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DID WE MENTION GROWTH IS SLOWING?

CLIENT TALKING POINTS

SLIGHT WORK, THE RIGHT WORK

Old Wall loves to spend its time forecasting earnings and pounding its chest about how great its calls are. That is, until they’re wrong. Then they get quiet or say something like “oh, but revenue doesn’t manner – only EPS does.”  That’s not a risk management process. In fact, that’s what  got us in trouble back in 2007. Value at Risk models and all that poppycock went out the door and the game was up. If you’re comfortable with a sellside report, you’ve got a tough stomach.

BACK TO THE VIX

We’re really biting our lip here with the VIX dropping below 14. Did you know the VIX hasn’t dropped below 14 since 2007? That’s scary. Every single asset manager is running around chasing beta and reallocating assets in an attempt to make some kind of return on their capital. We’re clearly overdue for a big drop in the market and with the VIX this low, it can’t be far off. NYSE volume continues to be abysmally low, but no matter. As long as the brokers have order flow coming their way, all is right in the world.

DID WE MENTION GROWTH IS SLOWING?

Hey, it may sound like a broken record at this point, but that IS the point. Growth is slowing and you’re stuck with it. Keynesian economics has worked real well for us thus far, hasn’t it? All this bailing out and printing of money and you’ve got a 1400 S&P 500. Buying anything here with the SPX this high and the VIX at 14 is maniacal. What do you think is going to happen? Are you that confident that we can pull off 1500 by year’s end? That’s wishful thinking for sure.

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ASSET ALLOCATION

Cash:                  UP

U.S. Equities:   Flat

Int'l Equities:   Flat   

Commodities: Flat

Fixed Income:  DOWN

Int'l Currencies: Flat   

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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

LAS VEGAS SANDS (LVS)

LVS finally reached and has maintained its 20% Macau gaming share, thanks to Sands Cotai Central (SCC). With SCC continuing to ramp up, we expect that level to hold and maybe, even improve. Macau sentiment has reached a yearly low but we see improvement ahead.

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

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THREE FOR THE ROAD

TWEET OF THE DAY

“Everytime I meet somebody who laughs at my trading methods or my rules, I sleep easy.” -@persist2end

QUOTE OF THE DAY

“The only function of economic forecasting is to make astrology look respectable.” – John Kenneth Galbraith

STAT OF THE DAY

NYSE volume was only down -42% versus our intermediate-term TREND duration average yesterday.