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Notes From Our Q4 Macro Themes Call

We held our Q4 2012 Macro Themes call today for clients and subscribers. Hedgeye CEO Keith McCullough and Director of Research Daryl Jones covered three major themes: Earnings Slowing, Bubbles and The Keynesian Cliff. 

 

Below are highlights from the call, including some images from our 45-page slide deck included on the call. For those who are interested in gaining access to future calls, which include a Q&A session with our team, please email sales@hedgeye.com or click here.

 

Theme 1: Earnings Slowing

 

 

Notes From Our Q4 Macro Themes Call  - theme1 pic

 

 

-You’re now seeing negative sell-side estimates on a YoY basis. Companies are lowering forward guidance. Look at FedEx, Caterpillar and Staples for examples of this.

 

-The Fed is running out of bullets; their balance sheet is going down and doesn’t have any juice left on a YoY basis and will be hard to continue as long as we keep printing into infinity and beyond.

 

-The S&P 500 is up, but durable goods are down on a YoY basis. The divergence between the two won’t hold. Either the S&P 500 will head down or durable goods will head higher.

 

 

Theme 2: Bubbles

 

 

Notes From Our Q4 Macro Themes Call  - theme2 pic

 

 

-Bubbles will continue. We saw the Tech Bubble in the 200s, then the Housing Bubble in 2007 and now we have the Commodities Bubble coming in 2012/2013. Check out 10-year charts of copper, oil, gold and the CRB Commodities Index.

 

-China’s growth over the past 10 years really helped fuel the commodity bubble. Keep in mind that China’s demand for commodities is decreasing. Chinese rebar demand has fallen off a cliff in the past six months. 

 

-Everyone loves investing at the peak of a bubble; speculators are betting on things like gold and that they’ll go higher. Eventually that bubble will pop, leaving many investors with frowns on their faces.

 

Theme 3: The Keynesian Cliff

 

 

Notes From Our Q4 Macro Themes Call  - theme3 pic

 

 

-The implications of the cliff are slowing short term growth. Republicans and the Tea Party want to get tough on fiscal reform. The cliff could reasonable equate to a 1-2% drag on growth in 2013, relative to consensus expectations.

 

-QE3 has been a positive for both stocks and President Obama’s reelection chances (according to the Hedgeye Election Indicator).

 

-Three scenarios could occur: Obama is reelected and Congress remains split: Weak Dollar / Obama is reelected and Democrats take back both houses: Weak Dollar / Romney wins and the Republicans take control of Congress: Stronger dollar?


Copper Meets The USD

Copper and China tell a story of decelerating growth among other things. But looking at the performance of the US dollar and copper, you can plainly see the effects of the Federal Reserve’s continued policy of devaluing our currency and ramping commodities higher. If Romney continues to win debates and the election in November, the US dollar will grow stronger and copper will likely fall lower.

 

Copper Meets The USD  - coppervsDOLLAR


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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DIAL IN & MATERIALS: Q4 2012 MACRO THEMES CALL

Valued Client,

  

Please dial in 5-10 minutes prior to the 1:30pm EST start time using the number and code provided below:

(Toll Free)

(Direct)

Conference Code: 535462#

  

To access the presentation please follow the link below:

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.

 

ABOUT KEITH MCCULLOUGH 

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). 

 

ABOUT DARYL JONES

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. 

 

ABOUT HEDGEYE

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.


MACAU OFF TO SOLID START

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%. 

 

MACAU OFF TO SOLID START - macau4

 

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.

 

MACAU OFF TO SOLID START - macau5


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