McCullough: To Be Clear, The Market Doesn’t Care What You “Feel”


In this brief excerpt from The Macro Show earlier today, Hedgeye CEO Keith McCullough answers a subscriber’s question regarding his current thoughts on the direction of the markets and economy.


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REPLAY | Macau September Presentation

watch the replay our of Macau September Presentation below.


Click Here to view the associated slides. 

Cartoon of the Day: To the Rescue?

Cartoon of the Day: To the Rescue? - central bankers cartoon 09.08.2015

Hedgeye CEO Keith McCullough has been trumpeting the growing risk of central bankers "certifiably losing control" for some time now (and how to risk manage your portfolio around this dangerous development.) Here's just one of many recent examples. We encourage you to take a closer look at our suite of products that can help you navigate these treacherous macro waters.


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We will be hosting a live Flash Call on Friday, September 11th at 11:00am ET.


As we stated a few weeks ago in a note, we added UNFI to our LONG bench (NOTE HERE). Now, after doing more work we are very confident in the longevity of this company and as a result are upgrading it to a LONG. UNFI has been battered down this year by ~35% due to significant worries stemming from the loss of the Albertsons contract as well as the competitive landscape.  Although increased competition (KeHE) and the potential of the captive systems are some of the biggest risks, we feel that this loss is an isolated incident and the company should not be penalized to this extent.


On August 20th, UNFI pre-announced 4Q15 and FY16 outlook and provided some positive color about the future for UNFI. Management provided positive commentary about the performance in the first two weeks of 1Q16, although only two weeks, it’s a marked sequential improvement and suggests that the core business remains strong.  Following the loss of the Albertsons contract, the notion that UNFI will continue to lose customers is overblown and not very realistic in our minds. UNFI provides a value added proposition (a high level service to retailers), offering a wide variety of over 80,000 products at industry leading prices. The industry is seeing continued growth in natural & organic, specialty, ethnic gourmet and fresh, all of which UNFI offers and can package together to provide retailers great value.


Following the disappointing end to FY15 UNFI is in a great position to leverage the strong asset base it has built.  Over the past two years, UNFI has gone through a period of significant investment in capacity to take advantage of the growth in the fresh, natural and organic market place.  With this investment in the past, capex will be declining to more modest levels, about 0.6% - 0.7% of net sales.  As a result, free cash flow is going to start to ramp up significantly and coupled with an underleveraged balance sheet M&A will become a bigger part of the story going forward.


The topics we will cover on the call will be:

  • The strong competitive position of UNFI
  • The significant growth opportunity
  • The strong financial position
  • Our estimate of +40% upside in the name



Toll Free:


Confirmation Number: 13618360

Materials: To be provided approximately 1 hour prior to start time


Please call or e-mail with any questions.


Howard Penney

Managing Director


Shayne Laidlaw



EARLY LOOK FLASHBACK: 'Do The Macro Before The Macro Does You'

Editor's Note: What follows below is an abridged excerpt from Hedgeye's Early Look written by CEO Keith McCullough on 8/20/15. We've said it before (and we'll say it again), if you're tired of recycled, second-rate, consensus research...there's a bona fide solution. Click here to learn more and subscribe.

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EARLY LOOK FLASHBACK: 'Do The Macro Before The Macro Does You' - z vv

The Big Picture

Since we started Hedgeye in 2008 with a macro view that the Fed couldn’t devalue their way out of a cyclical slowdown, I can’t tell you how many times I’ve been asked how I think this all ends.


“This” being the grand central-planning experiment of our time.


You know, the one that’s based on the linear-economist premise that “shock and awe” rate cuts, bazookas, and currency devaluations can not only smooth economic cycles, but raise the heavens and part the seas…


But what happens then the US economic cycle slows into a stiffening demographic (secular) headwind? What happens when all of the world’s growth and inflation expectations start to slow, at the same time?


If you didn’t know the answers to these questions, now you’re starting to know. It ends how it all started. It ends in the capitulation of the Currency War. This is it. This is the war that nobody, other than we Wall Street types, will come to fight for.


EARLY LOOK FLASHBACK: 'Do The Macro Before The Macro Does You' - currency wars

Macro Grind

Got capitulation via devaluation? After Vietnam devalued the ding Dong (their currency) yesterday, Kazakhstan opted for the -23% daily-devaluation overnight. If you don’t follow Global FX, you do now.


“But I’m an equity guy.” Yep. Totally get it. I used to be too. Then I got crushed by the macro and decided I better do some macro before the macro did me. Interconnected risks between policy moves, currency crashes, and equities matter, big time.


In the last year alone, “Emerging Market” Equity outflows have almost doubled the outflows they saw during the 2008 crash. Why the 2-bagger? Because when my boy Bernanke devalued the US Dollar to its post Nixon low (2011) chart chasers rammed their asset allocation pie charts into countries that “emerged” with strong currencies on the other side.


In other words, the outflow is a function of the prior inflow. Chase high; puke low.


Now a US Equity only guy/gal should be quick to say something like “but the market is only -3% off its all-time high.” And last I checked, that was true in NOV of 2007 and MAY of 2000  too. This is what happens at cycle tops – trailing returns look awesome.


But then you start to see the internals (and externals) break-down, crash, and challenge all of that awesomeness. And that is precisely what you are seeing right now. From a Global Equities perspective, in the last month alone, here are some draw-downs:


  1. Greece -18%
  2. Russia -13%
  3. Singapore -11%
  4. Hong Kong -10%
  5. Germany -10%
  6. Turkey -9%
  7. South Korea -8%
  8. Australia -7%
  9. United Kingdom -6%

    10. USA (Russell 2000) -5%


And voila. There it is, the Russell (2000 stocks) is “outperforming” the rest of the global growth and inflation slowing gong show. And the SP500 is outperforming that better yet. “So” everything must be fine. Global reflation and growth must be fixin’ to rip!


Let’s get serious here and not make the mistakes many equity only investors did in 2000 and 2007. Let’s not ignore the growth and inflation slowing data. Let’s not close our eyes when we look at the bond market either.


What say you Mr. USA Bond Market?


  1. TREASURIES (10yr) = 2.11% this morning after dovish Fed Minutes (that reflect dovish data)
  2. JUNK = making lower-lows (4yr lows), daily, as spread risk widens (as it always does when growth slows)


There’s that darn combo Hedgeye keeps using, #GrowthSlowing.


But what does it mean when the entire edifice of central-planning and those that market asset management at its alter are promising 2x the baseline growth (GDP) that is actually occurring? *reminder, Hedgeye is at 1.4% q/q SAAR and 1.6% y/y


Every single perma-bull economist/strategist in the US has not only a “3-4% US GDP” forecast in the 2H of 2015, but has it mapped in excel as far as the linear-seeing-eye can fathom, into 2016 and beyond.


That, to put its duration in historical context, implies the greatest economic expansion since WWII. And I’m thinking less American realists sign up to come fight for an un-elected central planning war today than they did for The People back then.


EARLY LOOK FLASHBACK: 'Do The Macro Before The Macro Does You' - z xb

Our levels


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.07-2.18%

SPX 2061-2090
RUT 1190-1213 
VIX 13.49-15.83 
USD 95.62-98.19 
Oil (WTI) 40.07-42.65


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


EARLY LOOK FLASHBACK: 'Do The Macro Before The Macro Does You' - z 89



RTA Live: September 8, 2015


Early Look

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