A Gray Time

“Monday, October 9th, 1933. A gray day in a gray time.”

-Daniel James Brown


Looking for some inspiration ahead of our Q4 Global Macro Themes Call on Thursday, I started reading The Boys In The Boat last night. It’s the story of 9 Americans and their quest for Gold at the 1936 Olympics in Berlin.


While the aforementioned quote probably doesn’t inspire you to get out of bed this morning and chase another no-volume US stock market chart on green, it is Daniel James Brown’s opening sentence to an epic story. I love opening sentences.


I read #history in order to stay away from the Old Wall’s noise. In gray times of both US and Global #GrowthSlowing, history provides me calm and context. Without knowing where we’ve come from, how on earth could we know where we’re going?


Back to the Global Macro Grind


The 1 period was one of sustained #Deflation. While we’ve seen deflationary shocks in markets in both 2008 and 2015, we have not had to deal with it being pervasive. That’s why consensus continues to chase “reflation” rallies like yesterday’s.


The most basic thesis on the illusion of growth (artificially inflated asset prices) is that central planners around the world can offset the gravity of oversupply and secular slowing with currency devaluation.

A Gray Time - Deflation cartoon 02.24.2015

*Click here to join Keith LIVE on The Macro Show this morning at 9am ET.


But, after 600 or so “rate cuts”, globally… what you have is a lot of inventory (supply – see Chart of The Day from our pending Q4 Themes Call), slowing demand, and … well… graying times for long-term global growth forecasts.


Roger that. What’s next?


  1. More economic data confirming what macro markets have been pricing in for the last 3-6 months
  2. More lower-highs in stock markets around the world that remain in crash mode
  3. More hope for moarrr #cowbell on currency devaluation to resuscitate asset prices


Oh, and more pre-announcements like Caterpillar (CAT) and Dupont (DD), more #LateCycle jobs cuts (including pro-cyclical CEO firings), and more and more and more hope that this is all “priced in” after 77 months of a US economic expansion.


Knocking the #process pins down 1 by 1 this a.m., let’s do the data first:


  1. US non-manufacturing (Services) ISM slowed from its cycle-peak yesterday to 56.9 in SEP from 59.0 in AUG
  2. German Factory Orders slowed (again) sequentially by -1.8% in AUG after slowing -2.2% in the prior month
  3. Swiss CPI remained deflationary at -1.4% y/y in SEP vs. -1.4% y/y in AUG


Actually, the “prices” component of the US Services PMI moved into the recessionary zone (like Switzerland that has a negative -0.23% yield on a 10yr bond as a result) yesterday at 48.4 SEP vs. 50.9 in AUG.


New orders dropped -10% month-over-month in the US Services PMI too. So I signaled SELL the Dow Jones Industrial Index (DIA) on that in Real-time Alerts. #timestamped


Whether I’m an hour or a week early on another US equity SELL signal really doesn’t concern me. I’m as focused as I’ve ever been in my career – focused on the research and quantitative signaling #process that has been working vs. consensus gone bad.


Got Lower-Highs on decelerating volume days? Big time:


  1. Japan’s Nikkei signaled immediate-term TRADE overbought within its bearish TREND last night (short it)
  2. Hong Kong’s Hang Seng failed @Hedgeye TRADE resistance and has -6% immediate-term downside from the close
  3. Germany’s DAX is struggling to stay out of #crash mode (-20.5% since April and no support to 9145)


But no worries, Spanish stocks rallied yesterday on a -8% drop in its Services PMI print for SEP… because consensus thinks Spain’s GDP is going to ramp back up to +3% in 2016.




It’s ok to laugh. I have to at this hour, or I’d be right grumpy. The grayness of it all can be all so consuming if one is considering the data within Mr. Macro Market’s score.


Finally, on the effervescent hope of the aforementioned “What’s Next” #3:


  1. Dr. Copper doesn’t appear to be hearing #Cowbell this morning, dropping -7% (and still crashing)
  2. UST 10yr Yield back down to 2.05% continues to signal a series of secular lower-highs (range = 1.95-2.08%)
  3. Gold, the barbarous relic of ancient times, has held support with immediate-term upside to $1157


And that’s all I have to say about that.


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


UST 10yr Yield 1.95-2.08% (bearish)

SPX 1 (bearish)
RUT 1070--1157 (bearish)
DAX 9 (bearish)
VIX 18.55-29.47 (bullish)
USD 95.25-96.65 (neutral)
EUR/USD 1.11-1.13 (neutral)
YEN 119.11-121.65 (bullish)
Oil (WTI) 44.08-47.91 (bearish)

Gold 1124-1157 (bullish)
Copper 2.22-2.38 (bearish)


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


A Gray Time - zz 10.06.15 chart




  • Oct 8: Hedgeye Macau call 2:30pm
  • Oct 8: Tigre de Cristal opens


0880.HK -  The chief executive of casino operator SJM Holdings Ltd, Ambrose So Shu Fai, believes measures the central government intends to take to help gaming in Macau recover from its slump will have the desired effect, Rádio Macau reports.   

The Portuguese-language radio station quotes Mr So as telling reporters that the easing of curbs on mainlanders visiting Macau would bring more tourists to the city. 


Takeaway: We still recommending a long trade in Macau stocks but we struggle to see what the government can do over the near term to boost GGR. 


AIRBNB - Westpac Bank confirmed on Tuesday that Westpac and Airbnb are teaming up in a new campaign to aid Australians with the home ownership process. The campaign, called "Spare, Spare Room" will be officially launched on Wednesday. Throughout the campaign, Australians will have the opportunity to win one of 50 $250 gift cards to accommodate their guests through Airbnb.  


CCL -  Star Princess docked at Canada Place in downtown Vancouver, BC, early Sunday with reported norovirus on the ship.  On the 15-day cruise to Hawaii apparently 61 were sickened by the virus.  



UBER - A small startup quietly operating in Boston says it can build a better business by taking less from drivers, and charging passengers lower prices.

  • Fasten’s service is identical to Uber’s low-cost UberX service, which employs regular folks to ferry passengers in their own cars, except for a couple of important details. 
  • Instead of taking a percentage cut, say 20% to 30%, from each ride, it only takes $1 per ride (or a fixed daily or weekly fee, according to Fasten’s website). 
  • For passengers, Fasten can potentially be cheaper because it doesn’t use “surge pricing,” price hikes that kick in when demand goes up. Instead, Fasten says it lets passengers increase their fare offers if drivers don’t accept their ride requests quickly enough. 



Korean Casino Deal - A deal announced on Monday could lead to the development of one of the largest foreigners-only casino resorts seen so far on Jeju Island in South Korea.  The country’s Lotte Tour Development Co Ltd announced that a privately held affiliate, Dongwha Investment and Development Co Ltd will be building the biggest integrated resort on Jeju Island.  The resort could have up to 1600 hotel rooms, 200 tables, and up to 400 slot machines. 


Takeaway: Chinese tourists can travel to Jeju Island without a Visa for up to 30 days, making Jeju a viable option. 


China Outbound Travel - According to the China Outbound Tourism Research Institute, Hong Kong, Tokyo and Bangkok were the top three outbound tourism destinations, while long-haul destinations in Europe and America have also increased significantly.  As the Golden Week holiday coincided with the mid-Autumn festival this year, Chinese workers taking an extra three days off work would have had a 12-day holiday, encouraging longer haul travel.  





Arkansas (total): +20% YoY

The Macro Show Replay | October 6, 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.

How Much Lower Can Stocks Go?

Client Talking Points


Great contrarian indicator with the Financial Times running a “risk on” story because the VIX is “below 20.” That, of course, means nothing to us as the risk range for the VIX is 18.55-29.47 coming off the all-time low in cross-asset class volatility last year; big asymmetry to the upside.


Signaled immediate-term TRADE overbought in Real-Time Alerts (the General Electric activist move helped perpetuate that) within our bearish TAIL risk view yesterday. We have immediate-term downside in the risk ranges for both the SPY and DIA of 6%; fits the asymmetric volatility setup too.


Gold held its immediate-term breakout line of $1,124 yesterday and is up with Copper down -0.7%; everything global cyclical remains in crash mode so this isn’t a spot to be complacent. We see upside in Gold to $1,157 and we expect to see that if the UST 10YR breaks down through 1.99% again.


**Tune into The Macro Show with Hedgeye CEO Keith McCullough in the studio at 9:00AM ET - CLICK HERE


Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

Our Consumer Staples team remains positive on General Mills coming out of the 2Q15 earnings call. We have been LONG GIS for the last six months and continue to have a favorable view of the company due to the following reasons:

  • Sequential improvement in cereal
  • Growth in Natural & Organic categories
  • Snacking
  • Cost cutting initiatives
  • M&A activity

Many of the regional gaming states will release September revenues next week and as we’ve written about, they should look a lot better than August. Overall same store revenue declined 5% in August (we had predicted –2%) but most of the decline was due to the calendar and a difficult comparison. For September we are projecting an increase of 2% YoY


Our Missouri tracker is forecasting September gaming revenues to be up 3.6% YoY. This is a 6% sequential improvement from August's YoY change of -2.5%. Meanwhile, Pennsylvania slot revenues were up 4% in September. Our thesis for a sequential rebound in September remains intact. We like PENN on the long side from these levels.


It was an important couple of weeks for those who were still wrestling with our lower-for-longer views. The brevity of the macro moves post-report Friday proves just how non-consensus that call remains in a year where the S&P 500 is down -8%. The scary thing with regard to Janet’s credibility is that bad news is now being priced in as bad news. Moreover, we believe this late-cycle weakness is likely to remain ongoing.  

Three for the Road


Do You Suffer From H.P.A.D.? (Hedgie Performance Anxiety Disorder)… via @hedgeye



There is no exercise better for the heart than reaching down and lifting people up.

John Holmes


The average out-of-network ATM fee in the U.S. is currently at a record high of $4.25, up 21% over the past 5 years.

October 6, 2015

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Call Invite | Q4 2015 Macro Themes Conference Call (10/8/15 at 1:00PM ET)


We will be hosting our highly-anticipated Quarterly Macro Themes conference call on Thursday, October 8th 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.



  • #SuperLateCycle (USA): Slowing growth typifies the twilight of an economic expansion and negative 2nd derivative trends are creeping in across much of the domestic fundamental data. From labor and manufacturing markets to consumer and business confidence, leading indicators are beginning to roll as the late-cycle moves past peak. We'll detail why Slower-And-Lower-For-Longer remains the call. 
  • #GlobalSlowing: With the Street, IMF, World Bank and OECD all still forecasting global growth of around 3% for 2015, we find it appropriate to reiterate our call for global growth to come in at or below half that rate. Moreover, while China's August CNY devaluation effectively made our #EmergingOutflows theme a consensus bearish cog in the global economic outlook, we do not think investors are appropriately positioned for a likely trend of negative revisions to the respective growth outlooks in the U.S., Eurozone and Japan throughout the balance of the year.
  • #Crashing: Definitive crashes have occurred across many global macro markets in recent months. Those market participants on the wrong side of growth slowing and deflation are feeling the most pain. Crashing inflation expectations are perpetuating the pain across all asset classes and sectors levered to unrealistic growth expectations (energy, industrials, materials), as well as across the high-yield bond market, commodity markets, commodity currencies. Is the U.S. equity market next in line?



Watch Keith McCullough walk through this presentation live Thursday at 1:00PM ET.



  • Toll Free:
  • Toll:
  • Confirmation Number: 13621323
  • Materials: CLICK HERE


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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