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    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

WE ARE AMERICAN

CLIENT TALKING POINTS

WE ARE AMERICAN

Americans catch a bad rep sometimes. For whatever reasons, financial professionals and policy makers think they can outsmart the public time and time again. And you know what? That’s simply not the case. Be it the gentleman in Arkansas who pulls money from a mutual fund or the misguided youth protesting with the Occupy Movement in New York, people are catching on and smarting up. They are tired of central planning policy that has killed their ability to generate yield and has created no economic boost that’s tangible. Devaluing the dollar has run its course, and soon the planners and policymakers will have to move on to something that doesn’t involve the word “easing.”

THUS THE EARNINGS SLOW

Our focus on the slowing of growth is still alive and beating in our hearts as we shake our head at Bernanke’s failed policies. But in the immediate-term, we have turned our attention to corporate earnings. Make no mistake about it: earnings are slowing. Companies like FedEx (FDX), Intel (INTL), Norfolk Southern (NSC) and Oracle (ORCL) all paint a picture of lower guidance and falling revenues. It’s interesting because this is one thing Bernanke can’t step in and fix with the wave of a magic pen. As we continue farther into the Q312 reporting game, things will likely become worse.

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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

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

“’Futures flat as Fed hopes offset Caterpillar’, LOL” -@KeithMcCullough

QUOTE OF THE DAY

“The middle of the road is where the white line is-and that's the worst place to drive.” –Robert Frost

STAT OF THE DAY

5 million. The amount of Apple iPhone 5s sold in just three days.