18 (Excellent) Book Recommendations From Hedgeye

18 (Excellent) Book Recommendations From Hedgeye - books

We receive a lot of book recommendation requests from our subscribers. Here's a list of some of the more thoughtful ones we've read recently here at Hedgeye (along with the person making the recommendation).

September 6, 2016

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  • Bullish Trend
  • Bearish Trend
  • Neutral

10-Year U.S. Treasury Yield
1.62 1.52 1.60
S&P 500
2,165 2,187 2,179
Russell 2000
1,231 1,253 1,251
NASDAQ Composite
5,190 5,261 5,249
SPDR S&P Oil & Gas Explore
35.01 37.84 37.35
1,211 1,245 1,233
Nikkei 225 Index
16,339 17,091 16,925
German DAX Composite
10,480 10,726 10,672
Volatility Index
11.21 14.32 11.98
U.S. Dollar Index
94.39 96.50 95.84
1.11 1.13 1.11
Japanese Yen
99.95 104.58 103.41
Light Crude Oil Spot Price
42.99 46.18 44.44
Natural Gas Spot Price
2.59 2.90 2.79
Gold Spot Price
1,303 1,349 1,326
Copper Spot Price
2.04 2.12 2.07
Apple Inc.
105.41 109.40 107.73
750 780 772
J.P. Morgan Chase & Co.
65.34 67.99 67.49
Intel Corp.
34.80 36.29 36.08
Costco Wholesale
154 160 157
Las Vegas Sands Corp.
50.96 54.47 53.93

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CHART OF THE DAY: Those Fickle Fed Fund Futures

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. 


...Yellen’s Fed is much shorter-term than that. If she does what the market is telling her to do right now (Fed Fund Futures dropped to 32% on a SEP hike), this will be her 6th pivot (hawkish-dovish-hawkish-dovish-hawkish-dovish), in 9 months.


CHART OF THE DAY: Those Fickle Fed Fund Futures  - cod 09.06.16 chart

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Old New Data

“The old in the new is what claims the attention.”

-William James


You see, I don’t have a confirmation bias. Once in a while, Harvard grads have come up with some good ideas too. William James died in 1910 but is rightly revered as one of the most important psychologists and thought leaders in American history.


I wonder how he’d psycho-analyze Janet Yellen…


Oh, you didn’t hear? She’s “data dependent.” Lol. On the heels of a recessionary ISM report last week, the latest US jobs report was yet another new confirmation of what’s becoming an older TREND. Since peaking in 2015, the US labor market continues to slow.


Back to the Global Macro Grind


Slow. You know – in rate of change terms. While the Fed continues to cling to old “indicators” (like the Phillips Curve), my generation of economists and strategists have evolved the predicting process to just letting the old cycle data instruct the new.


That’s right. Most long-cycle macro data is glacial in terms of how it trends. Peaks and troughs are processes. They take time to manifest. But when something big and super #LateCycle like the rate of change in Non-farm Payrolls (NFP) puts in a cycle-peak, it slows to flat (year-over-year), then negative (year-over-year), 100% of the time.


Yellen’s Fed is much shorter-term than that. If she does what the market is telling her to do right now (Fed Fund Futures dropped to 32% on a SEP hike), this will be her 6th pivot (hawkish-dovish-hawkish-dovish-hawkish-dovish), in 9 months.



Old New Data - Yellen cartoon 09.17.2014NEW


But, Keith, Keith – “what if she still hikes?”… what if she makes her 2nd policy mistake in 9 months and just does it anyway? A: she can do whatever she wants and the precedent of going against both the market and the data is established.


*See DEC rate hike for details


On a very short-term basis (2 week duration), there isn’t anything big in the USD Correlation Risk matrix that would like a Dollar Up, Rates Up surprise in September from Yellen:


  1. USD vs. SP500 inverse correlation -0.46
  2. USD vs. Oil inverse correlation -0.70
  3. USD vs. CRB Index inverse correlation -0.90


And being a steadfast Gold Bond Bull, I most certainly wouldn’t enjoy it either (Gold’s 2-week inverse correlation with USD is -0.78). So how about from a positioning and sentiment perspective? Who’d be up for a rate hike (CFTC futures & options data)?


  1. SP500 (Index + Emini) net LONG position ramped another +22,325 contracts last week to +227,291
  2. Russell 2000 (mini) net LONG position built to a YTD high of +22,075 (that’s 2.89x on a 1yr z-score!)
  3. 10YR Treasury net LONG position doubled by +61,722 contracts (week-over-week) to +120,196
  4. Crude Oil net LONG position came down -10,612 week-over-week to +373,618
  5. Gold net LONG position came in -26,802 week-over-week to +238,152 (that’s +1.07x on a 1yr z-score)


In other words, Janet, from a net positioning perspective everyone is NET LONG everything!


I get that. Ex some Financials shorts (gotta ex-out when I don’t like being wrong, eh?), that’s why I was positioned as long as I’ve been all year (net and absolute) in our Real-Time Alerts and Asset Allocation products last week.


But also understand that if we move back to the top-end of my immediate-term risk ranges in some of these asset classes, I’m a seller, not a buyer of green. Lots of macro market signals are currently implying range bound markets so buy/cover red, sell/short green.


Financials (XLF) were +1.9% last week to +3.1% YTD, I assume, because more than a few of you are thinking there’s still a better than 32% chance that she raises rates. I hear you. Same old song on “it’s only 25 beeps.” Nothing new vs. what I heard in DEC there.


That’s probably why the 2yr and 10yr US Treasury Yields were only down -3 and -6 basis points, respectively, week-over-week. Pre the August ISM print of 49.4 the 2yr Yield tapped 0.85%. Now it’s back down to 0.79%. The 10s/2s Yield Spread remains at +81bps.


But Utilities (XLU) and REITS (MSCI Index) were +1.0% and +1.5% week-over-week to +14.7% and +12.0% YTD, respectively, too. So what is it – hike or no hike?


Maybe there’s nothing new to see here at all as the 1-year old #GrowthSlowing TREND @Hedgeye remains firmly intact.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 1.52-1.62%

SPX 2165-2187

VIX 11.21-14.32
USD 94.39-96.50
Oil (WTI) 42.99-46.18

Gold 1


Best of luck out there this week,



Old New Data - cod 09.06.16 chart

Thank goodness for all the #GrowthSlowing U.S. data in August!

Client Talking Points


Not that anyone is short-term these days, but with the Fed Funds Futures at 32% on SEP, markets are betting on Yellen pivoting for the 6th time in 8 months – Down Dollar has a -0.5-0.9 (2-week) inverse correlation with SPY-CRB Index.


Interesting move here; on a week-over-week basis both 2yr and 10yr yields ended up down -6bps and -3bps, respectively; JGB 10yr +2bps to -0.03% this am on BOJ commentary of not making a move until they see what the Fed does; tightening into a slow-down and/or when Fed Funds aren’t pricing it as probable would be super interesting.


Still one of the easiest macro long positions to stay with at this stage of the FX War as Japan, Europe, and the USA all try to out-ease one another; Gold +0.2% last wk and another +0.3% this am to +25.4% YTD (it’s a currency too).

Asset Allocation

9/5/16 42% 8% 8% 15% 21% 6%
9/6/16 44% 7% 8% 14% 21% 6%

Asset Allocation as a % of Max Preferred Exposure

9/5/16 42% 24% 24% 45% 64% 18%
9/6/16 44% 21% 24% 42% 64% 18%
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

See update above.


Income & Consumption

Slowing employment growth + a decline hours worked + deceleration in earnings growth will = a deceleration in aggregate income growth when the official data are reported at the end of the month.  Absent a significant decline in the savings rate and/or significant re-acceleration in credit growth, consumption growth can be expected to track income growth lower. 


Industrial Activity 

The -14K decline in manufacturing employment in August accords with the retreat in the employment subcomponent in the ISM manufacturing report.  Lower manufacturing employment and a slowdown in manufacturing hours worked also points to a sequential decline in Industrial Production when that data is reported later in the month.  In short (and in the short-term), bad economic data is good as falling rate hike expectations support asset price inflation.  Over the intermediate-term, "slower-and-lower-for-longer" continues to characterize the growth, inflation and interest rate outlook and support #GrowthSlowing allocations in bonds, gold, and dollars.   While incremental dovishness from the Fed may serve as a short-term headwind to the dollar, the structural case for the $USD amidst ongoing policy divergence between the U.S. and the balance of global DM markets remains intact.   

Three for the Road


It's (very) unlikely #Fed raises rates before #Election2016. Here's why via @KeithMcCullough…



“The old in the new is what claims the attention.”

-William James


Mike White of Western Kentucky leads the NCAA in passing with 517 yards.

The Macro Show with Keith McCullough Replay | September 6, 2016

CLICK HERE to access the associated slides.

An audio-only replay of today's show is available here.



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