RTA Live: September 30, 2015


Retail Callouts (9/30): New RL CEO is a Win

Takeaway: We think this CEO change is a huge win for RL shareholders | Academy Sports announces new CEO, could be gearing up for IPO.

RL - Fountain of Youth

We think this CEO change is a huge win for RL shareholders. It’s important, we think, for the age of the executive team at most consumer brands to be as closely aligned with its core customer as possible. For too long, that’s been going the wrong way at RL. But RL just made the biggest adjustment in that regard that we’ve seen at any company – perhaps ever.

To See Our Full Note From Yesterday CLICK HERE

To See Our June Vetting Book On RL CLICK HERE

Retail Callouts (9/30): New RL CEO is a Win   - RL chart 2


Academy - Academy Sports has named Kevin Symancyk (43) as President and CEO. Symancyk comes from Meijer, the Midwest hypermarket chain, where he was President and COO. Prior to Meijer he worked in merchandising for Sam's Club.  Could be gearing up for IPO.



Neiman - Neiman Marcus is reportedly delaying IPO until 2016 due to volatility in the market.



AMZN - Amazon launching a program called Flex, to compete with UBER, where consumers can deliver Prime Now packages. Drivers must provide their own car, have an android smartphone, and pass a background check. Pay range is expected at $18-$25 per/hr.



HBC - Hudson's Bay Restructuring North American Operations. Cutting 265 positions, and expecting $75mm in savings in 2016.



COST - 4Q15 Earnings

Retail Callouts (9/30): New RL CEO is a Win   - 9 30 15 chart2


GPS, EBAY - Former Gap Inc. CEO Paul Pressler joins EBay Board of Directors.



ARO - Aéropostale is on notice from NYSE due to its stock price's 30 day average below $1.  The company is considering a reverse split to meet the listing requirement.



The Macro Show Replay | September 30, 2015


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.

September 30, 2015

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September 30, 2015 - Slide11

Worst Q3 for Stocks Since 2011

Client Talking Points


The DAX bounced, “off the lows” … into month end down -24% since April; nothing new there – bear market bounce within more slowing data post yesterday’s 0.0% German CPI; Eurozone CPI moves into the #deflation zone at -0.1% year-over-year in SEP which should prompt ECB President Marion Draghi’s QE Cowbell.


Copper bounced, off the crashing lows… +2.5% as we’re sure people are starting to concern themselves with another “reflation” as the Fed contemplates more slowing economic data (= USD down, hoped-for-reflation up).


After tapping 2.05% into the close yesterday, it was a great month (and quarter) for the best way to play #Deflation & #GrowthSlowing (Long-Duration Bonds). Since 2.04% is the low-end of our current 2.04-2.15% range, it should be no surprise to see a yield bounce “off the lows” this morning.


**Tune into The Macro Show with Hedgeye CEO Keith McCullough and Macro analyst Darius Dale at 9:00AM ET - CLICK HERE

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

McDonald’s clearly continues to be well-liked by our Restaurants research team and is a near perfect fit into our macro team’s current "style factor" preferences. This stock is high cap with a low-beta, coupled with a company turnaround story that is currently well underway. We believe this stock will do well through this tumultuous time in the market.


As previously mentioned, the company has all day breakfast starting on October 6. We anticipate this development as not only driving increased visits from existing customers, but also new customers that maybe don’t wake up early enough to get breakfast by 10:30am (or simply just people that enjoy eating breakfast items outside of the morning!)


As Sector Head Todd Jordan notes, "PENN should benefit from the release of state gaming figures over the next few weeks. Recall that August was weaker than many thought. While we predicted this particular slowdown, our model is showing a sharp September rebound.


September revenues should rebound and serve as a catalyst for the stock going into Q3 earnings. On the research side we have not altered our views of PENN’s long term growth story. We continue to see more upside from current price levels.  


Is the U.S. economy still showing signs of a cyclical slowdown? Yes.  If you, like us, remain skeptical on the said policy path from our omnipotent central planners, and you believe growth continues to slow, then we respectfully submit that you sit on your GLD and TLT allocations.


3 GDP comps are difficult. And, once the data comes out, we think expectations will be downwardly revised again. In other words, wait for yet another Fed punt on a 2015 hike.

Three for the Road


VIDEO (2mins) Carl Icahn Can’t Be Serious



Formula for success:  rise early, work hard, strike oil.

J. Paul Getty


Mobile ads account for about 76% of Facebook’s ad revenue.

Flawed Beliefs

“The 1st reason we miss insights is that we are gripped by a flawed belief.”

-Gary Klein


As Q3 of 2015 is #timestamped into the market history books, that’s an important quote for those trying to be introspective about what went right and wrong. Alpha generating insights should have an element of surprise. Market risks change, every day.


A good example of a flawed belief would have been thinking US GDP “feels like” +3-4% in Q3. It will be lucky to be half of the low-end of that range (you’ll get the preliminary look at Q3 GDP at the end of October, and final Q3 GDP at the beginning of December).


An even better insight would have been to fade the “rates are going up, because it’s time” belief. While many of your competitors will lament “the worst Q3 for stocks since 2011” today, you can celebrate the absolute and relative performance of the Long Bond.


Back to the Global Macro Grind


With month and quarter-end, you’ll get a lot of “recap” type notes from the Old Wall and its media. And while contextualizing the history of market moves is critical to obtaining future insights, I don’t like to dwell too much on what we already know happened.


What’s next?


Well, for those of you who didn’t take the advice to “not pay so much attention to the data” in Q3, let’s kick off the advent of Q4 with the most recently reported European economic data:


  1. Eurozone CPI (inflation reading) deflated to -0.1% y/y in SEP vs. +0.1% AUG
  2. Germany’s CPI slowed to 0.0% in SEP vs. +0.2% AUG
  3. Producer Price (PPI) #Deflation was -0.9% y/y in France, -2.9% y/y in Italy, and -9.9% y/y in Greece


Yep. It’s a good thing Greece and the rest of Europe is fixed. Maybe their stock markets moving into #crash mode (German DAX -23% since April) will supersede Draghi’s flawed belief that #Deflation risks were dead (in June).


Given the #EuropeSlowing Q3 Macro Theme we introduced in July was accurate, the most recent European data implies that Draghi could/should very well “surprise” markets with another devaluation of the Euro in Q4.


What else might surprise?


  1. Classic #LateCycle gainers like employment + wage growth + consumption slow, sequentially, in the USA?
  2. Both Japan and Europe start slowing at an accelerating rate into recessions?
  3. As China continues to slow, they make up numbers to suggest they aren’t?


I don’t think the China thing would surprise people. Maybe the European and Japanese slow-down will. On the beloved “super-mid-cycle” USA thing people have been pitching, well… the risks to their beliefs are being drawn-down (in P&L terms) daily.


Having spent the last 2-days seeing Institutional Investors in NYC, here are some more things people are thinking about:


  1. What if Hedgeye’s forecast for a top-down GDP slowdown combined with a bottom-up earnings one is still right?
  2. What happens if we get another rate-of-change #EmploymentSlowing report on Friday?
  3. What does the Fed do if both US Employment + GDP reports slow, ahead of the DEC “rate hike” meeting?


Those are obviously thoughts about the US (newsflash: most US based investors still navel gaze at the US). But what if the most basic non-Consensus Macro thought of all is presenting itself to you (in live quote terms) on your screen, every day?


What if we’re entering a Global Recession?


Can the US “de-couple” from that? If the Fed is forced to cut their growth and inflation forecasts again (alongside every major economy on that) and the Dollar falls – what if Oil and Gold rise on that?


Is the new bull case going to be “US Economy To De-Couple On Rising Gas Prices”?


I’ll stop asking questions that challenge the flawed belief system that has been consensus throughout 2015. In other news, “Wall Street Strategists cut year-end SP500 target to 2173.” #Gripping analysis.


Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND research views in brackets) are now:


UST 10yr Yield 2.04-2.15% (bearish)

SPX 1 (bearish)
RUT 1077-1135 (bearish)
DAX 9101-9893 (bearish)

VIX 23.39-28.97 (bullish)
USD 94.82-96.99 (neutral)
EUR/USD 1.10-1.14 (neutral)
YEN 118.69-121.52 (bullish)
Oil (WTI) 43.68-47.41 (bearish)

Nat Gas 2.50-2.69 (bearish)

Gold 1115-1153 (bullish)
Copper 2.20-2.35 (bearish)


Best of luck out there today,



Flawed Beliefs - 09.30.15 Chart

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