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Profits vs. Credits

Client Talking Points


Strong recovery day for the U.S. Dollar yesterday after holding 94 @Hedgeye TREND support during the 2 week correction. The rest of the world’s equities (Europe and Japan in particular need #StrongDollar as their stock markets aren’t working unless their FX weakens) – can Draghi break the Euro down to $1.05 vs USD in March? Doubt it.


389 out of 500 S&P companies have reported and if you gave the bulls these numbers 6 months ago, they would have sold the OCT-DEC 2015 chart chase. Total REVS -4.2%, EPS -6.7% with only 3 of 10 Sectors showing year-over-year EPS growth. Get profits and credit right and you’ll keep getting this macro market right.


The VIX did precisely what it should have during yesterday’s slow-volume (total U.S. Equity Volume was -8% vs. 1 month average yesterday) rally to lower-highs, making a higher-low at 24 with an immediate-term risk range of 21-29. We’ve been bullish on volatility since Q3 of 2014 – this is going to go on and on and on as central planners panic.


*Tune into The Macro Show with Hedgeye CEO Keith McCullough live in the studio at 9:00AM ET - CLICK HERE

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

Utilities worked against us for a -2% loss on the week, but remain an outperforming sector YTD. New scares in the form of increased risk from the financial sector emerged last week. Deutsche Bank made headlines over liquidity concerns that tied into CEO Keith McCullough's favorite S&P Sector short, the Financials. Financials are the most over-owned group relative to its rate risk – XLF is now -14% vs. Utilities (XLU) +5.3% YTD.


Walmart is still having an effect on General Mills, but it isn’t any more or less severe than previously guided by management. They will begin to lap some of the effects caused by the retailer at the beginning of their 4Q16 (starting in March). Five years ago they dealt with a similar clean store policy implemented by Walmart. Coming out of that they seemed to have gotten more than their fair share of upside, specifically in cereal and fruit snacks, now they are seeing a little more than their fair share on the downside.


Investors continue to be confronted with our signal of #GrowthSlowing in the U.S. and globally. Even the White House came out to reduce 2016 U.S. inflation assumption to 1.5% from prior expectations of 1.9%!  We’ve called for yield compression alongside our signal of growth slowing and our expectation that global investors will continue to pile into US Treasuries as a “safe haven” liquid play. Last week, the US 10 year fell 13bps to 1.736%.Continue with our go-to macro market calls of long TLT and short JNK, and things don’t have to be so doom and gloom.

Three for the Road


Our analysts talk earnings..

VIDEO | Young Guns: A Deep Dive Into #Earnings https://app.hedgeye.com/insights/49153-young-guns-a-deep-dive-into-earnings?type=video




Strive not to be a success, but rather to be of value.

Albert Einstein


The youth unemployment rate in Spain is 48.3%.

The Macro Show Replay | February 17, 2016


Cartoon of the Day: The Dying Cartel

Cartoon of the Day: The Dying Cartel - OPEC cartoon 02.16.2016


News of OPEC's death might not be an exaggeration.

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.

Call Invite | Is the Market Prepared for What South Carolina May Signal?

Please join us Friday, February 19 at 11:00 a.m. for a special call with South Carolina's Republican and Democratic Party Chairmen, as we approach a pivotal moment in the election calendar. Specifically, there's less than one week left until the first votes are cast for the Republicans on February 20 followed by the Democrats on February 27. As such, we're very pleased to be hosting Democratic Chair Jamie Harrison and Republican Chair Matt Moore, who will give us their respective outlooks on how each race is developing in their state, and examine South Carolina's impact beyond the primary -- including a preview of Nevada and the Super Tuesday states voting March 1.


  • Matt Moore's bio available HERE
  • Jamie Harrison's bio available HERE

Dial-In Instructions for the Live Call:



If you have a question(s) you would like to ask, please send an email before or during the call to 


About Potomac Research Group

Potomac Research Group -- a Hedgeye company -- is a well-respected team providing Washington policy analysis to institutional investors and private equity firms. Together with Hedgeye's Macro and fundamental investment research, PRG's actionable, predictive and non-consensus analysis of federal legislative activities and regulatory policies helps clients determine Washington's impact on highly-regulated industry sectors, including health care, defense, finance, technology, and telecommunications.

For more information, please contact .

DRI: Adding Darden Restaurants to Investing Ideas (Short Side)

Takeaway: We are adding Darden Restaurants to Investing Ideas today.

Editor's Note: Please note that Hedgeye Restaurants analyst Howard Penney will send out a full report outlining our high-conviction short thesis later this week. In the meantime, below is a brief update sent today by Hedgeye CEO Keith McCullough in Real-Time Alerts:


DRI: Adding Darden Restaurants to Investing Ideas (Short Side) - darden


"I'm looking for the "consumer is in good shape" narratives to short...


And Howard Penney (of Chipotle short selling fame) is telling me to look no further than the never ending bowl of storytelling pasta.


Darden is up on a rope relative to where it was when Penney went bullish on it a few years ago... and he reminded our Institutional Research subscribers why it could go back to where it was on a conference call on February 2nd, 2016.


His new target price range is in the low $40’s 


Insiders might agree. Per Penney, "recently DRI’s largest shareholder announced it was selling more stock.  DRI’s core brand, Olive Garden is in need of a massive infusion of capital to fix the secular decline in traffic. 


Knowing this investment will slow earnings growth and depress the multiple; we don’t want to own the stock either!"


Short Green,



McCullough: ‘Are You Bearish Enough?’


In this brief excerpt of The Macro Show from this morning, Hedgeye CEO Keith McCullough explains why most investors aren’t bearish enough.