Poll of the Day Recap: Do You Hear That, Social Media? Pop, Pop, Pop!

Hedgeye CEO Keith McCullough wrote in today’s Morning Newsletter: “Risk happens fast. With the social media stock bubble crashing (single stock moves have been down -20% to -45% from their all-time peak), the Nasdaq is already -5.3% off its YTD high.”

Yikes. We went from “Bubble Overbought” (another note from Keith last week) to bubble popping, fast.


So, we asked you in today’s poll: Is the Social Media Bubble bursting the beginning of a broader market decline?

At the time of this post, 57% responded YES; 43% said NO.

Of those that voted YES, they said that the economy is slowing; people are running out of money.


One specifically noted that, “Inflation will reduce purchasing power for citizens and reduce top line revenue for consumer staple names. People on [government] assistance and fixed incomes won't be able to keep up with food prices and energy. GDP will fall precipitously.”


A few humorously explained, “This time, everyone will be able to tweet their dismay and Instagram their monthly statement.”


And: “The decline in the S&P will start in the next couple months, then Yellen will pump it back up, singing: ‘That's why I’m eaaaasing, I’m easing like Sunday morning.’”


Conversely, one NO voter felt that the Fed wouldn't “let the market fall too far.”


Hedgeye Managing Director Moshe Silver also argued NO, summing up that “In the short term, the social media froth will probably lead lots of frothy sectors lower; for the longer term, the next 12 months-plus, we are not on the brink of a broad bear market. There’s too much fear and uncertainty in the air to get outright bearish, plus the presidential campaigns will start this year, [which is] good for stocks.”


But, as Keith says, “I have no love for the bubbles - social or otherwise…Not buying this pullback was a risk managed choice.”


European Banking Monitor: CDS Tightens Broadly Across Europe

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .




European Financial CDS - Swaps tightened sharply across the European Financials complex last week. The biggest movers were in Greece, Italy, Germany and Spain. The Greek banks have posted impressive M/M moves, dropping by an average of 238 bps in just the last four weeks. Outside of Greece, the only EU bank that is still trading above our so-called "Lehman line" (+300 bps) is Sberbank of Russia.


European Banking Monitor: CDS Tightens Broadly Across Europe  - bank cds.1


Sovereign CDS – Sovereign swaps were tighter around the world last week. Italy, Spain and Portugal lead the charge lower, dropping by 24, 19 and 26 bps, respectively.


European Banking Monitor: CDS Tightens Broadly Across Europe  - sovereign cds. 2


European Banking Monitor: CDS Tightens Broadly Across Europe  - sovereign cds.3


European Banking Monitor: CDS Tightens Broadly Across Europe  - sovereign cds.4


Euribor-OIS Spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread tightened by 2 bps to 13 bps. 


European Banking Monitor: CDS Tightens Broadly Across Europe  - euribor OIS spread.5


Matthew Hedrick


investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

Bubble, Overbought: SP500 Levels, Refreshed

Takeaway: You just saw 40 handles of upside from our 1842 oversold signal and now you have 30 handles of downside from our overbought signal.

Editor's Note: Hedgeye CEO Keith McCullough released the following note on April 01, 2014. The Nasdaq has fallen approximately -5% since 4/2. Follow Keith on Twitter @KeithMcCullough.




In my last SP500 Levels note, “Bubble Up” (March 26th) I signaled that we’d like re-test the all-time-bubble-highs. Now that bubble is signaling immediate-term TRADE overbought.


Bubble, Overbought: SP500 Levels, Refreshed - bubble pic 

While buying-the-damn-bubble #BTDB felt pretty darn good at the beginning of last March, Biotech and Social Media stocks were only down -15-45% from that prior capitulation high. I trust no one forgets that. Risk happens fast.


Across our core risk management durations, here are the lines that matter to me most:

  1. Immediate-term TRADE overbought = 1885
  2. Immediate-term TRADE support = 1854
  3. Intermediate-term TREND support = 1823

In other words, you just saw 40 handles of straight upside from our 1842 oversold signal – and now you have 30 handles of downside from the overbought signal.


Don’t chase beta. Fade it.



Keith R. McCullough
Chief Executive Officer


Bubble, Overbought: SP500 Levels, Refreshed - SPX

Learn More about Hedgeye.

McCullough: What's Working Right Now (And What's Not)


Hedgeye CEO Keith McCullough discusses the outside-consensus macro themes we've been running with YTD as well as what's working in the markets right now and what's getting whacked.

5 Minutes with Target’s CEO: My 3 Questions

 Let’s cut right to the chase. For a whole host of reasons, (not least of which is the continuing fallout from the credit card data breach disaster) we think Target is one of the better shorts in retail right now. And if we were able to sit down, face-to-face, with CEO Gregg Steinhafel for five minutes, we would want answers to three key critical uncertainties that exist in the minds of investors right now.


Here are the three questions we’d ask:


1. Who exactly are you guiding? In other words, who are you addressing with your company guidance—Wall Street or Main Street? In the two decades I’ve been doing this, I’ve never once had to ask this question before to a CEO. But the reality is that you’re saying that you are going to comp positive this year and Gross Margins will be up in the US and in Canada. And all of this will happen while you are lowering prices to win back customers who left after the data breach? Good luck. It all seems like a Mission Impossible combination.


That leads us back to the original question – are you giving guidance to Wall Street or consumers?


What’s going on right now with Target reminds me of what cruise companies do during their peak booking season – they generally issue positive comments because they’re talking to travel agents, not to Wall Street. If they say that bookings are weak, then agents will discount price more heavily. So, is Target sending out this perplexing message to keep consumer opinion high, even if it means opening up the possibility of lowering Wall Street expectations later in the year?


2. Share Loss. Who do you think is gaining the most business from customers who headed for the exits following the data breach debacle? For argument’s sake, let’s assume that it’s Wal-Mart. Do you think that WMT is prepared to let that business to come-and-go so easily? Will you match Wal-Mart if it comes down to price?


In reality, the shoppers that left Target did not leave because of price. They left because of trust. You might be able to buy back trust, but you’ll have to undercut Wal-Mart on price rather significantly.


If that’s true, please refer to question #1.


3. What does Target want to be when it grows up? That may sound like a ridiculous question at face value. But the reality is that it used to be “Wal-Mart vs. Target” – in share of market, share of mind, and share of investment dollars. But as bad as Wal-Mart’s rap sometimes can be, the fact remains that it has over 10,000 stores under 71 banners in 27 countries. It has several formats – from Supercenters, to warehouse clubs, to neighborhood markets, and it is even beta-testing C-stores/gas stations. At least it’s trying to evolve.


Meanwhile, Target just has one primary format in North America, with a token operation in India.


The point here is that as far as perception is concerned, Target used to be right there with WMT – but now it seems to be somewhere between WMT and Kohl’s. When you look out five to 10 years, what will Target look like?


Bonus Question (if he hung around an extra 2 minutes). Do you think you fired your customer? JC Penney fired its customer. Former CEO Ron Johnson said at the time that he did not. Lululemon fired its customer. CEO Chip Wilson said at the time that he did not. The reality is that both of those retailers fired their customers. It will likely take them 2-3 years to get an acceptable portion of their customers back.


So, do you think that you fired your customer? Your current lofty guidance suggests that the answer is No.


(Note: we’d give Target’s CEO all the credit in the world if he said Yes. Why? Because it would suggest that he’s actually doing something about it).





Brian McGough is Managing Director and Retail Sector Head at Hedgeye Risk Management. You can follow him on Twitter at @HedgeyeRetail

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 80.46%
  • SHORT SIGNALS 78.35%