Living On A Prayer

LIVING ON A PRAYER

 

 

CLIENT TALKING POINTS

 

GET A JOB (REPORT)

Friday’s jobs report was basically a can of hope for market participants that were, to quote Jon Bon Jovi, “living on a prayer.” In an election year, this was basically “good enough” for most people to buy. This, despite unemployment rising to 8.3%, revised non-farm payrolls down to 64,000 vs 80,000 prior (for June), and a birth/death adjustment (for July) of +52,000 jobs – the highest on record since July 2000. You can only keep “killing it” for so long, remember. Especially when considering…

 

 

REMEMBER THE VIX?

We certainly do, and right now, it’s hovering at 15. You aren’t going to have rallies like Friday’s going on all the time with the VIX at this level. Every time people start buying between 14-15, in the last 5 years, they get killed. It’s just a matter of fact at this point. Never mind the lack of inflows into US equities on the buyside. A short squeeze is fun for the bulls until it’s not.

 

 

INFLATION EXPECTATION

The commodity players have to love the recent melt up in commodities; corn and gold are really something these days. Net long contracts (read: bets on agriculture) were up +3% week-over-week at a new high of 884,477 contracts. There is the inherent correlation risk between the US Dollar and stock and commodity prices. Again, it is an election year and an overinflated market looks good for the incumbent. Bernanke and Geithner definitely have your back on this one.

 

 

_______________________________________________________

 

ASSET ALLOCATION

 

 Cash:                  UP                    U.S. Equities:    DOWN

 

 Int'l Equities:   Flat                      Commodities:    Flat

                                  

 Fixed Income:  Flat         Int'l Currencies: DOWN

 

 

 

_______________________________________________________

 

TOP LONG IDEAS

 

JACK IN THE BOX (JACK)

This company is transitioning from cash burn to $75mm annual free cash flow generation thanks to completion of a reimaging program and refranchising of JIB units. Qdoba is the leverage; a maturing and growing store base will bring higher margins. We see 8.5% upside over the next 6-9 months.

  • TRADE:  LONG
  • TREND:  LONG
  • TAIL:      LONG            

 

FIFTH & PACIFIC COMPANIES (FNP)

The former Liz Claiborne (LIZ) is on the path to prosperity. There’s a fantastic growth story with FNP. The Kate Spade brand is growing at an almost unprecedented clip. Save for Juicy Couture, the company has brands performing strongly throughout its entire portfolio. We’re bullish on FNP for all three durations: TRADE, TREND and TAIL.

  • TRADE:  LONG
  • TREND:  LONG
  • TAIL:      LONG

 

LIFEPOINT HOSPITALS (LPNT)

We continue to expect outpatient utilization to pick up in 2H12 alongside stabilization in acuity with ortho and cardiac/ICD volumes supporting both pricing and inpatient admissions growth. Births should serve as a tailwind into year-end, recent and prospective acquisitions offer some upside to 2012/13 numbers and the in place repo offers some earnings flexibility. With European and Asian growth slowing, we like targeted domestic revenue exposure as well.

  • TRADE:  NEUTRAL
  • TREND:  LONG
  • TAIL:      LONG

  

_______________________________________________________

 

THREE FOR THE ROAD

 

TWEET OF THE DAY

“$BBY gets best bailout” -@Commodity_Bull

 

 

QUOTE OF THE DAY

“Study without desire spoils the memory, and it retains nothing that it takes in.” – Leonardo da Vinci

 

 

STAT OF THE DAY

The Bank of Portugal said on its website on Monday that cumulative borrowing at the end of last month stood at 56.8 billion euros ($70.22 billion) – down 6% for July. An all-time record of 60.5 billion euros was set in June.


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more