Are You Relaxed?

“Do I live a more relaxed life?”



“Nowadays, I can dash off an email, send it half way around the globe, and receive a reply a minute later. I’ve saved all that trouble and time, but do I live a more relaxed life?”


That was an important question I started to think about the other day while I was reading Yuval Noah Harari’s Best Seller, Sapiens. “We have invented countless time-saving devices that are supposed to make life more relaxed…” (pg 87)


But do they? Maybe it’s just me, but there is absolutely nothing relaxing about watching people being blown up this morning in Brussels and, at the same time, watching others race to tweet and trade macro markets on it “being priced in.” #Sad


Back to the Global Macro Grind


I’m not going to ask you for your time this morning. I’m going to ask you to do this for yourself. Stop what you are racing to reply to via text. Stop being imprisoned by your inbox. And just take some time to breathe and think about what you are doing.


Are You Relaxed? - meditation




If you didn’t just shut everything off and start thinking about where the world’s rates of change is going next, I’ll keep you entertained for the next 5 minutes of your time. Let’s start with a very basic question:


Q: From an economic, profit, and credit cycle perspective, what’s really changed in the last month?


A: The Cycle


Yep. That’s it really. Since I didn’t ask what’s happened to “stocks” (I realize your monthly-reporting-period of manic return chasing matters but that wasn’t what I was asking about), the answer is very obvious. The Cycle continues to slow.


Sure, we’ve seen some episodic hope that components of the most cyclical part of The Cycle (Energy, Commodities, Industrials, etc.) have slowed at a lesser rate.


But post last week’s Chinese and US Industrial Production (IP) data for FEB slowing again (US IP slowed to -1.03% year-over-year), hope is not an intermediate-to-long-term risk management #process.


How about on the latest parts of the cycle?


  1. US CONSUMER – 2-year comp for US Retail Sales slowed (again as real consumption growth peaked in 1H of 2015 – and US Consumer Confidence (after peaking in Q1 of 2015) hit new #LateCycle lows too
  2. HOUSING – post the worst rate of change report for Pending US Home Sales (2 weeks ago), Existing Home Sales for FEB (reported yesterday) dropped -7.1% month-over-month (despite the weather) to -1.4% year-over-year
  3. HEALTHCARE – as pricing, capacity utilization, margins, and relative earnings growth all put in their 2015 peaks, Healthcare stocks (XLV -6.7% YTD) have turned out to be the worst performing sector in the SP500 in 2016


I know. I know. I shouldn’t have mentioned the “stocks.” Sorry about that. I was being too short-term there for a second. For intermediate-to-long-term investors, getting The Cycle (fully loaded – economic, profit, and credit) right is what matters most.


Isn’t it fascinating though that most consensus economists that missed the industrial/cyclical #Recession call altogether are now quite confident about the recovery?


Forget the consumer-cyclicals like Autos and Housing (both of those cycles peaked in OCT 2015) for a second and look at a 1 and 5 year chart of the Industrials (XLI):


  1. The Industrial Stocks (XLI) doubled (up +100%) from their 2011 lows
  2. Then put in a cycle peak (as rate of change of growth peaked) between Q4 2014 and Q1 2015
  3. And effectively crashed from there in expectations terms (XLI -18%) from Q115 to FEB 2016


Then a +15% v-bottom bounce in the last month and everything global demand, energy, charts, etc. is off to the races again? Talk about some super short-term #HPAD (hedgie performance anxiety disorder) there. Wow.


Since I don’t have to make excuses for being the short-term chart chaser (I made Industrials one of our favorite S&P Sector Shorts in Q1 of 2015 #timestamped) and I’ve preferred the Financials (XLF) as a favorite short in Q1 of 2016, I’m thinking:


A) I might need to make Industrials (XLI) a “fav short” again for Q2 2016…

B) Or should I be thinking it’s more obvious to short Housing (ITB) from here?


Since my highest conviction call is The Cycle (slowing), this is going to be a tough one for me. I really like the Financials (XLF) on the short side, so it’s going to be hard to take that off for Industrials or Housing (or Utilities and Gold off the long side).


But I do believe that my being less consensus-manic in the last 6-18 months has bought me some serious time to think this through. So I’ll relax and get back to you on that, maybe in a few weeks.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 1.80-1.98% (bearish)

RUT 1055-1109
EUR/USD 1.09-1.13
Oil (WTI) 36.08-42.53

Gold 1 (bullish)

Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Are You Relaxed? - 03.22.16 Chart

Volume, Housing and Europe

Client Talking Points


The relationship between volume and volatility (relative to price) remains core to how we model trending risks. As they chased the charts to another lower-high (price) yesterday (SPX), total U.S. Equity Volume (including dark pool) was -13% vs. its 1 month average as front month equity VIX held the 12-14 level it held during JUL and OCT.


Another bad U.S. #HousingSlowing data point yesterday (Existing Home Sales -7.1% month-over-month and -1.4% year-over-year) keeps what we liked most at this time last year (Housing, Healthcare, Consumer – all #LateCycle consumption + employment peaks) on the short side this year. Housing stocks (ITB) are +20% “off the lows” from FEB with the data only getting worse.


Disgusting act of terror aside, it’s important to contextualize where European Equities were ahead of this news – DAX, MIB Index, and IBEX all just failed @Hedgeye TREND resistance (again) yesterday. Italy was -2% last week to -13% year-to-date, tried the bounce yesterday and is down -1.6% this morning as the Draghi #BeliefSystem breaks down.


*Tune into The Macro Show with Housing and U.S. Macro analyst Christian Drake at 9:00AM ET - CLICK HERE

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

Utilities (XLU) hasn’t bounced as much as leveraged , high-beta resource names, but the outperformance is greatly divergent vs. both the market, and our preferred sector short in financials (XLU +12.3% YTD, S&P -0.3% YTD, XLF -4.6% YTD).


General Mills (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 during turbulent times; high market cap, low beta and liquidity. Case in point, GIS is up 7% year-to-date, versus essentially flat for the S&P 500 in 2016. We'll have an update next week after GIS reports earnings.


Long-Term Treasuries (TLT) finished +1.9% on the week. Aside from Mr. Market, the Fed downwardly revised expectations (the common lag) on Wednesday:

  • The median 2016 GDP forecast revised to +2.2% vs. +2.4% in December
  • The median 2016 PCE Inflation forecast revised to +1.2% vs. +1.6% in December
  • Median Federal Funds end-2016 rate forecast revised to 0.9% vs. +1.4% in December

From a GROWTH, INFLATION, POLICY perspective, it’s lower for longer on growth and inflation and a more dovish Fed.

Three for the Road


VIDEO (2mins) Joke of the Year? Fed Data Dependence



The difference between the impossible and the possible lies in a man's determination.

Tommy Lasorda


Yesterday, Apple announced that 93% of its facilities run on renewable energy, including 100% of its facilities in the U.S., China, and 21 other countries.

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LNKD | Tracker Update (Talent Solutions)

Takeaway: Our tracker suggests that LNKD isn't seeing the recession that its guidance is calling for. However, we remain on the sidelines for now


  1. SEASONAL BUT MARKED IMPROVEMENT: Our LNKD JOLTS tracker improved sequentially into the first month of 1Q16, which is expected given seasonality in LNKD's selling environment.  But as we've mentioned previously, 4Q15/1Q16 is more about magnitude than direction; the former is fairly strong QTD.  As a reminder, our LNKD Talent Solutions TAM analysis suggests that the bulk of that TAM is in the upsell opportunity (ARPA) vs. new account volume.  Note that LNKD will no longer be reporting its Talent Solution customer counts, so we will not be able to calculate ARPA anymore (but that doesn't mean we can't use the tracker).   
  2. BUT DEAD MONEY FOR NOW: LNKD's 2016 guidance is basically implying a recession since it essentially calls for declining ARPA and/or net new LCS account growth.  Our tracker update suggests LNKD wasn't seeing the recession that its guidance is calling for when it issued it.  We expect a beat/raise on the 1Q16 release is even more likely now, but we're not sure the street will chase the print.  We suspect it will take more than one positive earnings release to regain the trust of the street after mgmt tattooed its holders on the 4Q15 release (especially after deciding to pull its LCS account metric).  We remain on the sideline for now.   

See the note below for additional detail on LNKD's 4Q15 release.  Let us know if you would like to discuss further.  


Hesham Shaaban, CFA




LNKD | Tracker Update (Talent Solutions) - LNKD   ARPA vs. JOLTS 1Q16  Jan

LNKD | Tracker Update (Talent Solutions) - LNKD   TS 2016 Guid Scen 1


LNKD: Guidance = Recession
02/05/16 09:50 AM EST
[click here]


Cartoon of the Day: Nuclear Decay

Cartoon of the Day: Nuclear Decay - radio activist cartoon 03.21.2016


Shares of embattled Valeant Pharmaceuticals (VRX) are down 89% since July much to the chagrin of (radio)activist investor Bill Ackman, whose firm Pershing Square Capital owns a 9% stake.




Hedgeye and the Potomac Research Group are proud to present our first annual Spring Health Policy Conference.  This special, invite-only event will be held at The Benjamin Hotel in New York City on Monday, April 4th, 2016 from 9:30am - 4:00pm.



Please note that space is limited.  RSVP to  to attend.


Our lineup of health policy experts will offer an insider's view on their policy outlook and how as practitioners policy is influencing their decision making process.


This exclusive event will be moderated by Hedgeye Healthcare sector head Tom Tobin and feature in-depth presentations and panel discussions.  There will be ample opportunity for interaction throughout the day.







CHIP KAHN - Hospital Industry Outlook


Chip Kahn, President and CEO of the Federation of American Hospitals, will shape the regulatory environment for hospitals heading into the Presidential election.  Mr. Kahn’s extensive health policy expertise and lengthy Capitol Hill experience make him one of Washington, D.C.’s most effect and accomplished trade association executives.


NEIL HOWE - Demographic Outlook & Healthcare Reform


A historian, economist, and demographer, Neil 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.


ANDREW MCKECHNIE - Health Reform Under Republican Administration


Andrew McKechnie, former policy advisor to the Senate Finance Committee, will discuss Republican efforts to repeal the Affordable Care Act and what the law may look like under a Republican controlled White House.  Mr. McKechnie was a key negotiator in bipartisan efforts to pass health reform in 2009, with an area of expertise in Republican politics and strategy.


YVETTE FONTENOT - Health Reform Under Democratic Administration


Yvette Fontenot is a partner at Avenue Solutions, a democratic government affairs firm that offers strategicadvice, policy development, and counsel in federal legislative and executive areas. She previously held theposition of Deputy Director of the Office of Health reform at the Department of Health and Human Services(HHS) and has helped to draft and implement the Affordable Care Act (ACA).


ROBERT LASZEWSKI - Managing Transition to Value Based Payment Models


Robert Laszewski, president of Health Policy and Strategy Associates (HPSA), will address the issues facing key stakeholders (Hospitals, MCOs, Physicians and Pharma) as we the transition to value based payment models focused on delivering better quality at a lower cost.  HPSA is a policy and marketplace consulting firm specializing in assisting its clients through the significant health policy and market change afoot.


DR. BABER GHAURI - Policy in Practice


Dr. Ghauri, Interim East Division CMIO for Trinity Health, will discuss how policy influences the decision making process of the second largest nonprofit health system in the nation.  Dr. Ghauri’s has a deep background in medical informatics and will also discuss how Trinity is using technology to pursue quality and value initiatives.


DR. RICHARD IORIO - Bundled Payments (CCJR)


Richard Iorio, MD, is the William and Susan Jaffe Professor of Orthopaedic Surgery at New York University Langone Medical Center Hospital for Joint Diseases and Chief of Adult Reconstruction at NYU Langone HJD.  Dr. Iorio was involved in the Medicare pilot program that led to expansion of the of bundled payment initiative for total knee replacements.

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