prev

OPEC Cuts = MIRAGE | CALL TODAY 1:30PM EST

Takeaway: Please join us for a flash call at 1:30PM ET today to discuss yesterday's developments and understand the thinking in Saudi Arabia and OPEC.

Please join us for a flash call at 1:30PM ET today with former US Secretary of Energy Spencer Abraham and former Vice Chairman of the Paris-based International Energy Agency Joe McMonigle to discuss yesterday's developments and understand the thinking in Saudi Arabia and OPEC.

 

OPEC Cuts = MIRAGE | CALL TODAY 1:30PM EST - HE M opec fc

 

KEY DISCUSSION POINTS:

  • A Tweet from the Wall Street Journal's OPEC reporter that "OPEC is ready to cooperate on a cut" sent oil futures higher and moved the entire market for two hours going into the close.
  • The WSJ tweet quoted a television interview given by the UAE energy minister but turned out to be false alarm as his comments resembled previous statements about cooperation if everyone cuts.
  • With oil heading lower, you should expect similar comments and headlines but it's nothing more than a mirage.
  • Investors should ignore the noise because it's too early for a cut. The Saudi's think their market share policy is winning.
  • A cut now would be counter-productive - like sending a lifeline to US producers.

 

Participating Dialing Instructions

  • Toll Free:
  • Toll:
  • UK: 0-
  • Confirmation Number: 13630766
  • Materials: CLICK HERE

 

BIOS:

 

Spencer Abraham

Secretary Spencer Abraham serves as Senior Energy Analyst and is Chairman and CEO of The Abraham Group, an international strategic consulting firm focused on the energy sector and based in Washington, DC.

Secretary Abraham is a member of the Board of Directors of Occidental Petroleum, NRG Energy and PBF Energy. Secretary Abraham served as the tenth Secretary of Energy in United States history from 2001-2005 under President Bush. 

 

Prior to being named a Cabinet Member, Spencer served as an effective and highly productive U.S. Senator from Michigan for six years.

 

In addition, he is a frequent commentator on FOX News, CNN and Bloomberg TV as well as a periodic contributor of op-ed articles to the Financial Times, The Wall Street Journal, The Washington Post, The Weekly Standard and other publications.

Secretary Abraham holds a law degree from Harvard University, where he co-founded the Federalist Society, and is a native of East Lansing, Michigan.

 

 

Joseph McMonigle

Joseph McMonigle serves as a Senior Energy Analyst and is president and co-founder of The Abraham Group LLC.


Mr. McMonigle is the former Vice Chairman of the Paris-based International Energy Agency. He also served concurrently as U.S. Representative to the IEA (2003-2005).

 

In addition, Mr. McMonigle served as Chief of Staff at the U.S. Department of Energy and also as the American co-chair of the U.S.-China Energy Cooperation Working Group. He is also an attorney and member of the Energy Bar Association as well as the Pennsylvania and District of Columbia bars.

 


OPEC Cuts = MIRAGE | CALL TODAY 1:30PM EST

Takeaway: Please join us for a flash call at 1:30PM ET today to discuss yesterday's developments and understand the thinking in Saudi Arabia and OPEC.

Please join us for a flash call at 1:30PM ET today with former US Secretary of Energy Spencer Abraham and former Vice Chairman of the Paris-based International Energy Agency Joe McMonigle to discuss yesterday's developments and understand the thinking in Saudi Arabia and OPEC.

 

OPEC Cuts = MIRAGE | CALL TODAY 1:30PM EST - HE M opec fc

 

KEY DISCUSSION POINTS:

  • A Tweet from the Wall Street Journal's OPEC reporter that "OPEC is ready to cooperate on a cut" sent oil futures higher and moved the entire market for two hours going into the close.
  • The WSJ tweet quoted a television interview given by the UAE energy minister but turned out to be false alarm as his comments resembled previous statements about cooperation if everyone cuts.
  • With oil heading lower, you should expect similar comments and headlines but it's nothing more than a mirage.
  • Investors should ignore the noise because it's too early for a cut. The Saudi's think their market share policy is winning.
  • A cut now would be counter-productive - like sending a lifeline to US producers.

 

Participating Dialing Instructions

  • Toll Free:
  • Toll:
  • UK: 0-
  • Confirmation Number: 13630766
  • Materials: CLICK HERE

 

BIOS:

 

Spencer Abraham

Secretary Spencer Abraham serves as Senior Energy Analyst and is Chairman and CEO of The Abraham Group, an international strategic consulting firm focused on the energy sector and based in Washington, DC.

Secretary Abraham is a member of the Board of Directors of Occidental Petroleum, NRG Energy and PBF Energy. Secretary Abraham served as the tenth Secretary of Energy in United States history from 2001-2005 under President Bush. 

 

Prior to being named a Cabinet Member, Spencer served as an effective and highly productive U.S. Senator from Michigan for six years.

 

In addition, he is a frequent commentator on FOX News, CNN and Bloomberg TV as well as a periodic contributor of op-ed articles to the Financial Times, The Wall Street Journal, The Washington Post, The Weekly Standard and other publications.

Secretary Abraham holds a law degree from Harvard University, where he co-founded the Federalist Society, and is a native of East Lansing, Michigan.

 

 

Joseph McMonigle

Joseph McMonigle serves as a Senior Energy Analyst and is president and co-founder of The Abraham Group LLC.


Mr. McMonigle is the former Vice Chairman of the Paris-based International Energy Agency. He also served concurrently as U.S. Representative to the IEA (2003-2005).

 

In addition, Mr. McMonigle served as Chief of Staff at the U.S. Department of Energy and also as the American co-chair of the U.S.-China Energy Cooperation Working Group. He is also an attorney and member of the Energy Bar Association as well as the Pennsylvania and District of Columbia bars.

 


INSTANT INSIGHT | McCullough On Short-Term Bounces, Oil & European Equities

Takeaway: Here's what you need to know about today's bounce in global stock markets.

INSTANT INSIGHT | McCullough On Short-Term Bounces, Oil & European Equities  - bounce cartoon 01.12.2016

 

"And the bounce… off fresh YTD closing lows, across Global Equity markets – that’s what bear markets do," Hedgeye CEO Keith McCullough wrote in a note to subscribers this morning.

 

Here's more analysis from McCullough:

 

"Does Draghi need to burn the Euro for European Equities to stop crashing? Yes. Down Euro -0.4% vs. USD this morning finally stopped the DAX at a -30% crash (since 2015’s high) – Italy’s crash (MIB Index) was -34%! This stops Gold from going higher this am too (Up Dollar) – my FX volatility signal is surreal (Euro risk range 1.07-1.14)"

 

 

Speaking of bounces... 

 

"What will a +4.5% bounce in oil prices off new cycle lows do? Keep Oil Volatility (OVX) astonishingly bullish – and that is bearish for the TREND call on everything Energy which remains bearish – risk range on OVX is, get this, 62-79! (immediate-term risk range for WTI = 25.98-29.99) – bear markets don’t end in big media sponsored bounces."

 

 

Heads up!


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.64%
  • SHORT SIGNALS 78.57%

[UNLOCKED] Keith's Daily Trading Ranges

Editor's Note: We've made some new enhancements to Daily Trading Ranges - our proprietary buy and sell levels on major markets, commodities and currencies sent to subscribers weekday mornings by CEO Keith McCullough. Click here to view a brief video of McCullough explaining how to use it most effectively.

 

Subscribers now receive risk ranges for 20 tickers each day -  the last five are determined by what's flashing on Keith's radar screen and what tickers subscribers are asking about. Click here to subscribe.

 

  • Bullish Trend
  • Bearish Trend
  • Neutral

INDEX BUY TRADE SELL TRADE PREV. CLOSE
UST10Y
10-Year U.S. Treasury Yield
1.81 1.58 1.63
SPX
S&P 500
1,809 1,882 1,829
RUT
Russell 2000
935 990 953
COMPQ
NASDAQ Composite
4,141 4,399 4,266
NIKK
Nikkei 225 Index
14,662 16,901 15,713
DAX
German DAX Composite
8,517 9,241 8,752
VIX
Volatility Index
23.97 29.50 28.14
USD
U.S. Dollar Index
94.62 97.99 95.62
EURUSD
Euro
1.07 1.14 1.12
USDJPY
Japanese Yen
111.07 116.96 112.38
WTIC
Light Crude Oil Spot Price
25.98 29.99 27.30
NATGAS
Natural Gas Spot Price
1.91 2.23 1.99
GOLD
Gold Spot Price
1,170 1,245 1,247
COPPER
Copper Spot Price
1.98 2.09 2.01
AAPL
Apple Inc.
91 96 93
AMZN
Amazon.com Inc.
443 525 503
GOOGL
Alphabet Inc.
671 727 706
MCD
McDonald's Inc.
112 119 116
XLU
Utilities Select Sector SPDR
45.30 47.11 45.70
JPM
JP Morgan Chase & Co.
53.01 56.79 53.07


RH | Expect Another 8k

Takeaway: If the company was going to miss, it’d have announced it along with this 8k around management changes.

The announcement that COO Ken Dunaj is leaving RH bugs us, but only because of the ammo it gives the Street around the ‘Don’t Like Management’ argument against the stock. It’s not that Ken is/was on his own a major force behind driving growth and profitability. But this release tells the investment community several things – even if we don’t believe most of them.

  1. First off, this ‘resignation’ actually happened on Tuesday. If you were wondering what took the stock from $52 to $47, now you know. Someone got the memo early.
  2. This will probably introduce a ‘revolving door’ component to investor’s concerns about management. As for the issues around Gary being eccentric – those we can handle, and can easily refute. But the facts are stacking up about management leaving in a way that people will universally question RH’s ability to retain talent. They’ll look at the following…
    • Carlos Alberini, Co-CEO who left to become CEO of Lucky in Dec 2013 (yes, people will revive ‘the Carlos argument’)
    • Doug Diemoz, Chief Development Officer, left RH last summer after 15 months in order to be CEO of Crate & Barrel (not a big deal, RH has not missed a beat).
    • Richard Harvey, head of Kitchens & Tablewear, who quietly left late 2015 after being hired to meaningfully grow the Kitchens business. (RH shifted gears and saw several opportunities to pursue ahead of kitchens. He left on his own accord).
    • Dunaj, COO (leads the organization that moves product – not store openings, to be clear)
  3. In every instance, there was a change in strategy or direction that makes sense out of the headcount changes, which makes sense to us. When a story is as transformational as this, nobody’s job is status quo indefinitely.  But still, people who want stability in management on top of a dynamic growth story won’t like this.
  4. Ironically, this is not the 8K we were expecting to see. We were looking to see a Business Update press release, and the market was too. An interesting thought is that if business was in trouble, it would likely have had to have been disclosed along with this management change. In that regard, relative to expectations, the fact that we got the singular release about Dunaj is probably more bullish than anything else – again, relative to the stock’s performance over the past three days.
  5. Top management has been in planning meetings for much of the past two weeks. In that regard, the timing of a change like this makes sense. It also makes sense to us that we’ll see an update by the end of Feb, which will bless the quarter, and include a business outlook that is far better than a $47 stock suggests.

In the meantime, RH is trading at 12x current year numbers and a long term earnings growth rate of 40% (both of which no one believes). In other words, it’s trading in-line with KSS, and 25% BELOW zero square footage growth retailers with peak margins (like FL, GPS).

 

Here is a link to our latest RH Black Book:  RH In A Recession Black Book Click Here


And the bounce… off fresh YTD closing lows

Client Talking Points

EURO

Does Draghi need Burning Euro for European Equities to stop crashing? Yes. Down Euro -0.4% vs. USD this morning finally stopped the DAX at a -30% crash (since 2015’s high) – Italy’s crash (MIB Index) was -34%! This stops Gold from going higher this am too (Up Dollar) – my FX volatility signal is surreal (Euro risk range 1.07-1.14).

OIL

What will a +4.5% bounce off new cycle lows do? Keep Oil Volatility (OVX) astonishingly bullish – and that is bearish for the TREND call on everything Energy which remains bearish – risk range on OVX is, get this, 62-79! (immediate-term risk range for WTI = 25.98-29.99) – bear markets don’t end in big media sponsored bounces.

SPY

Still in our Best Ideas list (Short Side), but after closing at new YTD lows yest (1829 SPX = down -10.5% YTD and -14.1% since we went bearish on it in July) we should see a bounce this morning – problem is risk range only gets me 1882 on the upside, whereas a month ago the range could get you at least back to 1950-2000.

Asset Allocation

CASH 66% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 21% INTL CURRENCIES 13%

Top Long Ideas

Company Ticker Sector Duration
XLU

The bond market understands #GrowthSlowing. So do Utilities (XLU), which is why XLU is leading S&P sub-sector performance in 2016. XLU is up +7.6% versus down -8.0% for the S&P 500. Stick with it on the long side.  

GIS

GIS remains one of analyst Howard Penney's top Long ideas in the Consumer Staples space. As we have continued to say, it boasts style factors ideal in turbulent times; high market cap, low beta and liquidity. While GIS is down year-to-date, it's held up very well against the broader stock market. GIS is down -4% versus down -8% for the S&P 500 in 2016.

TLT

Down go growth expectations and down goes the yield curve. That's the latest from Macro markets last week and it plays right into our long Long-Term Treasuries (TLT) and short Junk Bonds (JNK) Investing Ideas.

 

The UST 10YR Yield declined another -9 basis points last week which helped boost TLT +1.1% on the week. In a healthy environment, bonds as an asset class go up in tandem, but JNK lost -0.9% on the week despite a falling yield curve. That’s because we’re NOT in an “all is good” environment. Credit spreads widen in turbulent times. This widening is the alpha-generating opportunity in long TLT, short JNK.

Three for the Road

TWEET OF THE DAY

Headlines/Rumors of OPEC cuts are a mirage. Still too early. Here's what to watch. app.hedgeye.com/insights/48949…

@Hedgeye @JoeMcMonigle

QUOTE OF THE DAY

"I say I'm a million percent. That is better than a hundred percent!"

-Randy "Macho Man" Savage

STAT OF THE DAY

Randy "Macho Man" Savage played 289 games in four minor league seasons, batting .254 with 16 homeruns and 66 RBIs.


the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

next