• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Here


    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

“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