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Two Excellent Investing Ideas (On the House)

Two Excellent Investing Ideas (On the House) - bubble cartoon 11.02.2015

Looking for some investing ideas?

 

Below is one SHORT and one LONG idea with brief analysis from Hedgeye CEO Keith McCullough from a note sent to subscribers this morning. (If you like what you see, you'll love our suite of investing products.)

 

"... Post the short squeeze “off the lows” the Russell’s draw-down is still -18.6% since July – if you haven’t been short small/mid cap, junk, illiquidity, high beta, high short interest, etc., here’s another bite at a big apple of alpha. There is immediate-term downside in the Russell to 991 (short/sell lower-highs, cover lower)."

 

Two Excellent Investing Ideas (On the House) - russell 2000 3 2

 

"...To end on a bullish note, Donald Trump would characterize today’s excellent buying opportunity in the Long Bond as very very super huge with the UST 10YR at 1.84% (on a whiff of a rate of change slow-down jobs report on Friday, our risk range implies 20 basis points of immediate-term downside to 1.64%); buy TLT, ZROZ, EDV, XLU, etc."

 

Two Excellent Investing Ideas (On the House) - spx v tlt

 

BOTTOM LINE: We are bullish on Long Bonds (via TLT) and bearish on the Russell 2000 (via IWM).


Call Today | Get Ready for the Demographic "New Normal" in Housing

Takeaway: We'll be hosting a call with Neil Howe Today at 11am ET to discuss the demographic outlook for US Housing.

Call Today | Get Ready for the Demographic "New Normal" in Housing - housing cartoon 03.02.2016

 

Neil Howe recently joined Hedgeye as Sector Head, Demographics. He is an accomplished author on the topics of demographics, generational trends and economics. Neil is an often requested speaker and consultant to Corporate America. Most famously, Neil coined the term “Millennial Generation”. He is also a recognized authority on global aging, long-term fiscal policy, and migration.

 

We'll be hosting a call with Neil to discuss the Demographic outlook for Housing in America TODAY at 11am ET.

 

The call will delve into the following: 

 

KEY TOPICS

  • Why, long-term, housing will never return to its pre-2007 glory days
  • What's pushing the renaissance in extended family living--and what it means for home demand
  • Why Boomers are aging in place--and Millennial college grads are moving to urban centers
  • How long the home remodeling boom will last (hint: for a long time)
  • Why Millennials and many Xers are moving from buying to renting
  • Where I think Millennials home buyers will gravitate next

 

CALL INFORMATION

Toll Free Number:

Toll Number:

UK: 0

Confirmation Number: 13630931

Materials Link: CLICK HERE (presentation will be made available approximately 1-hour before the call)

Video Access: CLICK HERE (to watch this presentation live)

 

 

ABOUT NEIL HOWE

Hedgeye Managing Director & Demography Sector Head

Neil is a renowned authority on generations and social change in America. An acclaimed author and speaker, he is the nation’s leading thinker on today’s generations—who they are, what motivates them, and how they will shape America’s future.

 

Howe is founder and president of the consulting firm LifeCourse Associates, where he develops and implements cutting-edge research, analysis, and consulting services to help clients understand how generations impact marketing, workforce issues, and strategic planning. LifeCourse has served hundreds of corporate, nonprofit, and government clients.

 

A historian, economist, and demographer, Howe is also a recognized authority on global aging, long-term fiscal policy, and migration. He is a senior associate to the Center for Strategic and International Studies (CSIS) in Washington, D.C., where he helps direct the CSIS Global Aging Initiative.

 

Howe is a bestselling author who has written over a dozen books on generations, demographic change, and fiscal policy, many of them with William Strauss. Howe and Strauss’ first book, Generations (1991) is a history of America told as a sequence of generational biographies. Generations, said Newsweek, is “a provocative, erudite, and engaging analysis of the rhythms of American life.” Vice President Al Gore called it “the most stimulating book on American history that I have ever read” and sent a copy to every member of Congress. Newt Gingrich called it “an intellectual tour de force.” Of their book, The Fourth Turning (1997), Dan Yankelovich said, “Immensely stimulating…We will never be able to think about history in the same way.” The Boston Globe wrote, “If Howe and Strauss are right, they will take their place among the great American prophets.”

 

Howe and Strauss originally coined the term “Millennial Generation” in 1991, and wrote the pioneering book on this generation, Millennials Rising, in 2000. Neil has since released several application books on Millennials—including a Recruiting Millennials Handbook for the United States Army (2001), Millennials Go To College (2003, 2007), Millennials and the Pop Culture (2005), Millennials and K-12 Schools (2008), and Millennials in the Workplace (2010). Howe’s work on the Millennial Generation has been featured frequently in the media, including USA Today, CNN, the New York Times, and CBS’ 60 Minutes.

 

Previously, with Peter G. Peterson, Howe coauthored On Borrowed Time (1989; reissued 2004), a pioneering call for budgetary reform. He coauthors numerous studies for CSIS (including the Global Aging Initiative’s Aging Vulnerability Index and The Graying of the Middle Kingdom: The Economics and Demographics of Retirement Policy in China). In 2008, he co-authored The Graying of the Great Powers with Richard Jackson.

 

Howe grew up in California and currently resides in Great Falls, Virginia, close to Washington, DC.  He received his B.A. at U.C. Berkeley, studied abroad in France and Germany, and later earned graduate degrees in economics (M.A., 1978) and history (M.Phil., 1979) from Yale University.

 

 

Joshua Steiner, CFA

 

Christian B. Drake


CHART OF THE DAY | McCullough: 'How To Be Positioned On The Open Today'

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.

 

"... I have some very specific ways to execute winning the next speed round of Monopoly. On the open today, I want you to position your hard earned net worth and liquidity as follows:

  1. BUY Long-term US Treasury Bonds (TLT) ahead of Friday’s #LateCycle jobs report
  2. SHORT the SP500 (SPY) anywhere from here to 1978 for immediate-term downside to 1889
  3. SHORT the Russell 2000 (IWM) anywhere from here to 1070 for immediate-term downside to 991..."

CHART OF THE DAY | McCullough: 'How To Be Positioned On The Open Today' - 03.02.16 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.

Super Huge And Big

“This is going to be super huge and big.”

-Donald Trump

 

Oh, absolutely. We’re talking massively super extra huge, “folks.” The selling opportunity in the US stock market (and buying opportunity in The Long Bond) right now is going to make your YTD returns very excellent and very great again.

 

Super Huge And Big - trump point

 

Back to the Global Macro Grind

 

It’s a good thing there’s no leadership risk developing in the Oval Office. Imagine that was priced into the market? Wow. That might make our #Deflation and #GrowthSlowing risks to macro markets look tame.

 

To review the non-politicized bear case for US Small/Mid Cap, High Beta, and Highly Levered Stocks (i.e. the same super extra very huge bull case for being long Munis, Long-Term Treasuries, and Utilities), it’s the cycle, stupid:

 

  1. US Economic Cycle SLOWING
  2. US Profit Cycle SLOWING
  3. US Credit Cycle ACCELERATING

 

Surely, a Trump or Hillary Presidency would reverse all 3 of those things… after they take the cycle through what Trump calls a “healthy” bankruptcy process, or centrally-planned “wage hike” restructuring?

 

No, very much like the Fed and the Christie-pooch lap dogs at the US Treasury, Mr. Super Huge Big Time was not able to reverse the gravity of the profit and credit cycle in Atlantic City… and he probably won’t be able to do that in Washington, D.C. either.

 

Yeah, I heard. He’s the “anti-establishment” vote amongst two broken brands (the Republican and Democrat Baby Boomer Parties).

 

What you may not have heard is that I’m starting a new party – the anti-establishment Free Market Liberty party. We’re going to be in charge of picking up this mess after all the levered players at the Monopoly table have lost all their money.

 

To review how to survive this stage of the economic, profit, and credit cycle:

 

  1. Raise Cash (don’t run with massive gross long leverage and net long equity exposures)
  2. Buy long-term liquid fixed income securities (short high yield and junk)
  3. At the top-end of the risk range on bear market bounces, short consensus with impunity

 

I know, I know. It’s working. The People hear us on this. Old Wall Street doesn’t. But wow, this is the beginning of something super excellent and, believe me, very very huge.

 

Unlike Mr. Big Time, I have some very specific ways to execute winning the next speed round of Monopoly. On the open today, I want you to position your hard earned net worth and liquidity as follows:

 

  1. BUY Long-term US Treasury Bonds (TLT) ahead of Friday’s #LateCycle jobs report
  2. SHORT the SP500 (SPY) anywhere from here to 1978 for immediate-term downside to 1889
  3. SHORT the Russell 2000 (IWM) anywhere from here to 1070 for immediate-term downside to 991
  4. SHORT the Nasdaq (QQQ) anywhere from here to 4699 for immediate-term downside to 4440
  5. SHORT the Nikkei 225 (or DXJ and its ETF manufacturer WETF) for 1,000 points of downside
  6. SHORT the DAX (Germany) ahead of Draghi walking on water next week (1,000 points of downside)

 

Oh yes, definitely and absolutely. I have a friend who is an excavator… and he told me that my short ideas are going to make the bulls feel like they got hit by a Komatsu. Super huge ideas. Very big.

 

To be very very clear, don’t believe the NY Times. “I have a bigger heart than anybody.” And I really don’t want all of my US, European, and Japanese shorts to impose the pain on PMs that they will. But “America is going to hell” if I don’t short these things.

 

“Believe me, I know a lot about money.” And if you really really want America to be great again (or at least be one of the people who has all the money before it goes back into the Monopoly box), here are some other things you can buy against those shorts:

 

  1. US Equity Volatility (buy your spouse some VIX call options for the next move to 25-30)
  2. US Dollars (buy those only when they are on fire sale closer to 94 on the US Dollar Index)
  3. Gold (take delivery, but have the patience to buy some closer to $1150-1175)

 

I know, I know. It’s working. This is why the establishment hasn’t agreed with me on the cycle for the last 6-8 months. But look at the polls. As the super huge and great Benjamin Graham taught America:

 

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” So if you’re going to vote for my new party and consistent positioning, vote big. This ongoing crash in stock markets worldwide is going to be very very huge and big.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.64-1.85%

SPX 1
RUT

VIX 17.11-24.28
EUR/USD 1.08-1.12
Oil (WTI) 28.56-35.01

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Super Huge And Big - 03.02.16 chart


Short Low, Cover High? No Thanks

Client Talking Points

EURO

Despite terrible economic data this week (or is that what European Equities really need, and a commensurate Down Euro?), the EUR/USD is having a hard time breaking down through the low-end of our current $1.08-1.12 risk range. We believe that’s why European Equities stop going up (again) here – if Mario Draghi doesn’t walk on water next week, watch out below.

RUSSELL 2000

Post the short squeeze “off the lows” the Russell’s draw-down is still -18.6% since July – if you haven’t been short small/mid cap, junk, illiquidity, high beta, high short interest, etc., here’s another bite at a big apple of alpha. There is immediate-term downside in the Russell to 991 (short/sell lower-highs, cover lower).

UST 10YR

To end on a bullish note, Donald Trump would characterize today’s excellent buying opportunity in the Long Bond as very very super huge with the UST 10YR at 1.84% (on a whiff of a rate of change slow-down jobs report on Friday, our risk range implies 20 basis points of immediate-term downside to 1.64%); buy TLT, ZROZ, EDV, XLU, etc.

 

*Tune into The Macro Show with Hedgeye Macro and Housing Analyst Christian Drake live in the studio at 9:00AM ET - CLICK HERE

Asset Allocation

CASH 66% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 2%
FIXED INCOME 26% INTL CURRENCIES 6%

Top Long Ideas

Company Ticker Sector Duration
XLU

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
GIS

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.

TLT

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

TWEET OF THE DAY

$CMG has competitive issues too! The meat you eat is more likely to be antibiotic-free this year http://www.huffingtonpost.com/entry/antibiotic-free-meat-subway-perdue-tyson_us_56d49d09e4b0871f60ec465c

@HedgeyeHWP

QUOTE OF THE DAY

The prettier the garden, the dirtier the hands of the gardener.    

B.E. Barnes                                               

STAT OF THE DAY

Today in 1797, The Bank of England issued the 1st one and two Pound banknotes.


The Macro Show Replay | March 2, 2016

CLICK HERE to view the asscoaited slides.

An audio-only replay is available below:

 


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.

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