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Another Round Of (Recessionary) Data? Hike Away Janet!

Takeaway: Today's data confirms our #GrowthSlowing Macro theme. But the Yellen Fed wants to hike interest rates anyway.

Another Round Of (Recessionary) Data? Hike Away Janet! - fed tightening noose

Fed Day has finally arrived.


We're pleased to announce that at 2:10 pm (directly following the FOMC decision) Hedgeye CEO Keith McCullough will host a live, unadulterated Q&A with viewers offering insight and analysis on what it all means for investors. 


Did we mention it's free? Click here to join him this afternoon.


Here's some food for thought while we wait with bated breath for our omnipotent central planners at Yellen & Co. to tell us precisely (or perhaps not so precisely) what the future path of interest rates will be.


Another Round Of (Recessionary) Data? Hike Away Janet! - mccullough production

Another Round Of (Recessionary) Data? Hike Away Janet! - indus 

Another Round Of (Recessionary) Data? Hike Away Janet! - treasury


Here's an excerpt from a note sent to subscribers earlier this morning written by Keith:  


"Rates both locally and globally, in 10yr Yields, are higher into the Fed hike event risk – 2.27% on the U.S. 10yr with an immediate-term risk range of 2.13-2.36%; Swiss 10yr +19bps month-over-month (off all-time lows) to -0.17%; Italian and German 10yr yields +11bps m/m."


Another Round Of (Recessionary) Data? Hike Away Janet! - yields


In related news, on "Fed Hike Into a Slowdown" day, the Bank of England's Mark Carney reversed his hawkish course saying the data has changed (so he will).


Another Round Of (Recessionary) Data? Hike Away Janet! - BoE


Carney was asked, by the Financial Times, about whether the prerequisite "conditions" had been fulfilled to raise rates:


"In an interview with the Financial Times, the BoE governor showed no sign of wanting to follow the Federal Reserve, which on Wednesday is widely expected to raise rates for the first time in nearly a decade. The Bank of England, rather, is focused on curbing excessive credit growth in a “low for long” interest rate environment, he said.


With little sign of inflation, Mr Carney said the priorities for the central bank were to increase the resilience of the banking system in the event of a downturn and reassess the safety of the buy-to-let lending market..." *Emphasis added*


Sound familiar? We've been warning subscribers about #LowerForLonger (rates) and #Deflation for a while now. So Carney is actually paying attention to the #GrowthSlowing data.


Meanwhile, everything the Fed didn't forecast in the past year (see deflation and slowing growth) is just "transitory." It all will pass, Yellen says. So why not hike interest rates?


Transitory? Hmm...


Remember today's Industrial Production numbers? 


Another Round Of (Recessionary) Data? Hike Away Janet! - industrial production info

Another Round Of (Recessionary) Data? Hike Away Janet! - industrial production 2


Or how about today's PMI Manufacturing Index Flash which slowed to 51.3, with new orders printing their slowest pace in more than two years? 


Not good... 


Hike away Janet!


Another Round Of (Recessionary) Data? Hike Away Janet! - Titanic 03.31.2014

Retail Callouts (12/16): Gary, Chip, Tory stirring up the pot -- some better than others.

Takeaway: Gary, Chip, Tory stirring up the pot -- some better than others. Buy RH, short LULU ahead of next blowup/CEO sack, Buy KATE into a big '16.

RH - Gary Crushed it on Cramer

We have to give Gary Friedman props for his approximately nine minute segment on Cramer last night. Let's face it, him going on what's arguably the most volatile and biased financial media platform in an unscripted way is not what we wanted to see.  The risk of fireworks was high. But he capped off a successful day RH (CFO and IR) had on the investor conference circuit by focusing on the real value drivers at RH -- growth in product concepts, and RH's real estate transformation.  The appearance was planned well before the earnings release, by the way, coinciding with a business-focused trip to NYC. All-in, it was a positive event for the stock.


LULU - Watch This Video. There's a Lot of Chip-isms here.



Chip popped on Bloomberg to talk about his new venture with his wife and son -- Kit and Ace, but naturally the conversation focused entirely on the direction and problems at LULU. Chip held his tongue, most likely because of the gag order agreed upon when Advent bought half of his stake, and attributed LULU's problems to a 'culture problem'. You could argue that it was exactly this that got LULU into the mess it has found itself in the first place. Chip's belief that LULU was a talent incubator resulted in a management team that wasn't qualified to run a company with $12bn in market cap. And we are not convinced the new team in place today is much better.

Chip all but confirmed that he was pushed out by board politics, and we think the catalyst there was the hiring of Laurent Potdevin as CEO. He pushed for Laurent to be hired as CEO. The Board knew Laurent was unqualified, so Chip traded his Chairman title/power for the CEO appointment. That led to Wilson being effectively neutered on the Board, and to him selling his stock.

And yes, we stand by our statement that Potdevin will be fired within six months in conjunction with another blowup and restructuring for LULU.

Those are the biggest takeaways from the interview from where we sit, not the idea that LULU could/should have purchased UA. The thought that Kevin Plank would allow a deal like that to even be discussed when he has two-thirds of the voting stock is almost comical.

The video is actually worth a watch -- if for no other reason than to see the journalists ask the worst questions we've ever heard asked of an industry veteran.





This story is a few days old, but we got a few questions on it yesterday. So here's our take.  It's interesting to us that people view Tory Burch as a preeminent  brand in the luxury space. Consider this...the footprint of the brand was around $1.9bn last year. That compares to Michael Kors at nearly $9bn, and Coach at $7bn. Kate Spade was only $1.4bn in 2014. So yes, Tory is bigger than Kate -- for now.  Tory Burch's layoffs are just the culmination of issues it's been having with its business for 2-years...the same issues that led to hiring Roger Farrah (RL) as Co-CEO in late 2014. Our prediction -- KATE will surpass Tory Burch in size and profitability (forever) within two quarters.


TGT - Tech security firm says it's easy to hack Target gift registry apps



Over the past 2+ years we've seen a collection of execution/security gaffes at TGT. Running through them in order... 1) Data breach in 2013. 2) e-commerce site malfunction during the Lily Pulitzer launch in April 2015. 3) e-commerce site malfunction during Cyber Monday 2015. 4) Gift registry app allows hackers access to personal information. Most of the issues have been centered on the e-comm channel and that's no surprise given that TGT didn't assume full control of the business until 2011 when it kicked its former partner AMZN to the curb. To catch up we think TGT needs invest heavily in this channel if it wants to grow this business at a 40% CAGR (something its been unable to do 2015 YTD). For context, WMT is spending $1.1bn on e-commerce investments in 2016 alone. With the closure of the CVS pharmacy deal announced today, the low hanging fruit for Cornell is all but gone.


TGT, CVS - CVS Health and Target Announce Completed Acquisition of Target’s Pharmacy and Clinic Businesses



AdiBok - Adidas sees +8% growth in sales in North America, two-digit growth in the following year. But Nike too good to be messed with



Prada Makes Adjustments Amid Slow Sales



Rakuten to Set Up Shop on China’s JD.com


CHART OF THE DAY: Long-Term Rates Don't Lie About Growth

CHART OF THE DAY: Long-Term Rates Don't Lie About Growth - 12.16.15 chart


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.


"... You don’t have to be the Wright Brothers to understand the very basic physical nature of long-term bond yields vs. the rate of change in real-growth:


  1. When GROWTH is accelerating on a TREND basis, long-term yields rise
  2. When GROWTH is decelerating on a TREND basis, long-term yields fall


That’s why the longest of “long-term investors” have been right to bet on Lower-For-Longer at every long-term-lower-high in the 10yr Yield. It’s Slower-For-Longer, eh."

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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.

Can She Fly?

“Gentlemen, I am going to fly.”

-Wilbur Wright


And that, the Wright Brothers did.


But will Janet Yellen?


Ladies and gentlemen, you are about to see an exhilarating political liftoff whereby a dove will pretend to look like a hawk. Then, (within minutes maybe) you’ll be considering a dove being a dove again. I’ll have LIVE analysis @HedgeyeTV at 2:10PM EST.

Can She Fly? - Yellen cartoon 09.17.2014NEW

Click here to join Hedgeye CEO Keith McCullough live on The Macro Show at 9am. 


Back to the Global Macro Grind


Ahead of this historical Fed decision, I’m running out of original content, so bear with me while I update you with yet another data-driven perspective – that of the Bank of England (BOE).


Mark Carney (head of the BOE) stole some headlines this morning by reversing his hawkish course, saying that “rate hike conditions are unfulfilled.” Yep. He told the truth and said that both the growth and #deflation data has slowed since July.


Ultimately, you don’t need a central-planner who is analyzing data (and market moves) on a political lag to remind you what part of the world has already had precipitation. But it is nice to see that some of these people are somewhat objective.


Dollar Up, Pound Down on that…


And what you’d expect to happen on the 1st US rate hike day in 9 years (1st hike into a corporate profit slow-down since 1967), in FX and Rates markets, is happening right now too:


  1. US Dollar +0.1% vs. the Euro to $1.09 EUR/USD with bearish TREND resistance for EUR/USD = $1.13
  2. US Dollar +0.3% vs. British Pound to $1.50 with bearish TREND resistance for GBP/USD = $1.54
  3. US 10yr Yield +3 bps on the day to 2.27% (after dropping to 2.13% on last week’s US #GrowthSlowing news)


Interestingly, Global Bond Yields have “bounced” off the lows into this Fed hike too:


  1. Swiss 10yr +19 basis points (bps) month-over-month to -0.19%
  2. German 10yr +11 bps month-over-month to 0.64%
  3. Italian 10yr +11 bps month-over-month to 1.67%


Notwithstanding the basic observation that all of the aforementioned 10yr Yields remain below that of the US 10yr Yield, it’s important to note that British Yields are actually down (1 beep on the 10yr) in the last month on this dovish BOE pivot.


When the growth and inflation data slows, I pivot – what do you do, Sir (and Madame)?


So, let’s say that after an hour (or day) of rate-hiking, the market forces Yellen to pivot. Yesterday’s 0.0% CPI (consumer price inflation reading) and this morning’s US Industrial Production report (reminder, it’s in a recession) definitely support that.


Then what?


Does the Dollar go down? What if it doesn’t (because the Euro, Pound, and Yuan are being centrally planned down)? What if the Dollar doesn’t do anything but rates start going down (again)?


Damn that data. It’s been crashing those who have been betting on higher-rates for almost 2 years.


For those of you who are new to following Hedgeye, we were bullish on US #GrowthAccelerating and bearish on the Long Bond (bullish on #RatesRising) for all of 2013. That, incidentally was the year consensus was actually bearish on rates!


You don’t have to be the Wright Brothers to understand the very basic physical nature of long-term bond yields vs. the rate of change in real-growth:


  1. When GROWTH is accelerating on a TREND basis, long-term yields rise
  2. When GROWTH is decelerating on a TREND basis, long-term yields fall


That’s why the longest of “long-term investors” have been right to bet on Lower-For-Longer at every long-term-lower-high in the 10yr Yield. It’s Slower-For-Longer, eh.


With neither growth nor inflation accelerating, you’re probably going to witness the most dovish “rate hike” in US history today. Ladies and gentlemen, she is going to fly alright – in 10yr Yield terms, if she’s lucky maybe 10 beeps.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.12-2.36%

SPX 2003-2060
RUT 1105--1163

VIX 17.98-25.21
USD 97.01-99.54
Oil (WTI) 34.08-37.97


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Can She Fly? - 12.16.15 chart

The Macro Show Replay | December 16, 2015


December 16, 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
  • Bearish Trend
  • Neutral

10-Year U.S. Treasury Yield
2.36 2.12 2.28
S&P 500
2,003 2,060 2,043
Russell 2000
1,105 1,163 1,131
NASDAQ Composite
4,901 5,045 4,995
Nikkei 225 Index
18,498 19,203 18,565
German DAX Composite
10,145 10,683 10,450
Volatility Index
17.98 25.21 20.95
U.S. Dollar Index
97.01 99.54 98.22
1.06 1.10 1.09
Japanese Yen
120.34 123.67 121.69
Light Crude Oil Spot Price
34.08 37.97 36.74
Natural Gas Spot Price
1.76 2.01 1.81
Gold Spot Price
1,051 1,086 1,060
Copper Spot Price
1.99 2.10 2.05
Apple Inc.
109 116 110
Amazon.com Inc.
641 681 658
Alphabet Inc.
747 782 760
Facebook Inc.
102 107 104
Valeant Pharmaceuticals, Inc.
85.99 114.13 109.59
Kinder Morgan Inc.
13.53 17.66 15.84



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.