Restaurants Sector Head Howard Penney is adding Bob Evans Restaurants (BOBE) to Hedgeye's Investing Ideas.
Stay tuned for a full report detailing our bullish case on BOBE.
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GOLD has been rock solid amidst US domestic growth style factors going haywire; It's up another +0.3% this morning to +10% year-to-date.
We’ll walk through why Down Dollar, Up Gold remains one of our better Macro ideas on Friday’s institutional Q3 Macro Themes call.
Ping firstname.lastname@example.org if you would like more information and access to the call.
Takeaway: Natural gas broke through its key $4.58 @Hedgeye TREND Level of support of $4.58 and may see further downside.
On June 25th natural gas broke through its BULLISH TREND resistance level and confirmed a BEARISH TREND on June 30th.
TREND = duration of 3 months or more
TAIL = duration of 3 years or less
With inflation accelerating and growth slowing, the commodities complex faces upward pressure in 2H. Despite USD-devaluation induced inflationary pressures driving prices, natural gas may have more room to fall without an unpredictable geopolitical catalyst. Instead we'll stick to the multi-duration risk signals for confirmation. We highlighted the downside risk after breaking through its TREND level of support.
It has since sold-off nearly 9%...
The long-term TAIL support Line of $4.20 is under pressure this week, and further downside risk looms without confirmatory long-conviction at $4.20. Spot contracts are down -5.2% this week on NYMEX, so we're watching this level:
After breaking out in January, $4.20 has been tested twice. The supply disruption risk has certainly been priced out of markets for the back half of the year.
Barring a geopolitical catalyst, a break through the TAIL Line of resistance would signal further downside risk, making the likelihood of re-testing year-to-date highs more extreme.
Eustream AS penned an agreement with Ukraine on April 28 to supply about 10bcm/year through 2019 via the Vojany pipeline. The pipeline is on track to be fully functioning by September. Vojany, which has been closed for 15 years, would satisfy an estimated 20% of Ukraine’s annual demand. With the capacity of smaller pipelines from Hungary and Poland, Ukraine has the potential to satisfy about 2/3rds of its annual demand directly from countries outside of Russia.
Alternatives aside, the source of this flow is Russian-dependent, but it forces Moscow to involve other European countries without targeting Ukraine in isolation. Putin’s strategy throughout the conflict has been consistent in providing support for pro-Russian separatists while at the same time cooperating with the international community just enough to warrant plausible deniability.
We believe Moscow’s likely goal is likely to maintain and expand its influence in Ukraine's eastern provinces, keeping it weak and vulnerable with existing in the global spotlight. The EIA estimates that Oil and Gas make-up 70% of total annual exports ($515Bn). U.S. and EU-induced sanctions (which have just recently warned of financial and energy sector targeting) would provide further downside for the Russian economy.
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Here’s the handiwork of our unelected, unaccountable central planners.
Takeaway: As you think about how painful it might be to short the domestic growth style factor right here, it probably felt the same in March too.
Editor's note: The following note was written by Hedgeye CEO Keith McCullough on July 01, 2014 at 11:57 in Macro. The Russell 2000 is down approximately 3% since. If you're a professional looking for a research edge click here for more information on how you can subscribe.
POSITION: 7 LONGS, 8 SHORTS
I #timestamped my most recent cover signal on the Russell 2000 on June 12th, so there’s been a lot of waiting and watching going on for the better part of the last 3 weeks. While not perfect, over the years I have had to teach myself to act on my signals, not my emotions.
Being bearish on US consumption growth (and the highest multiple growth stocks within the Russell that are tied to US demand) doesn’t have to be accepted at every time and price. Hedge fund consensus dog piled the short side of the market in May. I think June’s meltup had a lot to do with that.
Which brings us to today – Happy Canada Day! And a fresh SELL signal at 1208.
There are a few things to note about the 1208 line. Most importantly, it’s where you could have sold the Russell before its 10% draw-down. And maybe as importantly, now it’s easier to see all the reasons why you’d have sold growth in March (and bought inflation and slow-growth #YieldChasing).
For now, across our core risk management durations, here are the lines that matter to me most:
In other words, my risk management model considers a -3% correction from this level more than improbable. And as you think about how painful it might be to short the domestic equity style factor of the market right here and now, it probably felt the same way in March too.
From a fundamental research perspective, we still think #Q3Slowing will be the story Consensus Macro will have to re-adjust for from now until September. We’ll host our Q3 Macro Themes call on why next Friday.
Keith R. McCullough
Chief Executive Officer