Look Out, Bulls!

“The enemy, of course, is the resistance of the water.”

-George Yeoman Pocock


For me, of course, the resistance isn’t that of a swimmer or a rower. Hockey players play above the water. Our resistance is the wall.


Without the Old Wall (and its legacy print + NJ cable media) how would we save or make any money? The Cover Story in the oldest of wallpapers this weekend pitched Bears against Bulls on a tightrope. The header of the article read:


“Look Out, Bears”


And it cited Barron’s latest “money manager survey” that found that “55% of managers are bullish and 16% bearish.” I was a little offended by the whole thing. After all, I’m sensitive. And I’m the bull of all bulls this year, in #GrowthSlowing and Long Bond terms!

Look Out, Bulls! - Bull and bear extra cartoon


Back to the Global Macro Grind


No offense to Barron’s and their Old Wall boys, but having not called for a slow-down and/or a down stock market (and down bond yields) 9-10 months ago, they have no credibility in calling for an end to what they didn’t realize was starting.


That said, while consensus macro has been many times wrong, it rarely seems in doubt. So what is it that is driving the “stocks can never go down” mentality, all over again?

  1. Is it that they were so wrong on growth that bad news about being wrong is obviously good?
  2. Is it that bad/good news of Down Dollar is the best path to US inequality and asset reflation?
  3. Or is it that no matter what happens, Treasuries are always too “expensive” and stocks are “cheap”?

You can waste your time answering those questions this morning. I’m getting back to work.


Let’s start with what contextualizing last week’s moves within the 3 month @Hedgeye TREND:

  1. US Dollar Index down for the 3rd straight week, taking Down Dollar to -3.2% in the last 3 months
  2. Japanese Yen was up another +0.7% last week, and is +3.9% vs. Down Dollar in the last 3 months
  3. Russian Rubles were +0.9% last week taking their 1-month gain to +6.9% vs. -7.1% in the last 3 months
  4. Russell 2000 was DOWN -0.3% last week, taking it back to -8.7% in the last 3 months
  5. Nikkei 225 (Japanese Stocks) dropped another -0.7% last week, taking its 3 month loss to -11.2%
  6. Spanish Stocks (IBEX) deflated another -0.8% last week, taking their 3 month loss to -11.1%

Oh no you didn’t.


You didn’t call both the broadest measure of the US domestic revenue outlook (80% of Russell 2000 revs are USA) and the other joints that did the devaluation thing (it didn’t work in Japan or Spain) as being down in a week that the Old Wall called “up”?


Yes I did.


And you can do this too. Just get up an hour earlier each day and watch what happens to your brain. This is not your brain on consensus. This is your brain, thinking for itself – crushing consensus:

  1. US 10yr Treasury Yield down another 5 basis points last week to 2.05% = down 32 basis points in the last 3 months
  2. UST 5yr Breakevens (inflation expectations) down another -5bps last wk (-41bps in the last 3 months) to 1.16%

Oh boy. I better stop there. Barron’s doesn’t do cross-asset class or bond market read-throughs!


Back to “stocks”, Mucker. What did “stocks” do?

  1. Utilities (XLU) +2.3% week-over-week were the BEST sub-sector exposure to be long (+2.3% in the last 3 months)
  2. REITS (MSCI Index) +1.2% week-over-week and +1.4% in the last 3 months (vs. SP500 down -4.3% in the last 3 months)
  3. Industrials (XLI) deflated another -1.6% last week and have lost -4.4% in the last 3 months

Yep. In an “up” market for US stocks, both the Russell 2000 (IWM) and Industrials (XLI) were down on the week. As long as your Old Wall broadcaster doesn’t have to explain those details, they’ll never have Draft Kings for billionaire “stock pickers.” #TooMuchDetail


Finally, for the “folks” who still think “stocks” tell you about a globally interconnected macro marketplace, here are some hard-core US Equity Style Factors:

  1. SP500 High Beta Stocks were -1.1% last week vs. their Low-Beta brethren +0.7%
  2. SP500 Smaller Caps (bottom 25% cap) were -1.3% last week vs. their Big Cap brethren +1.0%

In other words. Size matters. And so does beta chasing.


Just think about it – little Hedgeye continues to be long Treasuries, Utilities, Gold, Low-Beta and Big Cap Liquidity… and the US growth/beta bulls continue to be underweight what we like. Look out, consensus bulls!


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 1.98-2.07%

RUT 1130-1178
EUR/USD 1.11-1.14

Gold 1145-1195


Best of luck out there this week,



Keith R. McCullough
Chief Executive Officer


Look Out, Bulls! - 10.19.15 chart

The Macro Show Replay | October 19, 2015


October 19, 2015

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investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

USD, Nikkei and China

Client Talking Points


The USD was down for the 3rd straight week (post that terrible U.S. jobs report) giving the SPX short squeeze what it needed (up, on decelerating volume, to lower-highs) but the USD appears to be stabilizing this morning = Oil (-1.1%), Gold (-0.4%), and the “reflation” trade no likey.


Japanese stocks no likey either…Down Dollar = Up Yen. After closing -0.8% last week, Japan didn’t believe the China “news” and sold off -0.9% into the close, taking the Nikkei -12% in the last 3 months (with USD -3.2% in the last 3 months).


Look on the bright side of their storytelling, they didn’t stick a 7.0 this time and made-up “6.9%” GDP instead. LOL. Even the locals (who are paid to think a certain way) didn’t buy Chinese stocks on that – Shanghai Composite closes -0.14%.


**Tune into The Macro Show at 9:00AM ET - CLICK HERE

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

McDonald’s reports 3Q15 earnings Thursday, October 22nd before the market opens, with a conference call at 11:00am ET. We are expecting strong sequential improvement in performance globally. We look forward to giving you an update on the company’s performance next week, but this week we wanted to focus on the ‘Looming Crash in Beef.'


Restoration Hardware opened its new Full Line Design Gallery at the Cherry Creek Shopping Center in Denver this week.  This is another anchor property -- using 53,000 feet of the 90,000 left vacant by Saks at Cherry Creek.


RH is taking up the size of its stores from an average of 8,000 square feet to about 40,000+ for its new stores – and productivity rates on these new assets are headed higher. In the old stores, RH could only show 10% of its assortment, while in the newer format stores, the company is showcasing better than 75%. Consumers can’t (and don’t) buy what they don’t see.


The #SlowerForLonger theme from Hedgeye Macro has been consistent and straightforward. Our pivot in advance of the most recent jobs report to get long of gold and stay out of the way short-side on commodities turned out to be a good position.


Growth expectations have been correctly revised, but there’s still a good amount of room between Hedgeye estimates and consensus. We are expecting GDP in a range of 0.1%-1.5% for Q3 and another 1-handle in Q4. If that proves accurate, flatter goes the Treasury curve (TLT, EDV), wider goes high yield spreads (bad for JNK), and down goes the USD (GLD).

Three for the Road



The Big Fear: Jay Pelosky on the Key Market Risks Right Now… via @jaypelosky @HedgeyeDJ

#markets #Fed



Life is something like a trumpet. If you don't put anything in you don't get anything out.

W. C. Handy


A record 20 hurricanes or typhoons have reached Category 4 or 5 strength in the Northern Hemisphere this year. The record was broken on Saturday when Koppu became the nineteenth storm to reach this intensity prior to slamming into the Philippines as a super typhoon.


Special contributor Daniel Lacalle will join Hedgeye’s European analyst Matt Hedrick and DOR Daryl Jones on Wednesday, October 21st at 11:00am ET to discuss Spain’s economy and market outlook.


Lacalle is a renowned European economist, who previously worked at PIMCO and was a PM at Ecofin Global Oil & Gas Fund and Citadel.  He is the author of Life In The Financial Markets and The Energy World Is Flat and a lecturer for the IE Business School and Master MEMFI at UNED University.


INVITE | SELL SPAIN CONFERENCE CALL (10/21/15 at 11AM ET) - Spain pain



  • Is the IBEX in crash mode?
  • What are the key economic metrics telling us about the direction of Spain’s health?
  • Will Spain make the necessary fiscal reforms or revert back to its ‘old’ ways?
  • Who wins the general election on December 20th and what’s the impact on the sovereign?
  • What are the challenges for the Eurozone with habitual weak economic links like Spain?


  • Toll Free:
  • Toll:
  • Confirmation Number: 13622670
  • Materials: CLICK HERE

Ping for more information.

The Big Fear: Jay Pelosky on the Key Market Risks Right Now


Hedgeye Director of Research Daryl Jones recently welcomed J2Z Founder and Principal Jay Pelosky for another installment of Real Conversations. In this revealing excerpt from their interview, Pelosky expands on his thoughts from a recent piece he wrote entitled "The Big Fear."


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