NEW HAVEN, Conn., Jan. 4, 2011 -- Hedgeye Risk Management, a leading independent provider of real-time investment research and ideas, today announced that financial services veteran Bob Brooke will join the firm as Managing Director of New Business Development.
Brooke has more than 20 years of experience in financial markets and investments, in institutional equity sales and trading both domestically and internationally, private wealth management, and proprietary fund management in alternative assets.
Brooke has helped grow client rosters and revenues at firms such as Bear Stearns, CS First Boston, RBC Capital Markets, and Bernstein. His reach extended to the international markets of London, Geneva, and Paris as well as domestic territories from the upper Midwest to New York, Philadelphia and Boston. He has experience in analyzing different asset classes, alternative investment vehicles, long/short strategies, hedge funds, large and small-cap disciplines, as well as research into individual companies, their competitors, industries, and market valuations.
"Hedgeye is fortunate to have Bob Brooke join our team at this point in our growth," said Keith McCullough, CEO of Hedgeye. "He has a track record of success that extends from the highest level of professional sports to the highest levels of the corporate boardroom. As the research and brokerage landscape continues to evolve in the coming years, we look forward to having Bob lead our vast new business initiatives."
Brooke has a degree in economics from Yale, and an MBA from Harvard Business School. Prior to his career in financial services, Brooke was a member of the US Olympic hockey team and competed in the National Hockey League for the New York Rangers, Minnesota North Stars, and New Jersey Devils.
TODAY’S S&P 500 SET-UP - January 5, 2011
As we look at today’s set up for the S&P 500, the range is 10 points or -0.72% downside to 1261 and 0.06% upside to 1271. Equity futures are trading below fair value, tracking losses across Europe equities and a lower close among major Asian indices.
MACRO DATA POINTS:
TODAY’S WHAT TO WATCH:
PERFORMANCE: ALL 9 SECTORS BULLISH ON TRADE & TREND
EQUITY SENTIMENT: MIXED
CREDIT/ECONOMIC MARKET LOOK:
Treasuries were mixed with the belly of the curve outperforming. Some support was said to come from the pricing of corporate deals.
OTHER COMMODITY NEWS:
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Conclusion: While exogenous factors have driven the BDI index lower, the next move should be driven by growth, either an acceleration or deceleration, with the BDI likely being a leading indicator. So, keep your Hedgeyes on it.
We recently noted this, but wanted to highlight the point again. The Baltic Dry Index is down to an 18-month low. In fact, it most recently dropped 4.5% to 1693, taking out the July 2010 low. The largest BDI vessels, Capesize, led the way declining more than 6%.
As we wrote this summer, the Baltic Dry Index is very a relevant global macro data point. As was recently written in Slate, “Because dry bulk primarily consists of materials that function as raw material inputs to the production of intermediate or finished goods, such as concrete, electricity, steel, and food, the index is also seen as an efficient economic indicator of future economic growth and production. The BDI is termed a leading economic indicator because it predicts future economic activity.” Further, “Because it provides an assessment of the price of moving the major raw materials by sea, it provides both a rare window into the highly opaque and diffuse shipping market and an accurate barometer of the volume of global trade -- devoid of political and other agenda concerns."
We actually looked at the correlation between the Baltic Dry Index and global growth on an annual basis going back to 1993 and didn’t find a strong correlation between the two. This is primarily because while growth and demand for goods clearly and logically will lead to increased demand for shipping, there are other factors that drive the price of shipping contracts. Specifically, the two key factors that drive the price of shipping contracts: the supply and demand of ships.
The supply factor is obviously driven by the building of new ships (and likely to some extent the availability of financing and reasonable terms). Currently, oversupply is an issue. In fact, last year the supply of ships grew 17%, while demand grew only 11%. This is widely known news though, and has likely been discounted into rates for the past couple of quarters.
Conversely, the demand side of the equation is driven by the economic activity and general demand for dry bulk goods. Currently, there is an exogenous shock occurring on the demand side of the equation due to massive flooding in Australia. According to news reports, floods covering areas the size of France and Germany in Australia have damaged crops and led to a shutdown of mines. Due to the exogenous events, many Australia miners have implemented force majeure and cancelled contracts. As a result, there are 66 dry-bulk carriers idle near Brisbane. This too is widely disseminated news and likely priced into rates.
Clearly, with these exogenous events leading to a more than 45% decline in the BDI index, if global growth is going to accelerate in 2011, or even occur at high rates, we should see a pickup in the BDI. Keep your Hedgeyes on it.
Daryl G. Jones
We’re officially in the “unofficial” earnings season for retailers with both Sales Day and the annual ICR Exchange set to take place over the next several days. History paints an interesting picture (and precedent) of pre-announcements over this two week period. As such, we’ve updated our matrix of companies with a history of pre-announcing at or around the annual pilgrimage to ICR. Those with positive releases are highlighted in green while those with less positive news are highlighted in red. This year should be no different than in years past, where we are likely to see 10-15 companies update guidance in the coming days. If history tells us anything, PVH seems as sure as any to report “unofficial” results early next week.
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