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Keith's Macro Notebook 5/1: Russell 2000 | German Yields | Volatility


Hedgeye CEO Keith McCullough shares the top three things in his macro notebook this morning.


The Hedgeye Gaming, Lodging, and Leisure team will host a conference call on Tuesday May 5 at 1PM to discuss the latest findings from our proprietary cruise pricing database.


Points of discussion include:

  • Expanded Pricing Database 
    • Almost doubled the number of itineraries to 20,000
    • Inclusion of river cruises and other ocean brands
    • Pricing two years out (on a rolling basis)
  • Latest pricing pivots (RCL,CCL, NCLH) 
    • (NEW*) weekly sequential pricing 
  • Is RCL holding price in the Caribbean?
  • New ship premiums
  • Same-store pricing 
  • NCLH 1Q preview
  • Research topic: Asia 
    • Pricing vs Bookings
    • China vs non-China
    • Ocean vs River

Sell in May and Go Away

Client Talking Points


The Russell 2000 has a very positive relationship to the USD, we like the Russell when the dollar is going up and we don’t like it when the USD moves lower (as U.S. consumer purchasing power goes down as well). The Russell is now signalling bearish trade (immediate term) and trend (intermediate term). 



The German 10YR Yield is up 157% since Monday (we care about rate of change not absolutes as a risk management factor). This is a mega move and it is driving the UST 10YR. People have been confused with the Fed getting easier and the USD going lower why bond yields haven't gone down as well...there has been a huge rate move that is correlated to European bond yields coming off of all time lows.


We have been highlighting this for the past few days, but risk ranges are WIDENING - this is a key leading indicator in our model and a signal to raise cash. Risk ranges are widening in the foreign currency markets and in the fixed income markets which eventually gets to the equity and commodity markets. Be very careful - Sell in May and Go Away on this bounce.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

The Dodge Construction Starts Index accelerated at its highest rate since 1982. The index was driven largely by non-building projects, which was 74% higher for the first three months compared to last year. The Architecture Billings Index (ABI), a survey of architects, increased ~3% month-over-month and ~5% year-over-year for March. The ABI Index typically leads nonresidential and residential construction spending by 9-12 months. More importantly, the ABI Index leads Manitowoc Crane Orders by 2 quarters. This suggests MTW’s crane sales should see a pickup in the first half of the year. MTW reports April 29th after the close. Earnings Call will be held at 10:00am eastern time the following day.


iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call. Housing went 4 for 4 in a data heavy calendar for the sector this week with demand improving across both the new and existing markets and the fledgling acceleration in price growth finding some positive confirmation. The builder stocks had a choppy week of performance as investors held mixed opinions of earnings reports and management commentary out of DHI and PHM but, from a fundamental data perspective, the Trend remains one of discrete improvement.


Ten-year rates dipped 12bps on the week (forward-looking growth expectations) and the USD got crushed for a 1.5% loss. Growth and inflation expectations get priced in AHEAD of the more dovish policy tone resulting from any sign of deterioration in the labor market. Wednesday’s Fed meeting will be the next catalyst that will steer the market’s expectation on forward-looking growth and inflation. We expect the dots (forward-looking federal fund rate expectations) to be pushed out….again.

Three for the Road


LIVE at 130pm ET $ATHN Best Long Idea Q&A w/Healthcare Sector Head Tom Tobin Click here: https://app.hedgeye.com/insights/43841-live-athn-best-long-idea-q-a-with-healthcare-sector-head … cc @HedgeyeHC @HedgeyeHIT



The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.

Martin Luther King, Jr.


ATHN reported 290 basis points year-over-year Gross Margin expansion driving majority of Non-GAAP EPS Beat of $0.24 v $0.14 consensus (Consistent with our view that ATHN has tremendous operating leverage).

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Call Invite | Thought Leader Roundtable: A detailed look at the Cereal Industry

On May 5th at 11am we will be hosting a conference call on the Cereal industry with David Sprinkle.  David is the research director at Packaged Facts, which publishes a leading line of syndicated research reports on the U.S. food market.


Topics will include:

  • The future of the both the cold and hot segments
  • The split personality of the segment
  • Pricing trends
  • The ancient grain story
  • Where the category is struggling
  • Where the categories winners are
  • Why the category is important
  • What breakfast categories are growing/emerging

This call be will be followed by a detailed Black Book on General Mills on May 6th. 


David Sprinkle is the research director at Packaged Facts, which publishes a leading line of syndicated research reports on the U.S. food market.  He has contributed to publications such as Candy & Snack Today, Gourmet Retailer, Natural Products Insider, Nutraceuticals World, and Progressive Grocer, as well as  presented at industry conferences including Engredia, Fancy Food Show, GOED Exchange, Global Food Forums, Global Forum on the Future of Food, Healthy Beverages Expo, Ingredient MarketPlace, Institute of Food Technologists (IFT), IFT Wellness, International Baking Industry Expo, National Coffee Association, National Confectioners Association, Nutracon, SupplySide West, and World Tea Expo.  Book-length publications through Packaged Facts include Premium Consumers and the New Economy and Americans in 2020.  David has an MBA from Tulane University in New Orleans, where he also taught business communications.


The call will last about an hour including time for Q&A.

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CHART OF THE DAY: The Latest Household Income and Spending Numbers

CHART OF THE DAY: The Latest Household Income and Spending Numbers - DRAKE   CHART OF DAY


Editor's Note: This is a brief excerpt and chart from today's Morning Newsletter which was written by Hedgeye U.S. Macro Analyst Christian Drake. (You could read the whole thing and be staying a step ahead of consensus if you subscribe.)


In the Chart of the Day, we annotate the latest household Income and Spending numbers for March released yesterday.  


Generally, our Macro-for-Dummies/Lazy’s color-coding protocol follows a green = good, red = bad convention.  Over the last couple quarters, however, I’ve struggled with what colors to use to characterize the existent income and spending dynamics