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IMPORTS: Are The Holidays At Risk?

Labor strikes are an American past time that have been a constant source of disruption in every industry.  As we get closer to the holiday season, who would have thought that a bunch of longshoremen could prevent us from getting our children the Tickle Me Elmo that they absolutely must have?

 

The International Longshoremen’s Association and US Maritime’s contract runs up in September. They essentially control 20% of total apparel products coming in from Asia. While this could be basic jockeying for a more lucrative contract, recall that in 2002, a 10 day lockout of the west coast ports including the twin LA ports resulted in a $10bn to $20bn hit to the economy daily. Ouch.


Egypt . . . Now What?

Takeaway: The recent Egyptian political uncertainty is supportive of our view that the post Arab Spring transition in the Middle East will be complicated and long tail in nature.  As such, political transitions in the Middle East, in particular Egypt, should remain front and center as a global macro risk.

 

Back in April of 2011, when the Jasmine Revolution and Arab Spring were front and center for global macro risk managers, we wrote the following:

 

“In many ways, Egypt will be a real litmus test for the Middle East. With 85 million people, it is the largest country in the region and geographically it is very central. Furthermore, Egypt does not have any major tribal or sectarian issues, like many sovereign states in the Middle East, so it should have the best chance at a peaceful and democratic transition. Not dissimilar to Egypt’s role in the late 1970s when it was the first Arab nation to officially recognize Israel via the 1979 Egypt-Israel Peace Treaty, Egypt’s leadership may usher in a new era in the Middle East."

 

We believe this view continues to hold as it relates to Egypt. In the note below, we provide some background on Egypt and a couple of scenarios as to the political future of Egypt -- a nation that is and will continue to be a litmus test for the entire region.

 

Background: Egypt’s Political History


Egypt has been a republic since 1952, when members of the military over threw the old monarchy following a defeat in the 1948 Arab-Israeli War. After a brief attempt at civilian rule, the officers terminated the old constitution and declared Egypt a republic on June 19, 1953.

 

Since then, Egypt has had four presidents. Muhammad Naguib was sworn in as the first president of Egypt in 1953, and remained in office until he was succeeded by Gamal Abdel Nasser Hussein, famous for representing Egypt during the Suez Crisis. Nasser held office until his death in 1970, at which point Anwar El Sadat commenced an eleven-year presidency that culminated with his assassination in 1981.

 

Sadat fundamentally changed Egypt’s economic and political direction by re-establishing the multi-party system and negotiating the Egypt-Israel Peace Treaty.  After Sadat’s death and a brief interim president, Sadat’s former vice president, Muhammad Hosni El Sayed Mubarak, became Egypt’s fourth president in October of 1981.

 

Mubarak’s almost thirty-year presidency was characterized by broad corruption and abuse of power.  Not surprisingly, the Egyptian economy floundered under Mubarak and was in a large part supported by annual aid from the U.S.  Mubarak’s regime maintained one-party rule under a continuous state of emergency, refusing to null the emergency law that had been enacted after the Six-Day War in 1967 and thereby preserving the government’s unchallenged power to censor, imprison, police, and suspend constitutional rights. Under the Mubarak regime, political activists were imprisoned without trial, undocumented detention facilities were established and universities, religious buildings and publications were discriminated against based on political affiliation.

 

In late 2010, Tunisian President Ben Ali was ousted with the advent of popular uprisings across the Middle East and North Africa.  Given Mubarak’s seemingly self-serving and dictatorial rule, few astute political analysts were surprised when in early 2011 Egypt became the epicenter for the “Arab Spring” and popular unrest in the Middle East.

 

As protests escalated in early 2011, Mubarak made a number of live, televised appearances in which he promised governmental reform, but refused to step down from his office. Finally, in mid-February, Mubarak caved – Vice President Omar Suleiman announced that Mubarak was resigning his presidency and turning power over to the Egyptian military, led by Field Marshall Mohammad Hussein Tantawi.

 

Post-Mubarak and the Current Situation


In the aftermath of Mubarak’s deposition, Tantawi dissolved Egypt’s Parliament, suspended its Constitution and promised open presidential and parliamentary elections within six months. The prior cabinet, along with Prime Minister Ahmed Shafik (a secularist with ties to the old regime), was appointed to serve as a caretaker government until a new one was formed. In response to protests, Shafik was replaced on March 5th with Essam Sharaf, Egypt’s former transport minister.

 

In the new political landscape, Islamist parties such as the Muslim Brotherhood demonstrated a renewed strength, taking lead roles in constitutional changes, voter mobilization tactics, and demonstrations.  For many observers, the reemergence of the Muslim Brotherhood signified increased Islamic influence in Egypt and raised questions about the country’s future relationship with Israel, and whether Egypt would be able to assimilate and appease its broad political and religious interest groups.

 

Despite Mubarak’s resignation, protests continued throughout the remainder of 2011, fueling international concern over how long the military junta would rule the country. Parliamentary elections were held in January 2012, with the Muslim Brotherhood winning roughly half of the seats. In March, the Brotherhood reneged on their previous promise to seek the presidency and nominated Mohamed Morsi for office after their first-choice candidate was rejected by courts.  

 

After the first round of voting in Egypt’s presidential election from May 24-25th, the winners were Morsi and Shafik. Around this time, the Egyptian military took a number of legislative measures to extend their powers in what critics labeled a “silent coup.” Such measures included the dissolution of Parliament on the grounds that the law under which it had been elected was unconstitutional, and the passing of a charter limiting presidential authority and giving generals legal and economic control of the country.  The second round of voting took place from June 16-17th, and on June 24th, a week after the polls closed, Muslim Brotherhood candidate Mohamed Morsi was confirmed as the official winner of the election with 51.7 percent of the vote to Shafik’s 48.3 percent.

 

In the month since the second round of voting, a string of events have thrown the country’s switch to democracy into confusion as relations between the military establishment and the Brotherhood have grown increasingly strained. The Brotherhood had been well-established during Mubarak’s reign as the primary opposition to his military dictatorship, and its decision to join young liberal activists in revolutionary protests was integral to the revolution’s overall success. That said, it was the military that ultimately ousted Mubarak and took control of Egypt.

 

Ultimately, Morsi’s electoral success gave the Brotherhood a boost in its struggle for power with the Egyptian military. On July 8th, Morsi surprisingly ordered Parliament to reconvene, directly challenging the reigning military that had reaffirmed its order to dissolve the body. Despite this “breach,” the military made no move to prevent the legislators from gathering for a brief parliamentary session on July 10th.

 

At a military ceremony on July 17th, Field Marshal Tantawi asserted: “Egypt will not fall. It is for all Egyptians, not for a certain group – the armed forces will not allow that.” There is ample reason to believe that this defiant statement was addressed to the Brotherhood, and that there may be turbulent times ahead.

 

Expectations for the Future


Egypt has the 27th largest economy in the world, and remains incredibly relevant due to its place as an important American ally in the region and its role in global commerce as the home of the Suez Canal, which transports roughly 8% of the world’s oil supply. Moreover, Egypt has served as a key arbitrator in the Israel-Palestine peace process for thirty years.  As The Economist aptly stated in a recent article:


“With its strategic situation, its cultural influence and a population double that of any other Arab country, Egypt has for three decades now been the linchpin of a precarious but enduring regional Pax Americana.”

 

 At present, a number of unknown variables drastically complicate national (and regional) prospects for a stable future.  Moreover, accelerating internal unrest due to skyrocketing unemployment, as outlined in the chart below, is also a key factor.

 

Egypt . . . Now What? - chart2

 

Each group involved in the present power struggle seems to have a different ideal outcome in mind. The U.S. wants a thriving democracy to bring stability to the region; the army seems to want to maintain a status quo peace; the Muslim Brotherhood wants to establish a nation governed by traditional Islamic values. As a result of these conflicting interests, it’s nearly impossible to confidently predict where the nation is heading. Taking that into consideration, there are three possible directions in which the Egyptian political situation could head over the next few years.

 

Scenario one: The Egyptian military refuses to give up power and re-asserts control. The military wasn’t afraid to seize control of the country during Mubarak’s ousting, and there is no reason to believe that they wouldn’t do so again. Though they did concede in allowing Parliament to endure a five-minute session, they have the self-ordained legislative power to step in at any time. However, if the military did reassert control, it is likely they would face significant international pressure. Specifically, this pressure would come from the U.S. who provides more than $1.3 billion a year to Egypt in military assistance. (In the chart below, we highlight the close relationship between the U.S. and Egyptian stock market over the last six months, which is a point that is likely indicative of the massive U.S. support given to Egypt.) Moreover, if Islamists and liberals alike were to become convinced that the military had no intention of relinquishing power, we would see an increased probability of a second revolution with an unpredictable outcome.

 

Egypt . . . Now What? - Egypt

 

Scenario two: Morsi and the Muslim Brotherhood assert power. In response, the military would likely challenge the action in court, which will lead to more even more uncertainty and take months, if not years, to resolve. Even if the Egyptian military were to unexpectedly accept Morsi’s presidency, the challenge of leading Egypt remains monumental. The Egyptian population has endured a tumultuous past couple years, and citizens will be impatient in demanding immediate change. Apart from being forced to juggle what will most certainly be an overwhelming influx of social demands, Morsi will need to be cautious of threatening the military’s economic, commercial, and political interests. Morsi lacks political experience, and whether he has the nerve and/or ability to lead Egypt during this difficult transitional period remains to be seen.

 

Scenario three: Egypt enters a period of conflict and political paralysis, and party disagreements lead to violence. While Morsi may be the “official” president, it is critical to keep in mind that over 50 percent of Egyptians did not initially vote for either Shafik or Morsi, and instead supported more moderate candidates. It is uncertain how this demographic will respond to Morsi as a leader, yet they play a key role in determining the country’s political future. Many who initially supported the revolution are stuck between a rock and a hard place, having to choose between a traditional Islamist and an old-regime secularist who might threaten revolutionary progress. In the face of a prolonged power vacuum, there’s a risk for conflict Egypt’s political parties to take a violent turn and trigger a second revolution.

 

As Shakespeare wrote:

 

“Expectations are the root of all heartache.”

 

Currently, expectations in Egypt for a quick resolution of the current political stalemate are low, but perhaps these low expectations are just what the nation needs as it comes to grip with a new governing reality.

 

 

Daryl G. Jones

Director of Research

 

 

 


The New America

RIA DAILY PLAYBOOK     

FOR RELEASE ON WEDNESDAY, JULY 18, 2012

 

CLIENT TALKING POINTS

 

BACK TO SUPER MARIO LAND

Italy is just in full blown destruction mode with the MIB index down -21% from its year-to-date top. Their debt problem is so big that almost no one can bail them out. Come September 12th, Mario Monti and his cronies will have some explaining (read: begging) to do in order for the German Parliament to sign off on whatever package they end up getting.   

 

YOU BETTER GET TO WORK

Oh goodness. We almost felt sorry for Ben Bernanke yesterday when Senator Chuck Schumer started berating him to “get to work.” Yes, we realize that Congress will never agree on anything ever again and that the US political machine is broken. But demanding Bernanke “get to work” because the last bastion of hope is the Federal Reserve? Please.

 

EMBRACE THE CASH

Having a 100% cash position isn’t always the right call. Sure, we’re fond of it, but you need to have some wiggle room for when the market gives you an entry point for a specific sector. Keep your exposure to equities and commodities low and you’ll be fine out there. Fade that beta.

 

ASSET ALLOCATION

 

Cash: Down                U.S. Equities: Flat

 

Int'l Equities: Flat Commodities: Flat

 

Fixed Income: Up        Int'l Currencies: Up

 

TOP LONG IDEAS

 

PSS WORLD MEDICAL (PSSI)

The bulk of the bad news is on the table following disappointing F2012. Rebased F2013 estimates far more reasonable, and revenues should be supported by our expectations for rising physician utilization, and in the near-term, a flu season that is shaping up as a considerable tailwind.

                             

TRADE: LONG

TREND: LONG

TAIL: NEUTRAL

 

HCA (HCA)

SS volume accelerated in 1Q12 and employment remains a tailwind to both admissions & mix. We expect acuity to stabilize and births and outpatient utilization to accelerate out of 1Q12, while supply cost management continues as a margin driver and acquisition opportunities remain a source for upside.

 

TRADE: NEUTRAL

TREND: LONG

TAIL: NEUTRAL

 

UNDER ARMOUR (UA)

The company continues to control its own destiny through investments in all the right areas. We think 30%+ top line and EPS growth for 5+ years. One of its failures, however, has been in penetrating markets outside the US. That will happen. But for now, its failure is a competitive advantage in the face of a strengthening dollar. We like it in sympathy with a LULU sell-off.

 

TRADE: LONG

TREND: LONG

TAIL: LONG

 

THREE FOR THE ROAD

 

Tweet of the Day: “$CORN RT @douglas_blake: I'd go see Dark Knight Rises this weekend, but I can't afford the Popcorn.”-@ReformedBroker

 

Quote of the Day: “Glory is fleeting, but obscurity is forever.” –Napoleon Bonaparte

 

Stat of the Day: In the last three months, 225,000 net jobs were added in America. During that same time period,  246,000 were added to Social Security’s disability insurance.

 

 

 

 

 

 


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WYNN MAY HAVE COVERED THE POINT SPREAD

Even after normalizing hold, the Q was not good.  Whisper expectations were for a first down punt, however.

 

 

Wynn missed Street expectations, even after normalizing hold.  We had low hold already factored into our Wynn Macau and Las Vegas projections (not low enough for Vegas) and Wynn still needed a Hail Mary pass in the form of favorable reserve adjustment to make our number.  So why do we think WYNN could rally?  We’re pretty sure buy side expectations were lower and Wynn may have actually covered the point spread.  Moreover, the stock has been in a tailspin, down 42% and 28% from its 52 week high and recent April high, respectively.  Keep a trade a trade, however.  Wynn is still down by a lot and the opposing side is looking tough:  market share still at risk, Macau VIP may disappoint further, and the modest Las Vegas recovery seems to be moderating further.

 

Netting the impact of low hold and the benefit of the reversal of provision for bad debt, we believe that Wynn would have reported $1,32BN of revenue and $378MM of EBITDA, still 2% and 3% below the Street.  Wynn recorded a positive adjustment to its receivable reserve which we calculate favorably impacted EBITDA by $25 million.  As a former CPA and Audit Chair of a publicly traded company I find it hard to believe the auditors recommended getting less conservative.  Nevertheless, Wynn has clearly over-reserved historically so the end result on the balance sheet is appropriate.  Only the timing is suspect.

 

 

Macau

Wynn reported net revenue of $908MM which was just 0.4% below our estimate.  Adjusted EBITDA was 7% higher than we estimated, almost entirely due to a reversal of bad debt provisions.  Lower than historical hold on the VIP business was largely offset by high hold on Mass.  If hold was “normal”, net revenue and EBITDA would have been $15MM and $3MM higher, respectively.  If we adjust for the reserve and normalize for hold then we estimate that Wynn Macau would have reported net revenue of $923MM and Adjusted EBITDA of $289MM, 4% and 3% below consensus going into the print.

  • Net VIP table win was $1MM lower than we estimated. 
    • RC volume declined 7% YoY, despite a 9% increase in the number of VIP tables.  Volumes dropped 10% QoQ despite no change in tables.
    • Direct play was 8.3% vs. our estimate of 11.0% and hold was 5bps better than we estimated, resulting in gross table win that was $1MM above our estimate.  
    • The rebate rate was 30.8% or 84bps, a bit higher than we estimated
    • We estimate that all junket commissions & rebates were 41.9%, a little lower than we estimated and impressive in the current “aggressive” promotional environment that Wynn described.  However, we won’t know for sure until Wynn Macau files.
    • The property’s historical hold rate since opening, inclusive of this quarter, has been 2.92%.  Using the historical hold rate, net revenues would have been $27MM better and EBITDA would have been $8MM higher.
  • Mass table win was $2MM lower than we estimated
    • Drop declined 5% QoQ, despite a small increase in the number of tables and was 9% less than we estimated but the win % was 2.3% better.  
    • Wynn’s mass hold in 2011 was 28.4% and Wynn considers 26-28% normal. Assuming 28%, revenues would have been $15MM lower while EBITDA would have been about $5MM lower.
  • Slot win was $1MM below our estimate
    • Slot handle was down 22% YoY on a 11% reduction of average slots on the floor
    • Hold was 5.3%, 20bps better than we estimated
    • As Wynn mentioned on the call, they are adding some slots, so we’ll be watching to see if more supply drives demand here
  • We estimate that fixed expenses totaled $108MM, in-line with our estimate and flat QoQ

 

Las Vegas

Las Vegas revenues and EBITDA missed our numbers by 6% and 18%, respectively, and missed the Street’s EBITDA estimate by 24%. The entire miss came from lower than normal hold on Wynn’s high end baccarat play which held at only 9% and took down the hold on table games to 15% which is about 9% below normal.  The impact of low hold which the company estimates impacted EBITDA by $34MM was partly offset by the reversal in bad debt provision, which we estimate benefited Wynn Las Vegas by $9MM.  Net/net, we think that on a “normalized” basis, Wynn Las Vegas would have reported $392MM of net revenue and $107MM of EBITDA, which was still a little below consensus.  


A large part of the miss came from lower room revenue and higher promotional spend.  Despite management’s statements on the call, we believe that trying to inflate ADRs probably cost Wynn a lot of occupancy and hurt their gaming and non-gaming revenues in the quarter.

  • Net casino revenues were $31MM below our estimate
    • Table drop actually grew 8% YoY vs. our estimate of 5% growth but hold was way below normal, resulting in table win being $26MM below our estimate (we suspected low hold but not this low)
      • Hold was 15%, significantly below the company’s normal range of 21-24% and the 9 quarter trailing average of 23.5%.  Assuming 23% is normal, table win would have been $46MM better and according to Matt Maddox, EBITDA would have been $34MM higher.
    • Slot win was $2MM lower than we estimated
      • Slot handle 2% better than we estimated but the win % was 40bps lower at 5.7%
    • Total gaming discounts and promotions totaled 22% of gross casino win, higher than the 17.7% discount rate in 2011 and last quarter’s rate of 18%.
    • We estimate that the reversal in bad debt benefited EBITDA by $9MM 

THE M3: SANDS CHINA/FOUR SEASONS APARTMENTS

The Macau Metro Monitor, July 18, 2012

 

 

SANDS WAS CLOSE TO FOUR SEASONS APPROVAL BEFORE LEAKS: BUSINESS DAILY Macau Business

According to sources, Sands China was very close to reaching a deal with the government allowing it to transfer its Four Seasons luxury apartment hotel in Cotai to a subsidiary, in which shares to right of use of its units could be sold.  But the email leaks involving messages between former Sands legal adviser Leonel Alves, and fired former CEO Steve Jacobs put the deal on hold.  The deal could be worth up to US$1 billion (MOP8 billion).

 

The Four Seasons deal was to be in return for Sands dropping a lawsuit against the government for its decision to not award the company lots seven and eight in Cotai.  One source told Business Daily: “Once the fresh allegations were published in The Wall Street Journal it became too difficult for the government to let the Four Seasons apartment deal go through.”

 


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – July 18, 2012


As we look at today’s set up for the S&P 500, the range is 14 points or -0.93% downside to 1351 and 0.10% upside to 1365. 

                                            

SECTOR AND GLOBAL PERFORMANCE


THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

THE HEDGEYE DAILY OUTLOOK - 3

 

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: on 07/17 NYSE 1036
    • Up versus the prior day’s trading of -306
  • VOLUME: on 07/17 NYSE 697.74
    • Increase versus prior day’s trading of 15.89%
  • VIX:  as of 07/17 was at 16.48
    • Decrease versus most recent day’s trading of -3.68%
    • Year-to-date decrease of -29.57%
  • SPX PUT/CALL RATIO: as of 07/17 closed at 1.04
    • Down from the day prior at 1.47 

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: as of this morning 36
  • 3-MONTH T-BILL YIELD: as of this morning 0.09%
  • 10-Year: as of this morning 1.49%
    • Decrease from prior day’s trading at 1.51%
  • YIELD CURVE: as of this morning 1.26
    • Down from prior day’s trading at 1.27 

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, July 13 (prior -2.1%)
  • 8:30am: Housing Starts, June, est. 745k (prior 708k)
  • 8:30am: Housing Starts M/m, June, est. 5.2%  (prior -4.8%)
  • 8:30am: Building Permits, June, 765k (prior 784k)
  • 10am: Bernanke delivers monetary policy report to House
  • 10.30am: DOE Inventories
  • 11am: Fed to purchase $4.5b to $5.5b notes maturing Aug. 15, 2020-May 15, 2022
  • 2pm: Fed releases Beige Book 

GOVERNMENT:

    • House, Senate in session
    • House Armed Services holds hearing on budget sequestration effects, 10am
    • Defense Secretary Leon Panetta, U.K. Secretary of State for Defense Philip Hammond hold joint press conference, 9:30am
    • Equal Employment Opportunity Commission holds public meeting on Strategic Enforcement Plan, 9:30am
    • Office of Personnel Management holds meeting of National Council on Federal Labor-Management Relations to make recommendations on improving services, cutting costs, 10am
    • World Bank President Jim Yong Kim discusses global development at Brookings Institution, 1:30pm 

WHAT TO WATCH:  

  • FDA approves Vivus’s weight-management drug Qsymia
  • Housing starts may have climbed 5.2% in June
  • Bernanke resumes semi-annual testimony at House today
  • Facebook down 8.6% this week amid slowing-growth concerns
  • DirecTV says it’s closer to deal with Viacom on channels
  • Samsonite to buy High Sierra Sport for $110m NSN
  • BOE Voted 7-2 as MPC Signals Rate-Cut Case May Be Reviewed 

EARNINGS:

    • Knight Capital Group (KCG) 6am, $0.10
    • PNC Financial Services (PNC) 6:15am, $1.22
    • BlackRock (BLK) 6:30am, $3.01
    • Bank of New York Mellon (BK) 6:30am, $0.51
    • US Bancorp (USB) 6:45am, $0.70
    • Dover (DOV) 7am, $1.13
    • Stanley Black & Decker (SWK) 7am, $1.52
    • AO Smith (AOS) 7am, $0.67
    • Bank of America (BAC) 7am, $0.15
    • Northern Trust (NTRS) 7:14am, $0.75
    • Honeywell International (HON) 7:30am, $1.11
    • St Jude Medical (STJ) 7:30am, $0.87; Preview
    • Abbott Laboratories (ABT) 7:36am, $1.22; Preview
    • WW Grainger (GWW) 8am, $2.62
    • Amphenol (APH) 8am, $0.84
    • First Republic Bank/CA (FRC) 8am, $0.64
    • SEI Investments (SEIC) 8:30am, $0.30
    • Qualcomm (QCOM) 4pm, $0.86
    • Stryker (SYK) 4pm, $0.99
    • CYS Investments (CYS) 4pm, $0.48
    • Greenhill & Co (GHL) 4pm, $0.25
    • Platinum Underwriters Holdings (PTP) 4pm, $1.19
    • RLI Corp (RLI) 4pm, $1.13
    • Select Comfort (SCSS) 4:01pm, $0.27
    • Covanta Holding (CVA) 4:01pm, $0.12
    • International Business Machines (IBM) 4:03pm, $3.43
    • Wintrust Financial (WTFC) 4:03pm, $0.47
    • Yum! Brands (YUM) 4:05pm, $0.70
    • Kinder Morgan Energy Partners (KMP) 4:05pm, $0.47
    • Kinder Morgan (KMI) Aft-mkt, $0.26
    • F5 Networks (FFIV) 4:05pm, $1.14
    • LaSalle Hotel Properties (LHO) 4:05pm, $0.75
    • Umpqua Holdings (UMPQ) 4:05pm, $0.21
    • American Express (AXP) 4:06pm, $1.10
    • EBay (EBAY) 4:15pm, $0.55
    • Xilinx (XLNX) 4:20pm, $0.45
    • SLM Corp (SLM) 4:30pm, $0.54
    • Skyworks Solutions (SWKS) 4:30pm, $0.44
    • Cohen & Steers (CNS) 4:30pm, $0.41
    • East West Bancorp (EWBC) 4:45pm, $0.46
    • NI (HNI) 5pm, $0.17
    • Noble (NE) 5pm, $0.57
    • Crown Holdings (CCK) 5:03pm, $0.84
    • CVB Financial (CVBF) Late, $0.21
    • El Paso Pipeline Partners (EPB) Aft-mkt, $0.50 

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

 

GOLD – its telling you all you need to know about no iQe4 upgrade drugs from Bernanke. With tensions in the Middle East rising, we like the long USD, short Gold (and Gold Miners) position more than long USD vs short Oil. Next support for Gold = $1559, but it’s loose. 

  • Shell-Led Arctic Push Finds U.S. Shy in Icebreakers: Energy
  • Looming Copper Surplus Contracting as Mining Fails: Commodities
  • Gold Set to Drop as Fed Refrains From Specific Easing Measures
  • Corn Seen Rallying to Record $8.50 as Drought Kills Crops
  • India to Curb Hoarding as Food Prices Rally on Weak Monsoon
  • Japan Commission to Review Easing of U.S. Beef Import Curbs
  • Corn Drops for Second Day on Concern Rally Is Curbing Demand
  • Copper Rises on Speculation About Additional U.S. Policy Easing
  • Oil Declines From Seven-Week High on Outlook for China, Europe
  • BHP Sees Escondida’s Copper Output Rising by Nearly Half in FY15
  • Cocoa Falls on Demand Speculation Before Processing Figures
  • Silver Seen Declining to Lowest Since 2010: Technical Analysis
  • China Money-Supply Pickup Signals GDP Recovery: Chart of the Day
  • BHP Iron Ore Output Rises 15% to Beat Analyst Estimate
  • U.S. Feedlots Buy Fewer Cattle as Feed Costs Rise, Survey Says
  • Cocoa Arrivals From Brazil’s Bahia Advance 24%, Hartmann Reports 

THE HEDGEYE DAILY OUTLOOK - 4

 

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 5

 

 

EUROPEAN MARKETS


ITALY – back into crash mode the MIB Index goes (-21% from YTD top) as the Italians really have nothing but hope and prayers left until the Germans ratify whatever Italian banks will need on September 12th; without German Parliament signing off on it, Spain can try to jockey the headlines, but Italy is on a political island that the Germans own.

 

THE HEDGEYE DAILY OUTLOOK - 6

 

 

ASIAN MARKETS


KOSPI – in one of the nastier reversals from US green close to Asian red close last night, the KOSPI got pounded -1.5% to re-test its YTD lows; #GrowthSlowing is accelerating on the downside, globally, where it matters (Tech and Industrials demand); many ignored that in mid-April too. We didn’t, and won’t.

 

THE HEDGEYE DAILY OUTLOOK - 7

 

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - 8

 

 

 

The Hedgeye Macro Team


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