December 8, 2015

Hedgeye's Daily Trading Ranges are twenty immediate-term (TRADE) buy and sell levels, with our intermediate-term (TREND) view and the previous day's closing price for each name.  Click HERE for a video from Hedgeye CEO Keith McCullough on how to use these risk ranges.


  • Bullish Trend
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  • Neutral

10-Year U.S. Treasury Yield
2.32 2.14 2.23
S&P 500
2,049 2,109 2,077
Russell 2000
1,152 1,178 1,164
NASDAQ Composite
5,039 5,175 5,101
Nikkei 225 Index
19,461 20,030 19,698
German DAX Composite
10,651 11,106 10,886
Volatility Index
14.01 18.69 15.84
U.S. Dollar Index
97.54 99.46 98.67
1.04 1.09 1.08
Japanese Yen
122.18 123.56 123.35
Light Crude Oil Spot Price
36.64 39.98 37.63
Natural Gas Spot Price
2.01 2.21 2.07
Gold Spot Price
1,052 1,086 1,070
Copper Spot Price
1.98 2.09 2.05
Apple Inc.
115 120 118
650 680 669
1,220 1,306 1302
Valeant Pharmaceuticals International, Inc.
79.37 98.99 92.24
McDonald's Corp.
113 117 116
Kinder Morgan Inc.
15.06 20.03 16.42



CHART OF THE DAY: The Epic Crash In Commodities

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to subscribe.


"... Reflation (per Wikipedia) “is the act of stimulating the economy by increasing the money supply… seeking to bring the economy (specifically price level) back up to the long-term trend.”


That, my friends, is central-planning-cheerleading 101. So whoever’s research you are reading that continues to cheer on “600 rate cuts globally” being the elixir for perma-asset-price-inflation is still looking for Waldo (i.e. demand accelerating).


Here’s how “reflation” looked in commodity portfolios."


CHART OF THE DAY: The Epic Crash In Commodities - 12.08.15 EL chart

Reflation Capitulates

“I will be conquered; I will not capitulate.”

-Samuel Johnson


That’s what one of the 18th century’s most renowned writers had to say right before his death. Having published A Dictionary of the English Language in 1755, Samuel Johnson died at the age of 75 in 1784 in London, England.


Not to go all mortality on you this morning, but there is a cycle to big macro expectations. And, yes, some of them die of old age. Being long what the central planners have promised (the illusion of growth, i.e. inflation expectations) killed “reflation” returns in 2015.


What is “reflation”, you ask? I guess it’s the hope that global demand and/or growth “bottoms” and we magically see an end to the best call you could have had in Global Macro in the last 18 months - #Deflation. But hope is not a risk management process.


Reflation Capitulates - reflation cartoon 10.13.2015


Back to the Global Macro Grind


Reflation (per Wikipedia) “is the act of stimulating the economy by increasing the money supply… seeking to bring the economy (specifically price level) back up to the long-term trend.


That, my friends, is central-planning-cheerleading 101. So whoever’s research you are reading that continues to cheer on “600 rate cuts globally” being the elixir for perma-asset-price-inflation is still looking for Waldo (i.e. demand accelerating).


Newsflash: global demand doesn’t bottom and accelerate when an academic tells it to. It most certainly doesn’t accelerate in the things that have already inflated to all-time-bubble price highs which perpetuated all-time-supply-to-demand-ratio highs.


Here’s how “reflation” looked in commodity portfolios yesterday:


  1. CRB Commodities Index down another -2.6%, taking its crash to -29.2% year-over-year
  2. Oil (WTIC) smoked for another -5.9% drop, taking its epic deflation to -42.9% year-over-year
  3. Natural Gas tanked another -5.2% to, taking its crash to -45.6% year-over-year
  4. Copper deflated another -1.4%, taking its epic deflation to -30.1% year-over-year
  5. Cattle prices dropped another -2.3%, taking its crash to -26.2% year-over-year
  6. Coffee prices got tagged for another -1.1% loss, taking its epic deflation to -31.5% year-over-year


Aren’t epic deflations and crashes fun? Ex-all-of-it, “price stability” seems to be tracking right at the Fed’s transitory target!


If you didn’t back out the “transitory” (Fed speak for anything they miss) nature of what was an awesome year (if you shorted every “reflation” hope – and, yes, there were plenty of opportunities to do so), you also nailed the following #Deflation Risk links:


  1. Foreign Currency Devaluations
  2. Corporate Revenue and Profit Pressures
  3. Credit Cycle Risks


When we talk about conquering complacent consensus, we’re talking about making obvious connections in our Macro Themes across asset classes. That’s why it should be no surprise that the following prices hit lower-lows (vs. their SEP lows) alongside commodities yesterday:


  1. The Canadian Dollar (FXC)
  2. Ex-Energy names like Freeport-McMoran (FCX)
  3. Junk Bonds (JNK)


Oh no you didn’t. You didn’t go all FXC or FCX on me this morning did you? Say those tickers really fast and you’ll get a second derivative of a word guys who are long “reflation” are yelling at their screens going into year-end. It’s too bad the PMIs didn’t bottom.


Up next in narrative drift? They definitely have to blame China. The Chinese Yuan is under some pressure this morning and their reserves don’t look so sweet either. So, whatever you do, don’t blame the #LateCycle in both US consumption and employment. Blame Canada too.


In other pure-play US domestic short-selling news, after falling -1.6% last week, the Russell 2000 (80% of its revenues are pure play USA) got slammed for another -1.5% loss yesterday, taking its draw-down from its “reflation” highs in July to -10.1%.


Slammed, smoked, tanked – them be fighting words “folks.”


It’s a good thing we didn’t capitulate and chase those JUL and OCT “reflation” charts.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.14-2.32%

SPX 2049-2109
RUT 1152--1178

VIX 14.01-18.69
USD 97.54-99.46
Oil (WTI) 36.64-39.98


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Reflation Capitulates - 12.08.15 EL chart

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.

Global Growth Continues To Slow

Client Talking Points


Largely misunderstood for the last 18 months, we’ve entered the most painful part of a crash in inflation expectations – the capitulation. The CRB Index made lower-lows down -23% year-to-date yesterday and Oil and Copper have only bounced +0.7% and +0.2%, respectively this morning – this all but ensures the “bottom” in leading indicators is not in.


The Russell 2000 moved back into double-digit correction mode yesterday (-10.1% since July’s all-time #Bubble high) as small cap, leverage, and high beta continue to be some of the worst Style Factors to be long during a #LateCycle slow-down that’s driven by #Deflation expectations.


From Atlanta Fed’s Lockhart’s lips to whoever doesn’t do macro’s ears, after cutting his GDP forecast for Q4 to 1.4% he said the “market” is well prepared for a hike. He clearly wasn’t talking about credit, commodity, currency, EM, small cap, etc. markets. The UST 10YR Yield is right back down to 2.22% as the curve continues to flatten (129 basis points 10YR minus 2YR this morning).


*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

Restaurants Sector Head Howard Penney had no material update on McDonald's (MCD) this week. However, here is what Penney wrote around when we added MCD to Investing Ideas. It's worth reiterating our high conviction in the stock:


"We continue to get more bullish every time we talk to the company, franchisees and/or customers which we have polled via conducting surveys. We are going to be looking at a much different company 1-3 years from now." 


"Urgency has been instilled from the top down by new CEO Steve Easterbrook," according to Penney. "This ship is in gear and headed north. 2015 will be the last time this stock is below $100."


A lot has happened in 13 weeks... not the least of which is that Restoration Hardware (RH) is underperforming not only the market by 16%, but Retail as well (by 7%) – despite RH being more insulated from some of the issues that are clipping earnings today for retailers more broadly.


Over this time period, however, RH meaningfully accelerated square footage growth, launched two new concepts. Some say it’s bad timing. We disagree. RH is our favorite name in the retail space, and we like it across all three durations. Trade, Trend, and Tail.


On went the game of slowing last week with a little central planning un-secretive sauce. Despite the ECB’s move to cut the deposit rate to -0.30%, Draghi didn’t ring the cowbell loud enough. Meanwhile, Friday’s jobs report might have been just enough for Janet to hike rates into a late cycle slowdown. The consensus long USD crowd was crushed on the ECB news. The dollar lost over 2% on Thursday and rates were pushed higher.


If growth is going to continue to slow, with a rate hike on the horizon, a relative fixed income spread play (long TLT, short JNK) is exactly what you want on.

Three for the Road


VIDEO: ‘The Stock Market Looks Fantastic! (Ex-Energy, Ex-Consumers And Ex-Credit)’… via @hedgeye



The wise man should be prepared for everything that does not lie within his control.



A study of 15-year-olds was conducted in 42 countries and found that after G.N.P., the quantity of books in one’s home was the most important predictor of reading performance. The greatest effect was seen in libraries of about 100 books, which resulted in approximately 1.5 extra years of grade-level reading performance.

McCullough: ‘The Stock Market Looks Fantastic! (Ex-Energy, Ex-Consumers And Ex-Credit)’


On The Macro Show this morning, Hedgeye CEO Keith McCullough and Senior Macro analyst Darius Dale talk style factors and Old Wall’s evolving storytelling about the stock market.

Cartoon of the Day: More Potent Than Popeye's Spinach?

Cartoon of the Day: More Potent Than Popeye's Spinach?  - US dollar deflation cartoon 12.07.2015


"#StrongDollar (rate hike catalyst DEC 16th) driven #Deflation Risk definitely matters to most asset classes," Hedgeye CEO Keith McCullough wrote in a note to subscribers earlier today. "After a -3.8% decline last week, Oil is down another -1.1% this morning to $39.53 and the Commodities complex remains in crash mode."

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