Taking Issue With Oil

TAKING ISSUE WITH OIL

 

 

CLIENT TALKING POINTS

 

TAKING ISSUE WITH OIL

We put out a note on our website this week discussing oil sentiment and how the current price of WTI crude oil was rather high. We then noted that there would be a good opportunity to short oil soon and sure enough, a few hours later, oil fell fast and hard taking WTI down several dollars. Some claim the drop was due to rumors regarding the Strategic Petroleum Reserves being opened but the way we see it, the issue is correlation risk. Move the US dollar and it’ll move commodities, including oil, in turn. It doesn’t take a massive move in one asset class to greatly affect another.

 

 

OBAMA IN NOVEMBER

Our Hedgeye Election Indicator put up a +220 basis point increase in Obama’s chances of being reelected yesterday, propelling the odds to 63%. This is an all time high for the HEI and in line with InTrade standings. It is beginning to look like Obama will cruise into November and will nab a second term as Commander-In-Chief. It certainly doesn’t help that someone recorded Mitt Romney at a private fundraiser with Mitt speaking off the cuff. Like we’ve said before: if only Mitt would focus on strengthening the US dollar and getting rid of Ben Bernanke more, then he might have a real shot and Obama’s odds wouldn’t be at all time highs. Unfortunately, it may be too late for Mitt…

 

 

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ASSET ALLOCATION

 

Cash:                  Flat

 

U.S. Equities:   Flat

 

Int'l Equities:   Flat   

 

Commodities: Flat

 

Fixed Income:  Flat

 

Int'l Currencies: Flat  

 

 

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TOP LONG IDEAS

 

NIKE INC (NKE)

Nike’s challenges are well-telegraphed. But the reality is that its top line is extremely strong, and the Olympics has just given Nike all the ammo it needs to marry product with marketing and grow in the 10% range for the next 2 years. With margin pressures easing, and Cole Haan and Umbro soon to be divested, the model is getting more focused and profitable.

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

 

PACCAR (PCAR)

Emissions regulations in the US focusing on greenhouse gases should end the disruptive pre-buy cycle and allow PCAR to improve margins. Improved capacity utilization, truck fleet aging, and less volatile used truck prices all should support higher long-run profitability. In the near-term, Paccar may benefit from engine certification issues at Navistar, allowing it to gain market share. Longer-term, Paccar enjos a strong position in a structurally advantaged industry and an attractive valuation.

  • 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

“JP Morgan's strategists are smart, but they can garble English as well as any analyst. This week: "exhibits stationary" for "doesn't move”” -@jmackin2

 

 

QUOTE OF THE DAY

“The world is a tragedy to those who feel, but a comedy to those who think.” –Horace Walpole

                       

 

STAT OF THE DAY

UK inflation for August slows to 2.5%, in line with expectations.