The Week Ahead

The Economic Data calendar for the week of the 26th of December through the 30th is full of critical releases and events.  Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.


The Week Ahead - 1 cal a

The Week Ahead - 1 cal b

The Week Ahead - 1 cal c

NKE: Olympic Moves

Over the past 20 years, NKE has outperformed the S&P500 in 9 out of the 10 Olympic event years by an average spread of ~18%. More importantly, Nike has shown stronger gains relative to the S&P in Summer Olympic years, a la London, vs. Winter years.  


Our call on Nike goes far beyond a single sporting event. In addition, my view is that once someone holds up a chart like the one below, the ‘trade’ is known and should therefore cease to exist.


But as much as we hold on to such logic, we cannot argue with math. The math here is very clear.


Key Takeaways:

  • NKE has outperformed the S&P 500 by ~25% during Summer event years & ~12% during Winter event years over the last 2 decades (note: 1992 performance is included in both the Summer & Winter calculations).
  • From a timing perspective, over the last 3 Summer Olympic event years (Beijing, Athens, Sydney), NKE has significantly outperformed the S&P benchmark in the 3-6 month period following the event.

NKE: Olympic Moves - olympics table


NKE: Olympic Moves - olympics bar chart

Weekly European Monitor: The Difference a Day Makes

Positions in Europe: Short France (EWQ)

Asset Class Performance:

  • Equities: country indices were largely up w/w. Top performers: Ireland 5.1%; Austria 5.0%; Czech Republic 4.9%; Finland 4.8%; Sweden 4.7%. Bottom performers: Ukraine -2.3%; Russia (MICEX) -20bps
  • FX: The EUR/USD flat w/w. Divergences: RUB/EUR +2.6%, PLN/EUR +1.3%; CZK/EUR -1.7%
  • Fixed Income: 10YR sovereign yields broadly increased w/w, led by Italy +64bps; Greece +48bpsbps; and Spain +26bps. Italy’s 10YR is now up to 6.98%! Last week saw the ECB’s SMP buy 3.36 Billion EUR of secondary sovereign bond issuance, vs two weeks prior of a mere 635MM EUR. We think the continued elevated level of peripheral yields demonstrates that the SMP facility alone cannot arrest yields.

Weekly European Monitor: The Difference a Day Makes - 1. yields



Call Outs:


The European week was dominated by one major theme: the ECB’s LTRO


While on Tuesday European equity markets ripped ahead of Wednesday’s opening of the ECB’s first 3YR Long Term Refinancing Operation (LTRO) facility, with 523 banks taking up €489 billion in loans at 1% (vs initial estimates of €293B from Bloomberg and €310B from Reuters), European equities turned down on Wednesday and sovereign yields actually increased day-over-day, an indication to us that the LTRO will not be the panacea that the market had hope for. What a difference a day makes! (For more see our note on 12/21 titled “Optimism Is Over Ski Tips On LTRO”). Key points include:

  • We’d caution against an absolutist view that banks will be buying all European sovereign paper issuance going forward as they’ll stand to benefit from the carry trade, or spread.
  • These same banks have taken significant measures to sell their Europig debt holdings in the last 6-12 months. Why would they jump back in now? 
  • A more likely scenario is one in which banks look to take care of their own houses first before looking to participate in sovereign bond buying.
  • In the face of the inability to lever up the EFSF and no change on the ECB’s position to print money, we do think the opening of ECB’s LTRO facility is bullish, yet we don’t think we’re going to cross some magic bridge that will firewall the major issues.


Interest Rate Decisions:


(12/20) Riksbank Interest Rate CUT 25bps to 1.75%

(12/20) Hungary Base Rate HIKE 50bps to 7.00%

(12/21) Czech Republic Repo Rate UNCH at 0.75%

(12/22) Turkey Benchmark Interest Rate UNCH at 5.75%

(12/23) Russia Refinancing Rate CUT 25bps to 8.00%



Chart of the Week:


-Below we show Consumer Confidence from the countries reporting data this week. Of note is that while we are getting some slowing in the declines month-over-month (Germany here shows positive divergence), we’d expect confidence to continue to wane alongside the uncertainty on Eurocrat actions to reduce sovereign and banking risk.


Weekly European Monitor: The Difference a Day Makes - 1. consumer confid



CDS Risk Monitor:


-On a w/w basis, CDS was largely down across the periphery.  Italy saw the largest pullback at -32bps, followed by Spain (-18bps) and Ireland (-11bps).  On a m/m basis, Spanish CDS is down -95bps and Italian CDS is down -57bps.


Weekly European Monitor: The Difference a Day Makes - 1. cds a


Weekly European Monitor: The Difference a Day Makes - 1. cds b




-Our position remains unchanged week-over-week: we’d short the cross at $1.33 for an immediate term TRADE.  The EUR/USD remains broken long term TAIL ($1.40) and intermediate term TREND ($1.42) in our models and we think the lack of resolve from the newest proposals for a fiscal union will encourage greater downside. 



The European Week Ahead:


Sunday: European Bank capital raising “plans” due for meeting 106 Billion EUR target


Monday: Nov. France Total Jobseekers and Net Change


Tuesday: Dec. Finland and Czech Republic Consumer/Business Confidence


Wednesday: Dec. UK Nationwide House Prices (Dec 28-30th); Q3 Russian Current Account (Dec 28-31st)


Thursday: Nov. Eurozone Money Supply; Dec. German Consumer Price Index – Preliminary; Dec. Italian Consumer Confidence; Q3 Hungarian Current Account; Q3 Ukraine’s GDP – Final


Friday: Nov. German Retail Sales; Q3 BoE Housing Equity Withdrawal; Nov. Italian PPI; Dec. Spain’s Consumer Price Index – Preliminary 



Matthew Hedrick

Senior Analyst

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 80.47%
  • SHORT SIGNALS 78.69%

WMT: Under-Owned by Big Money


“Big money got a heavy hand, Big money take control, Big money got a mean streak, Big money got no soul...” Neil Peart

Big money is underweight Wal-Mart, just as the company is on the tail end of a multi-year comp slump, that we think has bottomed. In fact, based on the Hedgeye Retail Sentiment Monitor (see chart below), WMT’s current score of 69 is at its lowest level in over four years – and has declined from 94 at this time last year.

We’re rarely going to make a sentiment call (it’s just not what we do), but when the fundamentals are improving, returns are inflecting and it’s not represented in sentiment, we definitely pay attention.


WMT: Under-Owned by Big Money - WMT Sentiment


We think that Wal-Mart is outperforming this holiday. That’s in part because of a turnaround in its merchandise strategy from last year where the only category that comped positive was food, and also due to the layaway plan, which helps 4Q (even if a product was laid away in 3Q). But we also think that Wal-Mart will be among the biggest beneficiaries of our Macro team’s King Dollar theme, which calls for Consumption to follow the stronger dollar, with commodity prices easing on the margin.

In that regard, we can reasonably quantify how underowned WMT actually is by looking at public disclosure of its shareholder list. The bottom line is that when people (especially big long only money) realize that they need to at least get equal weight WMT, we think that roughly 6% of the float will need to trade hands. They’ll be competing with WMT, which will also be in the market buying 5-6% of its stock.

Here’s our math…

The S&P uses a float adjusted Market Cap re the sizing of S&P 500 components. With a float adjusted market cap of $104Bn, WMT accounts for 0.95% of the S&P500, which has a float adjusted market cap of $10.9T.

Looking at the top shareholders of WMT by AUM (not top holders), only 12 of the top 50 own enough of the stock to be considered equal weight or over-weight the stock relative to its representative weighting in the S&P.

  • According to the Investment Company Institute, approximately ~48% of mutual fund assets are allocated to domestic and international stock funds under which WMT would fall.
  • Assuming that 48% of fund assets are benchmarked to the S&P and its 0.95% WMT position, an equal weight position of WMT would equate to roughly 0.46% of a fund’s total assets.

Among the Top 80% of funds that currently own WMT as ranked by AUM, WMT accounts for only 0.39% of the average portfolio – over $6Bn shy of what this sample alone would need to acquire in order to be equal weight, or ~6% of the float. Given that our analysis does not account for the funds that don’t have a position in WMT at all, this figure actually understates what true demand in the market would ultimately be.


The following table of Top 50 shareholders by AUM is purely based on SEC filings:


WMT: Under-Owned by Big Money - WMT Ownrshp


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