In The Race!

“A horse never runs so fast as when he has other horses to catch up and outpace.”  



There are many great metaphors in life and business.  However, tomorrow we have the opportunity to witness a world-class achievement - the Triple Crown of Thoroughbred Racing - when California Chrome runs in the 146th Belmont Stakes.  If successful, California Chrome will become only the 12th winner of the Triple Crown. 


In The Race! - hedrick


The Triple Crown is a test of speed, strength, and stamina.  Winning the Triple Crown takes a special combination of horse, trainer, jockey, owner and veterinarian.  It is incredibly difficult to win the Triple Crown – win the Kentucky Derby at 1 ¼ miles, followed by winning the Preakness Stakes at 1 3/16 mile a mere two weeks later and then a massive 1 ½ miles (a distance not often run in horse racing) three weeks later at the Belmont.  The Belmont Stake will feature a field of 11 thoroughbreds with 10 challengers seeking to unseat the contender California Chrome. 


If you were jockey Victor Espinosa what would be your game plan – break away early and lead from the front, play it slow and keep something in the tank for the grueling one and one-half mile race, or simply let the race unfold as it happens, be flexible and nimble, taking advantage of number 2 post position near the rail, while keeping an open mind to anything that can and will happen – knowing all the while the other 10 jockeys are looking to run you down and spoil the party?


I am old enough to vaguely remember Secretariat win the Triple Crown in 1973. However, I more clearly remember Triple Crown winners Seattle Slew in 1977 and Affirmed in 1978.  My paternal grandmother loved to bet the ponies and she love to gamble as well.  Maybe that’s why I became an analyst covering the gaming industry.  My first horseracing experience occurred in the mid-1970s when I joined my parents and my grandmother for a day at the races on the Club Level Terrace at Arlington Park, now called Arlington International Racecourse.  Ever since then, I love to watch horseracing! 


Back to the Global Macro Grind...


A similar metaphor and strategy can be applied to managing money, and trust me I know, I’ve held the title “Portfolio Manager.” The one thing I learned as an equity analyst and I’ve carried through to my career as a PM is how to filter out the noise while also reading as much topical, salient and actionable literature, data, and related content.  More important than reading, I also spent as much time thinking about what I read – as such I remained flexible and adaptable to new information, new data and changed my outlook, strategy and holdings accordingly.  I did this while running as hard and fast as possible… Similar to Keith McCullough, Hedgeye’s CEO, and most of us on the Hedgeye team, I also hate to lose!


So here we are almost half-way through the race, mid-year 2014, Mr. PM what do you do?  Read more? Think more?  Are you open to new insights and a new strategy? 

The Hedgeye Macro and Industrials team will host a thought leader call today with foreign policy expert, Charles Hill.  Charles Hill is a diplomat in residence and lecturer in International Studies at Yale University. He is a career minister in the U.S. Foreign Service, serving in a variety of roles such as Deputy Assistant Secretary and Chief of Staff for the Middle East at the State Department, and executive aid to former U.S. Secretary of State George P. Shultz.


I am sure Victor Espinoza has a strategy in mind for running California Chrome in Saturday’s Belmont Stakes.  However, I am also sure he remains open to changing and adapting his strategy as the race unfolds.  Likewise, most PMs are suffering under the heavy hand of Mr. Market this year with the S&P 500 +5%, the NASDAQ +2.9% and the Dow Jones Industrials +1.6% –  by comparison nearly any asset class with above average yield are outperforming, namely:  REITs (IYR or VNQ) +15.6% (during my PM years I ran a REIT and Real Estate Fund), Utilities (XLU) +13.8% and Energy (XLE) +8.5%.


In The Race! - Mr Market


Did you know California Chrome’s dam is Love the Chase – a fitting name for our business! Personally, I remain bullish on REITs and I also like California Chrome to win the Belmont Stakes and thus become the 12th Triple Crown Winner because the colt has already outrun six ponies he faces on Saturday and others appear to simply be spoilers. 


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr yield 2.41-2.61%


RUT 1108-1155 

Nikkei 14

VIX 11.20-13.46 

USD 80.17-80.79 

EUR/USD 1.35-1.37

Pound 1.67-1.69 

Brent 108.13-110.87 

NatGas 4.58-4.78 

Gold 1 

Copper 3.04-3.12


Have a great weekend!


David Benz

Director - Gaming, Lodging & Leisure



June 6, 2014

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TODAY’S S&P 500 SET-UP – June 6, 2014

As we look at today's setup for the S&P 500, the range is 45 points or 2.19% downside to 1898 and 0.13% upside to 1943.                                                         













  • YIELD CURVE: 2.19 from 2.20
  • VIX closed at 11.68 1 day percent change of -3.31%


MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: Change in Nonfarm Payrolls, May, est. 215k (prior 288k)
  • Unemployment Rate, May, est. 6.4% (prior 6.3%)
  • 1pm: Baker Hughes rig count
  • 3pm: Consumer Credit, April, est. $15b (prior $17.529b)



    • House, Senate not in session
    • 8:45am: HUD Secretary Shaun Donovan speaks at American Association for the Advancement of Science climate change event
    • 11am: American Bankers Assn holds news conference to present monetary policy predictions, economic forecast
    • U.S. ELECTION WRAP: Cochran’s Voters; Cotton’s VAWA Record
    • WASHINGTON RECESS:‘Dirty Dancing,’ Oval Room, Summer Cocktails



  • May payrolls probably rose to surpass U.S. pre-recession peak
  • BNP executive firings sought by Lawsky amid sanctions talks
  • High-speed trading faces new SEC regulation White says
  • NOTE: High-speed traders face scrutiny by Levin’s Senate investigators
  • T-Mobile’s Legere said likely CEO after merger with Sprint
  • Wal-Mart holds its annual gen. mtg and investor day
  • Arista Networks raises $226m in cloud-networking IPO
  • Netflix-Verizon war of words on slow service escalates
  • Intel says mobile investment needed to ensure future
  • Republicans lack votes to block EPA’s air rules, Hoyer says
  • Fannie fees slated for review as Watt re-examines wind-down plan
  • KKR said to lead $270m stake purchase in Cofco Meat
  • Bank of America near $12b mortgage settlement, WSJ says
  • U.S. officials said planning makeover: WSJ
  • Tokyo governor says casino issue not his priority, Reuters says
  • U.S. Retail Sales, Japan GDP, World Cup: Week Ahead June 7-14



    • Jos A Bank Clothiers (JOSB) 6am, $0.40
    • Piedmont Natural Gas Co (PNY) 9:15am, $0.75



  • WTI Crude Swings Before Monthly U.S. Payrolls Data; Brent Steady
  • Virus Killing 8 Million Pigs Means Pricey Barbecues: Commodities
  • Palm Output in Malaysia Seen at Second Highest on Record for May
  • Mercuria’s Head of Non-Oil Trading Jones Said to Leave Company
  • Copper Reaches Four-Week Low Amid China Warehouse Investigation
  • Corn Trades Near 16-Week Low as U.S. Crop Seen Rising to Record
  • Arabica Coffee Rises as Farmers Put Off Selling; Cocoa Advances
  • Chinese Traders Seen Selling Copper Amid Qingdao Probe, SMM Says
  • Gail’s U.S.-Linked LNG Breaking From Traditional Ties to Oil
  • Chinese Consumers Sop Up Milk Once Foisted on American Taxpayers
  • Europe Poised for Hot Weather as Solar Power May Rise to Record
  • Codelco Asks CEO Keller to Resign After Clash Over Cost Cuts
  • Deep-Water Reserves May Be Key to Future Oil Supply: Primer
  • Gold Heads for Weekly Advance as Investors Await U.S. Jobs Data


























The Hedgeye Macro Team














Poll of the Day Recap: 82% Don’t Trust the Government’s Employment Numbers

Takeaway: 82% said NO; 18% said YES.

Economists are expecting tomorrow’s employment report to show 210,000 jobs were added to the U.S. economy in May.


Today’s poll question was: Do you trust the government’s employment numbers?

Poll of the Day Recap: 82% Don’t Trust the Government’s Employment Numbers - medium

At the time of this post, 82% said NO; 18% said YES.


Here’s what those who voted NO had to say:

  • “First of all, the employment numbers given by the government are based on those in work or actually seeking work.  With such a discouraged labor force most no longer even seek work and after 6 months of doing so they do not even count as unemployed.  so the unemployment rate may drop but it does not mean people are getting jobs, and could actually mean the opposite.  Lets get America working again!”
  • “There is little reported today that isn't seasonally adjusted beyond recognition or hedonic adjusted to show the minimal numbers of what is really happening like CPI, etc. Don't know how much longer markets are going to be fooled, probably depends on how much more money is printed or how long ZIRP like policy is extended.”
  • “No, and neither does Mitt Romney. If you remember just before the election someone in California "forgot" to send their unemployment data thus making the number look better than they actually were. The problem with government data is that although figures never lie, liars figure.”
  • “They have no upside in telling the truth about the total lack of aggregate demand in the economy. Participation rates back to levels last seen during the Carter admin. That's what we should watch, that and median household income and inflation.”
  • “Incentives are in place for the government to lie. Plain and simple. I trust the US employment numbers only slightly more than I trust China's.”
  • “The technical note in the BLS release even tells you not to trust the data as is reported...”
  • “No, but I do trust the fixed income market's reaction to them!”

Conversely, this YES voter disagreed, saying that "while it's easy to poke holes and you are maybe right to be skeptical being correct on economic data only gets you so far. You must understand how the market will react to said economic data which gets increasingly complicated if you do not believe headline numbers the market is reacting to."


Likewise, another YES voter said, "It has been wrong all along, but as long as it's been consistently wrong. Why not?" 


Foreign Policy Risks & Market Impacts: Call with Professor Charles Hill

Foreign Policy Risks & Market Impacts: Call with Professor Charles Hill - HE MAC fprisks charleshill


The Hedgeye Macro Team, led by CEO Keith McCullough, will be hosting an expert call featuring Professor Charles Hill tomorrow, June 6th at 10:30am EDT.  Professor Hill is a diplomat in residence at Yale University where he teaches Grand Strategies. 



To gain a better understanding of the key foreign policy risks on the horizon that may have an impact on global markets.


Professor Hill is a career minister in the U.S. Foreign Service, serving in a variety of roles such as Deputy Assistant Secretary and Chief of Staff for the Middle East at the State Department, and executive aid to former U.S. Secretary of State George P. Shultz.  He also served as a special advisor to U.N. Secretary General Boutros-Boutros Ghali.




  • What's next for Vladimir Putin in Ukraine?
  • How will Putin's strategy evolve beyond Russia? Will there be a broader influence?
  • What is the most imminent threat facing the West?
  • How real is the nuclear threat from Iran, particularly for Israel?
  • The Arab Spring has come and gone, what's next?
  • What does the election of Bashar Hafez al-Assad in Syria mean for the West? 

  • How has U.S. foreign policy evolved under the Obama administration?



  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 843981#



Charles Hill is a diplomat in residence and lecturer in International Studies at Yale University. He is a career minister in the U.S. Foreign Service, serving in a variety of roles such as Deputy Assistant Secretary and Chief of Staff for the Middle East at the State Department, and executive aid to former U.S. Secretary of State George P. Shultz. Dr. Hill has been a fellow at the Harvard University East Asia Research Center, a Clark fellow at Cornell University, and is currently a research fellow at the Hoover Institution.


He served as special consultant on policy to the secretary-general of the United Nations from 1992 to 1996. Dr. Hill has collaborated with former U.N. Secretary General Boutros Boutros-Ghali on Egypt's Road to Jerusalem, a memoir of the Middle East peace negotiations, and Unvanquished, about U.S. relations with the U.N. in the post-cold war period. He is also the editor of the three-volume Papers of U.N. Secretary-General Boutros-Ghali, published by Yale University Press.


His book "Grand Strategies: Literature, Statecraft and World Order" is published by Yale University Press. His "Trial of a Thousand Years: Islamism and World Order" is published by the Hoover Press, Stanford University. He received an A.B. degree from Brown University in 1957, a J.D. degree from the University of Pennsylvania in 1960, and an M.A. degree in American studies from the University of Pennsylvania in 1961. 


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