• run with the bulls

    get your first month

    of hedgeye free


CHART OF THE DAY: Why Most Americans Are FED Up

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.


"... As you can see in today’s Chart of The Day, if you’re part of the 10%, you have to admit we’re killing it as at least 50-60% are getting killed by cost of living. The Top 10% of US Households (by wealth distribution) own 85% of US Financial Assets.


Since the next 25% own 3% and the next 50% only own 1%, who really cares about the Fed other than us?"



CHART OF THE DAY: Why Most Americans Are FED Up - 09.01.16 EL Chart

Back To School

“I’d like to get a degree. You ever see the movie ‘Back To School’? I’ll go back with my kids.”

-Derek Jeter


Love ya, Captain Clutch. And I double-love the idea of getting an education. But there’s no way I’m going back to school with my kids. I have 4 of them (love them too!). But the end of the summer is the beginning of this man’s vacation.


Today is Day 1 of Back To School in Westport, CT. Godspeed to all the teachers out there; especially those who are employed to teach linear establishment economics. Kids have Google now. Eventually, they’re gonna getcha!


One thing I’d like to see schools teach is why the distribution of income in America looks nothing like a bell-curve. My man Mandelbrot nailed this well before it went mainstream. “In economics, one classic Power Law was discovered by Italian economist Vilfredo Pareto a century ago. It describes the distribution of income in the upper reaches of society.”


Back To School - Fed Up cartoon 03.22.2016


Back to the Global Macro Grind


I don’t want to give you the impression I’m living large like the Clintons or Trump but I think I’m in the Top 10%. I don’t dislike that. And with 4 educations to pay for and 3 weddings (I have 3 girls), I’m not volunteering to pay more taxes either.


As you can see in today’s Chart of The Day, if you’re part of the 10%, you have to admit we’re killing it as at least 50-60% are getting killed by cost of living. The Top 10% of US Households (by wealth distribution) own 85% of US Financial Assets.


Since the next 25% own 3% and the next 50% only own 1%, who really cares about the Fed other than us?


No. I’m not going to wax philosophically on what’s a “fair” distribution. Life isn’t fair. And taxes suck. So get up every morning and do your best to help whoever you can, without judging everyone by how much money they make.


Reality is that most people in our profession are going to make less money if the Fed tightens into a slow-down again. Since most of our asset inflation is held in Dollars, ramping the USD to new 5 year highs would simply deflate assets levered to “cheap” Dollars.


Macro markets get #Deflation Risk. Assets that are tethered to Down Dollar, Down Rates got clocked on both an absolute and relative basis in the month of August. The last 2 Augusts (2015 and 2016) have sucked for most public financial asset owners too.


But what about the “consumer”? Shouldn’t crashing Oil, Copper, and Corn prices be good for them?


  1. In the very short-term, it doesn’t move the needle.
  2. In the intermediate-term, maybe and maybe not.
  3. In the long-run, we’re all dead anyway.


I borrowed that last truthful (but crude) statement from Keynes obviously. But the entire concept that the WTI kind of crude collapsing again (-15% from $52 back to $44) is the next panacea for the US stock market is one mother of a stretch.


*Hint: the US stock market desperately needs higher Energy stocks and an “earnings have bottomed” narrative.


As Oil started crashing at a faster rate in AUG of last year, did the US consumer break-out to the upside? No. Actually, plenty of US Retailers crashed from their cycle highs of JUL-AUG 2015. How about now? Is the consumer ripping to the upside?


  1. Last night, Costco (COST) reported an AUG same-store-sales result of 0%
  2. Look at the “back to school” results from Abercrombie (ANF) which crashed this week
  3. Don’t tell me that’s because “no one shops at ANF” – who doesn’t shop at Costco?


Keith, you idiot, everyone only shops at Amazon (AMZN) now. Yep. Hadn’t heard that one liner before. Thanks for the update. Oh, and a little trivia for you in return – AMZN has about $60B of the $4.6 TRILLION in total US Retail Sales.


I’d love to see what percentage of the Bottom 30% of Americans (by wealth distribution) has and/or can afford an Amazon Prime membership. Ever see Fedex guys ripping around the hood leaving diapers on porches? C’mon.


Poor people do shop at the “Dollar Stores.” So while we need to go Ex-Energy, Ex-Costco, Ex-Earnings, Ex-RateHike narrative to just “buy the consumer”, we should also ex-out Dollar Tree (DLTR) getting slammed from $98 to $82 in AUG as well.


Forget who is in what percent of this country. We’re all humans. We all need a degree in real-world economics before it’s too late.


Our immediate-term Global Macro Risk Ranges are now (with intermediate-term TREND research views in brackets):


UST 10yr Yield 1.51-1.62% (bearish)

SPX 2162-2189 (bullish)
RUT 1 (neutral)

NASDAQ 5180-5260 (bullish)

XOP 35.03-37.85 (neutral)

RMZ 1 (bullish)

Nikkei 161 (bearish)

DAX 109 (bearish)

VIX 11.55-14.47 (bullish)
USD 93.99-96.46 (bullish)
EUR/USD 1.11--1.13 (bearish)
YEN 98.99-103.78 (bullish)
Oil (WTI) 44.09-47.25 (bearish)

Nat Gas 2.55-2.99 (bullish)

Gold 1 (bullish)
Copper 2.02-2.12 (bearish)


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Back To School - 09.01.16 EL Chart

BlackStone Group (BX) | Economic Gravity - Adding to Best Ideas List as a Short

Takeaway: We are hosting a new Best Ideas call next Wednesday September 7th at 11 am EST to discuss BlackStone Group as a short idea.

BlackStone Group (BX) | Economic Gravity - Adding to Best Ideas List as a Short - cover invite smaller


Rate of Change Decelerating: BlackStone is a market leader in all four of its business lines and a well liked and respected company which make it a dangerous stock in our view. The core factors that drive shares are starting to decelerate with distributable earnings sourced by net accrued performance fees now declining which is forcing the stock down in lock step. We calculate to make the Street's estimates next year that BX will have to expend 74% of its year end 2016 accrued performance fees, almost double the 39% put out for distributions in 2016 and over 10 points more than the former high of 61% of accrued fees in 2014. 


Big Data Points to a Hyper Cyclical: The causal factors of BX stock price and internal fundamentals point to a hyper cyclical stock with positive coefficients to all market indices, consumer confidence, and nonfarm payrolls. Negative betas are evident to corporate credit costs, the U.S. unemployment rate, and both equity and fixed income volatility. With the economy entering late cycle territory and the path of least resistence higher for both vol and unemployment trends, we think investors risk overstaying their welcome remaining long the stock compared to the growing risks of shares inflecting lower with the economy.


Earnings Quality Will Matter Again:  The entire Alternatives group ranks poorly as Non GAAP accounting beneficiaries which make results look stronger than they really are. The entire earnings quality measure of the S&P 500 has been deteriorating since 2009 and is now back to the worse levels since 2007. The S&P 500 is now averaging a GAAP-to-Non GAAP ratio of 77%, which means that there is a -23% discount between adjusted and GAAP results. The Alternatives are much worse averaging a 59% ratio, or a GAAP discount of -41%. When the tide turns and investors look for safety in defensive stocks, we think the Alternatives group will fail to qualify for that category and will experience substantial declines on a flight to quality. 


CALL DETAILS - Wednesday, September 7th at 11 am EST

  • Toll Free Number:
  • Toll Number:
  • UK: 0.
  • Conference Code: 13642040
  • To Automatically add to your Outlook Calendar Click HERE
  • For the Events Page and Live Video Link and Event Materials Click HERE


Please let us know of any questions.

Jonathan Casteleyn, CFA, CMT 



Joshua Steiner, CFA



Patrick Staudt, CFA


the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

Cartoon of the Day: Strikeout?

Cartoon of the Day: Strikeout? - Fed pitcher cartoon 08.31.2016


The Fed is threatening to hike rates into an economic slowdown.


Click here to receive our daily cartoon for free.

Our Message On Friday’s Jobs Report: Get Out Your Crystal Ball!

In this brief excerpt from The Macro Show earlier today, Hedgeye CEO Keith McCullough explains why the upcoming jobs report is a “binary event” with important ramifications.

Stock Report: Las Vegas Sands (LVS)

Takeaway: We added LVS to Investing Ideas on the long side on 8/26.

Stock Report: Las Vegas Sands (LVS) - HE LVS table 08 31 16 


Las Vegas Sands (LVS) has transformed into that rare stock which should appeal to “Growth,” “Value,” and “Dividend/Cash Flow” investors alike. The stock now yields 3x that of an S&P 500 index fund making it very attractive on a relative and absolute basis. Most importantly, these future dividends will be supported by strong free cash flow generation, on the heels of a new property opening in September and improving industry fundamentals. With the tides finally turning in Macau, we see LVS as the best way to express our views that Macau is once again a sustainable, longer term investment. 


After 25 months of consecutive GGR declines, Macau is finally set to snap its losing streak, being led by the more profitable mass segment. From the six Macau concessionaires, LVS has the least exposure to the shrinking VIP segment (~10% of EBITDA), while ~90% of their EBITDA is generated from Mass, Slots, and Non-Gaming Revenues (the segment of the market most apt for growth). Knowing that LVS is appropriately positioned to take full advantage of a Macau comeback, one must also consider our true Hedgeye Edge i.e. our Mass Tracker.  


The Macau Government shut off the weekly and monthly data spigot – forcing most of the sell side and buy side into a guessing gaming as to where revenues may fall. Thankfully we don’t share that problem. Our Mass Tracker utilizes observational and other data that we have developed into a proprietary tracker which drives a 0.97 R-Square to Macau mass table revenues.


Heading into 2Q 2016, we anticipated Mass revenue growth of +2-4% YoY and the market bested our estimate by printing +4.6% YoY – a major surprise for the market and the true driver of stock gains this summer. Now looking to 3Q 2016 we see acceleration off this growth and project Mass revenues to be +4-6% YoY. 


We know of very few stocks in consumer land which present a better risk/reward set up for 2H 2016.  




Mass growth and the Parisian are two of the top intermediate term catalysts. Mass Tracker continues to suggest that the mass inflection is real which is a significant near-term catalyst for LVS. As the premier mass and base mass player in Macau, LVS is best positioned over the near and long term to capitalize on what should be a sustained period of mass growth that began in Q2 2016. 


The Parisian opening on September 13th is a positive catalyst for base mass growth and cash flow. Unlike the premium mass focused Wynn Palace (and MGM Cotai), Parisian is directed at the base mass customer where there is more growth and less promotional pressure. Parisian should generate positive cash flow and mark the cessation of significant capital outlays. 


Stock Report: Las Vegas Sands (LVS) - MASS TRACKER  CHART 1




For the foreseeable future we choose to view the Macau recovery as volume driven. Lower hotel room rates, additional supply, and the inflow of more casino visitors are once again translating into casino revenue growth.   


Stock Report: Las Vegas Sands (LVS) - VOLUME DRIVEN  CHART 2


There’s undoubtedly a global hunt for yield at a reasonable price, and there are fewer examples where one does not have to pay up for yield. LVS presents a unique opportunity for investors. With low leverage (2x net debt/EBITDA) relative to its peer group (4x Net Debt/EBITDA), they could A) fund the dividend growth via increasing their leverage by 0.5x or even 1x and the dividend would explode (chart below) or B) they can continue to fund it via their growing FCF. Either way, we see dividend growth as sustainable and currently underappreciated.


Stock Report: Las Vegas Sands (LVS) - DIVIDENDS  CHART 3


Stock Report: Las Vegas Sands (LVS) - HE LVS chart 08 31 16

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.46%
  • SHORT SIGNALS 78.35%