prev

THE HBM: YUM, WEN

THE HEDGEYE BREAKFAST MONITOR

 

MACRO NOTES

 

Comments from CEO Keith McCullough

 

Consensus expectations for a European solution were what failed this week – this will take time.

  1. CHINA – just a market mess in Asia overnight led by what we know - an acceleration in Growth Slowing in China – Industrial Production came in at +12.4% (lowest report since 2009) and inflation dropped, sequentially, inline w/ our model’s estimate at 4.2%. Deflating The Inflation (positive) will take time too. Chinese stocks hit a 33 month low (down -24.5% from YTD high).
  2. GERMANY – the most important Global Macro factor to solve for when analyzing a country = GROWTH. The Bundesbank cut their Growth estimate huge this morning for 2012 to 0.6% (from 1.8% prior). European Stagflation is what kills Equity multiples, and there is no central plan that can stop gravity (Growth Slowing). Next line of DAX support = 5776.
  3. RUSSIA – I’ve been up for 2 hrs and have yet to see or hear someone mention that the Russian stock market is crashing (that doesn’t mean it ceases to exist) – down -4.3% this morning and down -33.5% from YTD high confirming 2 Big Mac-ro calls we had yesterday: A) Strong Dollar and B) Cutting our Asset Allocation to Commodities back to 0%. Brent Oil snapped its TAIL line of $110.42.

 

With US Stocks down for both November and December, Santa is going to have to have one heck of a rally in the next 2 weeks for us to be wrong. I am hearing that central planners are considering moving the date on Christmas however.

SP500 support 1231; TAIL resistance 1270. Manage your risk around that range.

 

KM

 

 

SUBSECTOR PERFORMANCE

 

THE HBM: YUM, WEN - subsector fbr

 

 

QUICK SERVICE

 

YUM: Yum! Brands was upgraded from Market Perform to Outperform at Bernstein.

 

WEN: Wendy’s tweet related to the annual promotion the company does to raise money for the Dave Thomas Foundation for Adoption was the most retweeted tweet in 2011.

 

THE HBM: YUM, WEN - stocks 129

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 


Popular Delusions

This note was originally published at 8am on December 06, 2011. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“During the great plague of London, in 1665, the people listened with avidity to the predictions of quacks and fanatics.”

-Charles Mackay

 

That’s one of my favorite quotes from one of my favorite economic history books – “Extraordinary Popular Delusions and the Madness of Crowds.” It serves as a healthy reminder that the psychology of the market can remain unhealthy, until it snaps.

 

Oh snap. After the US stock market puts on an +8.5% (99 point) move in less than a week, how dare the hockey head at Hedgeye Risk Management say sell!

 

How dare I say sell in February or April 2011 at SP500 1340 or 1363? How dare I not align my 2011 GDP estimates with Keynesian Quacks? How dare I do any globally interconnected work and say sell into year-end?

 

Oh, the almighty “year-end rally.” This is the stuff of savants. All it requires is the most elephantine intellects created on earth to summarily conclude that it has to happen – with other people’s money!

 

I was on the road in NYC seeing clients yesterday and that was a question I got in every meeting – why can’t we have a year-end rally?

 

My answer: why not?

 

After being down from April to September, US stocks rallied to a lower-high in October. After being down over -7% in a straight line for 4 weeks in November, stocks rallied to another lower-high on the last day of the month. After starting off down for December, heck, it made another lower-high yesterday too. Hallelujah, Yes We Can rally, baby!

 

Hopefully that’s as fanatic as I have sounded all year. I needed to get that off my chest.

 

Back to the Global Macro Grind…

 

Rather than get sucked into the speculation that European central planners are going to be able to suspend economic gravity this Friday, here’s what the rest of the world’s interconnected market is telling us this morning:

 

ASIA

  1. Australia is seeing growth’s slowdown accelerate on the downside here in December and cut interest rates to 4.25% overnight
  2. Australian stocks ultimately went down -1.3% on the “rate cut” news as Growth concerns trump policy moves
  3. China’s stock market closed down again overnight, taking the Shanghai Composite below its pre-rate cut level from last week
  4. Hong Kong’s stocks market fell another -1.2% overnight as it remains in crash mode (down -22.4% from its 2011 high)
  5. Singaporean stocks fell another -0.6% after reporting a recessionary PMI for NOV of 48.7 (down vs 49.5 in OCT) 

EUROPE

  1. EUR/USD fails, again, at all of our risk management levels of resistance (immediate-term TRADE resistance = $1.36)
  2. French Bond Yields (10yr) make another higher-low, holding the important 2.89% level of TAIL line support (3.29% last)
  3. German Bund Yields (10yr) make higher-lows as well and rally back up to 2.24% (+18bps over US Treasuries)
  4. France’s CAC40 rallies to another lower-high and remains bullish TRADE (3071 support); bearish TREND (3402 resistance)
  5. Italy’s MIB Index rallies to another lower-high and remains bullish TRADE (15,169 support); bearish TREND (18,925 resistance)

USA

  1. US Dollar Index remains in a Bullish Formation with TRADE line support at $77.71, keeping the Correlation Risk obvious
  2. US Treasury rates on the long-end of the curve continue to signal that US Consumption Growth slows as inflation rises  
  3. SP500’s immediate-term rally post “coordinated easing” has been exactly the same amount of S&P points as the SEP2008 rally
  4. SP500 is immediate-term TRADE bullish (1234 support) and long-term TAIL bearish (1270 resistance)
  5. Equity Volatility (VIX) is immediate-term TRADE bearish (30.12 resistance) and long-term TAIL bullish (22.98 support)

But, but, can’t we rally into year-end?

 

Let me look at the casino futures and give you an answer for the next 3 hours of trading…

 

Yes!

 

But to where? And, more importantly, then what? The typical Perma-Bull market operator has fed off of this thing that The People of the United States of America have a say in called inflows – as in the amount of money Americans are willing to invest in their 301k.

 

In addition to A) Shortening Economic Cycles and B) Amplifying Market Volatilities, the other major unintended consequence of Big Government Intervention in markets has been the loss of trust The People have in free-markets.

 

Trust?

 

Call me a quack, fanatic, or Mucker this morning and I’ll be totally cool with all 3 as long as that puts me in preservation of capital mode as the Street gets paid to suspend disbelief that a 1-week Keynesian Santa rally is real.

 

My immediate-term support and resistance ranges for Gold (broken TREND line support this morning), Brent Oil (broke TAIL line support this morning) and the SP500 are now $1720-1743, $109.06-110.42, and 1234-1260, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Popular Delusions - Chart of the Day

 

Popular Delusions - Virtual Portfolio



investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

The Secret

“The secret is to work less as individuals and more as a team. As a Coach, I play not my eleven best, but my best eleven.”

-Knute Rockne

 

Born in Voss, Norway, Knute Rockne was an American immigrant who coached college football in this country when the US Government didn’t have a perma-central plan for losers on the fields of finance to win.

 

Between 1, Rockne’s Notre Dame football teams amassed an amazing win/loss record of 105-12. He was not a qualitative analyst of the game. He was a chemist who learned how to change the game.

 

Re-think, Re-work, and Re-build – whether it was Rockne’s introduction of the forward pass, or Hedgeye’s vision of real-time risk management – this is the America that most of us love and believe in.

 

It was a great year…

 

I can say that tonight at the 4thannual Hedgeye Holiday Party. I can say that because we hired, net, more Americans than Bank of America, Citigroup, and Morgan Stanley, combined. I can say that because my team did so profitably (paid up +24% year-over-year). I can say that because we are building something, as a team, that no one can centrally plan away from us.

 

The Secret to our success is very simple. Whether you like our hockey learnings in life or not, my defense partner, Daryl Jones, summarized it best at our Company Meeting this week in New Haven:  

 

“It’s the name on the front of the jersey that matters more than the name on the back.”

 

That’s what USA Olympic Hockey Coach, Herb Brooks, famously said. It’s different than what Knute Rockne or Vince Lombardi said about winning – but it’s really all the same thing. It’s The Secret of American success.

 

Back to the Global Macro Grind

 

Yesterday’s intraday spanking of the S&P Futures came right on time with our catalyst – a failed European Summit. Failure, of course, being measured versus the market’s consensus expectations. With the SP500 dropping 34 handles from its Tuesday and Wednesday intraday highs, a -2.6% draw-down left a mark on Santa’s sleigh.

 

But where is old Saint Nick? We’ve done battle in the corners with any bull that wanted a piece of us in November. We’ve banged the boards for the home team on the “sell-high” side for the first 10 days of December. With the US and Global Equity markets down for both November and December, we’re calling this a win.

 

That’s just measuring success, of course, on our most immediate-term duration – at Hedgeye we call it the TRADE. And while many “long-term investors” don’t TRADE (or manage risk – same thing) like we do, we get that and also have a risk management framework that incorporates longer-term investor durations:

  1. Immediate-term TRADEs = 3 weeks or less
  2. Intermediate-term TRENDs = 3 months or more
  3. Long-term TAILs = 3 years or less 

Like Rockne’s vision of the forward pass, our vision of risk management has more to do with Embracing Uncertainty across durations than it does locking ourselves into a certainty of style. Our style isn’t to be bullish. It’s definitely not to be bearish either. It’s simply to be right – and being Duration Agnostic helps accomplish that.

 

In US Equities, across durations, what’s the score?

  1. TRADE = The SP500 is down -1% for December, 2011
  2. TREND = The SP500 is down -9.5% from its YTD high (April 2011)
  3. TAIL = The SP500 is down -21.2% (still in crash mode) from its October 2007 high

Since we’re one of the only teams that writes what we think to you in real-time that nailed both Global Growth Slowing calls of 2008 and 2011, we can celebrate our process tonight for what it’s accomplished – helping become a part of your risk management process.

 

That’s The Secret. We can collaborate and partner with our clients in a way that Marcus Goldman could. We can learn much more from your teams, collectively, than you can learn from ours – and we like that. It’s ok to learn. It’s ok to say I don’t know. It’s ok to say hey, we’re winning out there, together, and we’re proud of it.

 

I personally want to thank my teammates and all of you. As a Canadian immigrant to America, it’s both a pleasure and a privilege to wear this Made in the USA jersey every day.

 

My immediate-term support and resistance ranges for Gold (bearish TRADE and TREND), Brent Oil (bearish TAIL and TRADE), Gemany’s DAX and the SP500 are now  $1, $107.11-110.31, 5, and 1, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

The Secret - Chart of the Day

 

The Secret - Virtual Portfolio


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – December 9, 2011

 

With US Stocks down for both November and December, Santa is going to have to have one heck of a rally in the next 2 weeks for us to be wrong. I am hearing that central planners are considering moving the date on Christmas however.  As we look at today’s set up for the S&P 500, the range is 17 points or -0.03% downside to 1234 and 1.35% upside to 1251. 

 

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - levels 129

 

THE HEDGEYE DAILY OUTLOOK - daily sector view

 

THE HEDGEYE DAILY OUTLOOK - global performance

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE:  -2198 (-2370) 
  • VOLUME: NYSE 930.50 (-3.88%)
  • VIX:  30.59 +6.70% YTD PERFORMANCE: +72.34%
  • SPX PUT/CALL RATIO: 1.23 from 1.17 (+5.60%)

 

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 54.00
  • 3-MONTH T-BILL YIELD: 0.01%
  • 10-Year: 1.99 from 2.02   
  • YIELD CURVE: 1.770 from 1.880

 

GLOBAL MACRO DATA POINTS (Bloomberg Estimates):

  • US Trade Balance (Oct); consensus ($43.7B)
  • US Michigan Consumer Sentiment (Prelim.) (Dec); consensus 65.2
  • Germany Nov final CPI +2.4% y/y vs preliminary +2.4%
  • France Oct Industrial output 0.0% m/m vs consensus (0.3%), prior revised (2.1%) from (1.7%)
  • UK Nov PPI; Output +5.4% y/y vs consensus +5.4%, prior +5.7%; Core output +3.2% y/y vs consensus +3.3%, prior revised +3.3% from +3.4%; Input +13.4% y/y vs consensus +13.2%, prior revised +14.3% from +14.1%
  • Japan Q3 revised GDP +5.6% y/y vs cons +5.2% and initial +6.0%.
  • China November CPI +4.2% y/y vs cons +4.4%. November PPI +2.7% y/y vs cons +3.3%. November industrial output +12.4% y/y vs cons +12.8%. November retail sales +17.3% y/y vs cons +16.9%.

WHAT TO WATCH:

  • EU Backs $267 Billion for IMF as Draghi Hails Fiscal Pact
  • Stocks Advance, Euro Rebounds After Summit; Italy Bonds Decline
  • EU Leaders Drop Demands for Investor Write-Offs in Bailouts
  • U.S. Money-Market Funds Cut French Bank Debt by 68% in November
  • Toyota Lowers Annual Profit Forecast 54% After Thai Floods
  • Cameron Wishes Euro Bloc Well as U.K. Negotiates Isolation
  • Obama Defeats Romney in Global Poll Showing Republican Weakness

 

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Corzine’s ‘Intent’ Was to Head Off Possible Claims, Lawyers Say
  • Gold Traders Most Bullish in Month on Debt Crisis: Commodities
  • OPEC Deal May Falter on Saudi-Iran Supply Split: Energy Markets
  • Oil Heads for Weekly Decline on Economic Concern, Europe Debt
  • Extract Studies Options as $2.2 Billion China Takeover Looms
  • Stocks, Euro, Italy Bonds Retreat as ECB Damps Debt-Buying Bets
  • Gold Climbs in London on Concern About European Debt Measures
  • Corzine, MF Global Executives Face Commodity Traders’ Lawsuit
  • Malaysia’s Exports Rise More Than Estimated as Commodities Climb
  • Gold May Drop 9.5% After Triangle Formation: Technical Analysis
  • China’s Copper Output Declines to Five-Month Low in November
  • Potash Corp. Reports Cutbacks at Two Saskatchewan Mines
  • Extract to ‘Urgently’ Resume Partner Talks After China Bid
  • Climate Talks Closer to Agreement on Plan with $100 Billion Aid
  • Wilmar Beats China’s Cofco to Buy Proserpine Sugar After Vote
  • INTL FCStone Starts Trading on LME Floor in Expansion of Metals
  • Wheat Drops for a Third Day as Australia May Have Record Crop
  • Indonesian Commodity Exchange Plans to Introduce Tin Contract
  • Copper Declines in London After Car Sales in China: LME Preview

 

THE HEDGEYE DAILY OUTLOOK - daily commodity view

 

CURRENCIES

 

 

THE HEDGEYE DAILY OUTLOOK - daily currency view

 

 

EUROPEAN MARKETS

 

GERMANY – the most important Global Macro factor to solve for when analyzing a country = GROWTH. The Bundesbank cut their Growth estimate huge this morning for 2012 to 0.6% (from 1.8% prior). European Stagflation is what kills Equity multiples, and there is no central plan that can stop gravity (Growth Slowing). Next line of DAX support = 5776.

 

RUSSIA – I’ve been up for 2 hrs and have yet to see or hear someone mention that the Russian stock market is crashing (that doesn’t mean it ceases to exist) – down -4.3% this morning and down -33.5% from YTD high confirming 2 Big Mac-ro calls we had yesterday: A) Strong Dollar and B) Cutting our Asset Allocation to Commodities back to 0%. Brent Oil snapped its TAIL line of $110.42.

 

THE HEDGEYE DAILY OUTLOOK - euro performance

 

ASIAN MARKETS

 

CHINA – just a market mess in Asia overnight led by what we know - an acceleration in Growth Slowing in China – Industrial Production came in at +12.4% (lowest report since 2009) and inflation dropped, sequentially, inline with our model’s estimate at 4.2%. Deflating The Inflation (positive) will take time too. Chinese stocks hit a 33 month low (down -24.5% from YTD high).

 

THE HEDGEYE DAILY OUTLOOK - asia performance

 

MIDDLE EAST (HEADLINES FROM BLOOMBERG)

  • Iran Shows Off Downed Spy Drone as U.S. Assesses Technology Loss
  • OPEC Deal May Falter on Saudi-Iran Supply Split: Energy Markets
  • Libya’s Bey Rebuilds After Feeding Rebels Who Killed Qaddafi
  • Qatar May Consider Investing in Euro Bailout, Handelsblatt Says
  • Malaysia Yields at One-Year Low Defy Sukuk Drop: Islamic Finance
  • Gulf Keystone CEO Faces $6 Million Tax Fine Over Offshore Assets
  • Luke Donald Bounces Back From Slow Start At Dubai World Champions
  • Saudi Arabia Is in No Rush to Get New OPEC Quota, Naimi Says
  • Oil at $150 Becomes Biggest Options Bet on Iran: Energy Markets
  • Daily Mail (GB): Dubai World Championship leaderboard: Keep up to d
  • Video Rekindles Mystery Surrounding Former F.B.I. Agent Missing in Ir
  • Masdar City Offers Glimpse of Carbon-Neutral Future Amid Delays
  • EU to Consider Additional Sanctions on Iran, Summit Draft Says

THE HEDGEYE DAILY OUTLOOK - MIDEAST PERFORMANCE

 

The Hedgeye Macro Team

Howard Penney

Managing Director


THE M3: LVS VIETNAM

The Macau Metro Monitor, December 9, 2011

 

 

Las Vegas Sands mulls over tourism complex in HCM City Vietnam News Agency

According to LVS Chairman, Sheldon Adelson, LVS plans to build a tourism complex in Ho Chi Minh City at a cost of more than US$2 billion.  The complex, designed in the shape of two sails standing on a lotus, features hotels, restaurants, convention and exhibition centres, shopping, a spa area, gymnasium, theatre, museum and other entertainment places. 

Once completed, the complex is expected to become a symbol of Ho Chi Minh City , attracting more tourists to the city.  Le Thanh Hai, Secretary of the Ho Chi Minh City Party Committee, applauded LVS's idea of investing in the tourism and service sector in Ho Chi Minh City.  He affirmed that Ho Chi Minh City wishes to cooperate with LVS in the project.


GET THE HEDGEYE MARKET BRIEF FREE

Enter your email address to receive our newsletter of 5 trending market topics. VIEW SAMPLE

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.

next