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Client Talking Points

THE BIG DAY

Election day is finally upon us! There’s a lot of data out there and it’s essentially a dead heat between Obama and Romney. Rasmussen has Romney up a point on Obama while Battleground polls have both men tied. Our proprietary Hedgeye Election Indicator puts Obama’s chances of reelection at 62.5%, which is up 10 basis points week-over-week. While that bodes well for Obama, it’s not a landslide by any means. 

 

Remember the implications for this election: dollar up with Romney, dollar down with Obama and more Bernanke too. The outcome of this particular election will materially change the market. If Obama were to win, we’d likely short the US dollar and go long gold and vice versa if Romney wins. And with Hurricane Sandy having messed up the Northeast, it’ll be interesting to see how many people are able to get out and vote today.

Asset Allocation

CASH 52% US EQUITIES 9%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 24% INTL CURRENCIES 15%

Top Long Ideas

Company Ticker Sector Duration
TCB

After a long downward slide, TCB has finally turned the corner. The margin has stabilized after the balance sheet restructuring. Loans are growing thanks to the equipment finance business. Non-interest income is more likely to go up than down going forward, a reversal from the past 18 months. Credit quality has a tailwind from a distressed housing recovery in TCB’s core markets: Minneapolis, Detroit and Chicago. On top of this, the CEO, Bill Cooper, is one of the oldest regional bank CEOs, which raises the probability that the bank will be sold. Expectations are bombed out at this point, so we think it’s time to move from bearish to bullish on TCB.

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.

HCA

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.

Three for the Road

TWEET OF THE DAY

“@KeithMcCullough amazing how different obama's economic policies are from clinton's. and they are in the same party” -@HedgeyeSnakeye

QUOTE OF THE DAY

“I never did give them hell. I just told the truth, and they thought it was hell.” -Harry S. Truman

STAT OF THE DAY

Final Rasmussen Poll: Romney 49% / Obama 48%