CALL INVITE | Germany: Still Bullish

Hedgeye’s European analyst Matthew Hedrick will lead a discussion on why we are still bullish on the German equity market.


The call will be held on Tuesday, April 14th at 11am ET.


In the wake of ECB President Mario Draghi’s big QE announcement in January, we’ll discuss the impact of QE, where we see policy measures heading, and why we see Germany as the biggest ‘winner’ of central bank intervention.



  • Draghi’s influence on the capital markets vs the real economy
  • Why Germany’s economy is poised to most benefit from QE
  • An overview of German fundamentals
  • Key investment conclusions across durations


  • U.S. Toll-Free Number:
  • U.S. Toll Number:
  • Confirmation Number: 39466899
  • Materials: CLICK HERE (the slides will be available approximately one hour prior to the start of the call

CALL INVITE | Germany: Still Bullish - Draghi cartoon 01.20.2015

Ole Fashioned Group Patterns

This note was originally published at 8am on March 30, 2015 for Hedgeye subscribers.

“Individual persons tend to act pretty randomly.”

-Peter Zeihan


“But put those individual persons into large groups and individual randomness gives way to group patterns.”

-The Accidental Superpower, pg 92


Zeihan was alluding to one of the most important research topics @Hedgeye right now (demographics), but it can very well be applied to intermediate-term TRENDs in Global Macro positioning.


Eventually, most have to chase. And until everyone has given up on inflation expectations, I think the chase for #StrongDollar Deflation performance remains very much #on.


Back to the Global Macro Grind


I do both bottom-up and top-down investing. And while some of their respective rate-of-change analytics are the same, how I consider “valuation” in each discipline is not.


In Global Macro, funds flow to and from specific exposures and styles; whereas in value-investing, for example, you can buy something that’s “cheap”, and get paid – provided there is a catalyst. In macro, “cheap” tends to get cheaper – and “expensive” tends to stay expensive, until a phase transition finds a causal factor to arrest it.


In the case of what was our Top Global Macro Theme for Q1 of 2015, Global #Deflation, the causal (and correlating) factor is the US Dollar. Get the TREND in the US Dollar right, and you’re going to get a lot of other things right.


Last week, the US Dollar had what we call a counter-TREND move, closing down for the 2nd straight week. Down Dollar weeks provide us both buying (stocks) and selling (commodities) opportunities – here’s what a -0.6% wk-over-wk decline in the US Dollar Index delivered:


  1. Burning Euros bounced +0.6% to -10.0% YTD vs. USD
  2. Commodities (CRB Index) bounced +0.5% to -6.4% YTD
  3. Oil (WTI) bounced +4.9% to -11.1% YTD
  4. Gold bounced +1.3% to +1.3% YTD
  5. Copper bounced +0.2% to -2.0% YTD


That’s a lot of bouncing! Notwithstanding that I was long 0% of those 5 things, I am quite pleased that I didn’t chase any of them either. Come Friday afternoon, most of these counter-TREND bounces failed @Hedgeye immediate-term resistance.


In Global Equities last week, Down Dollar didn’t get either the #BigBeta chasers (Biotech and Technology) or #YieldChasers (Utilities and REITS) bulls paid. For one of the few weeks of the year, it didn’t get European Equity bulls paid either – Emerging Market equities were weak as well:


  1. SP500 lost -2.2% on the week taking it to +0.1% YTD
  2. EuroStoxx600 corrected -2.1% wk-over-wk to +15.5% YTD
  3. Emerging Markets LATAM dropped another -2.3% to -11.8% YTD


In other words, if you chased the counter-TREND move in Oil mid-week, by the weekend you were getting spanked, in Brazilian stock market terms, as the Bovespa reversed sharply, closing down -3.6% on the week at +0.2% YTD.


But why does CNBC’s beloved SP500 look as anemic as a major equity market index that is tied to commodities (like Brazil). Oh, right – they’ve morphed the SP500’s earnings into an international basket that is very much infected by #StrongDollar too. That sucks.


This is why, instead of owning the SP500, Global #Deflation Bulls have appropriately re-allocated their US equity exposure to US domestic revenue and earnings expectations:


  1. US Housing Stocks (ITB) were +0.1% in a down tape to +7.3% YTD
  2. US Consumer (XLY) and Healthcare (XLV) stocks continue to beat the SP500 at +3.8% and +6.8% YTD, respectively
  3. Russell 2000 and Nasdaq are +3.0-3.3% for 2015, beating their International Earnings Index competition too


If I didn’t signal “BUY” in what I signaled on red last week (and I had to chase the green US Equity futures this morning), I’d definitely buy more of the aforementioned basket over the SP500. It’s much more appropriately positioned for #Deflation.


The last point I wanted to make this morning has to do with Consensus Macro Sentiment. Going back to the weekend wood chopping, here’s how Wall Street’s (non-Commercial CFTC Futures & Options) net positioning looks going into quarter-end:


  1. SP500 (Index + Emini) net SHORT position came in by 41,359 contracts last week to -35,152
  2. Russell 2000 net SHORT position came in by 12,952 contracts last week to -13,277
  3. US Treasury 10yr Bond net SHORT position ROSE by 23,083 contracts last wk to -155,983


So you’ll probably get paid on hedge fund guys getting squeezed in both SP500 and Russell 2000 today anyway. We call this a good ole fashioned group pattern of a month-end markup!


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 1.84-2.01%

SPX 2043-2080
RUT 1224-1250
DAX 11708-12153
USD 96.35-100.02
EUR/USD 1.05-1.09
Oil (WTI) 42.82-51.40
Gold 1150-1208


Best of luck out there this week,



Keith R. McCullough
Chief Executive Officer


Ole Fashioned Group Patterns - 03.30.15 chart

Monday Mashup

Monday Mashup - 1


Recent Notes

04/06/15 Monday Mashup

04/08/15 REPLAY | ZOES: Standing Out from the Crowd

04/09/15 Casual Dining Continues to Cool

04/09/15 MCD: Boom, Like That

04/10/15 Sales and Traffic Downtrend Continues in March


Events This Week

  • None


Recent News Flow

Monday, April 6

  • COSI announced the completion of Hearthstone merger.
  • PLKI announced the retirement of board member Victor Arias, Jr.
  • BOJA chicken chain Bojangles filed for a $100mm IPO through Bank of America Merrill Lynch, Wells Fargo, and Jefferies.

Tuesday, April 7

  • WEN was resumed neutral at Goldman Sachs with a $10.50 PT.
  • ZOES appointed Cordia Harrington (CEO of Tennessee Bun Company) and Alex Taylor (former Chairman and CEO of FGX International) to its board of directors.  They will take the place of directors William Barnum, Jr. and Anthony Choe (both affiliated with Brentwood Associates) who agreed to resign from the board on April 6.

Thursday, April 9

  • SONC announced CFO Stephen C. Vaughan was promoted to the Company’s Executive VP of Franchise Operations, Finance and Planning.  Claudia S. San Pedro was promoted to Senior VP, CFO and Treasurer.



Monday Mashup - 2


Sector Performance

The SPX (+1.7%) outperformed the XLY (+1.3%). Casual dining stocks underperformed the XLY, as quick service stocks outperformed.

Monday Mashup - 3

Monday Mashup - 4


Casual Dining Restaurants

Monday Mashup - 6

Monday Mashup - 7


Quick Service Restaurants

Monday Mashup - 8

Monday Mashup - 9

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

April 13, 2015

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The Week Ahead

The Economic Data calendar for the week of the 13th of April through the 17th of April is full of critical releases and events.  Here is a snapshot of some of the headline numbers that we will be focused on.



The Week Ahead  - 04.10.15 Week Ahead

Investing Ideas Newsletter

Takeaway: Current Investing Ideas: VNQ, EDV, GS, ITB, TLT, MTW, MUB, RH

Below are Hedgeye analysts’ latest updates on our eight current high-conviction long investing ideas and CEO Keith McCullough’s updated levels for each.


Please note we added VNQ this week and removed UUP.


We also feature two additional pieces of content at the bottom.

Investing Ideas Newsletter        - levl1 

Trade :: Trend :: Tail Process - These are three durations over which we analyze investment ideas and themes. Hedgeye has created a process as a way of characterizing our investment ideas and their risk profiles, to fit the investing strategies and preferences of our subscribers.

  • "Trade" is a duration of 3 weeks or less
  • "Trend" is a duration of 3 months or more
  • "Tail" is a duration of 3 years or less


Investing Ideas Newsletter        - Draghi inferno cartoon 04.10.2015

Stock markets in Europe love the smell of Burning Euros.



Since being added to Investing Ideas on March 25th, Goldman Sachs has more than doubled the return of the S&P 500. GS has risen 4.4% versus 1.9% for the benchmark index. Hedgeye Financials analyst Jonathan Casteleyn has no material update to his thesis this week. He will provide an update next Saturday.


We added Housing to Investing Ideas on March 4th. It has outperformed the S&P 500 by approximately 300 basis points since then. ITB is up 3.1% versus 0.17% for the S&P 500.


Our housing analysts are pleased to offer a mortgage applications note written earlier this week detailing recent developments. It was a positive update and offers further positive confirmation for our call.


Click here to access. 

vnq | TLT | MUB  | EDV

After our Q2 macro themes call and presentation this week, we’re adding US REITs to the long side of Investing Ideas and removing the U.S. dollar.


One way to invest in lower-for-longer, from an equity perspective, is being long US REITS (ETF: VNQ). While we still believe the USD could very well appreciate over the longer-term, our view on lower-for-longer on U.S. rates is firmly intact.


As outlined in last week’s Investing Ideas update, where we discussed the direction of the U.S. dollar, longer duration interest rates (forward-looking growth expectations) can move lower regardless of the direction of the currency:


“Both the Hedgeye macro team and your central planners in D.C. will continue to eye the labor market intently for direction on the U.S. dollar but remember that rates can go lower with the dollar going both ways (In 2014 rates reverted a whole 75bps even though the U.S. dollar declined -2% from January 1st to May 6th before going on a tear through the back half of 2015 into this year).”


The Hedgeye macro team has been straightforward about moving into long-duration, fixed-income securities when growth slows and rates move lower.


We expect good ole’ yield chasing at its finest when the Fed turns more dovish than the masses expect at its April 29th meeting.


Those positioned in slow-growth, longer duration fixed income securities will continued to get paid. Yes, we’re talking TLT, MUB, EDV, and VNQ.

Click to enlarge

Investing Ideas Newsletter        - zen1


We’ve had a barrage of questions over this week about Restoration Hardware’s new store productivity – or lack thereof. First off… there is absolutely positively nothing ‘funny’ going on here as it relates to asset productivity. Unlike an apparel retailer that adds four stores per week, RH is adding four this year. It is a different animal altogether, one where the timing of an opening date, revenue recognition, and whether or not a Legacy store is closed all meaningfully impact what people consider ‘New Store Productivity’. Second, this is absolutely positively nothing new. There have been anomalous factors impacting the reported numbers for nine months now. Someone simply decided to write a report yesterday highlighting it 2 weeks after the earnings report.


Also, let’s not forget the big picture here. This company just finished a seven-year period where it consistently shrunk its square footage footprint every year, and just started off an inverse period where it will grow square footage by 20-30% annually over another 5-7 years. Given its limited store count, unique customer ordering profile, and radical change in the box size, it’s a near certainty that there will be major swings in ‘new store productivity’.  The good news is that what has hurt RH for the past nine months should start to go the other way later this year.


Punchline = if you’re worried about RH New Store Productivity, don’t be. 


While Manitowoc reports 1Q earnings around the beginning of May and face relatively easy sales and margin comps, 2Q earnings could benefit from several tailwinds.


First, a large backlog will be converted to revenue for the second quarter, which is composed mainly of the VPC (Variable Position Counterweight) cranes ready to be shipped. The VPC cranes should give sales a boost at above average margins. Second, the Architecture Billings Index is continuing to indicate positive construction momentum for crane sales in the second and third quarters.   


Investing Ideas Newsletter        - wuz1


Investing Ideas Newsletter        - wuz2


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oil: quick check-in with u.s. production machine

Macro analyst Ben Ryan distills what's going on with oil prices and the dollar.

Investing Ideas Newsletter        - Oil cartoon 04.09.2014a

mcdonald's: boom, like that

According to Hedgeye's Restaurants Sector Head Howard Penney, there has never been a time in the history of McDonald’s where following advice of its legendary founder has been more critical than it is today. 

Investing Ideas Newsletter        - z99

real-time alerts

real edge in real-time

This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.