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The Net Neutrality Ruling: Potential Implications For Netflix, Verizon & Charter


In Part Two of this Hedgeye TV video excerpt with Potomac Research Group Senior Telecommunications & Cable analyst Paul Glenchur, Glenchur discusses the likely outcomes of a pending D.C. Circuit Court of Appeals ruling on net neutrality and the effects it could have on Charter Communications, Verizon and Netflix with Hedgeye Internet & Media analyst Hesham Shaaban.

CHART OF THE DAY: A Quick Look At The (Massive) Fed, ECB & BOJ Balance Sheets

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


"... As you can see in today’s Chart of The Day, when it comes to unconventional monetary policy, the key divergence to focus on is the delta between the Fed’s Balance Sheet (which is contracting) and the balance sheets of the ECB and BOJ (expanding rapidly).


Again, there are many factors across many durations to consider here, but if I could only pick 3 charts that explain why stock market perma-bulls (who are now begging, again, for US Dollar Devaluation) are wrong being long “reflation”, this would be one of them."


CHART OF THE DAY: A Quick Look At The (Massive) Fed, ECB & BOJ Balance Sheets - 02.03.16 Chart

Stock Market Crooners

“I’ve developed a karaoke habit. I’ve become a crooner.”

-Serena Williams


If this imploding Global Equity market has got some of your friends down, maybe you should take them out for a night of karaoke. You don’t want to scare them – and you definitely don’t want to talk up your Long Bond position – so ease into it with some crooning.


To croon, or not to croon – that remains the risk management question. By Webster’s definition, a crooner is a karaoke singer who “sings slow, romantic songs in a soft, smooth voice.” That’s how I’m thinking the bearishness of it all can be empathetically framed.


After trying his best to belt out his rendition of Draghi’s “Whatever It Takes” in the last few weeks, the Governor of the Bank Of Japan (Kuroda) pivoted into a deep, slow version of Master P’s “No Limit Soldiers” last night… it was scary.


Stock Market Crooners - central banker cartoon 02.02.2016


Back to the Global Macro Grind


As my brother from West Seattle, Darius Dale, reminded me – that Kuroda crap ain’t dope; it’s downright terrifying. He changed the ole school central planning lyrics to “there is no limit to measures for monetary easing.”


That’s right, after 90-100 TRILLION (per year) in Japanese monetary policy easing, writing 30,000 Yen checks to “poor folks” for Christmas (that’s $265), and opting for “Negative Yields” on long-term Japanese Government Bonds on Friday, Kuroda has no limits!


Since the BOJ’s Governor is simply a poor man’s version of a decent Draghi Crooner when it comes to moving markets, this is what the response was in Asia overnight:


  1. Japan’s stock market (Nikkei 225) hammered for a -3.2% down day (down -17.5% from its 2015 peak)
  2. Japanese Yen went UP on that, +0.4% versus the US Dollar
  3. CNBC celebrated the move, as they do most things central-market-planning


“So”, someone on Wall St. might ask, how does this all end?


A: Strong Dollar #Deflation


If you’re the poor wretched “investor” who has been long something big that settles in Dollars (like Commodities and their related countries, stocks, and bonds) since 2013, you should probably take up crooning and drinking (late night) at NYC karaoke bars.


There are, of course, multiple macro factors at work here that are being compounded by PBOC, ECB, and BOJ panic. But the most important of them all is that the US Federal Reserve is TIGHTENING into a slow-down.


All the while…


  1. China is lying about their need to devalue its currency by 10-15%
  2. Europe is trying to keep pace with Draghi Euro-Devaluation rhetoric
  3. Japan is dying


Keynes had a lot of things wrong, but he did nail this: “In the long-run, we’re all dead.” Japan’s grand monetary policy experiment started way back in the 1980s when a huge American central-market-planning rockstar, Paul Krugman, told them to “Print Lots of Money.”


And they did.


And it didn’t work. So, when they really started dying (population growth went negative and their core demographic spending cohort from the 1980s started falling off a cliff), they introduced “Abenomics” in 2012-2013.


As you can see in today’s Chart of The Day, when it comes to unconventional monetary policy, the key divergence to focus on is the delta between the Fed’s Balance Sheet (which is contracting) and the balance sheets of the ECB and BOJ (expanding rapidly).


Again, there are many factors across many durations to consider here, but if I could only pick 3 charts that explain why stock market perma-bulls (who are now begging, again, for US Dollar Devaluation) are wrong being long “reflation”, this would be one of them.


Leaders: Should we beg for an easy money Fed (again) and US Dollar Devaluation?


Isn’t that the definition of insanity (doing the same thing over and over and over and over and over again, and expecting different results?) Or is the fact that this is a very relevant option just the saddest part of our profession as it stands today?


At this stage of the #CurrencyWar (one of our Top 3 Macro Themes right now), all I know is that I hear a lot of bad versions of the same old song. Maybe that’s why crooning is dope, bros. Have yourselves another “relaxed drink.” This is going to be a long drinking session.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 1.85-2.00%


Nikkei 16006-18146

VIX 20.04-28.40
EUR/USD 1.07-1.09
YEN 119.01-121.54


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Stock Market Crooners - 02.03.16 Chart

Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

The BOJ, UST 10YR and Sectors

Client Talking Points


Since the “whatever it takes” karaoke by Kuroda didn’t work (only a 2-day rally in Nikkei), he went with “there is no limit to measures for monetary easing”… code word = #panic, as the great central-planning experiment moves into its final phase of capitulation. The Nikkei got slammed for a -3.2% day as the Yen went UP on that.


We don’t want you getting piggy with the UST 10YR at 1.86% - it’s been a great start to the year (long the Long Bond), so book some gains after this epic move towards the all-time lows (in yields). The “expensive” Long Bond gets more expensive as A) Deflation persists B) Growth Slows and C) German 10YR 0.29%, JGB 10YR 0.06%, and Swiss 10YR -0.33%.


From a S&P Sector Style perspective, the Best Idea in our Q1 Macro Themes deck remains playing our rates call via long Utilities (XLU +0.4% yesterday to +6.4% YTD) and short Financials (XLF -2.8% yesterday to -11.8% YTD).



*Tune into The Macro Show with Hedgeye Financials & Housing analyst Josh Steiner live in the studio at 9:00AM ET - CLICK HERE

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

After a busy week of domestic data, you probably don’t need us to tell you that growth continues to slow. Despite the short-covering squeeze in energy stocks, Utilities (XLU) closed out January as the only sector in positive territory (+5%), other than Consumer Staples which eeked out a +0.5% gain. It was an awful start to the year for the S&P 500 (-5%). Don’t expect +10% of relative outperformance every month, but if you stuck with us on this trade, you’re in much better shape than most.


GIS remains one of our top Long ideas in the consumer staples space. As we have continued to say it boasts style factors that are ideal in turbulent times; high market cap, low beta and liquidity.


Recently, General Mills has been attacked by Chobani commercials, claiming that Yoplait yogurt contains the same ingredients used in pesticide. GIS filed a false advertising lawsuit against Chobani demanding that they stop showing that commercial because it could be detrimental to sales. GIS just got word that a federal judge has barred Chobani from continuing the ad campaign. This is a win for GIS, but it is unclear right now if there was any damage done to the brand. At this time we do not believe it had any serious impact on the company. We will keep you informed of any material information regarding this lawsuit as it moves forward.  


Long-Term Treasuries (TLT) continues to preserve capital against the slow-moving trainwreck in Junk Bonds (JNK). Week-over-week, 10-year bond yields crashed 13 basis points to 1.92%. That helped lift the best play on U.S. growth slowing (TLT) by 0.85% on the week as credit spreads continued to widen (JNK gained +0.76% on the week, underperforming TLT marginally on a relative basis).

Three for the Road



How 3 Key #FCC Decisions Could Affect $FB $NFLX $VZ https://app.hedgeye.com/insights/48896-how-3-key-fcc-decisions-could-affect-facebook-netflix-verizon… @KeithMcCullough @PotomacResearch



You will either step forward into growth, or back into safety.

Abraham Maslow                                      


China National Chemical Corp., or ChemChina, agreed to buy Syngenta AG, the total enterprise value (including debt) is $46.3 billion – making this China’s largest overseas acquisition.

The Macro Show Replay | February 3, 2016


JT Taylor: A Magical Night For Marco Rubio

Last night's Iowa caucuses yielded more than a few interesting takeaways. Hillary Clinton was forced to flip six quarters to beat Bernie Sanders for the top spot, while Ted Cruz cruised to a first place finish in the GOP leaving Donald Trump scratching his head.


Here's a brief excerpt from Potomac Research Group Senior Analyst JT Taylor's Morning Bullets sent to institutional clients each morning. 


JT Taylor: A Magical Night For Marco Rubio - marco rubio


"MARCO'S MAGIC NIGHT: The establishment has a heartbeat. And its name is Marco Rubio. In our opinion, Rubio pulled off the biggest victory of the night, stringing together an impressive close-third place showing led by late-breaking undecideds, as well a good share of evangelicals and new voters (thank you, Donald). Electability is the name of the game, and if Rubio can play in Iowa (they traditionally nominate the most conservative candidate who ends up fizzling out before the general election) then he'll play anywhere.  


CAN RUBIO CONSOLIDATE ESTABLISHMENT LANE/MONEY -- AND FAST? With Bush, Kasich, and Christie all flagging, there will be growing pressure for them to step out of the race and throw their support behind Marco Rubio. New Hampshire may be an elimination round for Kasich and Christie so they must have a strong showing, but Bush still has enough cash to keep going for the long haul. It all depends on how New Hampshire shakes out -- calls for the also-rans to bow out will be far louder -- but the candidates will decide whether to exit on their own terms, not necessarily when it's most convenient for Rubio. 


Republican moneyed circles will be anxious to see when Bush will drop out of the race. Big-ticket donors are practically throwing their money away out of loyalty to the family, and are waiting for the go-ahead to break. Just where will their dollars flow? Our money is on Rubio."


Watch TAYLOR's latest washington wrap-up In the VIDEO BELOW:

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