The Dollar Remains Your Friend

Client Talking Points


We had an immediate term overbought signal yesterday is the U.S. Dollar – backing off at 99.99 (Wayne Gretzky would have been proud). Equity markets bounced and then accelerated into the close. Big up day for the markets - lots of counter-trend moves, plus the things that have been working were trending higher - but don’t confuse that with the broader trend here: the U.S. Dollar remains your friend. Immediate term upside to over 100 for USD (finally!), with an immediate term risk range is 97.46-100.31.


Oil is getting sacked in the backfield for another loss, down almost a full percent to 46.63. This is actually a big move in standard deviation terms - we have it at 3.6 standard deviations oversold which establishes a lower-high of resistance inside of 50 (49.64 to be exact). The two important points today are that the USD has a 100 handle in its risk range and oil at the top end of its risk range is inside of 50….that’s very deflationary. 



You don’t need someone at the Fed to give you inside information, you just need the risk ranges U.S. equity market volatility signaled an immediate-term overbought SELL signal on Wednesday. The current  immediate term risk range for the VIX is 13.03-17.36. We would suggest you risk manage this by taking off some of your U.S. equity exposure that you put on on the down moves. Buy low. Sell high. Rinse. Repeat.


Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call, U.S. #HousingAccelerating remains 1 of the Top 3 Global Macro Themes in the Hedgeye Institutional Themes deck right now. Not only did U.S. home prices accelerate (in rate of change terms) in the Core Logic data this week to +5.7%, but the supply/demand data has been improving throughout the last 3 months.


Penn National Gaming is the best way to play improving domestic regional gaming trends due to its superior operational management and unit growth opportunities. Catalysts include positive estimate revisions, the opening of the first Massachusetts casino in June, and industry leading earnings growth in 2015 and 2016.


Low-volatility Long Bonds (TLT) have plenty of room to run. Late-Cycle Economic Indicators are still deteriorating on a TRENDING Basis (Manufacturing, CapEX, inflation) while consumption driven numbers have improved. Inflation readings for January are #SLOWING. We saw deceleration in CPI year-over-year at +0.8% vs. +1.3% prior and month-over-month at -0.4% vs. -0.3% prior. Growth is still #SLOWING with Real GDP growth decelerating at -20 basis points to +2.5% year-over-year for Q4 2014.The GDP deflator decelerated -40 basis points to +1.2% year-over-year.

Three for the Road


GREECE: don't tell mainstreamers, but since they claimed Greece was fixed on FEB 24, Greek stocks have crashed 15%



A thankful heart is not only the greatest virtue, but the parent of all other virtues.



A strike at a Chinese factory that makes shoes for Nike, Timberland, Kenneth Cole and other well-known brands grew on Tuesday to about 5,000 workers.


Retail Callouts (3/13): HIBB, KATE, Sigmas: ULTA, ARO, ZUMZ,

Takeaway: HIBB - As Good As It Gets. KATE adding Singer to BOD, Big Win.



HIBB - As Good as it Gets

Quick thoughts on the HIBB Print...

  1. Comps beat printed Street estimates – which we expected. This quarter is literally as good as it can get for HIBB. 1) Wal-Mart, from which HIBB draws traffic in its core market, just printed the first positive traffic comp in nine quarters. 2) Athletic retailers like Dick’s and Foot Locker both printed solid comps in the last two weeks (DKS +3.4%, and FL +10%). 3) HIBB went against its second-easiest comp in over five years in the month of January.
  2. Gross Margins were down 30bps on a 5.4% comp. There are some added cost pressures this year due to the new DC in Birmingham, but this isn’t the HIBB of old where it could leverage occupancy on flat to down comp numbers. 1) Occupancy is going up, 2) distribution costs in non-core markets (where most of the growth is coming from) is done by a 3rd party vendor, ie more costly solution, and 3) merch margins which have been down in the past 3 quarters don’t appear to have helped in the quarter.
  3. Guidance – The company guided to LSD to MSD comp growth for the year. Reading between the lines on February, it appears the quarter is off to a slow start. Comps get easier for the rest of the Month going up against a 2.9% in March and 0.9% in April, but February (due to the NBA All-Star Game) carries the bulk of the quarter.
  4. Inventory – Inventories came in the lightest they’ve been in 7 quarters with the sales to inventory spread at 3.8%. We read nothing in the press release to indicate that the company has seen any disturbances in product flow due to the West Coast port issues, but we don’t see how HIBB walked through that unscathed. We’ve seen it cited from a number of companies to-date including BGFV, and think it contributed to HIBB’s cleaner inventory position.

For our prior note on HIBB from 3/12 CLICK HERE


Retail Callouts (3/13): HIBB, KATE, Sigmas: ULTA, ARO, ZUMZ,  - 3 13 chart1





Takeaway: This is a big win for KATE. Singer has one of the best resumes in the business and gets how to take a powerful brand/product and scale it across an international platform. We'd argue with anyone that KATE's share of voice is much higher than its actual share of wallet. Now the brand needs to grow into a footprint to capitalize on its wide consumer acceptance. Bernard Aronson and Kay Koplovitz (the two outgoing Directors) have been with the company for 17yrs and 23yrs respectively. They both have impressive resumes in their own right, but KATE is a much different animal than LIZ was 20 years ago. We think the company will benefit from some new blood, especially with Singer's pedigree.





ULTA - 4Q14 Earnings

Retail Callouts (3/13): HIBB, KATE, Sigmas: ULTA, ARO, ZUMZ,  - 3 13 chart2 


ARO - 4Q14 Earnings

Retail Callouts (3/13): HIBB, KATE, Sigmas: ULTA, ARO, ZUMZ,  - 3 13 chart3


ZUMZ - 4Q14 Earnings

Retail Callouts (3/13): HIBB, KATE, Sigmas: ULTA, ARO, ZUMZ,  - 3 13 chart4


Sir Philip Green Sells BHS to Retail Acquisitions Ltd.



AMZN - Amazon Has Quietly Acquired 2lemetry To Build Out Its Internet Of Things Strategy



PLCE - Children's Place increases store closures



COLM - Columbia Awarded $3.3M for Faulty Heating Technology



Metro on the lookout for acquisitions





Keith's Daily Trading Ranges, Unlocked

This is a complimentary look at Daily Trading Ranges - our proprietary buy and sell levels on major markets, commodities and currencies sent to subscribers every weekday morning by CEO Keith McCullough. It was originally published March 13, 2015 at 07:47. Click here to learn more and subscribe.

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LEISURE LETTER (03/13/2015)



  • March 16-19: Cruise Shipping Miami Conference
  • March 19: Galaxy FY 2014 results


MGM - announced staff pay rises equivalent in some cases to a percentage above the city’s rate of annual inflation for 2014.


For non-management workers at MGM Macau earning up to MOP12,000 (US$1,500) per month, the new increment is between 6%-8% of monthly salary. The casino operator said in a statement it amounted in many cases to approximately MOP700 per month per worker for those in that wage bracket.


MGM Macau workers earning more than MOP12,000 per month will receive an increment of 5% of monthly salary. All the awards are effective from March 23, the company said.


Takeaway:  More wage increases for MGM China due to higher inflation. 


SJM - CEO Ambrose So has denied that the casino operator is compelling employees to take unpaid leave because it has insufficient work for them to do during the gaming slump, Macao Daily reports.


The Chinese-language newspaper quotes So as telling reporters in Beijing that SJM Holdings employees are free to decline its offer of unpaid leave. But they will also not rush to recruit as vacancies occur as before as one of the ways to decrease cost.


An internal memorandum circulated among SJM Holdings employees invites them to apply for unpaid leave. So also said his company had no plans to lay off employees.


So told reporters that SJM will not file an application with the government to apply for gaming tables for their new Cotai project Lisboa Palace this year.


The application will only be submitted once the construction of the project is completed. He claimed that SJM is able to shift gaming tables from its other properties to the new project.

In addition, So revealed that the corporation has financial reserves of some MOP24 billion, claiming it does not have any financial difficulty even though the city’s gaming revenues have dropped for nine consecutive months.


Predicting that gaming revenues may still post decreases of 10-15% YoY in 2015, Mr. So stressed once more that he is optimistic about the development of the gaming industry, claiming that the opening of the Hong Kong-Zhuhai-Macau Bridge will attract more gamblers, especially from Hong Kong.



Takeaway: After recent comments from Secretary Leong, no casino operator will force unpaid leave. Operators will need to think about other cost-cutting measures. 


LVS - Sands China recommended a final dividend of HK$1.00/share for 2014 year. It will be paid on July 15.


PNK - elected Chuck Atwood to Board of Directors. Atwood is currently the Lead Trustee of the board of trustees for Equity Residential (NYSE:EQR), a REIT listed on the New York Stock Exchange and member of the S&P 500.  He is also a member of the board of directors of Gala Coral Group, a private U.K.-based gaming company, and ALST Casino Holdings, LLC, a private Las Vegas-based gaming and hospitality company.


Suncity- Suncity is interested in Phú Quốc, an island that is part of the southwest Vietnam province of Kiên Giang, and about 250 kilometres (155 miles) from Ho Chi Minh City.  Suncity also said it was willing to invest in Bai Truong if the current investors withdraw.



STR: US hotel results for week ending 7 March:

  • Occupancy rose 0.5% to 64.5%
  • ADR increased 2% YoY to $116.74
  • REVPAR was up 2.5% to $75.27  


Takeaway: US REVPAR growth have been slower recently.


AC FEB SS land GGR: -2% YoY

AC FEB I-gaming revenue: flattish at $10.4m



Hedgeye Macro Team remains negative Europe, their bottom-up, qualitative analysis (Growth/Inflation/Policy framework) indicates that the Eurozone is setting up to enter the ugly Quad4 in Q4 (equating to growth decelerates and inflation decelerates) = Europe Slowing.

Takeaway:  European pricing has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely in 2015.

CHART OF THE DAY: Multi-Duration Macro (Hedgeye Quantitative Set-Up) $USD

CHART OF THE DAY: Multi-Duration Macro (Hedgeye Quantitative Set-Up) $USD - 03.13.15 chart


Editor's note: This is an excerpt from today's Morning Newsletter written by Hedgeye CEO Keith McCullough. Click here to learn how you can subscribe.


For those of you who are new to my average at best sense of humor and risk management lingo, the aforementioned dump of macro signals are meant to contextualize multiple durations:


  1. Immediate-term TRADE and “risk range” commentary deals with the very immediate-term
  2. Intermediate-term TREND themes and signals consider a duration of 3 months or more
  3. And if I go all “long-term” TAIL on you, I’m considering the next 3 years or less


Project Olaf

“Do you want to build a snowman?”



If you haven’t seen Disney’s Frozen, you should. I have two daughters and a son. They love that movie. And, I must admit, I think I know all of the words to Anna and Elsa’s songs too!


Back to the Global Macro Grind


I’m in my favorite fairy-tale place on earth this morning (Washington DC) so I’ll keep this brief as I need to run over to the Fed’s office to have breakfast with all of my buddies over there. We’re going to hammer out how we keep ice cubes from melting.


In the spirit of centrally planning things like economic gravity (and Disney’s announced sequel), we’ve named our latest idea Project Olaf. This was inspired by the inflated hopes of Frozen’s first snowman, who thought the sun couldn’t deflate his expectations.


Admittedly, while we’re wicked “smart” Ivy League guys, I think this whole idea of ours has some headwinds (like heat for example). “So”, I’m thinking that instead of building a snowman, we should just build a billion dollar ice cube app.

Project Olaf - Fed forecast cartoon 03.02.2015


Moving along…


These meetings we do in Washington are funny. I think my defense partner, Daryl Jones, and I are the only two Canadian macro guys within 50 miles of this place who aren’t trying to get inside information on what the Fed is going to say next.


Notwithstanding the whole orange jump-suit risk part, we’re simply more comfortable reminding our audience that you don’t need that stuff to make and/or save money in macro – you simply need to front-run the predictable behavior of people who chase it.


“So”, before I have breakfast with my central planning boys, here’s what Mr. Macro Market is telling me to tell you across 10 Big Macro Risk Management Factors:


  1. US 10yr Yield signaled immediate-term TRADE oversold within its bearish intermediate-term TREND yesterday
  2. SP500 bounced right off @Hedgeye TRADE support and now needs to close > 2080 to keep the snowman from melting
  3. Russell 2000 (IWM) ramped +1.7% post our immediate-term buy signal (lower) on red; next resistance = all-time highs
  4. Weimar Nikkei up another +1.4% overnight to +10.4% YTD (vs. SPX +0.3%) signals immediate-term overbought
  5. Germany’s DAX has immediate-term downside to 11,506 after signaling overbought yesterday at +21% YTD
  6. US Equity Volatility (VIX) signaled overbought where I signaled SELL VXX on Wednesday; risk range = 13.03-17.36
  7. US Dollar Index signaled immediate-term TRADE overbought at 99.99 yesterday; bullish TRADE support = 97.46
  8. Burning Euros are straight back down this morning after their 1-day bounce; bearish TREND call remains
  9. Gold is bouncing (small) as the USD stops going up, but remains bearish TREND with a risk range of 1137-1179
  10. Oil (WTI) is probing the low-end of its immediate-term range this a.m., but has no intermediate-term support to $36.35


In other words, Global #Deflation remains a much more practical intermediate-term TREND investment outlook than building a snowman of inflation expectations in March.


Nope, sorry Olaf. It’s not different this time.


For those of you who are new to my average at best sense of humor and risk management lingo, the aforementioned dump of macro signals are meant to contextualize multiple durations:


    1. Immediate-term TRADE and “risk range” commentary deals with the very immediate-term
    2. Intermediate-term TREND themes and signals consider a duration of 3 months or more
    3. And if I go all “long-term” TAIL on you, I’m considering the next 3 years or less


Yep, more or less. Those are two critical words in risk management as market history will teach you that it’s a lot easier to have:


A)     A “longer-term” outlook (more days in your holding period) if volatility is trending lower, and…

B)       less days (more risk managing of your core investments, hedges, etc.) as implied volatility is tending higher


If that investing style rhymes with what you’ve realized using real ammo in this game of expectations, good. I’ll lose my boys at the Fed as soon as I start talking about anything that’s non-linear (like volatility). They think they can build an app to “smooth” that too…


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


UST 10yr Yield 2.01-2.24% (bearish)

SPX 2030-2080 (bullish)

RUT 1 (bullish)

DAX 116 (bullish)

VIX 13.03-17.36 (bullish)
USD 97.46-100.31 (bullish)
EUR/USD 1.04-1.107 (bearish)

YEN 119.45-122.01 (bearish)
Oil (WTI) 46.35-49.64 (bearish)

Gold 1137-1179 (bearish)


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Project Olaf - 03.13.15 chart

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%