prev

Is the Government Lying To You? McCullough Weighs In on The Macro Show

 

In this one-minute excerpt from today's edition of The Macro Show, Hedgeye CEO Keith McCullough lampoons government number crunchers who change the calculations when they don’t like what the numbers reveal. Don’t like the results? Just move the goalposts!

 

Subscribe to The Macro Show today for full access to this and all other episodes.


INITIAL CLAIMS | This Is a Strong Print. But...

Takeaway: Claims continue to show strength, posting the best numbers since April 15th, 2000.

This research note was originally published May 21, 2015 at 09:44 in Financials. Click here for more information on Hedgeye and how you can become a subscriber.

Seasonally adjusted jobless claims came in at 274,000 last week, slightly higher than expectations for 270,000. Even with the slight miss, this is a strong print. The rolling 4-week Seasonally Adjusted (SA) figure dropped to 266,300. This is the lowest rolling SA figure since the week ending April 15th, 2000, which also came in at 266,300.

 

In the first chart below, the 4/15/00 data is circled in red. It is important to bear in mind, though, that that date also corresponded to the peak in equities two cycles ago.

 

In the second chart below, indexed claims in energy heavy states improved more than the country as a whole in the week ending May 9th. The spread between the two series fell from 25 to 21.

 

INITIAL CLAIMS | This Is a Strong Print. But... - Claims9 2

 

INITIAL CLAIMS | This Is a Strong Print. But... - Claims18

 

The Data

Initial jobless claims rose 10k to 274k from 264k WoW, as the prior week's number was unrevised. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -5.5k WoW to 266.25k.

 

The 4-week rolling average of NSA claims, another way of evaluating the data, was -16.5% lower YoY, which is a sequential improvement versus the previous week's YoY change of -14.2%

  

INITIAL CLAIMS | This Is a Strong Print. But... - Claims2

 

INITIAL CLAIMS | This Is a Strong Print. But... - Claims3

 

Joshua Steiner, CFA

203-562-6500

jsteiner@hedgeye.com

 

Jonathan Casteleyn, CFA, CMT

203-562-6500

jcasteleyn@hedgeye.com

 


HedgeyeTV Announces Move to Over-The-Top (OTT) Subscription Model with The Macro Show

FOR IMMEDIATE RELEASE


STAMFORD, Conn., May 22, 2015 -- Hedgeye Risk Management, one of America’s leading independent investment research and media companies, announced today the official launch of The Macro Show, a live, fully interactive morning market discussion hosted by CEO Keith McCullough and analysts from the firm. The show distils the most significant market and economic developments and is followed by a live Q&A session featuring questions submitted from subscribers.

 

“By far, the most precious asset allocation for investors today is time. My team and I recognize this and created a product that delivers a ton of value in less than thirty minutes,” said CEO Keith McCullough. “Global Macro risk is dynamic, non-linear and constantly changing. My primary job as a risk manager is to prepare my subscribers as best I can and get in front of them everything they need to know before the market opens.”

 

Hedgeye has hosted a morning macro conference call exclusively for its institutional investor customers since the firm's inception.  Each show takes a close look at current asset allocation, followed by McCullough’s “Top-3 Things” that matter most in the markets, the “Grind” (a systematic look at various key market levels) and a brief market commentary. Each show concludes with a question and answer session. The introductory price is $39.95 for a monthly subscription.

 

“With the introduction of the Morning Macro show, HedgeyeTV is not only launching its first premium subscription product, but we are also opening up to the wider investing community a hallmark event in the day of many hedge fund and Wall Street investment firms,” said Hedgeye President Michael Blum. “For the first time ever, smaller investors are now able to see what happens behind closed doors at Wall Street firms on every trading day.”

 

HedgeyeTV was launched in 2013 and produces daily video content, including programs such as Real Conversations which has featured notable guests including investor Mario Gabelli, national bestselling “Currency Wars” author James Rickards, Jim Grant, founder of Grant’s Interest Rate Observer, Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. and Stephen Roach, Yale University professor and former Chairman of Morgan Stanley Asia.

 

Here’s a link to a brief explanatory video about the Macro Show.

 

 

About Hedgeye

 

Hedgeye Risk Management is an independent investment research and media firm. Focused exclusively on generating and delivering actionable investment ideas in a proven buy-side process, the firm combines quantitative, bottom-up and macro analysis with an emphasis on timing. The Hedgeye team features some of the world's most regarded research analysts, all with buy-side experience, covering Macro, Financials, Energy, Healthcare, Retail, Gaming, Lodging & Leisure (GLL), Restaurants, Industrials, Consumer Staples, Internet & Media. The firm is united around a vision of uncompromised real-time investment research as a service.

 

Visit the Hedgeye website for more information.


Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

The UK, Euro and Yields

Client Talking Points

UK

Just an awesome Retail Sales print of +4.7% year-over-year out of the UK this morning (to put that in context, with the same weather, the U.S. posted a 0.9% year-over-year Retail Sales # in April). The Pound is up +0.7% on that to $1.56 vs USD and looks as good as any currency on our screens right now.

EURO

The Euro held the low-end of our $1.10-1.15 risk range and is up +0.5% vs. USD this morning after A) dovish Fed Minutes and B) Hilsenrath parroting the same in the WSJ – this is the headwind to shorting Euros into the June 17th Fed Meeting, a Lower-For-Longer Fed; German data continues to slow. 

10YR YIELDS

Global Yields are trading like Pac-Man still but lower-highs remains the longer-term picture. The UST 10YR dropped -3bps to 2.22% this morning and really has no support to 1.97%; German, Italian, and Spanish 10YR Yields all -2-3 basis points as the ECB has front-loaded its QE to May-June.

Asset Allocation

CASH 48% US EQUITIES 4%
INTL EQUITIES 8% COMMODITIES 12%
FIXED INCOME 26% INTL CURRENCIES 2%

Top Long Ideas

Company Ticker Sector Duration
VNQ

One way to invest in Lower-For-Longer, from an equity perspective, is being long U.S. REITS (VNQ). The reality is that we are in a #LateCycle slowdown and the jockeying around each incremental data point will continue to get more and more intense as the Fed’s only ammo for suspending the cycle that has unfolded many times over is to push out the dots on a rate hike. #LowerForLonger.

ITB

The ITB turned in modest positive absolute and relative performance in the latest week as the advance in interest rates ebbed and the high frequency mortgage purchase application data continued to reflect improving housing demand trends. This is a data heavy week for housing. NAHB Builder Confidence dropped for the 4th time in 5 months, dipping -2pts sequentially in May to an Index reading of 54.   Confidence currently sits +9 pts higher than May of last year and is basically right on the average reading of 55 observed over the last three expansionary periods.  Further, at  the current reading of 54, the index remains well above the Better-Worse Mendoza line of 50, signaling builders continue to view conditions favorably.

TLT

The counter-TREND moves in the USD and commodities have been extensive and now confirmed: 1) U.S. Dollar: Down another 1.20% week-over-week to complete its BULLISH to BEARISH TREND Reversal. The dollar is now BULLISH on a TAIL duration (three years or less) and BEARISH on a TREND duration (3-Months or more) 2) CRB Index: +2.0% week-over-week and +5.5% 1-Month Change. The CRB is now BULLISH on a TREND duration and BEARISH on a TAIL duration.

Three for the Road

TWEET OF THE DAY

GOLD: still looks good +0.1% to $1210/oz this am - no resistance to $1240 $GLD

@KeithMcCullough

QUOTE OF THE DAY

There is no royal road to anything. One thing at a time, all things in succession. That which grows fast, withers as rapidly. That which grows slowly, endures.

-Josiah Gilbert Holland

STAT OF THE DAY

Australians are the most confident they’ve been since January 2014 after the central bank cut interest rates and the government announced a A$10 billion ($7.9 billion) boost for families and small businesses.

 

The Macro Show - CLICK HERE to watch today's edition at 8:30am ET.


CHART OF THE DAY: Short Low, Cover High? $IWM $SPX

Editor's Note: The brief excerpt and chart below are from today's morning note written by Hedgeye CEO Keith McCullough. Click here for information on how you can subscribe.

 

CHART OF THE DAY: Short Low, Cover High? $IWM $SPX - zzz Chart of the Day

 

Back to this epic SP500 “correction” that consensus has been positioned for (at the start of this week = YTD high net SHORT positions of -60,044 and -31,909 in SP500 Index + E-mini and Russell 2000 mini contracts, respectively):

 

  1. SP500 was down -0.1% yesterday
  2. SP500 was down -0.1% the day before that
  3. SP500 is down -0.2% from its all-time high

 


Consensus Corrections

“Brevity and conciseness are the parents of correction.”

-Hosea Ballou

 

I figured I’d use that title this morning to pad my open-rates. Bears love to read about corrections.

 

Correction? Looking at futures and options activity, consensus hedge fund positioning has been looking for a big correction for two weeks (i.e. they ramped the net SHORT position in the SP500 and Russell 2000 to YTD highs after the correction we had 4 weeks ago).

 

Short low, cover high, eh.

Consensus Corrections - Bubble bear cartoon 09.26.2014

 

Back to the Global Macro Grind

 

I’ve spent the last decade of my career analyzing relationships between price, volume, and volatility. Before that, all I’d stare at was price. For 6 long years I’d watch some of my bosses and their buddies chase price charts. Sometimes it worked; sometimes it didn’t.

 

Ole school money managers will recall Stan Weinstein’s technical reports and a charting program called TC 2000. While they hopefully worked for some, they didn’t work for me. So I built my own.

 

There’s no need to get into a fight with the point-and-click zoo-keepers of the 50 and 200 day moving monkeys today. My point on this matter is this: a market price has a tendency to put in a short term top when:

 

  1. Volume starts to decelerate into the final stages of the accelerating price momentum
  2. Volatility (in terms of how I calculate historical as a leading indicator) starts to signal higher-lows
  3. Price itself finally signals a series of lower-highs

 

That’s not the SP500, yet (it might be within another full day of fresh price, volume, volatility data today), but it is the Russell 2000. I’m not saying this is going to provide you the elixir of a “technical” life (it’s actually math). But it sure beats chasing charts.

 

As the years have gone by, I’ve added analysts to my risk management #process and, in turn, they’ve added their own ideas, revolutions, and overlays to my timing model. One of the big ones is a z-score to measure what we call the “lean” in Consensus Macro hedging.

 

This is one of the many ways we have tried to quantify one of the 3 core legs to the Hedgeye Process stool – Behavioral Market Analysis. Just as a quick reminder to those of you who are new to reading my rants – those 3 legs are:

 

  1. History
  2. Math
  3. Behavior

 

If our analysis can’t be quantified into one of those 3 buckets, we don’t really find it a productive and/or effective use of our research time. In other words, we don’t do the GDP or markets “feel” thing – and we definitely don’t try to tell markets what they should do.

 

Back to this epic SP500 “correction” that consensus has been positioned for (at the start of this week = YTD high net SHORT positions of -60,044 and -31,909 in SP500 Index + E-mini and Russell 2000 mini contracts, respectively):

 

  1. SP500 was down -0.1% yesterday
  2. SP500 was down -0.1% the day before that
  3. SP500 is down -0.2% from its all-time high

 

This isn’t always the case, but in a centrally-planned-raging-bull-market, it happens frequently. When everyone is positioned for down, and markets go up - consensus capitulates and covers… then volume dries up and volatility starts to rise – then markets go down!

 

Intraday yesterday, the US stock market gave you a preview on what keeps the Pain Trade (higher stocks for longer) in motion. It’s called a Dovish Federal Reserve (see Fed Minutes and/or Hilsenrath parroting the same in the Journal this a.m. for details).

 

So that makes this setup for timing the call on a correction tricky:

 

  1. Higher-all-time highs are bullish, until they are not
  2. The all-time closing high for the SP500 is only 3 days old
  3. We have at least 3 dovish catalysts between now and June 17th

 

Nope. No one said timing markets is easy. But there are north of 14,000 hedge funds out there that are still competing with me on the timing of it all! With over $2.2 TRILLION in assets under management, it’s a crowded game.

 

But, if you’re able to keep your emotions, frustrations, and intellect intact… while, at the same time, concisely measuring the rate of change in net positioning, volume, and volatility… your timing won’t be perfect, but it will be more profitable than consensus.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.97-2.32%

SPX 2105-2139
RUT 1
VIX 12.14-14.48
USD 92.75-96.16
Oil (WTI) 56.31-61.40

Gold 1

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

***Click here to watch The Macro Show live at 8:30am.

 

Consensus Corrections - zzz Chart of the Day


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.

next