inflation either.


If you believe that a country’s monetary policy is not causal to both the value of its currency and the domestic inflation that is priced in that currency, you are submitting to one of the great academic frauds of the 21st century. 

Harmonious Submission? - poot

If Putin didn’t believe that the only way to stop the Russian Ruble from crashing further was to raise interest rates, why has he done that, twice, since March? Ruble down = inflation up = social unrest up. If you want someone to preach that, Chavez is dead.


Back to the Global Macro Grind


I know, what a cheery note to wake up to. After watching the social and biotech bubble stocks close down on the day yesterday, I’m all beared up and grumpy. Inclusive of the iSplit ugrade from AAPL yesterday, don’t forget the Nasdaq is still -4.8% from its 2014 bubble high.


To review what every population since the beginning of, well, time has been beared up about:

  1. DOWN currency
  2. UP inflation
  3. DOWN real, inflation adjusted, economic growth


Now, to be fair, if you are long of either cost of living (inflation) and/or the output of Americans getting paid nominal (slow growth), you are absolutely crushing it for 2014 YTD. Here’s the Global Macro asset allocation that is putting a smile on that grumpy Mucker face:

  1. Long Inflation via inflation (commodities and/or companies, like Energy (XLE +6% YTD), who benefit from inflation)
  2. Long inflation via inflation protection (TIPs)
  3. Long inflation slowing growth via Gold, Bonds – or anything that looks like a bond (Utilities, REITS, etc.)


But, if you are long growth (real, not nominal) in countries like:

  1. Japan
  2. USA
  3. Russia


You are not smiling. Countries attempting to have their people submit to the broken promise of currency devaluation via debt monetization being the best long term path to income disparity… not good.

  1. Japanese Equities -10.9% YTD
  2. US Consumer Discretionary Equities (XLY) -3.5% YTD
  3. Russian Equities crashing -22% YTD


Putin’s issues are much more visible than Japan’s right now (BREAKING: “Tokyo Inflation Quickens To Fastest Since 1992” –Bloomberg), because most humans (not you!) are too economically illiterate to know the difference between nominal and real growth, until it’s too late. So you just need to front-run them.


For a market based economy, when is it too late?

  1. When your currency is crashing and local inflation starts to rip your people a new one
  2. Then your stock market starts to crash…
  3. And finally, your bond market starts to care about the causal currency and inflation risk factors, all at once


Right now, that’s Russia. Putin’s 10yr $10B bond auction effectively failed earlier this week, so this morning (after raising rates from 5.5% to 7% last month) he had his boys raise rates from 7% to 7.5% in order to “protect the people from inflation.”

Harmonious Submission? - poot1

I‘m hearing he bought Russia’s largest social media company (and probably had a few fingers lopped off a few Ruskies who weren’t cooperating harmoniously with his narrative too), but that’s just a rumor!


Putin gets paid in Petro Dollars. So I wouldn’t be surprised if he tries to solve for the aforementioned trifecta of sovereign risk (Russian CDS up to 282 bps wide now – a 2 yr high) by firing up the geopolitical risk news flow. That, and team Krugman/Japan/USA printing more moneys than god could, tends to be bullish for oil.


It’s too bad US Consumers can’t get an iSplit at the pump. Submitting to ideas like that would require Michael Lewis and Janet Yellen to team up on 60 Minutes Sunday night, and announce that US monetary policy is broken, and we need to raise interest rates to protect the purchasing power of the “little guy.”


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.59-2.71%

USD 79.34-80.03

Brent Oil 109.12-110.86

Natural Gas 4.55-4.81

Gold 1271-1325

Corn 4.95-5.12


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer

Harmonious Submission? - Chart of the Day

May 9, 2104

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TODAY’S S&P 500 SET-UP – May 9, 2014

As we look at today's setup for the S&P 500, the range is 27 points or 0.78% downside to 1861 and 0.66% upside to 1888.                                              













  • YIELD CURVE: 2.22 from 2.23
  • VIX closed at 13.43 1 day percent change of 0.22%


MACRO DATA POINTS (Bloomberg Estimates):

  • 10am: JOLTs Job Openings, March, est. 4.100m (prior 4.173m)
  • 10am: Wholesale Inventories m/m, March, est. 0.5% (prior 0.5%)
  • 11am: Fed to purchase $1.5b-$2b notes in 2020-2021 sector
  • 1pm: Baker Hughes rig count
  • 12pm: Fed’s Fisher speaks in New Orleans
  • 8:10pm: Fed’s Kocherlakota speaks in St. Paul, Minn.


    • 12:50pm: CFPB Director Richard Cordray speaks at Federal Reserve Bank of Chicago’s conf. on Bank Structure & Competition
    • 12:55pm: President Obama speaks on energy efficiency in Calif.
    • U.S. ELECTION WRAP: Benghazi Political Risk; Bitcoins for PACs


  • Apple said near buying Beats Electronics for $3.2b
  • Apple to move up iPhone 6 sales date by a mo.: Eco. Daily News
  • Omnicom, Publicis abandon $35b plan for advertising merger
  • Mitsubishi UFJ said to weigh offer for BNY corporate trust unit
  • Key Senate Democrats said to reject Fannie Mae overhaul measure
  • Marchionne to locate Fiat Chrysler headquarters in London
  • Winklevoss twins seek Nasdaq listing for Bitcoin exchange fund
  • RadioShack will close fewer stores as it contends with lenders
  • Twitter COO Rowghani sells part of stake as IPO lockup expires
  • U.S. administration reviewing ban on crude oil exports: FT
  • Telefonica earnings miss estimates as demand in Spain falls
  • Vestas beats ests., posts unexpected 2nd straight qtrly profit
  • Man Group assets increase 1.7% to $55b on GLG gain
  • China’s inflation decelerates to slowest pace in 18 months
  • U.S. Retail Sales, Yellen, BOE, Japan GDP: Wk Ahead May 10-17


    • Bloomin’ Brands (BLMN) 7am, $0.47
    • Broadridge Financial (BR) 7am, $0.25
    • Chiquita Brands (CQB) 8:01am, $0.14
    • EchoStar (SATS) 8am, $0.03
    • Enerplus (ERF CN) 6am, C$0.26
    • EW Scripps (SSP) 7:30am, $(0.12)
    • Hilton Worldwide (HLT) 6am, $0.09
    • HMS (HMSY) 7:30am, $0.16
    • Horizon Pharma (HZNP) 6:30am, $(0.02)
    • Magnum Hunter Resources (MHR) 7am, $(0.14)
    • NorthStar Realty Finance (NRF) 7:30am, $0.23
    • Ralph Lauren (RL) 8:01am, $1.63 - Preview
    • Sirona Dental Systems (SIRO) 7am, $0.78
    • Stratasys (SSYS) 5am, $0.40
    • TMX (X CN) 6am, C$1.04



  • Nickel Set for Biggest Weekly Gain Since 2010 on Supply Concern
  • WTI Heads for Weekly Gain as Crude Stockpiles Drop; Brent Rises
  • Biggest Iron Ore Bounty Locked in Spat Eases Glut: Commodities
  • Wheat Extends Drop Before USDA Report on Global Supply Outlook
  • Gold Heads for Second Weekly Drop on Ukraine to Stimulus Outlook
  • Record Beef, Pork Prices Mean Pricey Barbecues: Chart of the Day
  • Palm Imports by India Seen Rising First Time in Four Months
  • Iron Ore Slumps to Lowest Since 2012 as Global Surplus Deepens
  • Russia’s Exports Unhindered by Putin’s Incursion Into Ukraine
  • Tumble in Fuel Sales Adds to Evidence of China Slowdown: Energy
  • Norway Sees Stable Russia Gas Supply to EU Beyond Ukraine Crisis
  • Oil Producer Pleas Snubbed by Norway as Offshore Costs Surge
  • Russian Gas Bypass Forces Ukraine to Develop Domestic Resources
  • Cocoa Extends Drop in London on West Africa Crops; Sugar Rises

























The Hedgeye Macro Team














real-time alerts

real edge in real-time

This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.