Metals: The Effects Of QE

We've examined the year-to-date performance of several different metals, including gold, silver, platinum, copper and palladium. Although each metal is independent in terms of the moves in performance over this year, you can easily see the effects of the US dollar being devalued by the Federal Reserve in late August through September. Until the dollar can make significant moves to the upside, expect more of the same courtesy of Ben Bernanke.


Metals: The Effects Of QE - QE metals


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Materials: Q4 2012 Macro Themes Presentation


To submit questions for the live Q&A immediately following the presentation , please email






Today, October 8th at 1:30pm EST, the Hedgeye Macro Team, led by CEO Keith McCullough and DOR Daryl Jones, will be hosting our Q4 2012 Macro Themes Call.


Topics will include: 

  1. #EarningsSlowing - Corporate margins are stretched on numerous metrics. Even with financial engineering we suggest there's limited upside in the results from here.  We expect the gravity of global growth slowing and inflation accelerating to impact consumer and corporate P&Ls alike.
  2. Bubble #3 - Following the tech and housing bubbles, the charts of Bernanke's Commodity Bubble could not be more crystal clear. So when does this bubble pop?  We'll continue to take our cues from the U.S. Dollar and weigh the influence of policy and fundamentals across the complex.
  3. Keynesian Cliff - We wrap together an analysis of the U.S. Presidential  race with the nearing US fiscal  cliff. We discuss the impact of investors potentially shifting their attention away from  Europe and back to the U.S.'s ugly imbalances.



Prior to founding Hedgeye Risk Management, Keith built a track record as a successful hedge fund manager at the Carlyle-Blue Wave Partners hedge fund, Magnetar Capital, Falconhenge Partners, and Dawson-Herman Capital Management. He got his start as an institutional equity sales analyst at Credit Suisse First Boston after earning his Bachelor of Arts in Economics from Yale University, where he captained the Yale Varsity Hockey Team to a Division I Ivy League Championship. Keith is also a Contributing Editor to CNBC TV, Fortune Magazine and author of Diary of a Hedge Fund Manager (Wiley 2010). 



Prior to joining Hedgeye Risk Management, Daryl was the Sector Head for Basic Materials at HIG Capital's hedge fund, Brightpoint Capital. Earlier, Daryl founded the public investment effort at Onex Corporation, a leading private equity firm. At Hedgeye, Daryl covers commodities, geo-politics and major asset classes outside of equities. 



Hedgeye Risk Management is a leading independent provider of real-time investment research. Focused exclusively on generating and delivering actionable investment ideas, the firm combines quantitative, bottom-up and macro analysis with an emphasis on timing. The Hedgeye team features some of the world's most regarded research analysts - united around a vision of independent, uncompromised real-time investment research as a service.

Hedgeye’s Q4 Macro Themes Call

We’ll be holding our fourth quarter Macro Themes call today at 1:30pm for our institutional subscribers with CEO Keith McCullough and Director of Research Daryl Jones. We’ll be discussing three major themes on the call today: corporate earnings and how they’re slowing, the bubble in commodities and the fiscal cliff and its potential impact on the presidential election.


On our Twitter account, @Hedgeye, we’ll be live-tweeting highlights from the call from 1:30pm-2:30pm, so make sure to follow us closely then.

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Takeaway: Comps are tough but volumes and traffic look solid

Golden Week 2012 was decent with average daily table revenues (ADTR) for the 7 days up 1% over the first 9 days of October last year.  Golden Week and October as a whole are difficult comps (October 2011 up 42%) and hold was higher than normal last year.  Visitation through Golden Week was up 9% YoY (that is an apples-to-apples comparison) and we have reports of strong floor traffic.  This bodes well for high margin Mass gaming revenues.  We are projecting full month GGR of HK$27.0-28.5 billion which would represent YoY growth of 4-9%. 




In terms of market share, the first week winners were LVS, MPEL, and GALAXY while WYNN is clearly holding low in the first week.  Again, we don’t put much stock in market shares this early in the month.



European Banking Monitor: More Manipulation By Draghi

Takeaway: Bank swaps tightened across the board globally. Sovereign swaps followed suit.

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .


Key Takeaways:


* Last week American and European bank swaps tightened across the board fueled by ECB comments about assistance for Spain and an initially strong perception of the US labor situation. However, Friday's softening by the close coupled with this morning's performance around the world is suggesting the labor-based rally may be short-lived.


* Sovereign CDS - Sovereign swaps mostly moved in tandem with bank swaps around the world, tightening across the board. The one notable divergence was the United States, which saw its sovereign swaps rise by 26.4% (9 bps) to 42 bps from 33 bps in the prior week.


On OMTs Reporting: The ECB has stated that Aggregate Outright Monetary Transaction holdings and their market values will be published on a weekly basis and the average duration of Outright Monetary Transaction holdings and the breakdown by country will take place on a monthly basis. There is no indication that the OMTs has been initiated to date.



If you’d like to discuss recent developments in Europe, from the political to financial to social, please let me know and we can set up a call.


Matthew Hedrick

Senior Analyst





European Financials CDS Monitor – European bank swaps were tighter across the board with Italian, Spanish and French banks showing the sharpest week-over-week improvement. Overall, swaps were tighter for 35 out of 37 reference entities with an average tightening of 29 bps. 


European Banking Monitor: More Manipulation By Draghi  - 22. banks


Euribor-OIS spread – The Euribor-OIS spread tightened by less than 1 bp to 13 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 


European Banking Monitor: More Manipulation By Draghi  - 22. euribor


ECB Liquidity Recourse to the Deposit Facility – The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  


European Banking Monitor: More Manipulation By Draghi  - 22. facillity


Matthew Hedrick

Senior Analyst


WMT: Financing The Masses

Takeaway: Walmart and American Express both stand to benefit from the Bluebird program with the former getting shoppers and the latter getting fees.

American Express (AXP) and Walmart (WMT) have teamed up to offer a prepaid debit card targeted at lower income consumers. The program is called Bluebird and what makes it noteworthy is the fact that Walmart is a partner in the program, which allows for  widespread distribution across the United States.


The card is similar to existing American Express prepaid cards; you sign up, get the card and can load it up via a checking account, direct deposit or reload packs called Bluebird Feeder Packs. With money going right from someone’s paycheck on to the Bluebird card, Walmart stands to benefit from cardholders spending their paychecks at their stores because they’re suddenly feeling “flush” with cash. 


Keep in mind that Walmart already offers prepaid debit card and check cashing services for its customers. This is another move for Walmart as it tries to get a toehold in financial services which it has been trying to do for years. WMT also has an interchange fee advantage. They are likely paying close to nothing on interchange rates when these cards get used in their store. Overall, the program will be a hit with AXP, WMT and lower income consumers.

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