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[UNLOCKED] Early Look: The Taming of Profits

Editor's Note: The Early Look below was written by Hedgeye CEO Keith McCullough one week ago. It crystallizes many of our current thoughts about the precarious macro setup and why we think U.S. equities are in trouble. Click here to get it delivered in your inbox weekday mornings.

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“No profit grows where no pleasure is taken.”

-William Shakespeare

 

And, generally speaking, no multiple expansion grows when there’s no corporate profit growth. Rather than The Taming of the Shrew (i.e. where that Shakespeare quote comes from), USA is seeing The Taming of Profits.

 

No, I’m not talking about the taming of US stock market profits and/or returns (i.e. the ones that were negative in 2015 and mostly negative for 2016 YTD) – I’m simply talking about US Corporate Profits, which were reported to have remained in #Recession on Friday.

 

No worries. We’ll probably be the only ones on Wall St. writing about it this morning. If only the bulls of the 2015 peak warned you that Q415 corporate profits would slow another -540 basis points sequentially (vs. Q3 when they first went negative) to -10.5% year-over-year.

 

[UNLOCKED] Early Look: The Taming of Profits - recession cartoon 02.22.2016

 

Back to the Global Macro Grind

 

As Darius Dale wrote to our Institutional clients on Friday, you have to go all the way back to the depths of the 2008 Financial Crisis (Q408) to find a worse year-over-year decline in US Corporate Profits.

 

“More importantly, Q4 marked the 2nd consecutive quarter of declining corporate profit growth… such occurrences have been proceeded by stock market crashes in the subsequent year for at least the past 30 years (5 occurrences).”

 

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.

 

Ok. If you’re not stupid, but really super smart and still blaming “the algos and risk parity funds” for the AUG-SEP and DEC-FEB US stock market declines, but giving them 0% credit for the JUL, OCT, and MAR decelerating volume bounces… all good, Old Wall broheem, all good.

 

Many who missed the economic cycle slowing from its peak (and the commensurate profit #slowing and credit cycles that always come along with such a rate of change move) will blame the US Dollar for that.

 

They, of course, wouldn’t have blamed Ben Bernanke devaluing the US Dollar to a 40 year low for the all-time high in SP500 Earnings (2015) though. That would be as ridiculous as blaming the machines and corporate buy-backs for market up days.

 

Last week the US Dollar came back, and the “reflation” trade didn’t like that. With the US Dollar Index +1.2% on the week:

 

  1. The Euro (vs. USD) fell -0.9% on the week to +2.8% YTD
  2. The Yen (vs. USD) fell -1.4% on the week to +6.3% YTD
  3. The Canadian Dollar (vs. USD) fell -2.0% on the week to +4.3% YTD
  4. Commodities (CRB Index) fell -2.4% on the week to -2.3% YTD
  5. Oil (WTI) fell -4.1% on the week to -1.3% YTD
  6. Gold fell -2.5% on the week to +15.3% YTD

 

Yeah, I know. Those 5 things are just the things that have immediate-term inverse correlations of 79-99% vs. the US Dollar, but there’s this other big thing called the SP500 that now has an immediate-term (3-week) inverse correlation of -0.80 vs. USD too.

 

Imagine that. Imagine the machines stopped chasing the hope that the Fed fades on their rate hike plan, the US dollar gets devalued (again), and all of America keeps arguing about the “inequality” gap having nothing to do with Fed Dollar Policy?

 

You see, when you devalue the purchasing power of a human being:

 

A) Almost everything they need to buy to survive goes up in price as the value of their currency falls

B) A small % of human beings (i.e. us) get paid if they own the asset prices we are “reflating”

 

And if you’re not a human being (i.e. you’re a US corporation) and your profits are falling, all you have to do is lever the company up with “cheap” US debt, buy back the stock with other people’s money, lower the share count, and pay yourself on non-GAAP earnings per share.

 

#America

 

While small/mid cap US Equities reverted to their bear market mean last week (Russell 2000 down -2.0% on the week and -16.7% since US Corporate Profits peaked in Q2 of 2015), so did a few other US Equity Market Style Factors that had had a big 1-month bounce:

 

  1. High Beta stocks were -2.0% on the week
  2. High Leverage (Debt/EBITDA) stocks were -1.9% on the week
  3. High Short Interest stocks were -1.7% on the week

*Mean performance of Top Quintile vs. Bottom Quintile (SP500 companies)

 

At the same time, Consensus Macro positioning remained what most US stock market bulls would have to admit they want/need from here (Down Dollar => Up Gold, Commodities, and Oil):

 

  1. Net LONG position in USD (CFTC futures/options contracts) was -2.16x standard deviations vs. its TTM average
  2. Net LONG positions in Gold and Oil held 1yr z-scores of +2.45x and +1.33x, respectively

 

In other words, in the face of both the economy and profits slowing, Wall St. wants to go back to that ole story of Burning The Buck, I guess. It’s sad and it probably won’t work… but, as Shakespeare went on to say about profits and pleasures, “study what you most affect.”

 

Our immediate-term Global Macro Risk Ranges are now:

 

SPX 1983-2061
RUT 1060-1107
USD 94.68-97.01
Oil (WTI) 36.06-42.91

Gold 1208-1275

 

Best of luck out there this week,

KM

 

Keith R. McCullough
Chief Executive Officer

 

[UNLOCKED] Early Look: The Taming of Profits - 3 28 Profits Down  Stocks Down Slide 39


Wavering Fed Faith: Will U.S. Follow (Crashing) Japan & Europe?

Takeaway: The central planning #BeliefSystem is breaking down.

Following the worst U.S. stock market decline to start a year (ever), manic market myopia has set in among investors overweight advice of domestic permabull storytellers. They're missing criticial context in addition to a significant risk developing with respect to wavering faith in the global central bankers. 

Wavering Fed Faith: Will U.S. Follow (Crashing) Japan & Europe? - Central banker cartoon 03.03.2015

 

For the record, outside the recent Fed-stoked rally in U.S. equities, European and Asian markets remain deeply troubled as the central planning #BeliefSystem (in the ECB and BOJ) continues to break down.

 

Here's Asian market analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers this morning: 

 

"The yen up small +0.2% vs USD was enough to keep the Nikkei from bouncing overnight; Nikkei 225 closed down another -0.3% taking its crash from the July 2015 high to -22.8% and -15.4% YTD (China and Hong Kong closed today)"

 

Wavering Fed Faith: Will U.S. Follow (Crashing) Japan & Europe? - nikkei 52 wk

 

Looking at Europe...

 

"Post a dreadful producer price report of -4.2% y/y for the Eurozone this am the ECB’s Praet is saying they’ll “continue to act forcefully” (to try to tone down Euro Up vs Yellen’s Dollar Down move) so let’s see how European stocks react to this as they were down (again) last week with Italy’s MIB Index -2.1% w/w to -17.0% YTD."

 

Wavering Fed Faith: Will U.S. Follow (Crashing) Japan & Europe? - european equities

 

So ... what happens when the Fed (like its central-planning brethren abroad) loses all macro market credibility and the U.S. economy continues to deteriorate? If Europe and Japan are any indication, the outlook isn't good.

 

more to be revealed.


FL, DKS, HIBB, NKE | 9yr Nike Tailwind Rolling Off

Takeaway: Nike penetration peaking in traditional wholesale. Nine year industry tailwind rolling off as Nike changes the distribution paradigm.

Here's some additional context on the NKE/US Wholesale relationship.

 

Three of the four biggest public Nike distributors have released 10ks to date, and the Nike growth trends (measured by Nike as a % of purchases) have shown signs of a top. The headline, of course, is the deceleration of Nike sales within Foot Locker from 73% to 72% in 2015 (for a more detailed overview of our thoughts see our full note: FL | Nike Found Its Ceiling). But, just as important is the measured Nike growth within HIBB, up 180bps YY vs. 340bps in both 2014 and 2013, and DKS up just 100bps despite a renewed emphasis on footwear and additional floor space allocated to apparel from underperforming categories like hunt and golf. Nothing that any of these retail partners sells drives more traffic and boosts ASP more than something with a Swoosh on it. Unfortunatley for Nike’s partners, incremental Swoosh growth is coming from Nike direct putting an end to the nine year tailwind experienced by the industry.

FL, DKS, HIBB, NKE | 9yr Nike Tailwind Rolling Off  - 4 4 2016 nike   fl dks hibb

 

The critical point to understand when examining these relationships is how Nike accelerated penetration in its wholesale accounts over the past nine years while it built up its distribution network, on-premise manufacturing capability (i.e. you go to a Nike store, build a shoe and it is made before your eyes), and ability to ship single pairs efficiently to consumers rather than a containerload of 5,000 units to wholesalers. We’d argue that Nike funded growth in the DTC platform by way of outsized (and unsustainable) growth at its wholesalers.

 

So let’s fast-forward to the present… we’d argue that Nike is largely penetrated in virtually all its wholesale doors in the US. We’re seeing higher price points, which is great. But most of those higher-priced shoes are available only at nike.com or Nike’s ‘snkrs’ app. With those two taken in context, is it any surprise that Nike finally said in public that it will massively accelerate its e-commerce from $1bn to $7bn? Not at all. In fact we think that Nike is understating it’s e-comm growth potential over the next 5 years by as much as $4bn.

 

Perhaps most important in this discussion is that we are seeing a shifting distribution paradigm in NA (from traditional wholesale to Nike DTC) play out in every quarter that Nike reports. Here are the most notable highlights from the most recent Nike quarter…

 

1) Lower Lows at Wholesale, Higher Highs for DTC. NKE NA biz grew 13% during the 3Q16. The incremental $429mm in revenue was essential evenly split between wholesale and retail, with DTC growing 25% fueled by e-comm, and wholesale up 9% against the easiest comp in the past 5 years (3% wholesale growth in 3Q15). If we look at it on a 2yr basis, eliminating all of the quarterly noise, we’ve seen a meaningful bifurcation in the underlying growth trend – not over the past three quarters, but past three years.

FL, DKS, HIBB, NKE | 9yr Nike Tailwind Rolling Off  - 3 23 NKE decelerating wholesale 

 

2) Channel Growth Spread at New Peak. The growth spread (calculated by taking DTC growth minus Wholesale growth) accelerated to 16% in 3Q16. The chart itself paints a pretty clear picture on how Nike is turning the distribution paradigm on its head, but what we think is most important to point out is that we are seeing higher highs in the DTC growth rates as the business approaches $4bn in sales. Over the course of the next five years we expect Nike to blow away its $7bn e-commerce target with the majority of that growth coming in its home market. That means an incremental $5bn-$6bn in NA e-commerce off a base of ~$750mm today. That translates to a continued widening in the growth spread over the near and long term.

FL, DKS, HIBB, NKE | 9yr Nike Tailwind Rolling Off  - 3 23 NKE DTC growth spread

 

3) DTC Penetration is Accelerating – Off a Higher Base. DTC Penetration as a % of total sales accelerated meaningfully in the quarter on a TTM basis, up 75bps representing the largest growth rate we’ve ever seen sequentially at Nike NA. To add a little context, over the past five years NKE NA DTC has grown its penetration by 450bps. This one quarter amounted for nearly 20% of that growth. If we look at where Nike direct competes online, its at the top end of the distribution chain. Put another way it’s at the product level which drives ASP and traffic to the likes of Foot Locker, Finish Line, and Dick’s Sporting Goods. As Nike continues to push its DTC agenda, those dollars come directly from that tier of the market, while the mid-tier channel stays more or less isolated.

FL, DKS, HIBB, NKE | 9yr Nike Tailwind Rolling Off  - 3 23 NKE dtc penetration


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MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION

Takeaway: Yellen's dovishness has driven sentiment back into the green; both our short and intermediate-term measures of risk are now mostly bullish.

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM11

 

Key Takeaway:

The majority of risk measures eased this week in reaction to Fed Chairwoman Yellen's dovish comments on Tuesday. However, not everything is rosy. Two measures of counterparty risk, the TED spread and CDOR-OIS rose; the TED spread jumped by +6 bps while the CDOR-OIS moved up +1 bp. The TED spread is the difference between LIBOR and short-term treasury rates, and the CDOR-OIS is the difference between the Canadian interbank lending rate and overnight indexed swaps. Both measures isolate the risk that banks perceive in lending to each other; the latter measures that risk specifically in Canada. 


Current Ideas:


MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM19

 

Financial Risk Monitor Summary

• Short-term(WoW): Positive / 6 of 13 improved / 2 out of 13 worsened / 5 of 13 unchanged

• Intermediate-term(WoW): Positive / 7 of 13 improved / 1 out of 13 worsened / 5 of 13 unchanged

• Long-term(WoW): Negative / 1 of 13 improved / 2 out of 13 worsened / 10 of 13 unchanged

 

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM15 1

 

 

1. U.S. Financial CDS – With Fed Chairwoman Yellen's indication on Tuesday that the U.S. Federal Reserve would need to proceed with caution due to uncertain global risks, swaps tightened for 14 out of 27 domestic financial institutions, and the median spread tightened by -2 bps from 95 to 93.

Tightened the most WoW: PRU, LNC, MET
Widened the most WoW: ACE, MMC, MBI
Tightened the most WoW: AIG, AXP, MS
Widened the most MoM: JPM, MMC, SLM

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM1 1

 

2. European Financial CDS – Financial swaps mostly tightened in Europe last week, largely in reaction to Janet Yellen's dovish speech on Tuesday.

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM2

 

3. Asian Financial CDS – Financial swaps in Asia shared in the global tightening on expectations for slow changes to interest rates from the Federal Reserve. The median spread in the region tightened week over week by 9 bps to 127. Even in Japan swaps mostly tightened, while a BoJ survey on Friday showed business confidence at its lowest level in three years; this contrast is one more indication of the sway that Federal Reserve policy holds over global markets.

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM17

 

4. Sovereign CDS – DM sovereign swaps mostly tightened over last week. Portuguese swaps tightened the most, by -5 bps to 267.

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM18

 

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM3


5. Emerging Market Sovereign CDS – Emerging market swaps mostly tightened last week, led by Brazil which tightened by -31 bps to 364.

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM16

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM20

6. High Yield (YTM) Monitor – High Yield rates rose 3 bps last week, ending the week at 7.92% versus 7.89% the prior week.

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM5

7. Leveraged Loan Index Monitor  – The Leveraged Loan Index fell 2.0 points last week, ending at 1850.

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM6

8. TED Spread Monitor  – The TED spread rose 6 basis points last week, ending the week at 40 bps this week versus last week’s print of 35 bps.

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM7

9. CRB Commodity Price Index – The CRB index fell -3.0%, ending the week at 168 versus 173 the prior week. As compared with the prior month, commodity prices have decreased -0.3%. We generally regard changes in commodity prices on the margin as having meaningful consumption implications.

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM8

10. Euribor-OIS Spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread was unchanged at 10 bps.

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM9

11. Chinese Interbank Rate (Shifon Index) – The Shifon Index rose 2 basis points last week, ending the week at 2.01% versus last week’s print of 1.99%. The Shifon Index measures banks’ overnight lending rates to one another, a gauge of systemic stress in the Chinese banking system.

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM10

12. Chinese Steel – Steel prices in China rose 2.8% last week, or 67 yuan/ton, to 2486 yuan/ton. We use Chinese steel rebar prices to gauge Chinese construction activity and, by extension, the health of the Chinese economy.

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM12

13. Chinese Non-Performing Loans Chinese non-performing loans amount to 1,274 billion Yuan as of Dec 31, 2015, which is up +51% year-over-year. Given the growing focus on China's debt growth and the potential fallout, we've decided to begin tracking loan quality. Note: this data is only updated quarterly. 

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - Chinese NPL Fixed

14. 2-10 Spread – Last week the 2-10 spread widened to 105 bps, 2 bps wider than a week ago. We track the 2-10 spread as an indicator of bank margin pressure.

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM13

15. CDOR-OIS Spread – The CDOR-OIS spread is the Canadian equivalent of the Euribor-OIS spread. It is the difference between the Canadian interbank lending rate and overnight indexed swaps, and it measures bank counterparty risk in Canada. The CDOR-OIS spread widened by 1 bps to 41 bps.

MONDAY MORNING RISK MONITOR | YELLEN FURTHER DAMPENS GLOBAL RISK PERCEPTION - RM14


Joshua Steiner, CFA



Jonathan Casteleyn, CFA, CMT


CHART OF THE DAY: Why Stocks & Long-Term Treasury Bonds Are Rallying

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.

 

"... If the US economy was even half as “good” as the bulls would lead you to believe, the Fed would be raising rates and the US Dollar would be ripping higher (as opposed to closing -1.8% lower last week to -4.1% YTD).

 

The reason why both stocks and long-term Treasury bonds are rallying in sync right now is the same reason they always do when the market is begging for the Fed to replace what is disappointing economic growth with the illusion of growth (inflation)."

 

CHART OF THE DAY: Why Stocks & Long-Term Treasury Bonds Are Rallying - 04.04.16 chart


Surprised?

“We tend to make money out of surprises, and people are very bad at foreseeing surprises.”

-David Harding

 

Following up on the David Harding (Winton Capital Management) interview that I cited last Thursday, I wanted to highlight what I am sure many of you have had to deal with in 2016 YTD – surprises.

 

Are you surprised that the latest bull market (in US Equities) catalyst is a dovish Fed? Were you surprised (like the Fed was) at the pace of the slow-down towards 1% GDP and SP (FEB 11, 2016 closing low)? Or are you surprised that almost 2 months later SP500 is back up at 2072 and the Long Bond’s Yield this morning is only up to 1.76% (vs. 1.68% on FEB 11)?

 

As Harding reminded Pederson in Efficiently Inefficient, “luckily, most surprises do unfold gradually” (pg 227) and that’s how history would characterize economic, profit, and credit cycles. They take time to play out in full. On that score, Friday’s US jobs report was yet another rate of change slow-down from its #LateCycle peak. We’ll contextualize that on our Q2 Macro Themes Call on Thursday.

 

Surprised? - jobs pig cartoon 02.05.2016

 

Back to the Global Macro Grind

 

Sure, you can anchor on “ISM manufacturing surveys have bottomed.” Or you can stay with the reality that ISM Services (much larger part of the economy) continue to slow from their survey cycle peak in 2015. You’ll get confirmation of the latter tomorrow.

 

Bond Yields get it (TLT = +8.4% YTD). So do Utilities (XLU = +15.1% YTD). And The Financials (XLF = -4.7% YTD) get that too.

 

Instead of anchoring on one-off sequential data points (shorter term surprise moves like Oil had off its lows), Mr. Bond Market has an excellent historical track-record of mapping and measuring the intermediate-term TREND of the economic cycle.

 

If the US economy was even half as “good” as the bulls would lead you to believe, the Fed would be raising rates and the US Dollar would be ripping higher (as opposed to closing -1.8% lower last week to -4.1% YTD).

 

The reason why both stocks and long-term Treasury bonds are rallying in sync right now is the same reason they always do when the market is begging for the Fed to replace what is disappointing economic growth with the illusion of growth (inflation).

 

As you can see in the 30-day inverse correlations that the machines are chasing:

 

  1. SP500 vs. US Dollar Index -0.86
  2. CRB Commodities Index vs. USD -0.89

 

That’s what has mattered most to the US Equity and Commodity market for the last month.

 

You definitely won’t hear this from the equity-centric bulls, but there has been literally 0% correlation between that US stock, bond, and commodity-linked equity strength and the rest of the world’s equity markets:

 

  1. European Stocks (EuroStoxx 600) down another -0.6% last week to -8.9% YTD
  2. Spanish and Italian Stocks (IBEX and MIB Indexes) down another -2.1% each last week to -9.9% and -17.0%, respectively
  3. Japanese Stocks (Nikkei) down another -4.9% last week to -15.1% YTD

 

Yes, Chinese and Emerging Market Equities bounced (again) on Down Dollar. But most of you get why Down Dollar (remember 2011) drives bullish expectations in Gold (+15.3% YTD) and EM. I don’t want to rehash that history in this note this morning.

 

Instead, I simply want to remind you of what should not surprise you this morning. Contrary to popular “markets will never go down, ever, again” #BeliefSystem, The Currency War is alive and well. Unless your FX is falling, your stock market isn’t rising.

 

Here’s how the futures and options market sees things (non-commercial CFTC net positioning):

 

  1. SP500 (Index + Emini) net SHORT position of -132,850 is its LOWEST in a month (-0.06x 1yr z-score)
  2. 10YR Treasury net SHORT position of -18,579 vs. its 3 month avg net LONG position of +10,075 contracts
  3. USD Dollar net LONG position of +17,620 is right at YTD lows (-2.06x 1yr z-score)

 

In other words, consensus is betting that A) stocks go down less, B) long-term bonds go up less, and C) the US Dollar keeps going down. In the very immediate-term, I don’t doubt that could be right (I wouldn’t doubt anything short-term at this point!).

 

While my favorite long positions going up less (The Long Bond, Utilities, and Gold) and my favorite shorts going down less (XLF, SPY, and QQQ) would annoy me in the short-term, I’ll be less annoyed as the converse plays out over the intermediate-term (i.e. Q2).

 

The longer-term TAIL shift in investing styles that I’ve been calling for (towards good balance sheets and liquidity) played stronger than being long Oil did last week (WTI down -6.9% on the week). From a US Equity Style Factor perspective, here’s how that looked:

 

  1. Low Debt (EV/EBITDA) Equities were +2.4% to +3.2% YTD
  2. Low Beta Equities were +2.4% to 9.8% YTD

 

Like the Long Bond (TLT) and Utilities (XLU), some of our Investing Ideas (longer term ideas) like McDonald's (MCD) and General Mills (GIS) have turned into bigger momentum stocks in 2016 than Amazon (AMZN) and Netflix (NFLX). That multiple expansion in Low-Beta Liquidity vs. multiple compression in High Beta (-2.2% YTD) shouldn’t surprise any of our subscribers this year either.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.74-1.87%

SPX 2015-2077

NASDAQ 4

Nikkei 16043-16889
USD 94.11-96.12
Oil (WTI) 36.08-39.32

 

Best of luck out there this week,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Surprised? - 04.04.16 chart


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