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CHART OF THE DAY: The Truth About Real Wages

Takeaway: U.S. real-wages (what you get paid in terms of wage growth minus made-up gov't inflation) just went negative for the 1st time in 2 years.


CHART OF THE DAY: The Truth About Real Wages - RWG

Doves Kill

“And John bare record, saying, I saw the Spirit descending from heaven like a dove…”



God called Janet Yellen and told her to cut her US growth forecast and devalue the Dollar again yesterday. Thank goodness for that. What would we do without her?


Doves Kill - Titanic 03.31.2014


Back to the Global Macro Grind


As ridiculous as doing the same thing over and over and over again (and expecting a different economic outcome) sounds, the un-elected-economic-central-planning-authority did just that (again), targeting rates lower (and inflation higher), yesterday.


Not that anyone should hold them accountable to why, but here’s what the Fed did yesterday:


  1. Cut its 2014 US GDP Growth forecast from 3% to 2.1%-2.3%
  2. But kept its 2015 GDP Growth forecast at 3.0-3.2%


Ah, so doing more of what is slowing real-inflation-adjusted growth is the answer, eh? Cool. Maybe if you’re long slow-growth #YieldChasing assets like bonds (or anything that looks like a bond – Utilities (XLU) led the rally yesterday, closing at fresh new highs of +15.2% YTD).


If you’re the poor bastard living on $60,000 US or less (i.e. the median consumer in America)… Well, you can eat the all-time highs in cost of living, and like it. Because these doves are going to kill your real-wages.


As you can see in the Chart of The Day, before the Oil spike in June (this is a May number), American real-wages (what you get paid in terms of wage growth minus made-up government inflation) just went negative for the 1st time in 2 years. That’s gotta be good.


BREAKING: Fed Fueled Stocks Fly, Dollar Sags, Oil 9 Month Highs” –Reuters


That’s a pretty cool headline too, right? Notwithstanding that US Consumer Discretionary (XLY) stocks are still DOWN year-to-date and Energy (XLE) +12.6% and Utilities are leading the rally, who cares about the details.


In other news, divine intervention took the VIX back to 10 yesterday. As a friendly reminder:


  1. The VIX (US stock market fear index) has never (ever) held below 10 in US history
  2. Never, ever, is a very long time


“So”, with bond yields falling fast (again) and Gold rising (again), what do I think you should do now?


  1. Keep doing the same thing we have been saying all year (buy #InflationAccelerating and slow-growth #YieldChasing assets)
  2. And add more frequent prayer to your daily process on days that the VIX has a 10 handle


Even if you’re not religious, I think you should think outside the box here and just do it. Because this is not going to end well.


As opposed to making a backward looking call that the US is going to repeat the prior credit crisis, I think the next economic crisis is going to be perpetuated by Fed policy. These ideological doves are going to kill 70% of US GDP (consumption) with a Policy To Inflate.


Our immediate-term Global Macro Risk Ranges are now (with intermediate-term @Hedgeye TREND signal in brackets):


UST 10yr Yield 2.46-2.64% (bearish)

SPX 1 (bullish)

RUT 1155-1185 (neutral)

VIX 10.14-12.15 (bearish)

USD 80.07-80.63 (bearish)

EUR/USD 1.35-1.36 (bullish)

Pound 1.68-1.70 (bullish)

WTI Oil 105.14-108.28 (bullish)
Gold 1 (bullish)


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Doves Kill - RWG

LEISURE LETTER (06/19/2014)

Tickers: LVS


  • Thur June 19: Todd in Macau for meetings
  • Thurs June 19:  Hedgeye Cruise survey (pre-CCL F2Q)
  • Thurs June 19: LA May revs released
  • Thurs June 19-20:  2014 Asia Cruise Forum (Taiwan)
  • Tuesday June 24:  CCL F2Q CC


LVS / 1928:HK - Sands Cotai Central announced a retail expansion with the addition of 150,000 square feet (13,935 square metres) called Shoppes at Cotai Central, the third phase of the shopping mall, which will bring the total number of stores to 140 and increases the size of the mall in operation by 70%.

Takeaway:  Adelson has repeatedly said the Company would only consider selling the retail assets when the growth has matured - which is clearly not the case.  Upside to retail revenues at SCC.


Macau VIP Junkets(Macau Business) Daiwa Securities believes some small VIP gaming promoters have stopped operating and that some medium-size promoters have reduced their operations and attributes this slowdown to insufficient liquidity and inability to meet minimum rolling chip turnover guarantees. 

Takeaway:  We heard annedotal commentary of a slowdown in "casual" junket more than four weeks ago. 


Macau Competition(GGR Asia) Australia-listed Donaco International Ltd says the newly opened Aristo International casino hotel in Vietnam is drawing strong interest from high rollers and junket operators from mainland China. The property had its soft opening on May 18 and is Donaco’s only gaming operation. The property is located in the northern province of Lao Cai, bordering China’s Yunnan province. The casino can have up to 50 gaming tables and most of those will be allocated for baccarat, the company previously said. Aristo’s VIP players check in a minimum of RMB600,000 (US$96,287), with a minimum bet size of RMB3,000, according to Donaco’s data.

Takeaway: A small threat to Macau and Singapore.


Malaysia – expects dip in Chinese tourists, eyes more visitors from Singapore (Strait Times) 

The Malaysian government hopes to make up for an expected dip in visitors from China by getting more Singaporeans to go for holidays across the Causeway.  Malaysia's Minister for Tourism and Culture, Datuk Seri Nazri Aziz, said that more than 60 flights from China to Malaysia have been cancelled because of poor take-up rates from Chinese travellers since March when Beijing-bound Malaysia Airlines Flight MH370 disappeared.

Takeaway: LVS/Genting have downplayed the Malaysian impact but we are concerned about the decline in visitors to Singapore.


Japan Gaming Legislation – Japanese legislators discussed the idea of an entry levy on all gamblers including foreigners as well as locals were casinos to be legalized in Japan.

Takeaway: An entry fee on foreigners would be a departure from the Singapore and Macau models and a deterrent to promoting visitation.


Singapore Pawn Shops(MDT) Pawnbrokers are proliferating across Singapore as gamblers seeking short-term loans add to demand for quick cash from people struggling to make ends meet in the world’s most expensive city. The number of pawnshops across Singapore increased to 214 in 2014, up from 114 in 2008, according to a report by DMG & Partners Securities Pte. Loans disbursed by the industry jumped to S$5.5 billion (USD4.4 billion) in 2013 from S$1.6 billion in 2007, according government data show.

Takeaway:  We expect more negative headlines around this issue as such data will not likely be received well by the Singapore government.


Rhode Island Gaming – The Rhode Island House of Representatives pass a bill allowing Twin River’s casino the ability to offer up to $50,000 in credit to gamblers.  However, the legislation will not go to conference committee to reconcile the differences as compared to the Senate legislation.

Takeaway: The state is likely trying to remain competitive against an every increasingly competitive landscape with the expansion of gaming in neighboring states. 


Taiwan Cruise – (Taiwan Today, Seatrade Insider)  "It is projected that next year, no less than 350 cruise ships will include local ports in their itineraries, bringing 1 million tourists and NT$7 billion [US$233.3 million] in revenue,” a TIPC official said on the sidelines of the Asia Cruise Forum in Kaohsiung City.  Taiwan is strategically located along popular cruising routes in the Asia Pacific – from Japan along the Western rim to Singapore and the Straits of Malacca.  

Takeaway: Another Asian market to keep an eye on


Chinese Debt(China Daily) Total Chinese debt according to Standard Chartered is 142T yuan ($22.7T) - or 245% of GDP - as of the end of March, is up from 133T yuan, or 233% of GDP, at the end of 2013. However, Standard Charted pointed out that debt expansion slowed to 18% y/y during Q1, compared with 24% in the same period of 2013. The article noted that the buildup in debt is leading to mounting repayment pressures. The bank estimates that interest payments were equivalent to 13% of GDP in March, up from an average of 7-8% in recent years.


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.

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.

Our Process Is Different

This note was originally published at 8am on June 05, 2014 for Hedgeye subscribers.

“Because our process was so different… we felt it had real power.”

-Ed Catmull


As I grind through the end of it, Creativity Inc. is turning out to be one of the best business books I’ve read in a long time. Chapter 4, “Establishing Pixar’s Identity”, is all about process – “trust the process.”


For my team, that’s going to sound very familiar. As real-time market prices, volumes, and volatilities change, we feel that our process is better than our #OldWall competition’s, if only because we change.


Our Process Is Different - Busines

“What is the nature of honesty? If everyone agrees about its importance, why do we find it hard to be frank? How do we think about our own failures and fears? Is there a way to make our managers more comfortable with unexpected results?” (Catmull, pg 82)


Back to the Global Macro Grind


This is going to be one of the shortest Early Looks of the year because a European Central Planner can change my decision making process by doing something drastic to the Global Currency Market in the next few hours.


While I’d only have to work 6 hours a day if I had the inside information that Mario Draghi may have whispered to his favorite cronies, I still wouldn’t know how to position until I saw the reaction to this version of “whatever it takes.”


That’s the main point about my process. I react to what Mr. Macro Market tells me to do – I don’t tell him what to do. It’s taken me a long time to embrace the reality of not only information surprises, but how the market scores them.


Just to set the manic media’s volume on this ECB decision right:


  1. “Euro, stocks, hostage to ECB’s ability to surprise” –Reuters
  2. “Draghi’s rate tonic seen piquing taste for the stronger stuff” –Bloomberg
  3. “Live Blog: ECB’s Draghi poised to unveil stimulus” –CNBC


In other words, no one needs moarrr central-planning-cowbell moarrr than those trying to sell advertising. And everyone in the financial media is leading every lemming who will trade alongside the implied trend of the headline, until the market goes the other way.


That’s why contextualizing the #behavioral side of markets across multiple factors and durations is as critical as it has ever been. I’ve been doing this for almost 17 years now and I have never seen macro consensus positioning get run-over so consistently.


That’s not to say that Draghi can’t do something wacky this morning and burn the Euro through my $1.35 EUR/USD long-term TAIL risk line of support. It’s simply to remind you that everyone and their brother is worried that he will, at the same time.


“So”, deal with it. How do I deal?


  1. Have a process
  2. Have a plan
  3. Plan to change the plan, if the market tells you to do so


On the process, I’m constantly vetting, evolving, and hopefully improving ours by stress testing it with the best buy-side minds in the world. Yesterday I was in Boston. Coming out of every meeting I was told that our “macro calls” for 2014 have been different.


Being different can also mean being wrong. “So”, what’s the plan if I am wrong this morning and the EUR/USD doesn’t hold $1.35?


  1. If it snaps $1.35 in the moment, I won’t freak-out – I’ll wait and watch for confirmation
  2. A sustained breakdown in the Euro would probably mean a breakout in the US Dollar
  3. A breakout in the US Dollar would probably mean a breakdown in commodity #InflationAccelerating


In other words, the plan is that the plan could change. If I take myself out of the emotion of what will be this morning’s moment, there are other big time macro events that could then change the plan yet again:


  1. US Employment Report is on Friday
  2. US Federal Reserve June meeting (where I think Yellen will get incrementally dovish)
  3. Stanley Cup Finals


Yes, the process of printing moneys, destroying currencies, and compromising the trust of The People who have to eat the cost of living born out of that has real power too. Our job is to help you risk manage it.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.41-2.61%

SPX 1894-1938

RUT 1104-1151

USD 80.16-80.79

EUR/USD 1.35-1.37   

Gold 1233-1293


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Our Process Is Different - Chart of the Day

June 19, 2014

June 19, 2014 - HE DTR JAN14



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TODAY’S S&P 500 SET-UP – June 19, 2014

As we look at today's setup for the S&P 500, the range is 32 points or 1.48% downside to 1928 and 0.15% upside to 1960.                                                   













  • YIELD CURVE: 2.14 from 2.14
  • VIX  closed at 10.61 1 day percent change of -12.02%


MACRO DATA POINTS (Bloomberg Estimates)               

  • 8:30am: Initial Jobless Claims, June 14, est. 313k (prior 317k)
  • Continuing Claims, June 7, est. 2.6m (prior 2.614m)
  • 9:45am: Bloomberg Economic Expectations, June (prior 42.5)
  • Bloomberg Consumer Comfort, June 15 (prior 35.5)
  • 10am: Philadelphia Fed Business Outlook, June., est. 14 (prior 15.4)
  • 10am: Leading Index, May, est. 0.6% (prior 0.4%)
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas storage change



    • 8:50am: Dpty CMS Admin Cavanaugh at Accountable Care Summit
    • 9:30am: House Energy and Commerce panel meets on EPA’s proposed carbon dioxide rules for power plants
    • 10am: House Armed Services Cmte holds hearing on negotiations over Iran’s nuclear program
    • 12pm: FDIC Vice Chair Thomas Hoenig at Nat’l Economists Club
    • 2pm: House Republicans hold election to replace Majority Leader Eric Cantor; if House Majority Whip Kevin McCarthy wins that post, election will be held to replace him
    • U.S. ELECTION WRAP: Landrieu Touts Senate Panel’s Keystone Vote



  • GE’s Immelt in final push to sell France on Alstom bid
  • House Republicans hold leadership election to replace Cantor
  • Obama tells lawmakers he can act without Congress on Iraq
  • President distances U.S. from Maliki; see Iraq crisis wrap
  • Blackrock urging regulators to study risk of investor flight
  • Facebook working again after temporary site outage
  • Wal-Mart China to grow hypermarkets, e-commerce: China Daily
  • Markit raises $1.3b pricing increased IPO at $24 midpoint
  • T-Moble offers 7-day IPhone trial to tempt users to brand
  • Electronic Arts exec. says NCAA refused licensing rule change
  • Senators criticize marketing of e-cigarettes: Reuters
  • Ex-Goldman trader says bonus unfairly cut to $8.25m
  • FHLBs said to suspend admissions of insurers used by REITs



    • BlackBerry (BB CN) 7am, ($0.26) - Preview
    • IHS (IHS) 6am, $1.44
    • Kroger (KR) 8:45am, $1.05 - Preview
    • Oracle (ORCL) 4:01pm, $0.96
    • Rite Aid (RAD) 7am, $0.04
    • Smith & Wesson Holding (SWHC) 4:05pm, $0.40
    • TIBCO Software (TIBX) 4:05pm, $0.13



  • Fleeing Migrant Workers in Thailand Seen Delaying Rice Shipments
  • Brent Trades Near Nine-Month High on Iraq Conflict; WTI Rises
  • New Silver Benchmark Seen Heralding Gold Fix Revamp: Commodities
  • Commodities Climb to Highest Since August as Oil Rallies on Iraq
  • Zinc Climbs to Highest in Almost 16 Months as Stockpiles Shrink
  • Silver Fix Benchmark Replacement Should Be Announced Early July
  • Wheat Extends Gains as Rain Threatens to Thwart U.S. Harvest
  • Raw Sugar Retreats From Three-Month High; Arabica Coffee Drops
  • Steel Rebar Near Record Low as Traders Weigh Output, Economy
  • Half-Price Kurd Oil Threatens Iraq Breakup With Turkish Help
  • Ukraine Wants U.S. and EU Companies to Hold Gas-Pipeline Stake
  • Modi’s Inflation-Curbing Drive Seen Failing by Onion Traders
  • Iraqi Violence Jeopardizes PetroChina, Petronas Oil Investments
  • Gold Trades Near Highest in Three Weeks on Fed’s Rate Outlook


























The Hedgeye Macro Team














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