Brent Versus ANS

As of this morning, the spot price of Brent Crude oil is trading at a near $7 premium to Alaska North Slope spot. This is a bullish signal on the immediate-term TRADE duration for refining margins based on the West Coast, which process ANS and sell products based largely off of Brent. Energy Analyst Kevin Kaiser likes Tesoro (TSO) as a long play here, as it’s the most heavily levered to West Coast refining margins. 


Brent Versus ANS  - brent ans normal

Check 'Em







In the days leading up to last night’s presidential debate, there was much a stir about the choice of Candy Crowley as moderator of the debate. She said she would defy rules and rephrase questions as she saw fit. That’s like a replacement ref in the NFL making up stuff as they go along - it’s not right. She was clearly going out of her way last night to drum up a brouhaha over her work and she got it. She interpreted the debate as she saw fit and that’s not what the American people deserve. What happened to truth and fairness?




We bought gold into the close yesterday because when the dollar is down, gold goes up. When Obama does well in a debate, the dollar goes down and vice versa when Mitt is killing it. Gold is still in a long-term bubble but the point is that on the immediate-term side of things, if you get that US dollar right, you’re going to get a lot of other things right. Keith pointed out a factoid on the USD that’s worth sharing this morning because it has huge implications:


A)  IF the US Dollar snaps its TAIL line of support ($78.11)

B)  AND the Euro (vs USD) breaks out above its TAIL risk line of resistance ($1.31)

C)  THEN the market is probably telling you that Obama is going to win the Election






Cash:                Flat


U.S. Equities:   Flat


Int'l Equities:   Flat   


Commodities: Flat


Fixed Income:  Flat


Int'l Currencies: DOWN  








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.

  • TAIL:      LONG            



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.

  • TAIL:      LONG



While political and reimbursement risk will remain near-term concerns, on the fundamental side we continue to expect accelerating outpatient growth alongside further strength in pricing as acuity improves thru 1Q13. Flu trends may provide an incremental benefit on the quarter and our expectation for a birth recovery should support patient surgery growth over the intermediate term. Supply costs should remain a source of topline & earnings upside going forward.

  • TAIL:      LONG







“The media simply don't hold Obama to a high standard. I call it the soft bigotry of low expectations.” -@TPCarney




“Nothing is so admirable in politics as a short memory.” -John Kenneth Galbraith




Pepsi’s Q3 earnings fells 4.9% amid a decline in food and beverage sales. Higher commodity prices at work, folks.


In preparation for PENN's 3Q earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.



Penn National Gaming Proposes $807 Million Springfield, Massachusetts Development Including Hollywood-Branded Destination Casino Resort (10/11/2012)

  • +300k ft casino
    • 3,000-3,500 slots
    • 80-100 tables
  • Hotel:  300-500 rooms
  • Nightclub/ultra lounge; structured parking with 4,000-5,000 spaces; and 30,000-45,000 square-feet of meeting and convention space

Hollywood Columbus opens (10/8/2012)





  • "We've got the Harrah's St. Louis acquisition, which we expect to close right around the end of this month, maybe November 1, November 2."
  • "We have two VLTs for tracks that we're relocating to one to Dayton, Ohio, which will open in 2014 and another track which we're going to relocate to Youngstown, Ohio, which will open in 2014 as well."
  • "The amount that we've spent to date is deminimis, really for land cost, $4.9 million and $3.6 million, population – that will start ramping here in probably late fourth quarter, early first quarter of next year and population there is roughly 0.8 million or 800,000 people and 600,000 people in Dayton."
  • "Baton Rouge, L'Auberge opened in Baton Rouge. Clearly to date that's having an impact on our property. It's fairly substantial."
  • "We've clearly seen an impact from Scioto Downs opening in Columbus... on our Lawrenceburg facility. We have roughly 10% of our business comes out of the Columbus market for Lawrenceburg, and we have clearly felt the impact of that."
  • "Table games play has been very strong. Similar to what we're seeing in Dayton, we saw a little bit of that in Columbus. For whatever reason, and I think maybe it's simply a function that it's a less mature market and it hasn't had a lot of exposure to gaming, but we're clearly seeing that the slot business is a little bit slower building than what we might have expected to happen. I would say at Toledo, we're basically on track, but we're well ahead of track on poker and tables. So, clearly both of those markets are a little stronger in Ohio. The slot business – for whatever reason, I think it's going to just develop over time."
  • "We think the cannibalization in St. Louis market is over for the foreseeable future."
  • [Maryland Heights acquisition]  "Our new CapEx is going to include new slot machines, not completely new slot machines, probably about 500 new slot machines, all new systems and a Hollywood rebranding."
  • "First there's the process of getting selected by Springfield. Then it goes to the state. It's not completely established yet whether the city's going to approve one or two sites or three sites or four sites or whatever and let the state decide. So that's all to come. I don't think there's a final selection in Springfield until 2014 and even after that selection process, I would guess it's a 2016 event before you see any kind of actual opening of a facility in Western Mass." 


  • "Generally not having any expectation that we're seeing any improvement in consumer confidence or unemployment levels as we think about the balance of 2012."
  • "I would remind everybody that we have the preferred equity sitting out there with the maturity in 2015, which currently has a dilution impact of roughly 27 to 28 million shares. It currently costs us 0% to leave that out there, so there's certainly no incentive for us to go out and accelerate the redemption of that instrument. But that's a mechanism that sits out there." 
  • "Riverside is the closest casino to the speedway. We fully expected that it would take the largest hit from the Kansas Speedway opening. But with all that, we have continued to look at our fight zones in and around that market and try to capture share from Ameristar and Harrah's and, to a lesser extent, Isle. And they have been very aggressive in preserving their slot business especially. And that's been our challenge, but we're not going to be undisciplined in how we go after that. So we've continued to look at geographically where we think we have opportunities to continue to grow the business at a very profitable level but not overspend in our marketing dollars. Our margins there have held up very well, even though the revenue impact has been a double-digit decline. We'll continue to do that as well at Riverside and...continue to grow both of those businesses as Kansas Speedway evolves."
  • "Project CapEx is expected to be roughly $160 million for the third quarter and roughly $88.9 million for the fourth quarter. Maintenance CapEx in the third quarter was roughly $23.7 million and maintenance CapEx for the fourth quarter were projected to be around $21.2 million."
  • [Toronto] "We have a broad interest in any opportunity in that province. So Toronto is certainly of interest if we have a better understanding of what they're looking to do there, plus there's other regional markets in that province that also we view as very attractive."
  • "We're hopeful to have a groundbreaking before the end of 2012, and right now we're thinking first half of '14. But it's still a very fluid process and a lot of things have not been resolved yet."
  • [Promotional environment in Vegas]  "Generally more of the same. The locals market continues to be sluggish out there. Promotional activity is slightly more rational than what we saw a couple quarters ago. And we've certainly at the M continued to pare back our marketing expenses where we believe we can improve the profitability of our revenue streams."
  • [Illinois VLT impact] "We don't anticipate any impact from these bars and taverns opening up."
  • [Cap interest guidance] "We have roughly $2.2 million in the third and roughly $800,000 in the fourth."

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.52%
  • SHORT SIGNALS 78.68%

Retail Expert Call: European Trends Before Earnings

Takeaway: We will be hosting a European Channel Check Conference Call featuring retail expert Stacey Widlitz this Thurs (10/18) at 1:30pmEST


Retail Expert Call: European Trends Before Earnings


Topics will include:

  • International trends at ANF, RL, TJX, TIF, COH, GPS, URBN, KORS, LULU, FOSL, Whole Foods and Kate
    Spade (FNP)
  • Reports from the trenches for International Retailers including Burberry, Louis Vuitton, H&M, Zara, Topshop, Debenhams, Jack Wills, Selfridges, NEXT and Uniqlo
  • Analysis of the competitive landscape in the UK including updates on markdowns for public and non-public players
  • The importance of Chinese tourism in Europe (exposure 20%+) to luxury brands
  • Unique views on tourism and its relationship with spending  


  • Date: Thursday, October 18th
  • Time: 1:30pm EST
  • Number: Toll Free Number:
    • Direct Dial Number:
    • Conference Code: 636217#

Please dial in 5-10 minutes prior to the 1:30pm EST start time using the number and code provided above.
For more information regarding this call please email .

Stacey's Background

  • Currently President of SW Retail Advisors Inc., a consulting firm with offices in New York City and London
  • On air contributor on CNBC and writes for the blog
  • Started her career as a Retail Buyer for a major Department Store
  • Following her experience in the retail field, Stacey started her career on Wall Street covering Retail Equities
  • After receiving an MBA Stacey joined the Retail Equity Research Team at PaineWebber (now UBS) where she spent 3 years
  • Following UBS, Stacey worked as a Senior Analyst at SG Cowen, Fulcrum Partners
  • In 2005 was one of three analysts to launch the Research Department at Pali Capital, where she covered Retail and Home Video for 5 years
  • After more than a decade of experience covering Retail on Wall Street, Stacey launched SW Retail Advisors in 2011  
  • To learn more and read Stacey's blog please visit   

Investigating Truth

“The first duty of a man is the seeking after and investigation of truth.”



Hail Mary end-zone finale to Packers/Seahawks? Last night’s end to the Presidential Debate was not, but Candy Crowley played the role of an NFL replacement ref, turning what I had scored as a tie into a late Obama win.


What is the truth in America? Was the moderator “fact-checking” Romney into the boards at the most critical point of the debate fair? Does it matter? Like many journalists in the manic media, Candy knows where her bread is buttered. Maintaining access to the party in power = priority #1. Sadly, for the country, that included her on-the-fly interpretation of Romney vs Obama truth.


Not surprisingly, the stock, currency, and commodity markets front-ran the momentum swing of the debate. It was a marginal win for Obama, but what happens on the margin in Macro matters most. What’s good (on the margin) for Obama, is bad for the US Dollar. It has been since he took office. Partisan Republicans may disagree with me on last night’s score; the market doesn’t.


Back to the Global Macro Grind


With the SP500 inverse correlation to the US Dollar of -0.95 right now, the truth is that if you get the immediate-term moves in the US Dollar right, you’ll get a lot of other things right. That’s the only reason why I feel compelled to score political momentum right now.


Perversely (even though I think Gold is in a long-term bubble) that’s why I bought Gold in front of last night’s debate. Obama up = Dollar down = Gold Up. Bubbles can remain bubbles for as long as causality (policies to debauch the Dollar) remains intact.


As I investigate other truths this morning, here are some big ones:


1.   #EarningsSlowing – this is our top Hedgeye Global Macro Theme for Q4 2012 (send an email if you want the slide-deck; I did meetings all day in Boston yesterday and we came away with plenty more long-cycle ideas to discuss on peak US Corporate margins). #EarningsSlowing remains very relevant this morning with both Intel (INTC) and IBM reiterating the same.


2.   Tech Stocks (XLK) – if you didn’t know global growth slowing would translate into +/- GDP businesses (semis, hardware, etc.) seeing top and bottom line slowdowns, now you know. Tech is down -2.4% for October.


3.   The sun rises in the East


While Obama, Geithner, and Bernanke continue to believe that they can “smooth” the economic cycle (Keynesian Economics 101), points #1 and #2 are now colliding with point #3 (gravity). The stock market hasn’t been the economy in 2012 but, eventually, they’ll collide.


What’s the market’s truth (last price) telling you this morning?

  1. Lower-highs in stocks (globally)
  2. Higher-lows in bonds (globally)
  3. EUR/USD testing its TAIL risk line of resistance

On that last point, I can’t overstate how important the next currency move is from here.


A)     IF the US Dollar snaps its TAIL line of support ($78.11)

B)      AND the Euro (vs USD) breaks out above its TAIL risk line of resistance ($1.31)

C)      THEN the market is probably telling you that Obama is going to win the Election


Four more years of the same (Big Government Interventions, Spending, and Regulation/Rule-Making on-the-fly) might actually be fantastic for the stock market – but it will continue to crush both real (inflation adjusted) economic growth, hiring, and confidence. I wonder what the 47% think about that?


Collectively, the American people aren’t as dumb as some of the media’s partisans. I highly doubt they’ll trust the stock market anymore today than they didn’t yesterday (stocks at 5yr highs = Equity Fund outflows and Financial Media ratings at YTD lows).


If you didn’t know Candy’s role in the debate was as politically rigged as Bernanke’s has been at the Fed, now you know that too. The truth about America 2.0: your un-elected and un-accountable pundits and politicians are running the gong-show.


My immediate-term risk ranges of support and resistance for Gold, Oil (Brent), US Dollar, EUR/USD, UST 10yr Yield, Russell2000, and the SP500 are now $1, $112.60-115.26, $79.08-80.07, $1.29-1.31, 1.64-1.76%, 813-842, and 1, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Investigating Truth - Chart of the Day


Investigating Truth - Virtual Portfolio

Early Look

daily macro intelligence

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.