THE SKY IS FALLING
CLIENT TALKING POINTS
THE SKY IS FALLING
Chicken Little had it right. Replace the word “sky” for “economy” and he’s spot on. Yesterday’s durable goods print dropped -13.2% for August, an astonishingly awful number. We posted a chart on Hedgeye.com which we implore you to take a look at. Titled “This Is What A Recession Looks Like,” the chart showcases durable goods numbers since 2000. And guess when we saw big time drops like yesterday? In 2000 and in 2007; two years when we encountered bubbles/crises of epic proportions. Things are still really bad out there, folks. Don’t let anyone tell you otherwise just because it’s a Friday.
EVERYBODY YUAN TONIGHT
We’re surprised that Mitt Romney’s promises to hold China accountable as a currency manipulator haven’t resonated more with the American public. Meanwhile, the Chinese yuan hit a new record versus the dollar this morning at 6.2856. This can be attributed to strong corporate demand and institutional investors getting out of short positions ahead of the long holiday weekend in China. Keep in mind that China is under economic pressure, too. Their artificial housing market has tanked and commodity demand has plummeted over the past year.
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ASSET ALLOCATION
Cash: UP
U.S. Equities: DOWN
Int'l Equities: DOWN
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
“The harder it gets to manage this immediate-term price volatility, the more insider trading (cheating) you'll see” -@Grainmonster
QUOTE OF THE DAY
“A good listener is usually thinking about something else.” –Kim Hubbard
STAT OF THE DAY
Corn futures hit an 11-week low of $7.1625 a bushel.
