Got Aretas?

“Aretas  meant that competing had shaped you into a better person.”

-Po Bronson

 

No, the highly competitive nature of this profession hasn’t made everyone a “better person.” The fact is that if you want to see someone’s true character, either give them lots of money and power – or hold their #process to account when they are losing.

 

This week was a humbling one for me on that front as many men and women who have a lot more money than I’ll ever have gave so graciously to our growing Hedgeye Cares charity. On behalf of my team, thank you for your Aretas. It matters.

 

In many ways, Homer’s The Iliad and The Odyssey are paeans to aretas. Both Achilles and Odysseus who hone their aretas over the duration of the epic poems. In The Iliad, the questions of why we fight, whom we fight for, and how we maintain honor while fighting help define the aretas. The Odyssey portrays sports prowess, endurance, self control…

 

The Ancient Greeks did not fear that competition bred immoral behavior. They believed that competition taught it.”

(Top Dog – The Science of Winning and Losing, pg 14)

 

Got Aretas? - z km golf 1

 

Back to the Global Macro Grind

 

So forget that it’s a summer Friday and fire yourself up for some competition this morning! Last I checked, Mr. Macro Market doesn’t take vacation. In many ways, this summer is starting to feel a lot like the summer of 2011.

 

But why do we “feel” anything about markets? Can’t we just turn our emotions off and not thirst for victory or cringe at the prospect of defeat? I can’t. And unless you were one of these machines just chasing price momentum, you probably can’t either.

 

What we feel is generally driven by the score of this game. That’s why we play it. Whether you were long SBUX or AMZN into their earnings prints, it’s #timestamped right there in front of you. Yesterday’s Global Macro score was one that left a mark:

 

  1. Most things #Deflation (Commodities and countries/sectors linked to them) have been smoked this week
  2. Credit markets linked to inflation expectation expectations (Energy Junk Bonds) are back at their YTD lows
  3. Dammit, they even sold off the SP500 for a 3rd straight day!

 

#NoWorries though, you can buy Amazon (AMZN) on the Barclays upgrade this morning (+18% pre-market) for 1,000x earnings, or something like that. Heck, that’s cheaper than something biotech that has no earnings at all.

 

I wrote this yesterday and I’ll write it again – in Style Factor terms, if a stock has:

 

  1. SIZE (big cap)
  2. LIQUIDITY (you can get in/out of your position in 1-3 days)
  3. NICE CHART (i.e. price momentum machines can chase)

 

You are all set. That’s why I kept Starbucks (SBUX) on the long side of Real-Time Alerts. Is there a legitimate debate on why the stock shouldn’t trade at 55x earnings if people are willing to chase it at 35x?

 

C’mon, let’s get real here. This has nothing to do with your business school “valuation” models. This has everything to do with what always happens when you can buy neither Global Growth nor Inflation – you have to chase the last growth you can find.

 

For those of you still keeping score on the GROWTH and INFLATION data, here it is this morning:

 

  1. CHINA: PMI slowed (again) in July to 48.2 from 49.4 in June
  2. EUROPE: Germany and France saw their PMIs for July slow (again) to 51.5 and 49.6, respectively
  3. JAPAN: PMI accelerated (again) in July to 51.4 from 50.1 in June

 

Pardon? Buy Japan as both the absolute (rate of change) and relative momentum of its growth factor is beating China and Europe? Yep. That’s the really cool kids’ portfolio – long AMZN, SBUX, and Nikkei!

 

Oh, did I mention that Japan’s rate of change in growth will be accelerating in the 2nd half of 2015 as the beloved navel gazer market (USA) slows? What the un-cool kids own are basically US cyclicals (I think they’re now called “value” stocks):

 

  1. Industrials (XLI) down another -0.9% yesterday (down -4.4% in the last month)
  2. Dow Transports down another -2.1% yesterday (down -4.1% in the last month)
  3. Russell 2000 down another -1.1% yesterday (down -3.0% in the last month)

 

So much for the “global growth is back, buy reflation” idea…

 

For your “value” friends who don’t do macro cycle work, please send them my way. I have a very basic lesson I learned a long time ago about thinking a cyclical that is tied to commodity #deflation is “cheap”: it’s going to get cheaper.

 

As Darius Dale shows in today’s Chart of The Day, the Russell “Value” index is underperforming the Russell “Growth” index by almost 1,100 basis points (that’s the most since, well, global growth really slowed in the summer last time = 2011).

 

I guess that’s why I’m feeling something this morning. I’m all fired up, taking a few shots at the competition (is that impolite while they’re revising GDP growth from 4.0 to 3.0?). Bob, weave, jab – it’s ok to compete. This isn’t Ancient Greece, but it is Wall St.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 2.24-2.36%

SPX 2093-2130
RUT 1
Nikkei 209
VIX 11.88-14.37
USD 96.62-98.45
Oil (WTI) 48.03-50.95

Gold 1068-1121

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Got Aretas? - z dd Chart of the Day


Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more