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Daily Market Data Dump: Monday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, and rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products




Daily Market Data Dump: Monday - equity markets 6 27


Daily Market Data Dump: Monday - sector performance 6 27


Daily Market Data Dump: Monday - volume 6 27


Daily Market Data Dump: Monday - rates and spreads 6 27


Daily Market Data Dump: Monday - currencies 6 27

Our Favorite Macro Call Continues To Pummel The S&P 500

Our Favorite Macro Call Continues To Pummel The S&P 500 - tlt say cheese


Got #GrowthSlowing?


The bond market does. The 10-year Treasury yield hit an all-time low Friday on the heels of the historic Brexit vote and as the flight to safety trade continues as global growth slows.


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


"Our favorite ways to play both US and Global #GrowthSlowing in 2016 continues to be the Long Bond, Gold, and Safe Equity Yields (like Utes) that look like bonds; UST 10yr = all-time lows this a.m. at 1.46% as UK 10yr drops another -13bps breaking 1.0% at 0.96%."


Below is a chart of the 10-year Treasury yield Going back to 1962. 


Our Favorite Macro Call Continues To Pummel The S&P 500 - 10yr all time low



For those of you keeping score, here's a look at the year-to-date scorecard of our favorite Macro call, long the Long Bond (TLT), versus the S&P 500:


  • TLT: +12.6%

  • S&P 500: -0.32%



CHART OF THE DAY: Sector Scorecard | What's Working In 2016

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 all you do is US Equities, did someone say underweight (short) the Financials vs. Utilities in 2016?

  1. Financials (XLF) hammered on Friday, losing another -5.4% to down -7.3% YTD
  2. Utilities (XLU) did their job for our clients, closing +0.6% on a very red day for Equity Beta at +16.9% YTD"


CHART OF THE DAY: Sector Scorecard | What's Working In 2016 - 06.27.16 chart

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Robo Macro?

“Everybody’s out there wrestling like a robot.”

-Hulk Hogan


At $2.08T (T = Trillion, in US Dollars) in losses, Friday June 24th, 2016 will be remembered by objective market historians as the biggest down day ever (surpassing SEP 29, 2008), in terms of Global Equity value lost. By our scorecard, ever is a long time.


Oh, but is that “inflation adjusted, Keith?” Seriously, we’re half-way through 2016 and we’ve not only had the biggest loss in global “stocks” (on a one day basis) ever, but in the USA we had the worst 6-week start to the year, ever. Evers are adding up.


Yes, pre and post both “China” and “Brexit” (no the 34k NFP jobs print last month didn’t have to do with either), #GrowthSlowing has proven to be causal. With consensus still wrestling with equity “valuations”, we’re the only independent research firm on Wall St. whose favorite asset allocations remains the Long Bond, Gold, and Safe Yield Stocks that look like bonds (Utilities).


Robo Macro? - hulk


Back to the Global Macro Grind


What changes this morning? Not a whole heck of a lot. While I’m assuming they’ll try to bounce US Equity Beta into month and quarter end (Thursday), the 2016 game clock continues to tick with some immediate-term catalysts:


  1. US corporates levering up to buy back stock on no volume up days, are now in their “black-out” period (EPS Season)
  2. Pre-announcement Season = ON. And we continue to think Q2 US Corporate Profits will be the worst yet
  3. Financials (XLF) report first and with US long-term yields at all-time lows, guidance is going to be nasty


Yep, instead of calling Earnings Season “Ex-Energy”, you’re going to have to be all about being long Energy (with the US Dollar back to +0.5% year-over-year) and “backing out the Financials”… if you want to be an “earnings have bottomed” bull.


Say what? The US Dollar isn’t getting smashed by the Fed anymore? Nope, thanks to the UK reminding the world that a devalued currency is a bad thing, the US Dollar Index rally was part of the following macro FX matrix last week:


  1. US Dollar Index +1.5% to -3.1% YTD
  2. Euro vs. USD -1.4% to +2.3% YTD
  3. Yen (vs. USD) +1.7% to +17.4% YTD
  4. Pound (vs. USD) -4.7% to -7.1% YTD
  5. Gold +2.0% to +24.3% YTD


Gold is a currency? Yes. While it has “no yield”, neither does the British Pound. Gold competes with both real interest rates and central bankers trying to devalue currencies around the world. Since it has no yield, it loves playing against “negative yields.”


Btw, who in their right mind would want to be long the Euro vs. Gold, from here?


Friday was one of the best absolute and relative performance days in my 17 year career. While I am genuinely humbled by that (it was a research team effort, not just me), I’m not considering Hedgeye’s position consensus, yet.


Most of what happened on Friday had been in motion, in rate of change terms, since AUG-SEP 2015. Our call on US long-term yields going to all-time lows, didn’t happen in a 1-day vacuum.


This morning’s follow through in being long duration and/or low-beta stocks with a “safe” yield looks like this:


  1. UST 10yr Yield down another 10 basis points to a fresh YTD low of 1.47%
  2. UK 10yr Yield down another 13 basis point to a fresh all-time low of 0.96%
  3. Swiss and German 10s testing all-time lows at -0.61% and -0.12%, respectively


If all you do is US Equities, did someone say underweight (short) the Financials vs. Utilities in 2016?


  1. Financials (XLF) hammered on Friday, losing another -5.4% to down -7.3% YTD
  2. Utilities (XLU) did their job for our clients, closing +0.6% on a very red day for Equity Beta at +16.9% YTD


While US Equity Beta and Small Caps had “nice charts” at the May and June highs, from a TRENDING US Equity Style Factor perspective, they continue to be shorts on weeks like last week. With the SP500 (beta) down for the 3rd week in a row:


  1. High Beta Stocks dropped -3.0% on the week to -1.7% YTD
  2. Low Beta Stocks were almost flat at -0.2% on the week to +9.4% YTD
  3. Small Cap Stocks were -2.7% on the week to -1.9% YTD
  4. Large Cap Stocks were -1.8% on the week to +0.1% YTD

*Mean performance of Top Quintile vs. Bottom Quintile, SP500 Companies


While a US Equity perma bull might say something passive aggressive like, “well the market is kind of flat”, that’ll make you beta in 2016, if you’re lucky. Those generating alpha are up +8-15% in 2016. They’re going to take a lot of market share from beta chasers.


One of the “technologically innovative” share gainers at the peak of #TheCycle (2015) were “Robo Advisors.” Unlike a firm like ours, these guys have the efficient-market-robotic-pie-chart-allocation thing down cold… until global equities implode, that is…


Betterment (one of the more marketing savvy Robo Advisors), “suspended trading” on Friday. Personally, I enjoyed seeing that headline. With Total US Equity Volume +65% vs. its 1-month average (on the day), you do not want your hard earned net worth to get that kind of memo. You want a real-time risk manager who isn’t a consensus exposure chasing robot.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 1.45-1.65%

SPX 2021-2066
RUT 1115-1151


VIX 17.66-26.99
USD 94.08-96.12
EUR/USD 1.09-1.12

Gold 1


Best of luck out there this week,



Keith R. McCullough
Chief Executive Officer


Robo Macro? - 06.27.16 chart

Friday = biggest 1-day dollar value lost in Global Equities

Client Talking Points


The Pound continues to crash, down another -3.4% vs. USD to $1.32 – signaling immediate-term TRADE oversold, finally – but this crash and the bearish TREND break-down in EUR/USD keeps the super-cycle (bullish) call for USD intact. There’s #Deflation risk in that.


Rajoy wins a minority government with 137 seats, and Spanish stocks continue to crash down another -0.9% after dropping -6.9% last week, taking the crash in the IBEX to -35% from the 2015 cycle-peak; DAX -1.6% this AM, down -24% from its 2015 cycle-peak.


Our favorite ways to play both US and Global #GrowthSlowing in 2016 continues to be the Long Bond, Gold, and Safe Equity Yields (like Utes) that look like bonds; UST 10yr = all-time lows this AM at 1.46% as UK 10yr drops another -13bps breaking 1.0% at 0.96%.

Asset Allocation

6/26/16 57% 0% 0% 13% 25% 5%
6/27/16 58% 0% 0% 13% 25% 4%

Asset Allocation as a % of Max Preferred Exposure

6/26/16 57% 0% 0% 39% 76% 15%
6/27/16 58% 0% 0% 39% 76% 12%
The maximum preferred exposure for cash is 100%. The maximum preferred exposure for each of the other assets classes is 33%.

Top Long Ideas

Company Ticker Sector Duration

In Great Britain, the people voted for freedom and not for the broken promises that central planners can bend and smooth economic gravity. The #BeliefSystem is breaking down and despite the fact that every central banker around the world was out Friday talking about “stepping in.”


As we’ve mentioned, the bond market has gotten the #GrowthSlowing call right all along.


Looking at other markets (yes there are other markets), maybe being long the Long Bond (TLT) for almost two years and sitting long of Gold (GLD) was too boring for some people, you have to ask yourself what you’re buying in broader equity indices with an ongoing earnings and cyclical slowdown. The second quarter of 2016 is setting up as the 5th consecutive quarter of Y/Y earnings declines for the S&P 500, the longest streak since the quarter ending in Q3 2009.


There have been rumblings in the news thatMcDonald's (MCD) 2Q comps have slowed due to the temporary replacement of the 2 for $5 value platform for Monopoly. This has clearly been reflected in the stock as of late, as MCD has underperformed the S&P 500 over the last month.


Despite this near term headwind, we still strongly believe in the long-term story for MCD and remain confident that once they get their value platform right nationally, they will be just fine. In the short to intermediate term, as we wait for a solidified value platform, this recent underperformance represents a great buying opportunity. We remain LONG MCD.

Three for the Road


How to handle #Brexit chafing. $TLT $GLD @KeithMcCullough pic.twitter.com/NcdZxKO9x4



“Vision is the art of seeing what is invisible to others.” 

-Jonathan Swift


Wayne Gretsky had 894 NHL goals.

CMS Releases CY2017 ESRD Payment Update with Surprise Increase for Home Training; Positive NXTM, BAX

Takeaway: CY 2017 ESRD reimbursement uneventful save for 90% increase in home training add-on. Nice surprise for portable dialysis device makers.

On Friday, the Centers for Medicare and Medicaid released the proposed CY 2017 payment update for End Stage Renal Dialysis Services (ESRD). They propose to increase the CY 2016 base treatment rate from $230.39 to $231.04. This $0.65 increase is estimated by CMS to increase Medicare reimbursement to ESRD providers by about $50 million in CY 2017.


The more interesting feature of the annual payment update release is a significant increase in the in-home treatment training add-on payment (from $50.16 to $95.57) that patient advocates and device manufacturers like NXTM have sought since 2011. Also of interest is the expansion of the ESRD benefit to include patients suffering from Acute Kidney Injury. Finally, CMS is changing reporting arrangements so dialysis providers can bill for patients receiving dialysis more than the maximum three times per week by pro-rating the base amount accordingly.


In-home Training Treatment Add-on Payment. The big news in the CY 2017 ESRD payment update is the proposed increase in the add-on payment for training of patients and their families during in-home dialysis treatment. CMS is proposing this add-on payment be increased from $50.16 to $95.57. So, in-home dialysis that includes training will be reimbursed at the proposed base rate of $231.04 plus the training add-on payment of $95.57 plus other patient and facility level adjustments, as appropriate. CMS reimburses for 15 training treatments for peritoneal dialysis and 25 training treatments for hemodialysis.


The increase in the add-on payment for in-home dialysis training represents a victory for patients and in-home dialysis equipment manufacturers who have argued for an increase since 2011. In the CY 2014 payment update, CMS responded by increasing the training add-on from $33.44 to $50.16. That increase was not sufficient in the eyes of many patients and their advocates. Last year, a letter writing campaign was organized – by whom is not clear – in support of an increase. Virtually all the 268 comment letters submitted regarding the CY 2016 ESRD payment update were from patients asking CMS to consider a change. Since an increase in the add-on payment was not part of the CY 2016 proposal CMS did not include it in last year’s final payment update but pledged to consider it in the future which they have now done.


In-home dialysis is a small part of the dialysis market. In the CY 2017 proposed rule, CMS indicates that in 2014, they paid for in-home training (and the associated dialysis session) for 12,800 peritoneal dialysis patients and 2,400 hemodialysis patients or about 4 percent of all Medicare dialysis beneficiaries. Of the 6,500 dialysis facilities in the Medicare program, only about 1,900 offer in home training for hemodialysis. CMS does not report the number of facilities offering in-home training for peritoneal dialysis.


According to CMS, large dialysis organizations (read: DVA, FMS, ARA, Renal Care Group and U.S. Renal Care) have indicated that the training add-on payment is sufficient. This assertion may reflect the LDOs view that, given their cost structure, the payment is sufficient. It may also indicate that these large organizations seek to protect their mostly clinic-based business model. Although the point of in-home dialysis is convenience and privacy, the result is lower cost to Medicare as patients and their families provide the necessary care in lieu of a paid provider like a dialysis clinic.


In any event, the largest of the LDOs do offer in-home training treatments for hemodialysis at a rate higher than the national figure. About 28 percent of all ESRD facilities in the Medicare program offer in-home training for hemodialysis. CMS does not provide data on peritoneal dialysis in-home treatment training. Table 1 breaks down availability of in-home training for hemodialysis by LDO.


Table 1. Availability of In-home Hemodialysis Training by Large Dialysis Organization

CMS Releases CY2017 ESRD Payment Update with Surprise Increase for Home Training; Positive NXTM, BAX - In Home training Chart

Source: CMS


The in-home training treatment add-on payment will be implemented on a budget neutral basis, meaning CMS intends to pay all ESRD providers the same amount as it would have had the add-on payment not been increased. The result of imposing budget neutrality is that the base per-treatment payment must be adjusted downward slightly (see payment update analysis below). In order for dialysis providers to capture the reimbursement dollars that will shift to the in-home training treatment add-on, they must offer more in-home training for patients and their families.


Potentially, the biggest winners for an increase in the in-home training add-on payment are the device manufacturers like NxStage Medical, Inc. (NXTM) which manufactures portable hemodialysis machines for a variety of settings but primarily suited for the home.


As a caveat, CMS notes in their proposal that they are setting the add-on payment for in-home training without a lot of data. Over the next few years, CMS will be implementing changes to the cost reporting system so they have better information to use in considering another change to the in-home training treatment add-on payment. The result could be an increase or a decrease in the payment. Since, the $95.57 add-on payment is based almost exclusively on the national median hourly wage for Registered Nurses and does not consider other costs associated with a home visit like fuel or mileage, we would expect better data collection to argue against any decrease in the future.


Expansion of Dialysis Benefit to Acute Kidney Injury Patients. Incrementally – albeit modestly – positive for ESRD providers is the expansion of coverage to include patients with Acute Kidney Injury (AKI) in the dialysis benefit. AKI patients, whom CMS estimates at about 8,500, heretofore have received dialysis through hospital outpatient departments. A change in the law in 2015 made them eligible for dialysis treatments at a dialysis facility like those owned by DVA.

AKI patients typically need dialysis for a short period of time relative to an ESRD patient while they recover from their kidney injury. For these patients, dialysis is also largely curative. Due to these unique characteristics, CMS is proposing that they pay for all dialysis treatments prescribed even when they exceed the three times a week maximum applied to ESRD patient. The payment rate for an AKI dialysis treatment will be the ESRD base rate as determined each year by CMS.


Hemodialysis Payment Equivalency. For CY 2017 – with most operational elements of the proposal delayed until July 1, 2017- CMS is proposing to calculate a per treatment payment for hemodialysis when it exceeds the maximum three times per week. CMS is proposing that ESRD providers prorate the total three times a week payment amount across the number of sessions prescribed by the physician. Using this math, ESRD providers would then bill for the number of treatments delivered even when it exceeded the three times a week maximum imposed by Medicare rules.


Although this billing change would not result in additional reimbursement, it does mean billing will actually reflect services delivered. Heretofore, the Medicare Administrative Contractors which handle all the billing for CMS, have not permitted the ESRD providers to submit bills for more than three treatments per week (13 or 14 per month) except in a limited number of cases. This change acknowledges certain technological and medical advances that have led to dialysis prescriptions for more frequent but shorter treatment sessions.


CY 2017 Base Payment Rate. The per treatment base rate is set to increase by $0.65 in CY 2017. This increase is accounted for by a 2.1 percent increase in the market basket adjustment, less a 1.25 percent decrease mandated by the Protecting Access to Medicare Act, less a 0.5 percent decrease for the Multifactor Productivity Adjustment, less a 0.0448 percent wage index budget neutrality factor and less a 0.0271 percent in-home training budget neutrality factor. Table 2 illustrates the components of the rate setting for CY 2017.


Table 2: Proposed CY 2017 ESRD Base Rate

CMS Releases CY2017 ESRD Payment Update with Surprise Increase for Home Training; Positive NXTM, BAX - ESRD Annual Payment

Source: CMS


Taking all adjustments into account, payments to ESRD providers should increase about $50 million in CY 2017, according to CMS. After several years of near zero payment increases, the CY 2017 update is a positive development for ESRD providers


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.