Winter Is Coming: The U.S. Growth Cycle Is Coming to An End


In today’s “Game of Thrones” inspired edition of The Macro Show on Hedgeye TV, U.S. Macro Analyst Christian Drake channels the numbers-first approach of the Iron Bank of Braavos to explain how Hedgeye is approaching the end of this economic growth cycle.


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


TOMORROW 11am: Speaker Series Call - The Impact of Currency Wars on S&P500 Earnings

We will be hosting a Speaker Series call with Jack Ciesielski, the CEO of the Accounting Observer (AO), tomorrow (June 9th) at 11 a.m. EST.


Our topic will be the ongoing impact of overly volatile foreign currencies on the financial statements of some of America's most important companies. While most analysts and portfolio managers are up-to-speed on the earnings impact of FX translation, there are less obvious consequences including: 

  • Devaluation of foreign cash reserves which impacts cash flow
  • Common equity degradation which increases financial leverage
  • ROE implications depending on the direction of financial leverage

The AO will outline which sectors in the S&P 500 have the most sensitivity to various FX implications and also distill impact to the company specific level for the largest constituents of the index.


TOMORROW 11am: Speaker Series Call - The Impact of Currency Wars on S&P500 Earnings - c1png


TOMORROW 11am: Speaker Series Call - The Impact of Currency Wars on S&P500 Earnings - c2


TOMORROW 11am: Speaker Series Call - The Impact of Currency Wars on S&P500 Earnings - c3


CLICK HERE to add this call to your Outlook Calendar for Tuesday, June 9th at 11 a.m. EST or simply dial:


Toll Free Number:

Direct Dial Number:

Conference Code: 39894189# 

Call Materials HERE


About Jack Ciesielski and the Accounting Observer:


Jack Ciesielski is the owner of R.G. Associates, Inc., an investment research and portfolio management firm located in Baltimore, MD. Mr. Ciesielski is the publisher of The Analyst's Accounting Observer, which is an accounting advisory service for security analysts. Before founding R.G. Associates in 1992, Jack spent seven years as a security analyst with the Legg Mason Value Trust. Prior to that, he worked in the accounting profession as an auditor with Coopers & Lybrand, as an internal auditor with Black & Decker, and as an educator at the University of Maryland. The AO focuses on deep dive issues to assist analysts and portfolio managers to completely understand a financial problem set.  



Jonathan Casteleyn, CFA, CMT 




Joshua Steiner, CFA


Hedgeye Cares Calls on All Golfers and Supporters!

The Hedege Cares team invites you to our 2nd annual Hedgeye Cares Charity Golf Challenge on July 21st at the exclusive GlenArbor Golf Club in Bedford Hills, NY.


Watch a recap of last year's event below.

This year’s tournament will again benefit Bridgeport Caribe Youth League (BCYL),

a tremendous organization that focuses on providing underprivileged youth with diverse educational and sports opportunities that foster intellectual, physical and social development.  It’s truly a great organization and dedicated group of kids!


Hedgeye Cares Calls on All Golfers and Supporters! - Glen Arbor


For a second straight year we’re very excited and proud to have The Lincoln Motor Company as our title sponsor, and we are still in need of more participation to be able to make a meaningful donation. Beyond signing up to play, there are numerous ways to contribute through sponsorship, auction items and donations.  


Hedgeye Cares Calls on All Golfers and Supporters! - sponrsorships


We appreciate you helping to make a difference in our local community and look forward to seeing you on a beautiful course!  


For any inquiries and to RSVP please contact Josefine Allain (


Hedgeye Cares Calls on All Golfers and Supporters! - Golf 2014

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.

HEDGEYE INSIGHT | The Slow March to Tautness: May Employment

This note was originally published June 05, 2015 at 10:31 in Macro. Click here for more information on the various products we offer individual investors.

Has a policy maker ever said that “strength” was transitory and “we expect conditions to worsen away from target over the medium term”?  Anyway, the May employment report was strong pretty much across the board.


As always - we’re not big on adding to the noise of manic data reporting on employment Friday but below are some quick highlights.  If you have any specific questions or would like to dig/discuss a particular dimension of the labor market in more depth, let us know.


  • Payrolls: RoC Solid -  NFP & Private payrolls improved both sequentially (MoM and 3M/6M MA) and in RoC terms.  March/April get net positive revision of +32K
  • Unemployment Rate & LFPR : Off the Lows - Unemployment rate ticked up to 5.5% but the internals were largely positive with labor participation rising for a second month and the chg in employed > chg in unemployed.
  • Wages: Golf Clap - Both Total Private & Nonsupervisory Worker wage growth accelerated sequentially (from sub-middling to more discretely middling).  ECI and NFIB data continue to suggest forward wage inflation but that been true for a while; material BLS reported wage acceleration has remained a panglossian phantasm. 
  • Slack: Paint Still Drying -  The U-6/Underemployment rate held at 10.8%.  From a Trend perspective every slack chart looks basically the same (charts at bottom below): The labor markets painfully slow march towards tautness remains ongoing.  
  • Housing = Mojo Extends to May:  Residential Construction employment growth re-accelerated (suggesting ongoing health in demand trends) while 25-34YOA employment again accelerated to a new cycle high - headship rates/HH formation will benefit on a lag.
  • Energy Sector: Broad Strength > Concentrated Weakness -  The bleed in Energy sector employment continued in April/May but the concentrated weakness continues to get swamped by the broader labor mkt strength.  
  • (Firm) Size Matters:  Small Firm employment (1-499) growth is carrying the load (+2.5% YoY) according to the latest May ADP data.  Large & Extra-Large Firm employment remains in multi-month deceleration mode currently.   
  • Income/PCE: Its Just Math - The net of rising employment + rising wages + flat hours worked should = another solid month of reported aggregate income growth in May.  Whether that income actually gets spent is a different question but rising income + rising savings remains a positive for the aggregate household PnL/BS. Salary and wage income remains of particular import as it has been the primary source of funds for households as credit growth has remained somewhat muted.  We’ll get the April consumer credit figures this afternoon
  • Policy = Don’t Call it a Comeback:  The May data is probably irrelevant for direct policy action in June but it will likely serve as a backboard in the framing of the June meeting statement (i.e. 1Q probably represented transitory weakness and ‘we expect employment/inflation to trend toward target over medium term’) 

A visual tour of the data is below.  Have a great weekend. 


HEDGEYE INSIGHT | The Slow March to Tautness: May Employment - z1 CD


HEDGEYE INSIGHT | The Slow March to Tautness: May Employment - Housing Demand 25 34 YOA employment


HEDGEYE INSIGHT | The Slow March to Tautness: May Employment - Resi Empl


HEDGEYE INSIGHT | The Slow March to Tautness: May Employment - Oil   Gas May


HEDGEYE INSIGHT | The Slow March to Tautness: May Employment - Oil Industry April


HEDGEYE INSIGHT | The Slow March to Tautness: May Employment - Payroll Growth vs Earnings Growth


HEDGEYE INSIGHT | The Slow March to Tautness: May Employment - NFP TTM gains


HEDGEYE INSIGHT | The Slow March to Tautness: May Employment - Empl diffusion Indices


HEDGEYE INSIGHT | The Slow March to Tautness: May Employment - Available Workers per Job


HEDGEYE INSIGHT | The Slow March to Tautness: May Employment - ST Unemployed


HEDGEYE INSIGHT | The Slow March to Tautness: May Employment - JOLTS Quits


HEDGEYE INSIGHT | The Slow March to Tautness: May Employment - Employment By Firm Size


HEDGEYE INSIGHT | The Slow March to Tautness: May Employment - NFIB Jobs Hard to Fill


Christian B. Drake





Yes, this past week’s table revenues were awful. But that’s not the reason we like the Macau stocks on the short side. Following last week’s relief rally, which was totally predictable, valuations are full again and the most disconcerting issue – base mass trends are decidedly negative – is not well understood nor projected by the Street. Thus, even if GGR trends hold, the mix is unfavorable and Street estimated margins and EBITDA need to come down considerably for 2015 and especially 2016.


As we discussed in our Macau conference call/presentation on Friday, Sands China (LVS) looks most at risk:  it maintains the most exposure to base mass segment – biggest negative delta to current expectations and most targeted segment by upcoming Cotai supply – and LVS’s competitive positioning should outperform in good times and underperform in bad. It’s clear what environment Macau is in now.


Please see our detailed note:

Rates, Gold and Emerging Markets

Client Talking Points


We got slammed staying long Treasuries last week as both the Global Yield move (German 10YR Yield doubled in 3 days) and the U.S. jobs report (NFP growth +2.21% year-over-year vs. its cycle peak of 2.34% year-over-year in FEB) and that puts the U.S. 10YR right @Hedgeye TREND resistance of 2.40% - if growth (global and local) wasn’t slowing, we’d reverse the call.


No follow through this morning on either the U.S. rates or USD move (up) from Friday – that has Gold up +0.2% off a pretty good zone of $1150-1170 support (which is a higher-low vs. both the NOV and MAR Gold lows).  Fortunately we’re just getting bullish on Gold now and didn’t wear it the whole way (3 years) down. 


Emerging everything (ex-China +2.2% Shanghai Composite to +22% in the last month!) didn’t like the #StrongDollar move on Friday either – stocks in Turkey are down -5.7% this morning and after dropping -3.2% last week, India’s BSE Sensex is down another -1% this morning; Emerging Market stocks get more interesting now into the Fed meeting (June 17th).

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

Penn National Gaming is a true growth story in regional gaming, finally, ripe with catalysts, same store and new unit growth, and accelerating cash flow.  We see stability in regional gaming revenues over the next several months providing some much needed earnings visibility.  PENN maintains the best new unit growth story in domestic gaming with the opening of the Plainridge casino in Massachusetts in June and the Jamul casino in Q2 2016. PENN has a proven track record as the best regional casino operator and recently proved its prowess at successfully opening racinos (casinos at racetracks) with estimate beating Dayton and Mahoning commencing slot operations last year.


The takeaway on Purchase Activity was mixed as demand declined -3.0% sequentially but accelerated from +13.1% to +13.9% on a year-over-year basis.  More broadly, and inclusive of the latest week, purchase demand in 2Q continues to reflect both sequential and year-over-year improvement with demand growth for the quarter currently tracking +13.6% QoQ and +12.8% YoY. No major callouts in the latest week as the larger trend towards ongoing improvement in purchase activity in 2Q remains intact. CLICK HERE to watch Housing Sector Head Josh Steiner give a brief update on our call on ITB.


Considering we are already well passed an above average length expansion, and moving into the second half of 2015 growth and inflation comps (i.e. the base effects) become very difficult, growth is likely to continue to slow. We put the likelihood of a rate hike in 2015 as highly unlikely and continue to expect rates to move to make a series of lower-highs through the balance the year (bullish for EDV, TLT, and VNQ. When forward looking growth expectations are downwardly revised and the Fed kicks the can on rate hike expectations, rates and the dollar move lower. Gold has historically performed well in an environment of falling rates and a declining U.S. dollar and we don’t expect anything different this time around. Supporting our view, both gold (GLD) and treasuries (TLT, EDV) remain BULLISH on an intermediate-term TREND duration (3-months or more).   

Three for the Road


NEW | Two-Hitter: Ben Axler Brings One Long Idea & One Short to Hedgeye TV… via @sprucepointcap + @HedgeyeIndstrls



Destiny is not a matter of chance, but of choice. Not something to wish for, but to attain.

William Jennings Bryan


Ralph Lauren in 75 years old, he is the seventh oldest CEO in the S&P and has 81.5% of the voting power at RL.



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