We will be hosting our highly-anticipated Quarterly Macro Themes conference call tomorrow Tuesday, April 7th at 11:00AM ET.  Led by CEO Keith McCullough, the presentation will detail the THREE MOST IMPORTANT MACRO TRENDS we have identified for the quarter and the associated investment implications. 




#LateCycle USA: Employment, Inflation and Earnings follow an archetypic progression over the course of the economic cycle and always look best before the crest.  We’ll detail where we are in the current cycle, the likely trajectory for this trinity of late-cycle macro indicators from here and how best to be positioned in the twilight of the current expansion.  


#DemographicYields: Year after year in the post-crisis era, investors, economists and policy-makers alike have consistently seen their estimates for GDP growth, inflation and interest rates surprised to the downside. Perhaps there is some merit to the “secular stagnation” thesis most recently highlighted by Bernanke’s blog. In this theme, we pull back the curtains on the impact of demographics on the domestic and global economy. The conclusion? Lower-for-longer...

Oil’s #DeflationDeck: Taking a birds-eye view of oil prices throughout the peaks and troughs in business cycles provides essential context as deflation’s dominoes continue falling on a global scale. With the U.S. production machine changing the supply/demand dynamics in global energy markets, a deep-dive of this shift is key to generating sector-specific alpha into 2016 and beyond.



  • U.S. Toll-Free Number:
  • U.S. Toll Number:
  • Confirmation Number: 39359212
  • Materials: CLICK HERE (the slides will be available approximately one hour prior to the start of the call)

As always, our prepared remarks will be followed by a live, anonymous Q&A session. Please submit your questions to .


Also, for those of you who cannot join us live, we will be distributing a replay video of the call shortly after it concludes.


Kind regards,


The Hedgeye Macro Team

Monday Mashup

Monday Mashup - 11


Recent Notes

03/30/15 Monday Mashup

04/02/15 MCD: Still Lacking Direction

04/02/15 New Best Idea: Long ZOES

Events This Week

Tuesday, April 7

  • PLAY earnings call 5:00pm EST

Thursday, April 9

  • RT earnings call 5:00pm EST


Recent News Flow

Monday, March 30

  • PLKI introduced the new Red Stick Chicken to its menu as an LTO.  Four premium tenderloins marinated in a cayenne and Tabasco marinade will be served with Cajun Fries, a Buttermilk Biscuit, and Smok’n Pepper Ranch dipping sauce for just $3.99.
  • DNKN announced its new commitment to transitioning to 100% cage-free eggs globally.  10% of all eggs sourced for its breakfast sandwiches in the U.S. will be cage-free by the end of the year.  DNKN also made a commitment to source only gestation crate-free pork in the U.S. by 2020.
  • MCD will begin testing all day breakfast in the San Diego area in April.

Tuesday, March 31

  • COSI hired Miguel Rossy-Donovan as its new CFO.  Rossy-Donovan will join Cosi from Teach of America, where he has served as Chief Finance & Administration Officer for the past ten years.
  • WEN has agreed to submit management-supported proxy access amendments to its By-Laws.  The amendments would allow a stockholder, or group of up to 25 stockholders, owning 3% or more of the company continuously for at least three years to nominate directors nominees making up to 20% of the Company’s board, given certain conditions are met.

Wednesday, April 1

  • DENN announced the launch of a new kids menu that will feature popular DreamWorks Characters from televisions shows and movies such as Penguins of Madagascar, Puss In Boots, and Turbo FAST.
  • NDLS introduced BUFF Bowls to its menus nationwide.  The new BUFF Bowls are low carb and high protein versions of popular NDLS dishes (Japanese Pan, Whole Grain Tuscan Fresca, Pesto Cavatappi, and Bangkok Curry).
  • MCD plans to raise its pay for U.S. company-owned restaurant workers by more than 10% as well as offer a paid vacation benefit.
  • DENN established a new $250 million credit facility and increased its share repurchase authorization by an additional $100 million of its common stock.
  • JMBA reached an agreement with Vitaligent to refranchise 100 company-owned restaurants in the San Francisco, Sacramento, and San Diego markets in exchange for $36 million cash.  JMBA is on track to complete its refranchising program in 1H15.

Thursday, April 2

  • JMBA announced the termination of it stockholder rights agreement after feedback from investors and considering its current corporate governance practices.



Monday Mashup - 2


Sector Performance

The XLY outperformed the SPX. Both casual dining and quick service stocks, in aggregate, underperformed the XLY.

Monday Mashup - 3

Monday Mashup - 4


Quantitative Setup

From a quantitative setup, the XLY remains bullish on an intermediate-term TREND duration.

Monday Mashup - 5


Casual Dining Restaurants

Monday Mashup - 6

Monday Mashup - 7


Quick Service Restaurants

Monday Mashup - 8

Monday Mashup - 9

US 10YR, USD, Commodities

Client Talking Points


We were always 1 bad jobs report away from the Fed coming around to our lower-for-longer view on rates; 1.83% yield for the US 10YR this morning with an immediate-term risk range = 1.80-1.93%, and no intermediate-term support to the all-time closing (yield) lows.


The USD was down hard on Friday, especially vs. the Euro, as the short position in EUR/USD (futures/options contracts -225,776 net SHORT position) is massive; risk range now $1.07-1.10 and we think the rates move is much more important from an intermediate-term point of view.


Gold loves Down Dollar, Down Rates – it’s +1.2% to $1222/oz this am but signaling immediate-term overbought; Oil +3.5% on the same, but tapping the top-end of its current 46.48-51.06 WTI risk range too

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

Manitowoc (MTW) is splitting the business into two companies. Given the valuation differential between the sum-of-the-parts and the current enterprise value of the company, the break-up should be a substantial positive. Recent nonresidential and nonbuilding construction data remains firm for 2015, which suggests that MTW’s crane sales should see a pickup in the first half of the year. The Architecture Billings Index (a survey of architects) typically leads nonresidential and residential construction spending by approximately 9-12 months. More importantly, the ABI Index leads MTW Crane Orders by 2 quarters.


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. Builder Confidence retreated for a 3rd consecutive month in March and New Home Starts in February saw their biggest month-over-month decline since January 2007.  We think the underlying reality is more sanguine with the preponderance of the weakness in the reported February data largely attributable to weather.  


                                                                                                                                                                      While labor supply constraints may serve as a drag to builder confidence, presumably it is rising demand trends that are driving tighter conditions in the resi employment market.  All else equal, we’d view improving demand as a net positive.  On the New Construction side, while the sharp drop in Housing Starts captured most of the headlines, we believe the real story was in the 3% gain in permits. We'd expect to see a big rebound in the next two months in housing starts as the data plays catch-up to the thaw.



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. Most of the #Deflation trades bounced to something less-than-terrible (both absolute and relative) for 2015, whereas the real alpha trending in macro markets continues to play to the lower-rates-for-longer camp’s advantage.

Three for the Road


REALITY CHECK #2: We have been long bonds & $TLT since 4/1/14 in Real-Time Alerts. It's up +22% since. @Hedgeye @KeithMcCullough


“Yesterday is not ours to recover, but tomorrow is ours to win or lose.”

                     -Lyndon B. Johnson


Today in 1808, John Astor (America's 1st millionaire), incorporated the American Fur Company.

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.

Hope Remains Intact

This note was originally published at 8am on March 23, 2015 for Hedgeye subscribers.

“One would hope that the Fed will be very cautious about tightening.”

-Ray Dalio


That’s what Global Macro man, Ray Dalio, was hoping for in his Bridgewater’s Daily Observations note from March 11, 2015. He believes that it is “best for the Fed to err on the side of being later and more delicate than normal.”


While hope is not a risk management process, I was hoping for the same last week. And my fundamental research call for lower interest rates for longer (as the rate of change in both Global Growth and Inflation slow) remains intact.


At the same time, I am not hoping for a devalued US Dollar. US companies who are reporting international revenues and earnings are. The only reason why US GDP growth isn’t falling below 2% is because real US consumption growth loves #StrongDollar.


Hope Remains Intact - z doll 2


Back to the Global Macro Grind…


The problem, of course, is that when the Dollar is rising and Rates are falling (at the same time), you get #Deflationary forces in asset prices tied to inflation expectations. This is where Wall Street and Main Street are hoping for different things.


Last week, on the dovish Fed “news”, the US Dollar and Interest Rates dropped:


1. US Dollar Index (-2.4% for the week) had one of its biggest down weeks in the last 6 months

2. US Treasury Yields (10yr) dropped 18 basis points on the week to 1.93%


That was the very immediate-term move that Dalio and I were hoping for, as it took out the big bang risk of the Federal Reserve making a policy mistake at the end of multiple cycles.


On Down Dollar:


1. The Euro had one of its biggest up weeks in the last 6 months, +3.1% to -10.6% YTD

2. Gold had a big bounce (Gold loves Down Dollar, Down Rates) of +2.8% to 0.0% YTD

3. Commodities (CRB Index) finally stopped making new weekly lows, +1.6% at -6.9% YTD

4. Emerging Market Stocks (MSCI Index) bounced +3.2% to +1.4% YTD

5. Latin American Stocks (MSCI) had an even bigger bounce +5.4% to -9.6% YTD


Meanwhile, on Down Rates:


1. Biotech Stocks (IBB) ramped another +6.0% to +20.8% YTD

2. REITS (MSCI Index) ripped a +5.6% move to +6.8% YTD

3. NASDAQ tacked on another +3.2% to +6.1% YTD

4. Long Bond (TLT) had a great week, +3.8% to +4.6% YTD

5. SP500 had its 1st up week in the last 3, closing +2.7% putting it back in the black at +2.4% YTD


In other words, most of the #Deflation trades bounced to something less-than-terrible (both absolute and relative) for 2015, whereas the real alpha trending in macro markets continues to play to the lower-rates-for-longer camp’s advantage.


All the while, consensus was setup for a rate-hike. Here’s where futures and options net positioning (CFTC non-commercial positions) are:


1. SP500 (Index + Emini) net SHORT position rose to its highest of 2015 at -76,511 contracts

2. Long-term Treasuries (10yr) net SHORT position came off its YTD highs to -132,900 contracts

3. The Euro’s net SHORT position got pinned at YTD highs of -201,135 contracts


With the SP500, Long-term Treasuries, and Euros all straight up from within six minutes of the FOMC announcement, Consensus Macro getting squeezed provided for a cherry on top of what was an admittedly hoped-for reprieve in policy mistake expectations.


Hence my “buy everything” call on the news. But now what? Do you sell everything? I don’t think so – I’m definitely not selling Long-term bonds and/or anything that looks like a bond. Not if the market is expecting the Fed to deliver on “data dependence.”


While this week’s CPI data should get a small lift from Oil bouncing like it did in FEB, that #deflation data is going to look very dovish when it gets reported for MAR (in April). Friday’s final GDP report for Q414 will also look slower, sequentially.


Fortunately, our rate of change models are not built on hope.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 1.89-2.03%

SPX 2080-2119

RUT 1238-1275

USD 97.17-100.39

EUR/USD 1.04-1.08

Oil (WTI) 42.04-48.03

Gold 1159-1188


Best of luck out there today,



Keith R. McCullough

Chief Executive Officer


Hope Remains Intact - 03.23.15 chart

CHART OF THE DAY: Which Way for $USD, Commodities and $TLT?

CHART OF THE DAY: Which Way for $USD, Commodities and $TLT? - 04.06.15


Editor's Note: This is a brief excerpt from today's Morning Newsletter written by Hedgeye CEO Keith McCullough. Click here to learn more and subscribe.


In the meantime, the only big macro call that I’ll stay with is being long Long-term Bonds. While I’m always learning about theoretical scenarios where the easiest call to make can be wrong, the only thing that’s been dead wrong there is the Rate Hike consensus.


Always Learning

“Organizations cannot learn unless the individuals within them learn.”

-Edward Hess


“Always Learning” is a nicer title for the morning after the long weekend than the title of the most recent book I cracked open: Learn Or Die, by Edward Hess.


For those of you who missed the Late-cycle slow-down in the US labor report on Friday, Global Macro markets did not. It’s a big Rates Down, Dollar Down (Commodities Up) morning here in America that we need to risk manage.


We’re on the right side of the rates move, so my primary focus will be risk managing the losing side of the Currency move. Will a bearish TRADE in the US Dollar disrupt our bearish intermediate-term TREND view of Commodities? Learning starts by questioning what it is that we believe.


Always Learning - 44


Back to the Global Macro Grind


When it comes to running money or an independent research firm, I think Hess asks the right question as an opening volley to the aforementioned book: “Learn or Die: Is this just a snappy title or is it a business truth?”


Having run both a buy-side and research company, I’d say that it is an absolute truth. Everyone makes mistakes. Not everyone can recover from not learning from those mistakes.


Since what I believe about Global Macro markets today can easily change tomorrow, I try to put myself in a position of perpetually being open to the idea that Mr. Market’s immediate-term TRADE can change the direction of our intermediate-term TREND views.


With that in mind, the easiest call to reiterate this morning is the one where both the TRADE and TREND agree: lower-for-longer on US interest rates. Here’s how that looked both week-over-week, and in the context of the intermediate-term TREND:


  1. US 2yr yield dropped -12 basis points last week to 0.48% (-19 bps YTD) and remains bearish TREND
  2. US 10yr yield dropped -12 basis points last week to 1.83% (-33 bps YTD) and remains bearish TREND


Whereas the toughest call to make is the counter-TREND move (which was caused by the same employment #GrowthSlowing factor – a weak jobs report) in the US Dollar. Here’s how I’d contextualize that, across durations:


  1. US Dollar Index -0.5% on the wk to 96.80 (+7.2% YTD with bullish intermediate-term TREND support of 93.71)
  2. CRB Commodities Index +0.4% last wk to 216 (-6.0% YTD with bearish intermediate-term TREND resistance of 239)


What makes easy even easier (and tough tougher) is Consensus Macro positioning (in non-Commercial CFTC futures and options positioning terms) right now:


  1. Long Bond (10yr US Treasury) net SHORT position still way too short at -134,579 contracts
  2. EUR/USD net SHORT position at its highest short position of 2015 at -225,776 contracts


In other words, Bond Bears got squeezed on Friday inasmuch as Euro Bears did – and now one major question is will there be follow through on either and/or both? The other, of course, is what do slowing growth expectations mean for US stocks?


If you’re purely playing this from a Correlation Risk perspective (like many of the machines are), answering the question on US Equities is tough too. That’s because shorter-term durations have an inverse correlation, whereas longer-term ones have a positive correlation.


Here’s what I mean by that:


  1. US Dollar Index 30-day correlation to the SP500 is -0.70
  2. US Dollar Index 180-day correlation to the SP500 is +0.73


I could be wrong on this, but what I believe Mr. Market is trying to tell us with that juxtaposition is that for the US stock market to go up longer-term, growth expectations need to stabilize and strengthen. That only happens with a #StrongDollar – not a weak one.


But, if growth expectations continue to fall, at an accelerating rate:


  1. US interest rates will fall
  2. US Dollar will fall
  3. And as expectations for an easier Fed rise, stocks could bounce like commodities just did


If I haven’t confused you yet on the potential for multiple scenarios playing out, across multiple durations, let me speak to you every other day as rates, currencies, stocks, and commodities whip around! This is going to be fun.


In the meantime, the only big macro call that I’ll stay with is being long Long-term Bonds. While I’m always learning about theoretical scenarios where the easiest call to make can be wrong, the only thing that’s been dead wrong there is the Rate Hike consensus.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 1.80-1.93%
SPX 2039-2076
USD 96.60-98.80
EUR/USD 1.07-1.10
Oil (WTI) 46.48-51.06
Gold 1181-1227


Best of luck out there this week,



Keith R. McCullough
Chief Executive Officer


Always Learning - 04.06.15

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