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One big cross asset class reset continues this morning with Dollar Down (EUR/USD Pain Trade Up), Yen Up, Nikkei Down – Gold stabilizing and holding our $1150-1170 zone of support – it likes Down Dollar, Down Rates.


Down -27 basis points for the UST 10YR Yield in a week to 2.27% now so we’re glad we didn’t capitulate and chase the charts as the fundamental research call didn’t support doing that; 2YR Yield backs off hard (for the 3rd time from 0.75% since DEC) to 0.64%.


Now this gets interesting as both Japanese and European stocks do not like their respective currencies strengthening whereas yield chasers in the U.S. do – so U.S. futures will have to deal with overseas weakness, as a result of a more dovish Fed.


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

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

Penn National Gaming will likely tee off on the bears with a strong Q2, upward 2015/2016 EPS revisions, and the start of a 2 year growth period. PENN’s stock has climbed 27% this year on stabilizing regional gaming revenues, transaction-fueled optimism (real estate) surrounding the regional gaming companies and proximity to the opening of the new Plainridge racino on June 24. So what will drive even more upside? More and better. We think regional gaming trends are even better than anticipated by the Street and Q2 earnings should be a solid beat even before Plainridge contributes.


Housing outperformed in the latest week alongside choppy price action in equities and further, extraordinary volatility in sovereign bond markets.  Fundamental data was light with weekly purchase applications data from the MBA the lone release of import for the industry.  The first, high-frequency update on purchase demand in June, however, was positive. Purchase demand rose +9.7% sequentially, taking the index to its strongest level in 2 years at reading of 214.3. On a year-over-year basis, growth accelerated for a  4th consecutive week to +14.6%. Inclusive of last weeks gain, demand in 2Q is tracking +14.3% QoQ and +13.4% YoY.


The market has been jockeying for positioning in front of next week’s policy statement from Janet Yellen. We believe Yellen signaling that she remains “data dependent” (i.e. repeats what she said at the March 18thmeeting) is the most probable outcome. To be clear, we remain the long-bond bulls (TLT, EDV, MUB). With that being said we aren’t claiming to be able to predict the outcome of next week’s meeting (sure we do have biases). What we do know is that Hedgeye estimates for growth and inflation shake out much lower against both consensus and central bank forecasts for the full year 2015 (remember that this is after their forecasts have already been downwardly revised).

Three for the Road


Japanese real wages continue to see no growth, -0.1% y/y



The winner's edge is not in a gifted birth, a high IQ, or in talent. The winner's edge is all in the attitude, not aptitude. Attitude is the criterion for success.

Dennis Waitley


8.1 million people tuned in for HBO’s “Game of Thrones” finale on Sunday, a record for the show.

CHART OF THE DAY: Pushing the #Dots | $TLT

Editor's Note: The chart and excerpt below are from today's Morning Newsletter written by Hedgeye CEO Keith McCullough. Click here if you would like more info on how you can subscribe.


CHART OF THE DAY: Pushing the #Dots | $TLT - z 06.18.15 chart


...In terms of levels (they matter):


    1. The 10yr US Treasury Yield has just made yet another epic long-term-lower-high (we’re 18 months into this)
    2. The 2yr US Treasury Yield has now failed to “breakout” from the 0.75% level for the 3rd time since December
    3. My Risk Range model (which I use to front-run volatility) is signaling a narrowing (rather than widening) range


Look At That Dot

“Look again at that dot. That’s here. That’s home. That’s us.”

-Carl Sagan


And, Sagan, the American astro-everything-ist, went on to write about that Pale Blue Dot:


“On it everyone you love, everyone you know, everyone you ever heard of, every human being who ever was…”


This is your market life too. And unless you can show me that dot – as in the one that has the data to support a rate hike, you are going to be subject to the risks associated with one of Sagan’s most basic teachings – gravity.

Look At That Dot - Central banker cartoon 03.03.2015


Back to the Global Macro Grind


Where is your dot?


  1. 6-12 months ago, was it June 2015?
  2. Before yesterday’s Fed announcement, was it September?
  3. Where is it now? December, 2016, or 2017?


After pounding a serious amount of caffeine (and air miles) into my system, I can assure you that the Institutional Investor community’s answer on when, precisely, we are going to get that interest rate “liftoff” is imprecise.


Why the confusion?


  1. Some anchor on what has been an inaccurate forecasting process (The Fed’s)
  2. Some hem and haw about what Hatzius and Hyman are saying (after the Fed changes its forecast)
  3. Some don’t have a process (and/or use the Fed’s/Wall Street’s) at all – they just react


So, please, allow me to direct-your-dot this morning to December with a rising probability for another push to 2016, and a misunderstood rising (not declining) probability of 2017 or 2018 and beyond.


“Blah, ha, ha!”


You crazy Mucker (that’s my hockey nickname and please use an M). I had more than one group in California laugh at me out loud as the 10yr US Treasury Yield was testing 2.54% last week when I submitted the scenario analysis for 2016 and beyond…


One PM said “Dude, I am buying TBT (UltraShort 20yr Treasury) and the Financials (KRE) right here #charts look great – don’t you think?” … and I responded (group meeting) that I was going to short both of those right after the meeting.


No it wasn’t a head-bobbing-for-voting-commissions moment. I wasn’t trying to be a mean Mucker either. I have my dot – and it’s not the one that chased those charts (or have chased any “rate hike” fear since I was bullish on #RatesRising in early 2013).


Yes, this is a competitive game – and you’re darn right I like to win. From London, I’m happy to report that I stayed with my #process and did not capitulate. I remain long TLT and would still short the Financials and Industrials (XLI) on up days.


In other news – post the dovish Fed announcement yesterday:


  1. Dollar Down
  2. Rates Down
  3. Bonds (and stocks that look like bonds) Up


Oh, but not all “stocks” are up (going all Global on you now), because:


  1. Japanese stocks get Dollar Down, Yen Up, Nikkei Down
  2. European stocks get Dollar Down, Euro up, DAX Down


Not surprisingly, amidst all of the “blah, ha, ha”, that ole Doctor Dollar did me good. He was signaling a dovish Fed throughout the Global Bond Yield ramp (which wasn’t US economic data driven – it was a technical-liquidity move)… and I thank him for that.


The German DAX is actually -1.4% this morning and -6.7% in the last month on what some of Bloomberg’s Editorial/Advertising department has been saying is all about “Greece.”


Thanks for coming out guys. Please get back to interconnected macro markets and redo the headlines this morning to:


  1. Dovish Fed Pushes Out Dots
  2. Dollar and Rates Fall
  3. Global FX Volatility Drives Global Equity Declines


In terms of levels (they matter):


  1. The 10yr US Treasury Yield has just made yet another epic long-term-lower-high (we’re 18 months into this)
  2. The 2yr US Treasury Yield has now failed to “breakout” from the 0.75% level for the 3rd time since December
  3. My Risk Range model (which I use to front-run volatility) is signaling a narrowing (rather than widening) range


When the risk range widens, the “dot” scenarios are widening – and confusion breeds some bid/ask spread contempt. When my risk ranges are narrowing though, the Fed is usually toning down bond market volatility by telling you where the dot is not.


They showed you their dot yesterday. And I’ll show you mine again this morning – it’s called Slower-For-Longer on US growth as the #LatecCycle slow-down becomes evident. My catalyst for more of that data is called time.


Look again at that cyclical slow-down within the framework of a longer-term TAIL risk of secular demographic headwinds for US consumption growth. That’s here. That’s the baby boom generation slowing. That’s the US growth problem. That’s us.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.15-2.39%

SPX 2072-2114
USD 93.51-95.49
EUR/USD 1.11-1.14
YEN 122.21-124.98
Oil (WTI) 58.11-61.72

Gold 1172-1199


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Click image to enlarge

Look At That Dot - z 06.18.15 chart

The Macro Show Replay | June 18, 2015

Please note that we experienced some technical difficulties during today’s show. Hedgeye CEO Keith McCullough called in live to The Macro Show from London and the connection was compromised. We apologize for the inconvenience.



June 18, 2015

June 18, 2015 - Slide1



June 18, 2015 - Slide2

June 18, 2015 - Slide3

June 18, 2015 - Slide4

June 18, 2015 - Slide5

June 18, 2015 - Slide6

June 18, 2015 - Slide7 



June 18, 2015 - Slide8

June 18, 2015 - Slide9

June 18, 2015 - Slide10

Dale on the Fed: 'This Won't End Well'

Takeaway: Short the FOMC's "dot plot."

The Fed has cut its growth forecast by ~40% in the past six months, yet officials still expect two rate hikes in 2015.


This won't end well.


The FOMC's growth forecasts have been consistently too optimistic by 90 basis points on average over the past 5 years. 2015 looks like more of the same.


Click to enlarge 

Dale on the Fed: 'This Won't End Well' - z dale gdp


It is unlikely that the trend in domestic economic data will support hiking interest rates at any point in the next 6-9 months.


Dale on the Fed: 'This Won't End Well' - z dale forecasting


My best long-term investment idea? Short the FOMC's "dot plot." Is there a futures market for that?


As an investor, you shouldn't let the Fed set your monetary policy expectations. Do your own work on the economy and beat them to the punch.

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