I Can't See Land!

“The problem was sight.”

-Peter Zeihan


That quote is not alluding to the Fed’s decision tomorrow. Peter Zeihan was describing what I am sure all of your FOMC day previews are writing about this morning - 14th century macro strategy.


In the world before 1400, true ocean transport was a rare thing, being neither quick nor reliable nor safe… once line of sight to the land was lost, you had to more or less guess.” (The Accidental Superpower, pg 24)


Guess? When I was first hired on the buy-side, sometimes I’d guess. Then I’d lose lots of other people’s money and my boss, Jon Dawson, would tell me not to guess. “We don’t do open-the-envelope investing.” It was a great risk management lesson.


And it’s one that has stuck with me for the 14 years since he taught it to me. That’s why I’ve been taking down my asset allocation to long-term Treasuries on the recent bounce. I can’t guess what Yellen says tomorrow. I’d rather raise cash and react to it. I Can't See Land! - Yellen cartoon 09.17.2014NEW


Back to the Global Macro Grind


This is not to suggest that what super “smart” people on the Wall Street refer to as an ‘educated guess’ can’t make you a lot of money. As I implied in my intro, the smartest of those types have figured out to bet big with other people’s money!


Will Janet Yellen remove the word “patient” from tomorrow’s Fed policy language? Will she replace it with another scrabble word score? Will she leave the word in there and be “data dependent”? Will a ramping US Dollar find its way into the language? How about the dirtiest word she’s ever whispered publicly, #deflation?


You can buy-pass the whole seeing thing if you just have answers to the aforementioned questions in advance. It’s called inside information. Some pay a lot of dough for it! If you’re a little Mucker in Stamford, CT – you’re going to have to wait and watch.




Since we said buy both stocks and bonds before they started bouncing last week, now we can sell some of what we bought, raise some cash, and sleep soundly. Chasing beta by levering up your bets after markets bounce is no way to live.


Bets? Yes, people in this profession bet. Before yesterday’s US stock and bond market ramp, here’s where consensus macro bets were leaning, from  CFTC Non-Commercial futures and options perspective:


  1. SP500 (Index + Emini) net SHORT position hit a YTD high of -39,891 contracts
  2. Russell 2000 net SHORT position hit a YTD high of -40,793 contracts
  3. Long-bond Bears ramped the net SHORT position in the 10yr Treasury to -173,194 contracts
  4. Crude Oil Bulls remained pervasive with a net LONG position of +294,609 contracts
  5. US Dollar Bulls hit YTD highs at +81,210 NET long contracts


And, guess what? Every single one of those Consensus Macro positions was wrong on the day:


  1. After 3 straight down weeks (yes people get bearish after corrections), SP500 popped +1.35%
  2. Russell 2000, which has been our favorite of the US major indexes, tested an all-time high
  3. 10yr UST Treasury Yield dropped to 2.07% (TLT was up +1% on the open)
  4. Oil continued to crash with WTI closing -2.3% on the day at -17.7% YTD
  5. US Dollar Index had one of its biggest down days of 2015, -0.76%


“So”, what does this mean?


  1. You should pay attention to modern day mind-maps like futures and options positioning
  2. Wall Street is begging for Janet to devalue Dollars and keep rates lower for longer
  3. If Yellen delivers #dovish tomorrow, you’ll see a lot more of Consensus Macro bets being wrong


I personally don’t like being wrong. That’s why, especially heading into an open-the-envelope event day like tomorrow, I lower the probability of being wrong by raising cash.


Do I have an opinion on what the Fed should do? Of course. But that and a bus ticket will get me a swift beating at a men’s league hockey game in northern Quebec. What the Fed should and could do are two very different things.


Since we’ve had a good run here in March, I’d rather cling to my cash (US Dollars) than pretend to see something I have absolutely no edge on. And I’ll let the clairvoyant vision of the Federal Reserve rule another non-free-market day.


Today we’ll be hosting a Macro Call on the US Employment Cycle at 11AM EST (ping for access). Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.01-2.14%

SPX 2053-2112

VIX 13.72-17.39
USD 98.50-101.17
Oil (WTI) 43.05-47.36
Gold 1131-1169


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


I Can't See Land! - 03.17.15 chart

March 17, 2015

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REPLAY: The Macro Show With Keith McCullough

Today's edition of The Macro Show with Hedgeye CEO Keith McCullough features a can't-miss special appearance by Hedgeye Energy Sector Head Kevin Kaiser.






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Takeaway: We continue to like PENN over the intermediate and long term but negative same store revs in March could pressure regional gaming stocks

  • We’re forecasting a return to negative same store revenue in the regional gaming markets following 3 straight months of gains.  A monthly downturn would counter the recent regional gaming narrative and could hurt sentiment and the stocks: BYD, PENN, PNK, and GLPI
  • The stocks have performed very well since we went positive on the space in January, even before GLPI’s offer to buy PNK. 
  • We are removing PENN from the Hedgeye Best Ideas list even though the company’s return to growth in beginning in 2H 2015 should drive a higher stock price.  Our concern rests with the potential reversal in sentiment as March gaming revenues are released by the states in early April.
  • Early weekly revenue read from a few markets is mixed as a much weaker Pennsylvania was offset by a stronger Missouri. 


Cartoon of the Day: Blinders

Cartoon of the Day: Blinders - Stimulus cartoon 03.16.2015

Our centrally-muppeteered markets are getting less real, by the day.

Reminder: Call Today | Patience or Pre-emption? Contextualizing the Domestic Labor Market

The Hedgeye Macro team will be hosting a conference call on Tuesday, March 17th at 11:00AM EST to discuss the current state of the domestic labor market and the implications for the path of monetary policy. 


We'll present a comprehensive review of the current domestic labor market dynamics, profile the prevailing trends and contextualize the recent data within the context of the labor and economic cycles over the last half-century.   


Watch the replay of this presentation below.



  • The Cycle:  We'll detail where we are in the current cycle and what's the likely trajectory for labor fundamentals from here.
  • Wage Inflation:  While leading labor metrics are approaching levels of peak improvement, wage inflation remains the notable holdout.  We'll discuss the dynamics underpinning the ongoing stagnation in wage growth and the outlook for this key input in the Fed's policy calculus. 
  • Patience or Pre-emption?  We'll conclude with a detailed scenario analysis regarding the outlook for U.S. monetary policy. 




  • Toll-Free Number:
  • Toll Number:
  • Conference Password: 13604172
  • CLICK HERE to download the slides associated with this call


***As always, there will be an audio-visual replay distributed after the call.***


Kind regards,


The Hedgeye Macro Team

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