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Romney Rally: SP500 Levels, Refreshed

Takeaway: #EarningsSlowing is bearish. Potential for political change (was with Obama in 2009 too) is bullish.

POSITIONS: 9 LONGS, 5 SHORTS

 

I leaned longer again on the open, covering CAT and buying some of our favorite long ideas. The signal is the signal. I think I’ve been as flexible adhering to leaning long or short in the last 3 weeks as I have all year.

 

Across risk management durations, here are the lines that matter to me most:

 

  1. Immediate-term TRADE resistance = 1463
  2. Immediate-term TRADE support = 1448
  3. Intermediate-term TREND support = 1419

 

In other words, what was resistance yesterday (1448) is now support. That changed, so I did. And there are no rules against selling some at 1463 ahead of tomorrow’s employment report either. That’s the market we are in. Romney just changed the probabilities of Obama winning too.

 

#EarningsSlowing is bearish. Potential for political change (was with Obama in 2009 too) is bullish.

 

Keep managing the risk of this 1 (Bernanke Top) range.

KM

 

Keith R. McCullough
Chief Executive Officer

 

Romney Rally: SP500 Levels, Refreshed - SPX

 


INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET

Takeaway: Claims retrace some of the prior week's improvement. Meanwhile, the market continues to look frothy based on the current labor market.

***The following note comes from our Financials team led by Managing Director Josh Steiner. If you aren't yet receiving their work on the space, including their seminal work on the U.S. housing market, please email if you're interested in setting up a trial.***

 

 

Jobless Claims - Small Step Backward

Initial claims rose 8k last week to 367k but after incorporating the upward revision to the prior week's data, rose only 4k. Rolling claims were unchanged at 375k. On a non-seasonally adjusted basis, claim were 5k lower than the prior week, ending at 299k. Last week, the rolling NSA YoY series weakened from -7.7% YoY to -7.3% YoY. The rate of improvement in claims has been slowing since early 2010. We like to look at the rolling NSA series on a YoY basis because it removes the effects of seasonality. For reference, this morning's print was slightly lower than consensus expectations for 370k.

 

Overall:

Over the coming months we expect jobless claims to benefit from distortive seasonality tailwinds. In the first chart below we show how the claims series trends lower from September to February and goes sideways or higher March through August. We expect that 2012 will play out similarly to the last three years. That said, it will be important to monitor the YoY change in the rolling NSA series going forward. If we continue to see the rate of improvement slow, this could offset some of the effects of the positive seasonal distortion.

 

Another important relationship to monitor is that of the S&P and claims. These two series move together over the long-term but tend to see short-tern divergences. The current level of claims now implies an S&P level of 1348, which is 7.1% lower than the most recent S&P print.

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - Seasonality Claims

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - Non farm Seasonality

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - Raw

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - Rolling

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - NSA

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - NSA rolling

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - S P

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - Fed
 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - YoY

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - Initial Unemployment Claims Recessions

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - Rolling Claims Line 

 

Joshua Steiner, CFA

 

Robert Belsky


INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET

Takeaway: Claims retrace some of the prior week's improvement. Meanwhile, the market continues to look frothy based on the current labor market.

Jobless Claims - Small Step Backward

Initial claims rose 8k last week to 367k but after incorporating the upward revision to the prior week's data, rose only 4k. Rolling claims were unchanged at 375k. On a non-seasonally adjusted basis, claim were 5k lower than the prior week, ending at 299k. Last week, the rolling NSA YoY series weakened from -7.7% YoY to -7.3% YoY. The rate of improvement in claims has been slowing since early 2010. We like to look at the rolling NSA series on a YoY basis because it removes the effects of seasonality. For reference, this morning's print was slightly lower than consensus expectations for 370k.

 

Overall:

Over the coming months we expect jobless claims to benefit from distortive seasonality tailwinds. In the first chart below we show how the claims series trends lower from September to February and goes sideways or higher March through August. We expect that 2012 will play out similarly to the last three years. That said, it will be important to monitor the YoY change in the rolling NSA series going forward. If we continue to see the rate of improvement slow, this could offset some of the effects of the positive seasonal distortion.

 

Another important relationship to monitor is that of the S&P and claims. These two series move together over the long-term but tend to see short-tern divergences. The current level of claims now implies an S&P level of 1348, which is 7.1% lower than the most recent S&P print .

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - Seasonality Claims

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - Non farm Seasonality

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - Raw

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - Rolling

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - NSA

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - NSA rolling

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - S P

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - Fed

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - YoY

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - Initial Unemployment Claims Recessions

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - Rolling Claims Line

 

Yield Spreads

The 2-10 spread rose  3 bps WoW. 4QTD, the 2-10 spread is averaging 1.39%, which is up 2 bps basis vs 3Q12.  

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - 2 10

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - 2 10 QoQ

 

Financial Subsector Performance

The table below shows the stock performance of each Financial subsector over multiple durations. 

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - Subsector Performance

 

INITIAL JOBLESS CLAIMS: OUR WEEKLY TAKE ON THE STATE OF THE LABOR MARKET - Companies

 

Joshua Steiner, CFA

 

Robert Belsky

 

 

 

 


Early Look

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Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

STRONG VISITATION TO START OFF GOLDEN WEEK

Takeaway: Mass visitation looks good - positive for Macau operators, particularly LVS.

While September finished with a dud, Golden Week visitation is way up over last year.

 

 

The Macau stocks may react initially to September being up "only 12%" but it looks like October is off to a strong start.  As reported in the press today, Macau September GGR fell short of the 15-17% Street expectations due to late month softness.  We suspect hold played a role.

 

However, despite a tough comparison, 2012 Golden Week visitation is off to a blazing start.  Total visitation from Oct 1-3 is up 36% YoY while visitation from mainland China grew 15%.  In October 2011, total visitation and mainland Chinese visitation were up 14% and 31%, respectively.  Higher Mass visitation particularly benefits Mass-centric properties such as LVS's Venetian and Sands Cotai Central and MPEL's City of Dreams and Galaxy Macau.

 

STRONG VISITATION TO START OFF GOLDEN WEEK - GGR


Down In Missouri

We took a look at regional gaming revenue in Missouri for the month of September and it doesn’t look good. Gaming operators needed September to be a strong month to finish the quarter and they just didn’t get it with a near -5% year-over-year decline in revenues. Our projections show things getting worse over the next three months, which will continue to put pressure on regional operators.

 

 

Down In Missouri - mo


The Aftermath

THE AFTERMATH

 

 

CLIENT TALKING POINTS

 

THE AFTERMATH

Last night’s debate touched on myriad topics ranging from the economy to the fiscal cliff to job creation. This morning, polls show that Mitt Romney was the clear “winner” of the debate. For anyone who missed it, Mitt was aggressive, well-spoken and was not afraid to offer a retort to accusations from the President. Considering that Obama hasn’t really had to truly face off against anyone in almost four years, it makes sense that he was a little rusty. 

 

This is exactly what Mitt Romney needs to do in order to win the election in November. He must continue to be aggressive and offer solutions to the American people that will fix the economy. If Mitt wins, things across all markets will change provided he keeps his promise of firing Ben Bernanke.

 

 

MANIC MEDIA

The media loves a good headline. Hype gets people watching and those eyeballs attract advertising dollars. These days, the financial media is all about sensationalism and shooting firm whilst asking questions later on. They are anxious to report on Bernanke, Draghi, and anyone else who may move the markets. It seems like every week there’s a rumor or someone was “overheard” discussing a bailout, increasing stimulus measures or something of the like. The market follows suit accordingly and then calms down after realizing these reports are nothing more than pure speculative reporting. The media is certainly manic these days; when will they calm down and report just the facts?

 

_______________________________________________________

 

ASSET ALLOCATION

 

Cash:                DOWN

 

U.S. Equities:   DOWN

 

Int'l Equities:   UP   

 

Commodities: Flat

 

Fixed Income:  DOWN

 

Int'l Currencies: UP  

 

 

_______________________________________________________

 

TOP LONG IDEAS

 

BRINKER INTL (EAT)

Remains our top long in casual dining as new sales layers (pizza) and strong-performing remodels (~5% comps) should maintain sales momentum. The company is continuing to enhance returns for shareholders through share buybacks . The stock trades at a discount to DIN (7.7x vs 9.3x EV/EBITDA) and in line with the group at 7.3x.

  • 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

 

UNDER ARMOUR (UA)

This company’s on track to post $3Bn in revenues by ’14 – impressive given a $1.5Bn print in 2011. Perhaps more impressive is the breadth of growth drivers that will get it there – women’s, accessories, new underwear platform etc. in addition to footwear. UA is gaining share in both apparel and footwear quarter-to-date. While some may be concerned over the loss of UA’s SVP/Sourcing we’re 8% ahead of the Street in the upcoming quarter and buyers on weakness.

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

  

_______________________________________________________

 

THREE FOR THE ROAD

 

TWEET OF THE DAY

“Romney probably uses murray's pomade, his hair doesn't move..” -@ZorTrades

 

 

QUOTE OF THE DAY

“There is always a well-known solution to every human problem--neat, plausible, and wrong.” -H.L. Mencken

                       

 

STAT OF THE DAY

ECB holds main interest rate at 0.75%.


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