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WHAT’s IN A DOLLAR?

CLIENT TALKING POINTS

WHAT’S IN A DOLLAR?

Jerry Seinfeld would probably say something along the lines of “what’s the deal with the US dollar these days?” Well, Jerry, the US dollar broke its 6 week spell of falling lower and lower and is now up for the week. You know what that means? A Dollar Holler smashes commodity prices in the face of Ben Bernanke and his policy of inflating prices and easing the markets. The CRB Commodity Index is down -4.4% week-to-date. You have to remember that when trading these markets, there is correlation risk to be had. Get the US dollar right and you’re going to get a lot of other things right, including oil, gold and even the stock market.

TREASURY TROVE

The 10-year Treasury is an instrument which many consider to be among the safest in the world. When people flock to Treasuries, driving yields lower, they’re looking for a safe haven play; a way to allocate capital while still earning some kind of return, even if it’s only 100 basis points or so. Well now that Ben Bernanke has extended QE3 and encouraging rampant stock market orgies of epic proportions, we’re seeing the 10-year yield climb higher. 10-year breakevens are testing new all-time highs and the current 1.76% yield will probably go higher by the end of the day as long as there’s no drastic news about the issues in Europe.

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ASSET ALLOCATION

Cash:                  UP

U.S. Equities:   Flat

Int'l Equities:   Flat   

Commodities: Flat

Fixed Income:  Flat

Int'l Currencies: DOWN  

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TOP LONG IDEAS

WENDY’S COMPANY (WEN)

Our conversations with Wendy’s franchisees indicate that sales have been trending sequentially higher in 3Q versus 2Q. We believe the company is about to announce the end of the company’s Sisyphean breakfast initiative after a prolonged “testing” phase. Given the capital demands on the company over the next few years as it invests to upgrade its asset base, shifting capital from the distraction that has been breakfast is a positive. The tail is less certain as it will take years for the system to rejuvenate the asset base and push out the older franchisees that don’t want to make the necessary investments to bring the asset base in line with contemporary industry standards..

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

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

“If you waited in line earlier then 7am for an iPhone 5 today, you need to get a job. $AAPL” -@MarketShot

QUOTE OF THE DAY

“I didn't really say everything I said.” –Yogi Berra

STAT OF THE DAY

CRB Commodity Index fell -4.4% week-to-date.