This Bull Isn't Spanish

This bull is Asian. This bull is Small Cap. This Bull is Short Interest – This bull is a stock picker!

This is a bull shark ripping the underbelly of everything complacent and consensus. The last thing you want to be short out there in these trading waters this morning is a high short interest Chinese internet company like say, Baidu.com (BIDU -trading +13%). Realizing that you’re smarter than everyone else didn’t pay you staying short the US Financials this past week, nor is it going to pay your “fundamental” short Amazon (AMZN) or Qualcomm (QCOM) bets this morning (they’re trading +8% and +10% respectively). If you’re short a trifecta ticket with Chipotle (CMG), Sketchers (SKX), and Ryland (RYL) – you’re a winner!

CMG and SKX are trading down -12% and -13% pre-open, respectively, and yes they have high short interest – but that factor gets wiped aside on alpha day, so be careful out there – some of these bulls are not like the others. I have to give some Obama knuckles to my partners, Brian McGough and Howard Penney, for nailing these two shorts in their portals. Great job, Gentlemen.

I know this has to be a frustrating month for some, if not for many. I’ve been bearish on the market’s “Trend” for 9 months, but I’m having another good month riding this bull “Trade”; lucky me, I guess. Understanding where we go next continues to weigh to the bullish side of an extended “Trade” higher, and as depressing as my notes may have been in months past, it is only too ironic that I am depressing the shorts with these key strokes. This is a complex market system of interconnected factors. They change daily, and they must be respected.

In the last 72 hours we’ve been issued macro facts that are outright bullish. Most of these factors center around deflating an inflation bubble. You can find these facts littered all over the world. They’re fairly straightforward too. So let’s go through a list of 9 bullish factors, for starters:

1. Oil broke my support level of 126.16
2. CRB Commodities Index broke my support level of $428
3. US Dollar recovered from crisis zone, through my resistance level of 72.61
4. US Treasury 10 year yields rallied through my resistance level of 4.05%
5. Brazil raises interest rates overnight to 13%, and remains hawkish
6. US Federal Reserve rhetoric changes to explicitly hawkish after Plosser and Bernanke comments
7. Canadian and Brazilian stock markets continue to break down (Food and Oil inflation proxies)
8. Russian, Norwegian, and Middle Eastern equities (Energy inflation proxies) continue to break down
9. Asian currencies and stock markets strengthen in tandem

The facts have changed, and unless these levels reverse in unison, there is no reason to be short this bull shark. That does not mean I want to buy everything. That certainly does not mean I want to run out and buy US Financials after they have ripped the shorts for a +30% 6 day move. It means, I don’t want to be long commodities (including Gold); and it means I want to be picking stocks, assets, and country’s that fit the macro short squeeze profile. Vietnam reported the 1st of global inflation numbers we will see for July, and it was the 1st sequential deceleration since guess when – October 2007. I am looking for CPI and PPI July inflation reports to decelerate, globally.

China traded up +2.6% overnight to 3053 on the Shanghai Index. As I said yesterday, that’s a contrarian macro “Trade” that I think works. Conversely, a country that’s levered to the Euro pinned up at 1.57, and hostage to their own balance sheet malaise like Spain is, should be avoided like the bubonic plague. Spain reported a whopper of an unemployment number this morning at +10.4% year over year, and Spain’s stock market is trading down -1.1% as a result, taking its cumulative losses from October 2007 to -26%.

This bull is a “Trade” that can run for longer than some “wanna be” short sellers can remain solvent. This bull isn’t Spanish. This bull needs to be understood.

*Full Disclosure: I am long FXI.
KM



Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more