Big Bonds

BIG BONDS

 

 

CLIENT TALKING POINTS

 

BIG BONDS

Keith appeared on CNBC’s Fast Money Halftime Report yesterday and discussed why he’s shorting the S&P 500. In a nutshell, August feels a lot like March. And In March, we went bearish on stocks and bullish on bonds. Thus, we are a buyer of Treasuries and have maxed out our fixed-income asset allocation to 33%. It’s increasingly looking like we’re due for a reversal in equities, especially with the VIX coming precariously close to 13. Short SPY, Long TLT is the name of the game.

 

 

MITT’S OUTCOME

Our Director of Research Daryl Jones wrote an interesting piece this morning comparing the (slight) edge that President Obama has compared to Mitt Romney in terms of the polls and the electoral college. The battleground states that Romney will essentially need to win include: Colorado, Florida, Iowa, Nevada, New Hampshire, North Carolina, Ohio, Virginia, and Wisconsin. Wisconsin may come easier with the addition of Ryan to the ticket. Jones sees voter engagement as a key factor that gives Republicans an edge. This election cycle, the Republicans are certainly giving it their all in an effort to get Romney into office.

 

A USA Today / Gallup poll earlier this week which showed that 74% of Republicans are thinking “quite a lot” about the election, while only 61% of Democrats are doing the same. You never know, but that could make all the difference.

 

 

CAN YOU FIX SPAIN?

Doubtful. Though the 2-year bond yield slide a few basis points (see our State of the Day below), there’s no economic growth occurring in the country. The IBEX is up +7% over the last three days and is up a whopping +30% in less than a month. That’s short term market rallying, but Keynesian stimulus can only go so far for so long. Spain’s long-term TAIL risk line remains intact at 7835 (resistance).

 

_______________________________________________________

 

ASSET ALLOCATION

 

Cash:                  Flat

 

U.S. Equities:   Flat

 

Int'l Equities:   Flat   

 

Commodities: Flat

 

Fixed Income:  UP

 

Int'l Currencies: Flat   

 

 

_______________________________________________________

 

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

  

_______________________________________________________

 

THREE FOR THE ROAD

 

TWEET OF THE DAY

“We have to find ways to encourage non-violence, compassion and respect for others’ rights to achieve a better world in the future.” -@DalaiLama

 

 

QUOTE OF THE DAY

“We do not know what we want and yet we are responsible for what we are - that is the fact.” – Jean-Paul Sartre

                   

 

STAT OF THE DAY

Spain’s two-year note yield slid 24 basis points, or 0.24 percentage point, to 3.75 percent


Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more