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One Of Our Best Calls YTD


In this brief excerpt from The Macro Show today, Hedgeye Senior Macro analyst Darius Dale discusses our macro team’s call to remove the Industrials and Energy sector as top short ideas while adding short Financials.

Cartoon of the Day: Reality Check

Cartoon of the Day: Reality Check - Math   Myth cartoon 03.30.2016


"Since Q4 ended on December 31st (they haven’t been able to centrally plan a change in the calendar dates yet), has anyone considered why we just saw the worst 6 week start to a stock market year ever? Yep, it’s the Profit vs. Credit Cycle (within the Economic Cycle), stupid," Hedgeye CEO Keith McCullough wrote in a recent Early Look.

The Gloves Come Off For GOP & Dem Presidential Hopefuls

Below is a brief excerpt from Potomac Research Group Chief Political Strategist JT Taylor's Morning Bullets sent to institutional clients each morning.



The Gloves Come Off For GOP & Dem Presidential Hopefuls - trump pic


Our claim that endorsements matter little will be tested next Tuesday in WI, where political and media establishment figures are lining up to endorse candidates who are not Donald Trump. WI Gov. Scott Walker endorsed Ted Cruz yesterday, while former WI Gov. Tommy Thompson is backing John Kasich. Most local conservative radio hosts are virulently anti-Trump, and anti-Trump super PACs have made more ad-buys than anyone else in the state. These efforts have had little success to date, and could just be another example of the party elite out of step with the base.



The Gloves Come Off For GOP & Dem Presidential Hopefuls - boxing gloves


Bernie Sanders is slowly ditching the nice guy persona as his victories in HI, WA and AK make him an irksome opponent to Hillary Clinton. This is the same man who proclaimed that he didn't follow polling or use negative attacks, but is singing a different tune as he sets his sights on WI. Sanders and Clinton are currently neck-and-neck in the state that shares its borders with MI and MN (both won by Sanders), but has a demographic similar to OH (won by Clinton). Sanders' strategy is to pummel Clinton on her ties to Wall Street, fracking, campaign finance, and Iraq to keep his winning streak - and hope - alive. 



With WI looming next week, Clinton is already turning her attention to her home state of NY with the hope that it will provide her with a decisive win over Sanders - boosting enthusiasm in her party, and securing her enough delegates to put her in a position to defeat Sanders well before CA. Sanders' strategy is to target the same districts won by Gov. Andrew Cuomo's last primary challenger (whose platform was similar to Sanders') and, although he's a Brooklynite, losing the state will not be a shock, but he wants prevent Clinton from taking home the lion's share of the delegates.   His focus will be on tightening the margins in the Empire State and in PA - where he is closer to Clinton in the polls. 

investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

Millennials Gone Mild: The Investing Implications


In this complimentary edition of “About Everything,” Hedgeye Demography Sector Head Neil Howe discusses the sweeping behavioral changes of Millennials (“Generation Yawn”) compared to prior generations, and spells out what it all means for investors and companies around the globe.

What Investors Missed Hanging On Yellen's Every Word

Takeaway: Stick with what has worked all year: Gold, Utilities, Long Bonds (and short the Fed's forecast.)

What Investors Missed Hanging On Yellen's Every Word - Yellen cartoon 03.17.2015


Omnipotent (dovish?) Fed head Janet Yellen yesterday said the opposite of her hawkish regional Fed talking heads who made the Old Wall media rounds last week. So, naturally, USD/Rates smoked, reflation rallies!


However, what really matters is not Janet Yellen's every last word but economic fundamentals, which continue to slow. According to Hedgeye CEO Keith McCullough:


"As opposed to v-bottoms on the SPY short-side, the long side has been easy YTD – as #GrowthSlows, Fed Easing has pounded the 10yr down to 1.81% this morning (2yr just went from 0.90% to 0.77% in less than a week on Fed Head confusion) and Utilities (XLU) continued to lead the way on yesterday’s Yellen Ramp, closing up another +1.5% = +14.3% YTD XLU."



How about those sectors? Take a look:


What Investors Missed Hanging On Yellen's Every Word - sectors macro


There's more...


"Heck, why buy Utes on Yellen turn-tailing dovish when you can go right to the vein and buy Gold? It was +3% yesterday (vs. Financials barely up at +0.18% XLF #terrible) to +17% YTD leading most things in absolute return space which I highly doubt will be trumpeted more than “the S&P is up” (+0.5% YTD) all day today (into month-end markups)"



So here's what's working:


Fork-Tongued Fed Needs To Get Its Story Straight

Takeaway: Hawkish? Dovish? Fed needs to get it together.

Fork-Tongued Fed Needs To Get Its Story Straight - Fed cartoon 02.23.2015




As Hedgeye CEO Keith McCullough points out in this morning's Early Look:


"Following the Fed’s “transparent communication process” can really trip up a Fed follower:

  1. Two weeks ago, Yellen cuts via taking out the rate hikes = #Dovish
  2. Then, for all of last week, her Regional Talking Fed Heads talked up “April and June” rate hikes = #Hawkish
  3. Then she pivots incrementally dovish vs. her teammates’ hawkishness yesterday?" 


Here's a look at some recent (i.e. last week!) HAWKISH regional Fed head statements:

  • Atlanta Fed head Dennis Lockhart said U.S. economic growth has "sufficient momentum evidenced by the economic data to justify a further step at one of the coming meetings, possibly as early as the meeting scheduled for end of April." (3/21)
  • Philadelphia Fed head Patrick Harker said "I think we need to get on with... This economy is really quite resilient to a lot of the headwinds (including the strong dollar).... I am not a two (rate) rise person... I'd rather see [more hikes this year]." (3/22)
  • San Francisco Fed head John Williams said the U.S. economy is “looking great” and the Fed would raise rates faster were it not for global factors. “All else equal, assuming everything else is basically the same and the data flow continues the way I hope and expect, then April or June would definitely be potential times to have an increase in interest rates." (3/21)
  • St. Louis Fed head James Bullard said a case could be made for rate hike in April, sounding a hawkish tone. "The odds that we will fall somewhat behind the curve have increased modestly... We are going to get some [inflation] overshooting here in the relatively near term that might cause the committee to have to raise rates more rapidly later on." (3/23)
  • Chicago Fed head Charles Evans said U.S. economic fundamentals are "really quite good," citing improving manufacturing activity. (3/22)


Okay... So how exactly do we reconcile these statements with Janet Yellen yesterday saying "caution" about further rate hikes is "especially warranted"?


Fork-Tongued Fed Needs To Get Its Story Straight - Fed grasping cartoon 01.14.2015


The answer might come from the Atlanta Fed's own GDP forecast. The hatchet has been taken to that measure in the past month, cut from 2.7% in February to 0.6% earlier this week.


Holy smokes.


Here's a key snippet from Yellen's prepared remarks yesterday:


"On balance, overall employment has continued to grow at a solid pace so far this year, in part because domestic household spending has been sufficiently strong to offset the drag coming from abroad. Looking forward however, we have to take into account the potential fallout from recent global economic and financial developments, which have been marked by bouts of turbulence since the turn of the year.


For a time, equity prices were down sharply, oil traded at less than $30 per barrel, and many currencies were depreciating against the dollar. Although prices in these markets have since largely returned to where they stood at the start of the year, in other respects economic and financial conditions remain less favorable than they did back at the time of the December FOMC meeting.


In particular, foreign economic growth now seems likely to be weaker this year than previously expected, and earnings expectations have declined. By themselves, these developments would tend to restrain U.S. economic activity. But those effects have been at least partially offset by downward revisions to market expectations for the federal funds rate that in turn have put downward pressure on longer-term interest rates, including mortgage rates, thereby helping to support spending.


For these reasons, I anticipate that the overall fallout for the U.S. economy from global market developments since the start of the year will most likely be limited, although this assessment is subject to considerable uncertainty."



Yellen also said deflationary pressures on oil prices were "transitory" and the headwind of a stronger dollar would "gradually dissipate." 


In other words, Yellen intimates, no worries. But hang on...


  • Yellen mentioned the word "risk" 19 times during her speech yesterday
  • Uncertainty was referenced 5 times (the title of the speech, "The Outlook, Uncertainty, and Monetary Policy"
  • Or how about this acknowledgement of the risks embedded in the Fed's overly-optimistic forecast: "If such downside risks to the outlook were to materialize, they would likely slow U.S. economic activity... For these reasons, the FOMC must watch carefully for signs that the economy may be evolving in unexpected ways."


As we have pointed out before, the phrase "downside risk" is Fedspeak for "I think I probably should lower my forecast, but I'm not sure yet."


Whatever the Fed heads say, our #LowerForLonger (rates) and #SlowerForLonger (growth) calls continue to carry the day. 


Fork-Tongued Fed Needs To Get Its Story Straight - Slower for longer cartoon 09.25.2015

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