Mr. Volatility

Client Talking Points


If you took down both your gross/net exposure to U.S. equity beta pre this breakout in volatility, you might feel better than most right now. Bullish breakouts in volatility rarely feel good for anyone; unless they can crack 14.21 on front-month VIX, this central planning panic continues to signal #on – don’t forget it’s #LateCycle U.S. please. 


Chinese central-market-planners did not like the market’s reaction to a 49.4 PMI (June) so they tried to jawbone it (again) and this time it did not work. The Shanghai Composite is down -5.2% (down -16.1% month-over-month) and below @Hedgeye TREND resistance.


+1.4%-2.4% bounce in the FTSE and CAC and +1.7%-2.1% for the IBEX and DAX, but not one of the bounces were above @Hedgeye TREND resistance. Liquidity and levels matter here – so we would be in wait/watch mode; chasing high and freaking out low hasn’t worked; buying on the low-end and selling on the top-end of the risk ranges has.



**The Macro Show - CLICK HERE to watch today's edition at 8:30AM ET with Macro Analysts Darius Dale and Ben Ryan and CEO Keith McCullough.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

We came out of the earnings report being very positive about management doing all the little things right. They continue to prove that they are some of the best operators in the industry. Importantly, many small cap restaurant companies with an undisciplined unit growth strategy experience significant labor inefficiencies as they expand. ZOES is in a different class of companies.  In a quarter where ZOES opened 12 new company-owned restaurants they managed to decrease both COGS and labor. We view ZOES as one of the best small cap growth names.  The company is set-up for long-term success for the following reasons:

  1. Superior brand positioning
  2. Management philosophy and execution
  3. Unit opening geographic profile
  4. Early-stage average unit volumes and returns

PENN’s new property, Plainridge Park in Massachusetts, had a strong opening. We expect slot win per day of $400, above Street expectations. In addition, June state gaming revenues will begin to roll out in 1-2 weeks. We expect June to be as strong as May, setting up Q2 to be estimate-beating quarter for PENN.


After a Fed-fueled week of strength in slow-growth, yield-chasing asset classes and long duration fixed income, both the Dollar and interest rates re-couped their losses from Fed Week. The dollar declined, rates increased, and as a result, those long of gold took some pain. Will this continue? Will a long, sustained rate liftoff ensue? We don’t think so. We continue to repeat that the chance of further downward revisions to forward looking growth estimates from the Federal Reserve and consensus macro is much more likely than not. The attempted suspension of economic gravity from policy makers weakens the currency and puts pressure on bond yields. We remain long of this set-up with gold and long-duration fixed income.

Three for the Road


Every European Equity market remains bearish TREND @Hedgeye - waiting & watching, not chasing



Concentration is the secret of strengths in politics, in war, in trade, in short in all management of human affairs.

Ralph Waldo Emerson


700 million pounds of chicken is purchased and 190 million pounds of red meat/pork purchased in the week leading up to July 4th.



The Macro Show Replay | July 1, 2015



We will be hosting our highly-anticipated Quarterly Macro Themes conference call on Tuesday, July 7th at 1:00PM ET.  Led by CEO Keith McCullough, the presentation will detail the THREE MOST IMPORTANT MACRO TRENDS we have identified for the quarter and the associated investment implications. 




#SecularStagnation: Amid consensus expectations for a return to “normal” economic conditions, our analysis shows ample evidence of secular stagnation. In light of that, we reiterate our “lower-for-longer” thesis on growth, inflation and interest rates and continue to find the FOMC’s hawkish guidance wholly misplaced.


#EuropeSlowing: With our proprietary GIP (growth, inflation, policy) model we’ll outline the top 6 European countries that will be most impacted by real-GDP slowing as inflation accelerates in the back half of 2015. The timing of ECB head Mario Draghi’s eventual response will be critical in terms of risk managing the EUR/USD exchange rate, as well as any associated spillover risks.


#ConsumerCycle: Consumption peaks late cycle and with domestic and global growth set to slow alongside easing inflation comps in 2H15 it looks increasingly likely 1H15 marked the current cycle peak in household spending growth.  We'll contextualize the current cycle, discuss the implications and detail how best to be counter-cyclically positioned as the consumer cycle enters its twilight. 



  • U.S. Toll-Free Number:
  • U.S. Toll Number:
  • Confirmation Number: 13612090
  • Materials:  CLICK HERE (the slides will be available approximately one hour prior to the start of the call)


As always, our prepared remarks will be followed by a live, anonymous Q&A session. Please submit your questions to .


Also, for those of you who cannot join us live, we will be distributing a replay video of the call shortly after it concludes.


Kind regards,


The Hedgeye Macro Team


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Is This the Return of Volatility? | $VIX



Is This the Return of Volatility? | $VIX - z turb


This is one of the biggest things that gets people run over on the long side. When volatility storms back in a hurry (i.e. a volatility move of 34% yesterday on front-month VIX) that’s going to leave a mark. 


To put this into context, it was the first down day (of over 2%) for the S&P 500 since October which is a long time ago.  In the last two years, we’ve only had five market-down days of over 2%. Only five.


Is This the Return of Volatility? | $VIX - zz 06.30.15 chart


Now if that sounds like “not a lot of market-down days,” you’re right. If you go back to 2011, you had twenty market-down days of greater than 2%. And that’s when what was happening?


  • Europe was slowing
  • Europe went into crisis
  • US blamed their own slowing on Europe
  • Bonds went up


Oh the memories, the memories… 

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