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We Are Calling For A Tie In The Senate And 65+ Republican Seats Gained In The House

Conclusion: It’s not politics for us, but simply math.  The turnout measures for Republicans are very positive and should drive a big Republican win to the tune of a net gain of 9 seats in the Senate and more than 65 seats in the House.

 

We’ve been pretty consistent in our call that the Republicans will do better than even most conservative prognosticators have been touting in the midterm elections coming up tomorrow.  The primary reason that we believe this is so is because of Republican turnout and enthusiasm, which is as high as it has been in generations.  Conversely, Democratic enthusiasm and turnout and enthusiasm seems markedly low versus more recent elections, particularly the 2008 election.

 

Our favorite poll to highlight broad sentiment is the Generic Congressional Vote poll.  Based on the Real Clear Politics poll aggregate, which looks at all of the major polls by all major polling organizations, the Generic Congressional Vote poll is the widest it has been in this cycle on the eve of the election.  We have posted a chart of this poll below, but currently the Republicans receive 49.8% of the generic vote versus Democrats receiving 41.8% of the generic vote for a spread of 8.0 points.  Interestingly the most recent four polls show an even wider spread with a spread that averages +11 in favor of the Republicans (this is using Likely Voters).  Momentum matters in elections, and the Republicans are clearly exhibiting momentum in this key poll.

 

The secret sauce of any poll is, of course, its internals.  As we review many of the Generic Congressional Vote polls, the key measures we are analyzing are enthusiasm measures, which are a likely leading indicator for turnout.  While the spread in favor of the Republicans on the Generic Congressional Vote polls outlined above are incredibly significant as it relates to an advantage favoring the Republicans, the internals are even more so.  To wit: 

  • In the Pew poll taken from October 27th to October 30th, 70% of Republicans had given a lot of thought to the election versus 55% of Democrats for a spread of +15 favoring the Republicans.  In 1994, this internal favored the Republicans by only +5; and 
  • In the Gallup poll taken from October 28th to October 31st, 68% of Republicans have given a lot of thought to the election versus 54% of Democrats for a spread of +14 favoring the Republicans.  In 1994, this internal favored the Republicans by only +9. 

The fact that these enthusiasm measures are broader than in 1994 is quite telling as it relates to what will happen tomorrow.  In 1994, the Democrats lost 54 seats in the House.  As we will outline below, we think the losses this year will be more substantial than 1994.

 

As it relates to the Senate, we think that the when the dust settles on Wednesday, we could see a 50 – 50 tie. Currently, if we look at the seats that are not up for election, the Senators that may be independents but typically vote with one party or the other, or the polls that gives us a clear indication of who will win . . .the race for the Senate looks to be 48 seats for the Democrats and 45 for the Republicans with the remain 7 races currently registered by many poll aggregators as “Too Close To Call.”

 

As we look at the “Too Close To Call” races, it is clear that certain races have momentum towards one party or the other.  As a result, we will cede California to the Democrats at it seems Boxer will beat Fiorina.  On the Republican side, we will cede Colorado, Illinois, Nevada and Pennsylvania to the Republicans as the Republican appear to have the momentum in these races.  This leaves us with two races which will decide the balance of power in the Senate – West Virginia and Washington.  On the margin, it looks like Democrats might have a slight advantage in both of these races, but we believe at least one of these races will swing to the Republicans.  Most likely it will be West Virginia, which is historically more Republican (McCain won here by 13 points in 2008) and the polling has been less accurate and consistent over time.  In summary, we see the Senate coming in at 50 – 50, with Washington and West Virginia being the key races to watch in the Senate.  (Incidentally, in a 50 – 50 tie, the Vice President gets the deciding vote so the Democrats would still have control.)

 

In the House, a Republican majority is all but a foregone conclusion.  Based on the polls that are leaning or safe as it relates to either party, the Republicans are at 224 seats and the Democrats are at 168 seats, which suggests a net 46 seat gain for the Republicans.  Outside of this are the remaining 43 seats that are “Too Close To Call”.  While we could easily make the argument that these seats too will go on a high percentage basis to the Republicans, we will make a more conservative projection and suggest that half of the “Too Close To Calls” will go Republicans.  So, this is an incremental ~21 seats going Republican, which makes for a net Republican gain for 67 seats.  A Republican gain of 70 seats seems to be in the realm of mathematical reality as well. We have to go back to 1938 when the Democrats lost 72 seats to find a point in electoral history when a party has lost this many seats.

 

As former Congressman from Minnesota Walter Judd famously said:

 

“People often say that, in a democracy, decisions are made by a majority of the people. Of course, that is not true. Decisions are made by a majority of those who make themselves heard and who vote - a very different thing.”

 

In this election, nothing more could be true as, for better or worse, the Republicans seems overwhelming ready to make their voices heard by voting. 

 

Daryl G. Jones
Managing Director

 

We Are Calling For A Tie In The Senate And 65+ Republican Seats Gained In The House - 2


MACAU OCTOBER MARKET SHARES

Oct gaming revs were HK$18.3bn, lower than the Street estimate of HK$19-20 billion. 

 

 

The table below shows the table game market shares for October.  This morning the DIJC released that total gaming revenue, including slots, was HK$18.3 billion, up 49.8% YoY, but they do not provide market share.  We should have the property breakdown (Mass, VIP, slots, Rolling Chip volume, etc.) in the next day or two. 

 

October revenues were probably a little bit of a disappointment from earlier expectations of HK$19-20 billion.  However, business did pick up in the last week of the month and anecdotally we are hearing the Mass tables have been busier than normal at Venetian, City of Dreams, and MGM.  Fully month market shares are fairly consistent with what we were seeing earlier in the month although LVS seems to have dropped a little share late in the month and Galaxy gained some. 

 

MACAU OCTOBER MARKET SHARES - macau22


R3: ADI, PSS, CHKE, GCO

R3: REQUIRED RETAIL READING

November 1, 2010

 

 

 

 

RESEARCH ANECDOTES 

  • According to the Gallup-Healthways Well-Bing Index, “very religious” Americans have the highest levels of wellbeing (healthiness).  44% of Americans fall into the “very religious” category, attending church/synagogue/mosque at least once per week.
  • Add Prada to the list of footwear brands that allows its customers to create their own customized shoes.  The shoes are available in 16 colors and four different materials. 
  • According to a study by Equation Research, nearly 75% of CEO’s are looking outside the industry for retails’ next generation of leaders as retailers face increasing pressure to think outside their own four-walls to stay competitive. One of the key challenges will be attracting top talent, which 90% of those surveyed are saying the industry is failing to accomplish due to more attractive and lucrative options elsewhere.

OUR TAKE ON OVERNIGHT NEWS

 

Adidas HQ For Sale - Adidas America Inc. has put its North Portland headquarters up for sale, according to a report in the Portland Business Journal. The company is looking to lease back the facility a money-saving move and a spokesperson said the brand remains committed to the Portland region. According to a flyer announcing the property's availability, Adidas is looking for a buyer that will lease the eight-year-old, 320,000-square-foot campus back to the company for 10 years. "There are several business and financial reasons we are considering a sale-leaseback transaction, the most important being that it would free up funds which we can reinvest in our brand, employees and community in which we operate," said spokeswoman Lauren Lamkin, in an e-mail to the Portland Business Journal. "Adidas remains committed to continuing our strong local presence in Portland. According to the flyer, Adidas would pay $15 per square foot in rent, including 2%annual escalators, providing the eventual buyer with first-year operating income of $4.8 million. Adidas bought the site of the former Beth Kaiser hospital at 5055 N. Greeley Ave. in 1999. The $90 million development opened in 2002, allowing the company to consolidate its offices in Northeast Portland and Beaverton. <SportsOneSource>

Hedgeye Retail’s Take: Tough to argue with increasing one’s liquidity, particularly if you prescribe to further downside risk in real estate assets as outlined in our Hedgeye’s Housing Headwinds call.

 

Genesco Stock Repurchase Authorization - Genesco Inc. announced that its board of directors has authorized it to repurchase up to $35 million of the company's common stock.  The authorization replaces the remaining balance of a previous $35 million repurchase program authorized in Feb. 2010, pursuant to which the company has repurchased approximately 844,000 shares at a total cost of approximately $24.2 million, including approximately 435,000 shares repurchased during the company's third quarter ending Oct. 30, 2010 at a total cost of approximately $13.0 million. <SportsOneSource>

Hedgeye Retail’s Take: Replacing an authorization updated earlier this year, this could be either a case of poor planning at the board level, or a bullish sign of internal expectations with shares near multi-year highs – either way, we view it as a positive.

 

PSS Launches ATR - Collective Licensing International last week relaunched the Above the Rim brand at an event held at the Hudson Hotel on W 58th St. in New York City. Former NBA players Daryl Dawkins, Anthony Mason and Bo Kimble attended the event along with several ambassadors as part of a new community-based grant program. The 21-year-old Above The Rim brand was purchased from Reebok in January. ATR will launch with a limited basketball footwear collection available now at Payless ShoeSource, which is also part of Collective Brands. The initial collection will include three key styles, the Pivot, Crosscourt and Rise.  In addition, ATR will launch a full scale, premium basketball footwear and apparel collection geared toward specialty retail, department store and better sporting goods channel for Spring 2011 and backed by NBA star endorsements. The Spring footwear collection will be highlighted by the first signature ATR style created for Martell Webster of the Minnesota Timberwolves.  Available in four colorways, his Elevate MW5 shoe will debut in Spring 2011 and will be featured in the return of ATR's advertising efforts. <SportsOneSource>

Hedgeye Retail’s Take: One of Collective Licensing’s many brands in the portfolio, we like the opportunity ahead for ATR to capture share in a category dominated by a single player – Nike. Coming off such a small base, even modest share gains would drive meaningful growth. With the brand left for dead by Reebok, Collective has done a solid job lining up known endorsements that should drive interest at a considerably lower price point than industry average.

 

Cherokee Goes China - California-based Cherokee Inc. has officially launched its namesake brand in China through a distribution deal with RT-Mart, the country’s largest supermarket chain by sales volume. “This is one of the biggest launches we have ever had in a huge country and with a very aggressive company,” Cherokee chief executive Henry Stupp said at a recent launch event, which featured a runway show of the fall-winter collection. “We felt right from the beginning that RT-Mart had a long-term vision for where they wanted to take this brand, and they respected the culture, the history and the legacy of Cherokee.” Cherokee inked the exclusive, multi-year international licensing deal last November with RT-Mart, a division of Ruentex Industries Ltd., a Taiwan-based textile company. French retailer Groupe Auchan SA also owns a stake in the hypermarket chain, which first opened in China in 1997 and now has 134 stores on the mainland. <WWD>

Hedgeye Retail’s Take: Smart move for a company and brand that is essentially an exclusive at Target.  With growth 100% tied to TGT and it’s license, China makes a ton of sense.

 

Loehmann’s Running Out of Options -  The Melville, N.Y.-based off-price chain has defaulted on its credit agreement and is exploring reorganization options, including a possible bankruptcy or prenegotiated restructuring. The discounter said Friday it was unable to complete a swap of old notes due next year for new ones due in 2014, falling shy of the 97 percent of required votes by 4.6 percent. Without completing the swap, the off-pricer was unable to make its October interest payment to bondholders, as it had planned to do today. Loehmann’s last month was able to get a 30-day extension on its October interest payment in order to execute the swap. Istithmar, the investment arm of Dubai World, which owns Loehmann’s and Barneys New York, was expected to provide additional funding for the beleaguered retailer had the transaction been completed. Loehmann’s said Friday it was in discussions with certain bondholders and Crystal Financial LLC, its revolving credit lender, regarding its options. “While this dialogue has been generally constructive to date, there can be no assurance that these negotiations will be successful,” the company said. Jerald Politzer, chairman and chief executive officer of Loehmann’s, could not be reached for comment Friday. Earlier last month, the retailer said it had the approval of a requisite number of bondholders to close up to 15 stores over the next year. It currently operates 60 stores in 16 states. <WWD>

Hedgeye Retail’s Take: With the competitive landscape becoming more consolidated (Syms/Filene’s Basement) and the rich getting richer (ROST/TJX) it’s not surprising that Loehmann’s struggle for survival may ultimately be nearing an end.

 

Patagonia Driving Green Awareness - Later this month, Patagonia catalogue shoppers will be among the first to find out about the company’s Common Threads Initiative. Instead of just hailing the benefits of recycling and reusing clothing, the program is also meant to encourage consumers to think twice before they buy something new. “Don’t buy this jacket unless you really need it” will be one of the cautionary messages used on hangtags, posters and other in-store signage. Self-defeating as that might sound, founder Yvon Chouinard said this unconventional approach will “increase my business like crazy,” namely because the brand will cut into competitors’ sales. Over the past few years, the recession has made people more conservative about spending, more interested in long-lasting and better-quality items, he said. “We want people to imagine our lives consuming less and living simpler lives based on what we need as opposed to what we want,” said Chouinard, whose company has donated 1 percent of its annual sales — $40 million to date — to environmental organizations for years. The brand’s four Rs — reduce, repair, reuse and recycle — will be fleshed out in the holiday catalogue, which ships to about 1.2 million shoppers Nov. 15. To reduce, Patagonia is recommitting to making durable, multifunctional clothes that stay reasonably in fashion. Repair guarantees that if a zipper fails before a garment does, the company will fix it for free. As part of its reuse effort, the brand will help provide a way for shoppers to sell, trade or donate garments they no longer want. <WWD>

Hedgeye Retail’s Take: Check out Patagonia’s blog for another interesting initiative which tracks the manufacturing of its garments by country and by component.  If you’ve ever wondered how complex it is to make a piece of outerwear (and in a social responsible way) then this is worth a look.

 

Holiday Spending Forecasted to Rise Per Deloitte Survey - Consumer spending during this year's holiday season is expected to be slightly higher than in 2009, despite worries about the general state of the economy, according to Deloitte's 25th Annual Holiday Survey. The survey found that 62% of those questioned plan to spend more or the same on the holidays, up 11% from Deloitte's 2009 holiday survey and the highest level since 2006. The average total holiday spend per consumer is expected to grow to $1,160 this year, up from $1,145 in 2009. Consumers plan to spend a total of $466 on gifts, the first increase since 2004. However, the average number of gifts fell for the third consecutive year, to 16.8. Consumers hold a conservative outlook on the U.S. economy, with nearly four out of 10 (39%) of those surveyed expecting the economy to improve next year, down from more than half (54%) who anticipated an improvement at this time last year. Two-thirds (66%) of consumers surveyed indicate their household financial situation is the same or better than last year at this time, a 10 percentage point rise from 2009. <SportsOneSource>

Hedgeye Retail’s Take: While the holiday is likely to end up being better than last year, we won’t know it until it’s pretty much over.  Last minute shopping and post holiday deal scavenging will be bigger than ever.

 

November Key Month for e-Commerce - Forget Black Friday, the deal-crazy day after Thanksgiving when turkey-fattened holiday shoppers scour the web and race into stores in search of the most outrageous deals. For online retailer Newegg Inc., the holiday effort really kicks off Monday with a month of deals the e-retailer is calling Black November. “We plan a pretty strong assault beginning Nov. 1,” says Bernard Luthi, vice president of Internet and product marketing at Newegg, which sells computer and electronics equipment. “We’re looking to offer strong bargains, category-wide promotions and specific hot deals. We’re sending the message that this is an opportunity to land some bargains before the crazy, mad rush begins the day after Thanksgiving.” He expects other retailers also will begin a big push this week. “Everyone’s looking to get a head start,” Luthi says. <internetretailer>

Hedgeye Retail’s Take: Despite the hype over November e-com sales, the largest online shopping day is expected to be Dec 14th aka Green Tuesday.

 

Mobile Functionality a Challenge for Retailers - US internet users place great demands on multichannel retailers. A majority expect to be able to track, modify, complete and order from any channel, according to a July 2010 survey from Sterling Commerce. Shoppers expect to use a variety of routes from research to purchase, especially during the holiday shopping season. And as smartphones continue to proliferate and more consumers use their phone as yet another shopping channel, retailers must be ready to offer capabilities through the mobile web or an app, or both. While many retailers focus on the price-comparison ability of smartphones, which allows in-store shoppers to check competitors’ prices, web users surveyed by Sterling Commerce said the single most important shopping function of a mobile phone was the ability to check whether a product was in stock. <eMarketer>

Hedgeye Retail’s Take: This should come as no surprise to any retailer who is in touch with their customers.  Instant satisfaction and accurate information are now prerequisites for consumers.  After all, a mobile platform should be viewed as merely an extension of desktop shopping.

 

R3: ADI, PSS, CHKE, GCO - R3 1 11 1 10

 

Cambodian Strikes Likely - A local workers’ union in Cambodia plans to restart workers’ strike in front of clothing outlets and shops if the cases of the suspended workers are not solved. The secretary general of the Coalition of Cambodian Apparel Workers Democratic Union (CCAWDU) has been urging the government as well as garment industry representatives in an offer to help the union workers who had been suspended before the court’s verdict on the validity of the unions’ strikes came. The Ministry of Social Affairs had told CCAWDU to give them some time in order to solve the problem before restarting strikes and requested workers to respect the company rules and the Labor law of the country. According to the CCAWDU, ninety-four union representatives had been suspended from their jobs as they were related to the strikes that took place last month. The Secretary General of the Garment Manufacturers Association in Cambodia requested workers to remain away from the strikes which will do more harm than good to the industry. <FashionNetAsia>

Hedgeye Retail’s Take: Further labor unrest can only lead to one thing over time. Inflation.

 

China Footwear Brand Upgrades Image by Moving to Beijing - China’s footwear brand Kangnai has recently opened its first national flagship store in Beijing as a way to build itself a more high-end image. President of the group Zheng Xiukang said the opening of the Beijing store marks the beginning of the company’s transformation from a shoe maker to a high-end brand.  The new “Kangnai Family” leather shoe collection will be sold at the newly opened store with prices ranging from  CNY1200 to CNY1800. Currently, Kangnai has 2,900 retail stores worldwide and five hundred stores will be selling the new Kangnai Family products. The company is also planning to open more flagship stores nationwide. As the first Chinese footwear company opening stores overseas, Kangnai has 270 retail stores in the EU and the US, and 2,600 domestic franchise stores in China. <FashionNewAsia>

Hedgeye Retail’s Take: Yet another example of a Chinese company looking to tap into its domestic consumer rather than just being a “manufacturer.” 

 

 

 

 

 

 

 

 

 

 


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DIY Under Pressure

There’s mounting anecdotal and macro evidence that suggests momentum has slowed in the home improvement sector over the past 4-6 weeks.  Below we’ve taken highlights (lowlights) of commentary from major suppliers to the DIY channel from earnings calls over the past few weeks.  While this is hardly scientific, the breadth of product categories covered here along with the consistency of the negative commentary is something to consider.  Yes, we know that the supplier base to HD and LOW is highly, highly fragmented.   Either way, these are several of their largest suppliers.

 

Putting anecdotes aside, we’re also including a handful of the latest data points supporting Hedgeye’s Housing Headwinds call.  The data simply speaks for itself and on the very surface should be factored into anyone’s process for evaluating further recovery in the DIY marketplace.  In our view, the topline challenges resulting from a double-dip in domestic housing will likely be too big to overcome in the near-term.  As such in the absence of accelerated revenue growth, earnings should come under pressure.

 

Finally, to complete the trio of comments and supporting macro data we’ve included our Macro team’s quantitative (and bearish) view on LOW.  Of all the home related names, LOW stands out as the name with the greatest downside risk.  Hedgeye’s key price levels are below:

 

DIY Under Pressure - LOW 10 29 10


Supplier comments

 

10/14 Universal Forest Products (UFPI)- We were disappointed in our sales to our big-box customers, but pleased with the advances we're making with other retail business. We were equally disappointed with our drop in margins, but I can't imagine a circumstance again that would lead to such challenges with inventories.

 

By market, our sales to the DIY market decreased 8% due to a decline in unit sales as a result of soft consumer spending. Within this market, our mix changed as well.  Sales to our big-box customers declined 13% while sales to other retailers increased 11% due to market-share gains.

 

10/20 Stanley Black & Decker (SWK)- On the mechanical side, they're still battling tough market conditions. They had a negative 6% organic growth in legacy Stanley, five points of that was attributable to a large retail customer destocking residential hardware. That was pretty much as expected.

 

Okay, well I would say the weeks on hand, first of all, we have one major retailer that took about half a billion dollars of inventory out in their system in the last 90-120 days, and that may or may not continue into the fourth quarter, probably will continue to some extent.

 

…we see a scenario where point-of-sale is not robust at most of these customers. It's not terrible. It's just kind of bumping along flattish kind of territory, and our invoice sales was very consistent from a volume point of view, from a unit point of view, with that in the legacy Stanley business in the third quarter. So as we would step back from it I'd say we would probably see caution at the winds in the retailers, and part of our outlook reflects that, so we've kind of baked in the environment in a very reasonable way here.

 

10/21 Briggs & Stratton (BGG)- We continue to believe that overall inventories in the channel are reasonable for this time of year. It appears that OEMs, mass retailers and dealers are continuing to be very conscientious with regard to the amount of working capital invested in inventories.

 

10/26 Masco (MAS)-  We'll start with Cabinets. Tough quarter in both North America and internationally. Sales for Cabinets were down 18%.

 

Other question I wanted to ask was on key retail sales or sales to key retailers that softened in 3Q, it looked like four points versus 2Q. Can you give any further perspective on to that and to sell in relative to sell through perhaps trends in the quarter and kind of how things have started out in 4Q there?

 

I think we saw slowness pretty much across-the-board, whether it's a smaller ticket item like paint or plumbing or a big ticket like cabinet, so there isn't any issue or concern relative to share. No concerns, just outside of the macro environment I think our feeling is that consumers have just sort of closed down to a certain extent and we talk a little bit about that coming out of the second quarter. So I don't think there's any unique trends or anything else going on Donny that I'm aware of.

 

I'll take the repair/remodel related activity. I think if anything, you can kind of see that in our sales to our key retail customers.  We were positive in the first quarter of this year. We were flat in the second quarter. We're down a little bit in the third quarter, so if anything, our experience is that even lower ticket items we're seeing a little bit of slowness. Now, again, is that temporary? This year has been kind of funny. It started out very slow. March and April were pretty strong and since that point in time, things have tended to slow up a bit. Still not seeing a lot of traction for larger ticket repair/remodel activity.

 

I think there's maybe been a little bit more traffic. A little bit more in terms of people looking or considering but not necessarily willing to pull the trigger. In terms of price commodity over the last three months or your specific question is about price, I don't know that I would say that things are any more difficult than they normally are. That's always a tough conversation and will continue to be a tough conversation but I don't know that it's any more difficult. We continue to manage price commodity very aggressively and I don't know Donny if you have anything you want to add.

 

10/27 Whirlpool (WHR)-  And we did see some softness in demand during the third quarter. In spite of this weakening demand environment, over all we performed very well from a branded share perspective.

 

And while we have had a very positive consumer receptions to our new product innovations launch during the third quarter, the overall price mix environment was more challenging than our previous expectations particularly North America.

 

But at the same time industry volumes and the pricing environment were more challenging than expected and we took actions to make some aggressive competitive pricing pressure.

 

Let me also allude a little bit to this one. North America has, right now, flat to high inventory levels so it's about what we consider optimal. And that's basically twofold, one is yes there's quite a bit of Q4 pre-build and the other piece, we saw the market slow down in particularly during the second part of the third quarter and obviously it takes a little while to take that out of inventory. We have taken measures to work the end of September particularly in October, November to run down production to what we would consider appropriate levels of inventory which given the somewhat choppy demand environment will be slightly higher because we have got to be able to respond to the change in demand trend.

 

Housing Headwinds

 

The following are excerpts from recent posts published by Hedgeye’s Financials team.  If you’d like additional data or more detailed analysis supporting the Housing Headwinds thesis, please let us know

 

New Home Sales 

New Home Sales rose 6.6% to 307k SAAR. Is this a cause for celebration? Remember that it was just six months ago that a then-record-low print of 300k caused significant angst and a material selloff. Since then the numbers have remained in this 300k range. Expectations appear to have come a long way. To summarize our cumulative displacement theory, there was an epidemic of overbuilding during the bubble, which will take a very long time to work off.  Using a sales rate of 300k, we calculate that sales would have to continue at this level for ten years for the cumulative displacement from the mean to return to zero. Yes, new home inventory is very low, but we don't see sales rebounding anytime soon.  

 

DIY Under Pressure - eric new

 

Home Sales Rise as Prices Fall

Existing Home Sales rose 9.7% to 4.53 million (seasonally adjusted annualized rate) in September.  As Existing Home Sales are a lagging data series, it is still benefiting from a rebound off of the post-tax-credit lows. Below we show charts of existing home sales and median prices.

 

DIY Under Pressure - eric existing

 

Case-Shiller

The following chart shows Case-Shiller home price data on a month-over-month basis. As we've highlighted previously, by S&P's own admission, investors should not rely on the seasonally adjusted (SA) data as their seasonal adjustment factors are essentially unreliable. Rather, investors should rely on the non-seasonally-adjusted data as a better indicator of underlying trends.  It's worth emphasizing that the Case-Shiller series does have a notable seasonality - specifically, it generally improves sequentially through April, May, and June - so the NSA data has its own shortcomings.  

 

DIY Under Pressure - eric case shiller

 

 

 

Eric Levine

Director


THE M3: POSITIVE GALAXY OUTLOOK

The Macau Metro Monitor, November 1st, 2010


GALAXY HOPING FOR A "VERY POSITIVE" FOURTH QUARTER FOR MACAU OPERATIONS macaubusiness.com

Robert Drake, CFO at Galaxy,  said, "The fourth quarter remains very positive. The first part of the quarter, October, is very strong. We remain very optimistic about the prospect of Macau. We think the future is very bright." On Galaxy Macau, he said, “We haven’t given an exact date out, it’s a little premature to give out an exact day. We want to make sure that we execute operationally and move forward. In the not too distant future we will release when our opening date is. We are on time, on budget."


WEEKLY FINANCIALS RISK MONITOR - SHORT-TERM OUTLOOK REMAINS NEGATIVE

Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Negative / 2 of 10 improved / 5 of 10 unchanged / 3 of 10 worsened
  • Intermediate-term (MoM): Positive / 5 of 10 improved / 3 of 10 unchanged / 2 of 10 worsened
  • Long-term (150 DMA): Negative / 1 of 10 improved / 1 of 10 unchanged / 7 of 10 improved / 1 of 10 n/a

WEEKLY FINANCIALS RISK MONITOR - SHORT-TERM OUTLOOK REMAINS NEGATIVE - summary

 

1. US Financials CDS Monitor – Swaps were split last week, tightening for 19 reference entities and widening for 10. 

Tightened the most vs last week: COF, ACE, TRV

Widened the most vs last week: PMI, MTG, GNW

Tightened the most vs last month: ACE, ALL, TRV

Widened the most vs last month: BAC, WFC, COF

 

WEEKLY FINANCIALS RISK MONITOR - SHORT-TERM OUTLOOK REMAINS NEGATIVE - us cds

 

2. European Financials CDS Monitor – In Europe, swaps were similarly mixed. Swaps tightened for 23 of the 39 reference entities tightened and widened for 16, but the average level rose 13 bps, largely driven by increases in Greek bank CDS levels.    

 

Tightened the most vs last week: Commerzbank, Banco Popolare, Svenska Handelsbanken

Widened the most vs last week: Greek banks: Alpha Bank, EFG Eurobank Ergasias, National Bank of Greece

Tightened the most vs last month: Erste Bank, National Bank of Greece, Bakinter

Widened the most vs last month: Alpha Bank, Bank of Ireland, Swedbank

 

WEEKLY FINANCIALS RISK MONITOR - SHORT-TERM OUTLOOK REMAINS NEGATIVE - euro cds

 

3. Sovereign CDS – Sovereign CDS increased 36 bps on average last week as Greece, Ireland and Portugal continued to surge higher.   

 

WEEKLY FINANCIALS RISK MONITOR - SHORT-TERM OUTLOOK REMAINS NEGATIVE - sovereign

 

4. High Yield (YTM) Monitor – High Yield rates fell slightly last week, closing at 7.85 on Friday.  

 

WEEKLY FINANCIALS RISK MONITOR - SHORT-TERM OUTLOOK REMAINS NEGATIVE - high yield

 

5. Leveraged Loan Index Monitor – The leveraged loan index rose 7.3 points last week, closing at a new YTD high. 

 

WEEKLY FINANCIALS RISK MONITOR - SHORT-TERM OUTLOOK REMAINS NEGATIVE - lev loan

 

6. TED Spread Monitor – Last week the TED spread rose, closing at 17.5 bps.

 

WEEKLY FINANCIALS RISK MONITOR - SHORT-TERM OUTLOOK REMAINS NEGATIVE - ted spread

 

7. Journal of Commerce Commodity Price Index – Last week, the index fell 1.6 points, closing at 16.5.

 

WEEKLY FINANCIALS RISK MONITOR - SHORT-TERM OUTLOOK REMAINS NEGATIVE - joc

 

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields continued to climb sharply, rising 120 bps week over week, and are now rising on a month-over-month basis as well.

 

WEEKLY FINANCIALS RISK MONITOR - SHORT-TERM OUTLOOK REMAINS NEGATIVE - greek bonds

 

9. Markit MCDX Index Monitor – The Markit MCDX is a measure of municipal credit default swaps.  We believe this index is a useful indicator of pressure in state and local governments.  Markit publishes index values daily on four 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. Our index is the average of their four indices.  Spreads fell to their lowest level for at least four months before rebounding slightly to close at 189.   

 

WEEKLY FINANCIALS RISK MONITOR - SHORT-TERM OUTLOOK REMAINS NEGATIVE - markit

 

10. Baltic Dry Index – The Baltic Dry Index measures international shipping rates of dry bulk cargo, mostly commodities used for industrial production.  Higher demand for such goods, as manifested in higher shipping rates, indicates economic expansion.  Last week the index fell five points, closing at 268 versus 273 the prior week.  

 

WEEKLY FINANCIALS RISK MONITOR - SHORT-TERM OUTLOOK REMAINS NEGATIVE - baltic dry

 

Joshua Steiner, CFA

 

Allison Kaptur


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 80.64%
  • SHORT SIGNALS 78.61%
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