China, Oil and Earnings

Client Talking Points


But if we blame China and Oil for everything, all good – after seeing the Shanghai Composite re-test its year-to-date lows, the Chinese had a slew of central-planning headlines to change that. Including “cutting 5-6M jobs from zombie enterprises” (imagine the U.S. did that?) – bullish move there vs. expectations, Shanghai Composite “off the lows” +1.7%.


Oil is prodding the top-end of its immediate-term $28.48-34.75 risk range (WTI) so we would be looking to re-load on Energy related shorts again (newsflash: at $35-45 Oil and Oil Volatility = 60-70, most credit issues remain). You simply have to be there selling the top-end of the risk range so that you can cover lower.


Imagine consensus blamed the following reality for terrible U.S. Equity returns in the last 6 months: 485/500 S&P companies have reported an aggregate Sales decline of -4.5% (and an earnings year-over-year decline of -8.5% on non-GAAP numbers); that made-up EPS decline is right inline with the year-to-date decline of the Russell 2000 of -8.7%.



*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

Our preferred growth slowing vehicle remains Utilities (XLU) in equites. Hitting on Friday’s revised GDP report (Q/Q SAAR Q4 GDP revised to +1.0% from +0.7%), a deep-dive into the number doesn’t support an incrementally stronger economy:

  • Consumption was revised down marginally but net exports were up with the negative revision to imports outweighing the negative revision to exports. That’s good for the number but lower global trade activity is not a good sign for global growth;
  • Much of the actual change in the revision was due to inventories, which contributed +0.31pts to the headline number

General Mills (GIS) hit an all-time high last week when it reached $60.18 on Thursday. Although this would not be a great entry point, it is also not a reason to get out if you have a long-term view. Nothing has changed in our fundamental story and we have no reason to lose faith in our thinking to date.


Over the course of the past few years, GIS has made strategic acquisitions within the natural & organic / wellness space (we call it the string of pearls approach). Although they are not largely meaningful to top or bottom-line right now, they are changing the way the company thinks about its broader portfolio.


We continue to believe GIS is one of the best positioned consumer packaged foods companies due to its strong brands and best-in-class people and organization.


Our preferred growth slowing vehicle remains (Long-Term Treasuries) TLT in fixed income. A flattening in the yield spread (10YR Treasury Yield – 2YR Treasury Yield) continued last week into double digit basis point territory (currently at 96 basis points). Year-to-date the yield spread has declined 44 basis points while the 10YR Treasury Yield has dropped 47 basis points. As a reminder the yield curve flattens as the economy slows with policy and/or liquidity management driving the short-end higher and defensive positioning and/or discounting of lower future growth/inflation driving the long end lower.


Three for the Road



A #SuperTuesday16 Preview with @PotomacResearch & @HedgeyeDJ… @KeithMcCullough



Your decisions reveal your priorities.

Jeff Van Gundy


Kate Spade & Co (KATE) short interest into this morning's print is the highest in 3 years.

The Macro Show Replay | March 1, 2016


Cartoon of the Day: Blast Off!

Cartoon of the Day: Blast Off! - GDP cartoon 02.29.2016


"If the Old Wall wants you to imagine that Friday’s 1% GDP report was a “beat” (when the expectation for the past 2 years has been +3-4% growth), that’s fine," Hedgeye CEO Keith McCullough wrote in this morning's Early Look. "Your 2016 portfolio returns, however, have sided within being long asset allocations that do well when GDP growth slows from 3 to 2 to 1. So start your March off right - short the Financials (XLF) – buy more Utilities (XLU)."

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.


must-see [INTERACTIVE] market tv


You don't want to miss this. Earlier this morning we hosted a special *FREE* edition of The Macro Show with Hedgeye CEO Keith McCullough and Senior Macro analyst Darius Dale. You'll get a front-row distillation of all the key global market and economic developments and how to position yourself accordingly. In addition ... Keith answers viewer questions during our interactive Q&A.

Don't miss out. click below for access.





Washington on Wall Street: Super Tuesday Preview with JT Taylor and Daryl Jones


Potomac Research Group's Chief Political Strategist JT Taylor joins Hedgeye Director of Research Daryl Jones for a Super Tuesday preview. The Republican establishment hopes that Rubio or Cruz can capture some delegates in the face of Donald Trump's seemingly insurmountable leads in nearly every Super Tuesday state. Meanwhile, Hillary Clinton seeks to build on her momentum from a big South Carolina win to effectively seal the deal on the Democratic side.

BREAKING: SEC Investigation, The Valeant Implosion Continues (We Warned You) | $VRX

Takeaway: Our analysts think Valeant Pharmaceuticals' shares still have 70% downside.

BREAKING: SEC Investigation, The Valeant Implosion Continues (We Warned You) | $VRX - Ackman cartoon 10.26.2015


Shares of the drugmaker Valeant Pharmaceuticals (VRX) have tumbled -18% today after it was reported that the company is under investigation by the U.S. Securities and Exchange Commission. Our Healthcare analysts Tom Tobin and Andrew Freedman have long warned about Valeant's unsustainable business model was supported by an acquisition spree that aggressively valued those assets:


“Valeant is operating what we believe is an unsustainable business model of serial acquisitions and underinvestment, fueled by debt, that will continue to lead to deterioration in the ongoing business.” (Hedgeye, 7/2014)


Below we have unlocked our Healthcare team's original research along with a few updates and the most recent research laying out why VRX shares are only worth $20:



Below is a smattering of Freedman's follow up via Twitter: 





BREAKING: SEC Investigation, The Valeant Implosion Continues (We Warned You) | $VRX - Ackman cartoon 11.09.2015

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 80.47%
  • SHORT SIGNALS 78.71%