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RETHINKING POLICY

CLIENT TALKING POINTS

THE GOLDEN AGE

When Ben Bernanke came out to extend QE3, those invested heavily in precious metals, namely gold and silver, rejoiced knowing that burning the buck would inflate prices for the aforementioned metals quite a bit. $2000/oz for gold did not seem like a pipe dream. So when gold and silver make big moves to the downside these days, that’s something that really matters and this morning, there’s a -1-2% drop in both.

Should gold continue to fail at its February 2012 all-time highs (read: lower-highs), things will change for the gold bugs very quickly. As Keith mentioned this morning, “...it’s a very lonely camp being short GLD here.”

POLITICAL POLICY

We really think that Romney would be doing better in the polls these days if he had really pounded the table on getting rid of Ben Bernanke and putting strength back in the US dollar. Our proprietary Hedgeye Election Indicator put Obama at an all time high last week (63%) for his chances of being reelected. Bernanke and Obama are managing to keep the market afloat (just barely) until November. Meanwhile, the US dollar had an up week last week, breaking a 5 week consecutive drop. Should we continue to burn the buck, keep in mind a little thing called correlation risk; you get the dollar right, you get a lot of other things right.

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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 (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

“My $ gets 0 in the bank and inflation is a killer. buying a multi-family in this market w a 2.875% mortgage seems like a good option.” -@HedgeyeEnergy

QUOTE OF THE DAY

“Man has to suffer. When he has no real afflictions, he invents some.” -Jose Marti

STAT OF THE DAY

Dow Jones Chicago Fed: Aug National Activity Index -0.87 Vs Jul -0.12