Cute NYC Rats

“A squirrel is just a rat with a cuter outfit.”

-Sarah Jessica Parker


“So”, Obama and I were in NYC yesterday talking about inequality (at separate events, using separate explanations on the why – a 1500 sq/ft apt in midtown going for $3.47M has nothing to do with his Policy To Inflate – eat your ripping rents, and like it)…


And I came across an exhibition of sorts from some of de Blasio’s new city tenants. These dudes had few teeth and stunk to high-heaven, but still appeared to have the American Capitalist spirit. They’d spray painted a shopping cart full of rats and were selling pics to tourists.


I thought the pink ones with the fluorescent blue were cute. And evidently the high school girl who was posing for her Mom (with two live ones on her shoulders), thought so too. Everyone smiles until someone gets bit.


Cute NYC Rats - rat


Back to the Global Macro Grind


With the Russell 2000 down another -1.6% yesterday, US Growth Style Factors got bit again yesterday. Bond yields crashed to fresh YTD lows too. It was a great day for risk management. The CNBC “we’re at all-time highs” thing is cute and all, but still reeks like a rat.


As Detroit’s very own Lily Tomlin once said, “the problem with the rat race is that you’re still a rat.” And having been called more than a few names of this nature on the ice, I can sympathize with those who are forced to chase Wall Street’s performance bogeys.


But that doesn’t mean we have to be brain dead about it…


To review a very basic if, if, then statement in the Hedgeye Macro Playbook:


  1. If inflation is accelerating (you buy inflation)
  2. If growth is slowing (you buy bonds and anything slow-growth-yield-chasing that looks like a bond)
  3. Then, you will win the relative performance rat race of 2014


So easy a Mucker can do it, eh?


Congrats to the Montreal Canadians for keeping all the Canadian rink rat hopes alive by knocking the Boston Bruins out of the Stanley Cup Playoffs last night. Canadian Olympic Gold medal winning goaltender Carey Price proved that the best offense is a great defense.


I’m not sure why some people I talk to get so defensive about being long the defensive slow-growth playbook. Maybe it’s because they are losing. Maybe because it just doesn’t make sense. But maybe it does, and consensus is simply not positioned for it.


When people ask me where the proof is of inflation slowing US consumption growth, at this point I simply refer to the data. Don’t forget that US GDP growth was 0.1% in Q1, Retail Sales for April (Q2) missed this week, and US inflation (PPI yesterday) “surprised” to the upside.


Looking ahead at the calendar:


  1. Post the+2.1% y/y Producer Price (PPI) report for April (versus +1.4% y/y in March)
  2. Today you’ll get another “surprise” to the upside in CPI (Consumer Prices)
  3. Then on Friday, you’ll get more data on US #HousingSlowdown


It wasn’t just the Russell Growth Index that got crushed yesterday. US Housing stocks (ITB) got sold to YTD lows too. For 2014 YTD:


  1. US Housing Stocks (ITB) are now -6.7% YTD
  2. US Consumer Discretionary stocks (XLY) are now -4.6% YTD
  3. Slow-growth #YieldChasing Utilities (XLU) was UP +0.5% yesterday to +11.1% YTD


But you already know that. And you know that I know that almost everyone I talk to says “well, I get it, but I can’t buy Utilities up here after this move.” Why not?  I’m not trying to be a Kenny Linesman rat about this. I’m just trying to make and/or save you money by calling out Sector and Style Factors for what they are – huge competitive advantages in a performance chasing rat race that eventually forces everyone to buy what’s working.


We all make mistakes. But the biggest ones I have ever made in this game were doubling and tripling down on losers that kept going down. The Russell 2000 and Bond Yields are going down because consensus US growth expectations are – not because it’s different this time.


Don’t let your daughters pose with live pink rats and a toothless guy in NYC. That’s not different this time either.


UST 10yr Yield 2.54-2.61%

RUT 1089-1121

USD 79.11-80.29

EUR/USD 1.36-1.38

Brent Oil 108.41-110.36

Gold 1


Best of luck out there today,



Cute NYC Rats - Chart of the Day

Buy In May, And Pray?

This note was originally published at 8am on May 01, 2014 for Hedgeye subscribers.

“Basically, I’m for anything that gets you through the night – be it prayer, tranquilizers, or a bottle of Jack.”

-Frank Sinatra


Sinatra was a beauty, but he wasn’t a risk manager. And prayer isn’t a risk management process either.


I get it. There’s no need to bring our respective religions into this discussion…


So every time you hear a consensus Old Wall economist tell you to ignore the 0.11% US GDP bomb for Q1 (and that this sucker is going to magically accelerate to 3-4% growth from here), drink.


Buy In May, And Pray? - sinatra


Back to the Global Macro Grind


Imagine being me for a second… This morning I’ll be doing Institutional Investor meetings in my 4th state in 4 days (IN, MN, CT, and NY), and I get to hear all of it. I’ll hear about what all of our competitors selling macro research think. I’ll hear how all these sell side economists knew it was “all about the weather” (but they didn’t know the number would be so bad)… and how everything is really ramping (even though the data isn’t) …


On and on and on it goes…


Empathize with me people! I’ll be like the US Dollar (on its YTD lows post Q1 GDP disaster) and get down on my bloody knees and pray for your forgiveness for having my team think for itself. I must repent!


Serious question - should I, like the bond market (yields falling to 2.66% on the 10yr as growth slows), beg thy overlord at The Fed for an un-taper too? Or will that have to wait until the weather stops being the weather in Alabama this morning?


Enough questions already. Time to show you the wood (US GDP data for Q114):

  1. As inflation accelerated in Q114, US GDP growth slowed, big time, to 0.11% (from 4.12% in Q3 of 2013 – that’s not just weather)
  2. Consumer Growth (focus of our bear #ConsumerSlowing call) slowed from 1.03% in Q313 to 0.08% in Q114
  3. Retail Sales Growth slowed from 2.45% in Q313 (when we were bullish on US growth) to 0.68% in Q114
  4. Fixed Investment (capex) got smoked back into its hole of negative -0.44% (vs +0.89% in Q313)
  5. Exports (which are supposed to magically rise when you burn your currency) dropped -1.07% (vs. +0.52% in Q313)

Pardon? (says the ragingly linear economist who missed last year’s US #GrowthAccelerating as both the US Dollar and rates rose too). Pardon the data, I guess – because it’s not cooperating with Keynesian academic dogma!


Before I get into more of the good stuff (data), consider the following relationships that are driving David (Blanchflower) @Dartmouth right batty right now:

  1. As the UK currency rips to new highs, UK manufacturing PMI (57.3 in APR vs 55.2 MAR) is accelerating
  2. As the US currency gets devalued to YTD lows, US Export demand is falling

Oh, and there’s this other thing going on in US Housing that Janet refuses to address:

  1. As rates fall, US Housing Demand is falling to fresh YTD lows (MBA weekly mortgage demand down another -5.9% this past week)
  2. But let’s not talk or write about that any further, because that’s a Q2 reality and it doesn’t fit the February weather excuse

Back to the tasty data that is both the US government and Fed’s definition of “inflation”:

  1. Allegedly, the GDP Deflator for Q1 was 1.3% (you subtract that from nominal GDP to get a real GDP #)
  2. But MIT’s Billion Prices Project read on inflation (much closer to ours) ripped to +3.9%

So, do the math. If America was using anything in the area code of a real world cost of living proxy (let’s say MIT academic thought is acceptable to a Princeton or Yale economist) US GDP for Q1 of 2014 would have been DOWN over 2%.


But since we’re not going to play a game of gotcha with conflicted and compromised US government data, let’s pretend for a second that it’s the 16th century again and we haven’t learned a damn thing about economic gravity.


Yep, let’s go all Copernicus on the Catholics of Wall Street forecasting, and suggest there is a solar system!

  1. Even if we use the Fed’s definition of CPI or PCE, inflation is going to accelerate against the easiest comps of the last 3 years (Q2 and Q3)
  2. When #inflationAccelerating happens in the data series, there’s a structural headwind to reported GDP (its math)
  3. So, there’s pretty much no way on this side of hell that 2014 GDP is going to be 3-4%, real

To get real, or nominal, remains the question. And as long as we can monitor all of our proxy baskets for US inflation (food, rents, energy, education, wages, etc.) in real-time, even a Mucker can model this in the 21st century.


Buy In May, And Pray? - Chart of the Day


But you don’t need to take my or a dead Polish dude’s (Nicholas Copernicus died in 1543) word for it. You can ask Mr. Macro Market:

  1. Currency market (USD Dollar) says growth continues to slow
  2. Bond market (long-end of the curve) says growth continues to slow
  3. Stock market (Russell 2000 as a proxy for growth expectations) remains down YTD

If you’re going to buy in May, please do more of what you should have been doing since January 1st – be it inflation protection (TIP), food commodities (DBA), or slow-growth-yield-chasers (XLU), it’s all working. If you have been buying Twitter (TWTR) the whole way down on the weather thing, drink.


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


UST 10yr Yield 2.63-2.73%

Russell 1109-1155

USD 79.47-79.95

Pound 1.67-1.69

Natural Gas 4.61-4.85

Corn 5.06-5.20


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer

LEISURE LETTER (05/15/2014)

Tickers: SGMS, HST, MGM


Thursday, May 15

  • Japan Gaming Conference thru Friday, May 16


Tuesday, May 20 - Thursday May 22

  • East Coast Gaming Congress
  • G2E Asia - The Venetian Macao


Insider Transactions:

  • SGMS -  Director Ronald O. Perelman purchased 1,050,000 shares of the company’s stock through MacAndrews & Forbes in a transaction that occurred on Monday, May 12th, at an average price of $8.97 per share, with a total value of $9,418,500.00. Following the completion of the purchase, MacAndrews & Forbes now holds 33.555 million shares. Perelman himself owns 38,513 shares.
  • SGMS - CEO David L. Kennedy bought 36,000 shares of Scientific Games Corp. stock on Monday, May 12th an average price of $8.98 per share, with a total value of $323,280.00. Following the acquisition, Mr. Kennedy directly owns 147,534 shares of the company’s stock.
  • HST - CFO Gregory Larson sold 42,224 shares of Host Hotels and Resorts stock on Monday, May 12th at an average price of $21.70, for a total transaction of $916,260.80. Following the completion of the sale, Mr. Larson directly owns 116,503 shares of the company’s stock, valued at approximately $2,528,115.

MGM -  MGM Resorts International CEO Jim Murren made public comments at the Japanese Gaming Congress pressuring legislators to legalize gambling resorts via the passage of a bill to end the ban on casinos in the current session of Japan’s parliament ending June 22 and thus provide development time prior to the 2020 Olympics.

Takeway: May we suggest a slow, steady and a quiet approach with lots of deep bows to the Japanese officials rather a loud, public Gaijin approach.


2282.HK, MGM CHINA - recorded a block trade deal for a total of 1.09M shrs. The shares were sold at HK$25.648 a piece or $27.92M in total.

Takeaway: Interest for a large block to trade, near recent price lows...panicked or forced seller?


CODERE -  Win per day across Codere's key markets continue to be sluggish.  April win per seat in Argentina fell 28% to €176.7 and Mexico fell 18% to € 38.8 

Takeaway:  Not a good sign for gaming suppliers with exposure to those markets.


THOMAS COOK GROUP - Current Summer trading


LEISURE LETTER (05/15/2014) - TC

Takeaway:  Mixed leisure picture in Europe


Japan Gaming - lawmaker Sakihito Ozawa sees 50-50 chance of casino bill passing in current parliament session.

Takeaway: Lower odds than investors are discounting but legislators are hardly handicappers.  We do fear that strong language from the operators could be viewed as too bold to the Japanese legislators.  

Macau Gaming - Top Rank chief Bob Arum set a time, date and venue for Manny Pacquiao’s next fight and it’ll happen on Nov. 16 at 12 noon at Cotai Arena in The Venetian in Macau. 

Takeaway: The fallout between Arum and Jim Murren at MGM resulted in this outcome as we previously handicapped in our Leisure Letter. 


Hotel Transaction - Thayer Lodging has agreed to pay about $550 million for the Westin Diplomat Resort & Spa in Hollywood. The transaction includes the 998-room resort’s country club, which alone is valued at roughly $150 million because of its potential for residential development.  Average price per key:  $551k.

Takeaway:  Owned by rather the United Association of Journeymen & Apprentices of the Plumbing & Pipe Fitting Industry of the US & Canada (UA) which acquired the asset in 1997 so not a HOT owned asset.  We've visited both hotels (Beach Resort and Country Club) many times since their reconstruction and reopening in 2002 and today we believe both assets are in need of a significant capex refresh.  However, price per key was solid.


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.


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.45%
  • SHORT SIGNALS 78.38%

May 15, 2014

May 15, 2014 - Slide1



May 15, 2014 - Slide2

May 15, 2014 - Slide3

May 15, 2014 - Slide4

May 15, 2014 - Slide5

May 15, 2014 - Slide6

 May 15, 2014 - Slide7



May 15, 2014 - Slide8

May 15, 2014 - Slide9

May 15, 2014 - Slide10

May 15, 2014 - Slide11
May 15, 2014 - Slide12


 TODAY’S S&P 500 SET-UP – May 15, 2014

As we look at today's setup for the S&P 500, the range is 27 points or 0.77% downside to 1874 and 0.66% upside to 1901.                                                 













  • YIELD CURVE: 2.17 from 2.18
  • VIX closed at 12.17 1 day percent change of 0.33%


MACRO DATA POINTS (Bloomberg Estimates):

  • 7:30am: Empire Manufacturing, May, est. 6 (prior 1.29)
  • 8:30am: Fed’s Dudley speaks in New York
  • 8:30am: Consumer Price Index, April, est. 0.3% (prior 0.2%)
  • CPI Ex Food and Energy, April, est. 0.1% (prior 0.2%)
  • 8:30am: Initial Jobless Claims, May 10, est. 320k (prior 319k)
  • Continuing Claims, May 3, est. 2.690m (prior 2.685m)
  • 9am: Net Long-term TIC Flows, March est. $40b (prior $85.7b)
  • Total Net TIC Flows, March (prior $167.7b)
  • 9:15am: Industrial Production, April, est. 0.0% (prior 0.7%)
  • Capacity Utilization, April, est. 79.1% (prior 79.2%)
  • Manufacturing (SIC) Production, April, est. 0.3% (prior 0.5%)
  • 9:45am: Bloomberg Consumer Comfort, May 11 (prior 37.1)
  • 10am: Philadelphia Fed Business Outlook, May, est. 14.0 (prior 16.6)
  • 10am: MBA Mortgage Delinquencies, 1Q (prior 6.39%)
  • Mortgage Foreclosures, 1Q (prior 2.86%)
  • 10am: NAHB Housing Market Index, May, est. 49 (prior 47)
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas storage change
  • TBA: Commerce Dept. issues benchmark revisions on factory orders, etc.
  • 6:10pm: Fed’s Yellen speaks in Washington



    • Senate in session, House out
    • President Obama speaks at National Sept 11th Memorial/Museum
    • 10am: Senate Banking Cmte marks up housing finance bill; 538 Dirksen
    • 10:30am: Sens. Durbin, Harkin, Murphy, Schatz, hold news conf. w/Young Invincibles to call on Education Dept to put stronger student protections for-profit college career ed pgms
    • 10:30am: FCC set to decide whether to start writing open-Internet rules .
    • Also considering policies, rules for broadcast TV spectrum incentive auction, aggregation spectrum rules for mobile wireless services
    • U.S. Trade Representative Michael Froman visits China to talk with officials ahead of APEC Trade Ministers meeting in Qingdao
    • U.S. ELECTION WRAP: Bill Clinton on Immigration; Democrats’ Ads



  • Europe economy underperforms with weakness from France to Italy
  • FCC to decide whether to write open-Internet rules
  • France fortifies anti-takeover tool as GE-Siemens eye Alstom
  • Cisco sales forecast tops ests. as Chambers seeks turnaround
  • 13F deadline: Ackman, Buffett, Peltz to divulge holdings
  • JPMorgan, Citigroup, others release monthly delinquencies
  • CFTC reviews U.S. banks’ overseas trading for possible evasion
  • Carlyle’s Rubenstein speaks as SALT Conference continues
  • Changes announced for MSCI country index shuffle
  • AstraZeneca cancer drug coveted by Pfizer shows promise in trial
  • Senators ask for anti-trust review on PFE, AZN plan: Reuters
  • Times Co. publisher said to always have clashed with Abramson
  • Wynn, MGM plan Japan IPOs to fund casino projects
  • Teva loses suit seeking to block FDA generic Copaxone approval
  • Musk sees need for multiple “gigafactories” for battery demand
  • Japan’s economy accelerated in 1Q before tax rise
  • Senate Banking Cmte marks up Fannie Mae reform bill
  • Murphy Oil looking to sell stake in Malaysian assets: WSJ



    • Advance Auto Parts (AAP) 8:30am, $2.15
    • Air Canada (AC/B CN) 6am, C$(0.48) - Preview
    • Alliant Techsystems (ATK) 7am, $2.40
    • Applied Materials (AMAT) 4:02pm, $0.28
    • Autodesk (ADSK) 4:01pm, $0.21
    • CA Inc (CA) 7am, $0.59
    • CAE (CAE CN) 8:40am, C$0.20
    • Flowers Foods (FLO) 6am, $0.30
    • J.C. Penney (JCP) 4pm, $(1.22) - Preview
    • Kohl’s (KSS) 7am, $0.63 - Preview
    • Nordstrom (JWN) 4:04pm, $0.68 - Preview
    • Power of Canada (POW CN) 2pm, C$0.61
    • Prestige Brands (PBH) 6am, $0.33
    • Teekay (TK) 8:30am, $(0.18)
    • Wal-Mart Stores (WMT) 7:02am, $1.15 - Preview




  • Nickel Plunges Most in 31 Months as Surge Judged to Be Overdone
  • WTI Drops From Three-Week High as Stockpiles Gain; Brent Steady
  • China Aluminum Sales for Beer Cans Foiling Deficit: Commodities
  • Gold Below One-Week High as U.S. Outlook Weighed Against Ukraine
  • Coffee Advances as Brazilian Output Seen Lower; Sugar Retreats
  • Wheat Extends Longest Slump Since November on Ample World Supply
  • Gold Sales Drop in Hong Kong Seen Signaling Lower Chinese Demand
  • Steel Rebar Falls to Record Low as Chinese Mills Increase Output
  • London Metal Exchange Gets Permission to Appeal Warehouse Ruling
  • IEA Sees Higher Demand for OPEC Crude Amid Inventory Deficit
  • Moscow Hosts Summit as Gazprom Warns Ukraine on Gas Cut: Energy
  • Chocolate Consumption in Indonesia Seen Doubling in Three Years
  • Long-Run Coking Coal Demand Underpinned by Steel, Urbanization
  • Pemex May Struggle to Keep Output as Mexico Debates Energy Laws


























The Hedgeye Macro Team















Takeaway: Both the domestic macroeconomic outlook and globally interconnected risks favor remaining long of Brazil w/ respect to the TREND duration.

Yesterday, I had a call with one of our more astute long-term customers and he asked me a version of a question that we have been receiving a lot in recent months:


“Nice call on [INSERT INTEREST RATE-SENSITIVE ASSET CLASS HERE]. But how much more upside do you see from these levels?”


I specifically say “version”, because as a true believer in our repeatable and unbiased approached to front-running asset class rotations, he understood our calls from the beginning of the year while also getting involved on the long side of some of the more bombed-out macro markets where we saw opportunity – including Brazil.


Contrast this with what has clearly become consensus across the investment community in the YTD: chalking up the domestic growth slowdown to “weather” and sticking with the outcrop of 2013’s #StrongDollar + #RatesRising = #GrowthAccelerating trade.


Indeed, Brazil has had a nice run since our FEB 27th Best Ideas conference call and we continue to anticipate further upside from here. Specifically, the iShares MSCI Brazil Index Fund (EWZ) has appreciated +19.3% since then; that compares to a +1.7% gain for the SPY and to a sample mean of +5.7% for the 24 country-level ETFs we track across the EM space. Moreover, the EWZ’s +19.3% delta ranks third in the aforementioned sample, trailing only India (EPI) at +22.1% and Turkey (TUR) at +31%; we were fortunate to have been in print liking both throughout this time frame – India as a core long idea and Turkey as a beneficiary of our EM “junk” relief rally theme.




Going back to Brazil specifically, one of the reasons we’ve liked Brazilian equities – Petrobras (PBR) in particular – is because of our anticipation of a continued rally in the Brazilian real (BRL). Specifically, that would have a number of positive effects for Brazilian capital markets, including, but not limited to:


  • Easing operating margin pressure on domestic importers – most notably PBR; refer to our 72-slide presentation for more details;
  • Reducing pressure on net income margins as USD debt service costs are deflated; and
  • Attracting marginal financing for the current account deficit, which tends to be accretive to broad economic growth.


The BRL has indeed appreciated a fair amount since FEB 27th (+5.9%, which ranks second among the 21 currencies we track across Asia and Latin America and compares to a sample mean of +1.9%). Importantly, our proprietary FX valuation models see at least +10% upside from here on both a REER and carry basis.








Valuation is not a catalyst, however. What is a catalyst is continued poor performance by Dilma Rousseff and her Workers Party (PT) in the polls leading up to OCT’s general election; her support among voters dropped again to 37% from 38% in the latest Datafolha poll, which was published MAY 9th. Both consumer and business confidence trends – each at the lows of her administration – support a continuation of the aforementioned polling trends.






She’s clearly received little boost from the backing of former Brazilian president Lula da Silva and he’s already ruled out running in this election, effectively mitigating any upside surprise to credible promises for additional Big Government Intervention that investors have now come to associate with the PT – as most recently highlighted by PT president and Dilma’s campaign coordinator Rui Falcao who suggested this week that Brazil should consider capital controls to ward off speculative capital inflows and reiterated his opposition to an independent central bank.


Newsflash Falcao: global investors are responding to opinion polls and using their capital to vote you and Rousseff “off the island” for a reason. Your economic policy flat-out sucks…


Another catalyst for staying long of Brazil is improving GIP fundamentals. Our math shows World Cup host teams tend to receive a ~190bps sequential boost to real GDP growth and a ~100bps increase in the current account/GDP balance.


Brazil has yet to see these likely tailwinds roll through the system and, as a result, we remain well above both the street and the BCB on 2014E growth and [marginally] below both on 2014E inflation. If we’re right, Brazil’s woeful fiscal situation will show optical improvement and monetary policy will remain tight (not that it wouldn’t have anyway – the BCB just sold and rolled over a cumulative ~$450M of FX swaps yesterday, signaling a renewed commitment to supporting the currency).




One last catalyst that remains non-consensus is a continuation of recent global macro asset class flow trends. We’ve spent much of the past 12-18M designing and backtesting a quantitative model that can help investors front-run said flows at both the primary and secondary asset class levels. At a bare minimum, our TACRM™ All-Weather System consistently provides investors with a real-time “look-see” on rotation-based asset class flows.


There are four primary tools our All-Weather System employs to accomplish its stated goals (please email us if you’re interested in having an in-depth discussion regarding the rigorous quantitative methods employed in each tool):


  1. TACRM™ Global Macro Thermodynamic Monitor: We first take the “temperature” of nearly 200 global macro ETFs that represent individual markets or specific plays within each market. From there, we can track the current temperature of any market and compare it to both other markets and its own recent trends. Brazil is still exhibiting signs of a classic bearish-to-bullish reversal on this measure.
  2. TACRM™ Global Macro Weathervane: By taking the temperatures of all the individual markets that comprise a particular primary asset class, we can then calculate a measure of relative momentum by first calculating intra-asset class dispersion and then normalizing said dispersion. The result is a generalized dynamic asset allocation reading for each primary asset class on a 0-100% scale. From there we can track the current reading (i.e. the “weather”) of any asset class and compare it to both other asset classes and its own recent trends. Both Fixed Income & Yield Chasing and EM Equities continue to take share – supportive of our call on Brazil. Specifically, that gives us a green light for carry trading strategies, as well as portending positive EM equity beta.
  3. TACRM™ Global Macro Barometer: By taking each asset class’ current reading from the aforementioned weathervane system and normalizing it as a percentile of its respective TTM and trailing 5Y peaks, we can get a generalized sense of how much “pressure” is developing in any given asset class. The pressure is on to the upside both in Fixed Income & Yield Chasing and EM Equities, forcing investors to divest their DM Equity, FX and Commodity holdings to keep pace. This setup is also supportive of our call on Brazil.
  4. TACRM™ 40/40 Club Thermodynamic Monitor: By plotting a similar thermodynamic analysis with the “hottest” 20 and “coldest” 20 markets, we can get a sense of what secondary asset classes are really in or out of favor. The growth style factor remains for sale domestically – supportive of Brazil via a continuation of #DownDollar and #RatesFalling.










All told, both the fundamentals and TACRM™ support remaining long of Brazil, so we will – for now at least. When it is appropriate to deviate from this strategy, I promise we’ll/you’ll be among the first to know. Marrying top-down quantitative signals with bottom-up fundamentals analysis is one of the reasons we continue to add value to our institutional customer base – effectively differentiating ourselves from most other sell-side macro research providers.


Have a great night and/or wonderful Thursday morning,




Darius Dale

Associate: Macro Team