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INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA

Takeaway: Comparing Hurricanes Sandy and Katrina, their impact was similar on jobless claims. We'll know more once the State-level data is released.

Hurricane Comparisons

Remain calm. In the chart below we profile the trend in initial jobless claims following hurricanes Katrina and Sandy. If, in fact, this week's enormous surge in initial claims is attributable to Sandy, then we can reasonably expect to see it mean revert along a similar path that we saw following Katrina. That said, it took 8 weeks for Katrina to fully renormalize. 

 

There is in fact a way in which we can test the government claim that the rise in claims is attributable to Sandy. The government releases state-level NSA claims. Total NSA claims rose 104k WoW. We would expect to see a preponderance of that increase represented by New Jersey, New York and other hard-hit East coast states. Unfortunately, the state level data is not yet available on the Labor Dept website. Stay tuned.

 

INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA - sandy vs katrina

 

 

Initial Jobless Claims: The Data

Initial claims rose 84k last week to 439k (an increase of 78k after a 6k upward revision to last week's data). The rolling claims series rose 11.75k WoW to 384k. On a non-seasonally adjusted basis claims rose 104k to 466k. The year-over-year rolling NSA change made a dramatic jump to ~0% improvement. Last week the YoY rolling NSA change was -6.5%. 

 

INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA - Seasonality

 

INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA - rolling claims NSA YoY data

 

INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA - Raw

 

INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA - Rolling

 

INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA - NSA

 

INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA - Rolling NSA

 

INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA - SPX

 

INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA - Fed

 

INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA - NSA YoY

 

INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA - Recessions

 

INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA - Claims Linear

 

 

Yield Spreads

The 2-10 spread fell 3 bps WoW to 133 bps. So far 4QTD, the 2-10 spread is averaging 1.43%, which is up 6 bps relative to 3Q12.  

 

 

INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA - 2 10 spread

 

INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA - 2 10 QoQ

 

Financial Subsector Performance

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

 

INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA - Subsector performance

 

INITIAL JOBLESS CLAIMS: SANDY vs. KATRINA - Companies

 

Joshua Steiner, CFA

 

Robert Belsky

 


OFS: Flat Out

After examining yesterday’s Producer Price Index (PPI) data from the Bureau of Labor Statistics that was released yesterday, we’ve come to the conclusion that oilfield services prices have begun to flatten out after an abrupt slowdown that occurred this Spring. The pricing trends are a positive for the sector and negative for contract drillers.

 

OFS: Flat Out - 1

 

OFS: Flat Out - 2

 

OFS: Flat Out - 3


Move Fast

Client Talking Points

Snapping Support

The market moves quickly and you have to be prepared to deal with it. We noted that the 1364 line of support for the S&P 500 was a critical level to watch yesterday. It broke and took the market down to 1355. Right now, there is no intermediate-term TREND support to 1258; keep that in mind because the market is looking more grim day after day. Traders are keen to fade any sort of rally and if we go down any further and approach 1300, we’ll have quite the mess on our hands.

 

Who's To Blame?

You can blame the sell off on a number of things, but the focal point of the market seems to be the Fiscal Cliff. Hedgeye Financials Sector Head Josh Steiner pointed out yesterday that he estimates we will hit the debt ceiling top within 35 days. With the way our politicians act, any chance of compromise on the issue seems unlikely. It’ll be interesting to see what happens come December.

Best Ideas Call

A friendly reminder that Hedgeye will be hosting our bi-annual BEST IDEAS CALL today. We will be outlining the top investment ideas, both long and short, across each vertical of our world-class research team. In aggregate, we will offer one high conviction and differentiated investment idea from each of our 8 verticals over the intermediate term duration.

 

If you're interested, please get in touch with us. Risk Manager subscribers enjoy access to the call; see our sign up page for more information.

Asset Allocation

CASH 61% US EQUITIES 6%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 18% 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.

IGT

There is improving visibility on 20%+ EPS growth with P/E of only 11x with better content leading to market share gains. New orders from Canada and IL should be a catalyst. Additionally, many people in the investment community are out in Las Vegas at the annual slot show (G2E) and should hear upbeat presentations by management.

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

"Remember - if oil goes up on geopolitical risk, like Israel/Palestine, you do NOT want to be in energy stocks. Cost of capital goes way up" -HedgeyeEnergy

QUOTE OF THE DAY

“The belief in a supernatural source of evil is not necessary; men alone are quite capable of every wickedness.” -Joseph Conrad

STAT OF THE DAY

Foreclosure activity rose 3% in October on a month-over-month basis but is down 19% year-over-year.


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

THE M3: S'PORE: CASINO VISIT LIMIT, NEW HOME SALES, CPI

The Macau Metro Monitor, November 15, 2012

 

 

CASINO VISIT LIMIT REGIME FOR PROBLEM GAMBLERS TO START MID-2013 Channel News Asia

Parliament debated the Casino Control (Amendment) Bill on Thursday.  Second Minister for Home Affairs and Trade and Industry S Iswaran said there is an ongoing challenge of ensuring that Singapore's social safeguards protect the vulnerable from the casinos.  Hence, among the proposed changes to the Casino Control Act is the introduction of the visit limit. 


The visit limit will set a cap on the number of times an individual may visit the casino each month.  Some 4,000 to 6,000 locals could come under this regime, which is due to kick in by mid-2013.

There will be three forms of visit limits: firstly, individuals can apply to the National Council on Problem Gambling for voluntary self-imposed visit limits; secondly, family members can apply for family visit limits; thirdly, the NCPG will be empowered to appoint a Committee of Assessors to determine whether a third-party visit limit should be imposed on a financially vulnerable person. 

 

NEW PRIVATE HOME SALES DECLINE IN OCTOBER: URA Channel News Asia

According to the Urban Redevelopment Authority (URA), sales of new private homes in Singapore declined by about 25.7% to 1,948 units in October, from 2,621 units in September.

 

SINGAPORE'S CONSUMER PRICE INFLATION RATE UP BY 4.8% ON-YEAR Channel News Asia

Singapore's consumer price inflation rate was up by 4.8% YoY for the 1st nine months of 2012.



Learn Together

“We can do anything if we do it together.”

-William S. Knudsen, 1938

 

That’s how great business men and women think. Since its their own capital at risk, they know that the only way to win is through trust, teamwork, and collaboration. Markets didn’t see any of that from President Obama yesterday. Markets have a vote too.

 

The aforementioned quote comes from the beginning of Chapter 3 in Freedom’s Forge, “The World of Tomorrow.” Pre WWII, Post Depression, was arguably the greatest period of collaboration between competent US Business leaders and Washington in US history. Unfortunately, it took a crisis for politicians to cooperate with credible business sources. Maybe we need another.

 

From both a global growth and US earnings cycle perspective, this is not the late 1930s. “In 1939, the American steel industry was at its lowest capacity in twenty years” (page71). Today, American corporate profit margins are coming off all-time peaks. If Romney Republicans and Democrats alike are being advised by Neo-Keynesians, don’t expect them to get what I see. They haven’t all year.

 

Back To the Global Macro Grind

 

Setting aside the money printing thing (and investors being forced to chase stocks into their April and September tops), the biggest Global Macro Research call of 2012 has to be Global Growth surprising on the downside.

 

Since piling more debt-upon-debt-upon-debt structurally impairs long-term economic growth (Reinhart & Rogoff 101), this really shouldn’t have surprised as many economists and strategists as it did.

 

Like Americans of the late 1930s, we need to evolved our risk management, modeling, and forecasting processes. We need more doers advising Washington – less talkers. They do not know what they don’t know.

 

Risk happens fast…

 

The SP500 snapped our long-term TAIL line of 1364 yesterday and then quickly drew-down another 9 handles to close the day down another -1.4%. From The Bernanke Top, that puts the SP500’s correction at -8.1% (Russell 2000 down -10.5%). That’ll leave a mark.

 

But what have we learned? How many more times do you want to go through this? Japan has been doing it for 20 years and is now quadrupling-down on the same monetary policy that has not worked.

 

The Japanese Yen is getting hammered again this morning as the leader of the LDP (Abe) is begging for “unlimited easing” going into Japan’s December 16th election. Don’t blame them – they are doing precisely what Princeton and Yale taught them to do.

 

So, down Yen = up Dollar… and the Correlation Risk associated with Strong Dollar is on:

  1. US Dollar up for the 8th of the last 9 weeks (bullish TREND – see Chart of The Day)
  2. Euro snaps TREND line support of $1.28 (EUR/USD)
  3. Yen drops back into a Bearish formation at $81.22 (USD/JPY)

I know, I know – I should be whining about the US fiscal cliff this morning. Not. With Italian GDP -2.4% y/y in Q3 and France seeing the fruits of a socialist Hollande vote (going into a recession), do not forget that the rest of the world’s fiscal and monetary risks do not cease to exist. They’re all going off the #KeynesianCliff now.

 

We all knew this would end badly. So don’t tell me “stocks are cheap” if you use the wrong numbers. You are better than that. Tell me you’ve learned something since the October of 2007 all-time high in US Equities and proactively prepared for this moment.

 

Across our core risk management durations, here’s why I am more bearish today than I was yesterday:

  1. CHINA – Shanghai Composite down another -1.3% overnight to a 1 month low (-17.5% since #GrowthSlowing began)
  2. JAPAN – Nikkei getting whipsawed by Hilsenrath like attempts to scare Equities higher, but remain -13.9% since March
  3. SOUTH KOREA – KOSPI down another -1.2% overnight almost back to flat YTD remains bearish TREND in our model
  4. GERMANY – DAX was the last holdout of the European majors; now snapping its 7118 TREND line
  5. SPAIN – stocks are trying to rally on another “request for bailout” rumor; that’s so Q2; IBEX is bearish TRADE and TREND
  6. RUSSIA – RTSI continues to crash (down -21.8% from the Global #GrowthSlowing top of March 2012)
  7. BRAZIL – Bovespa down another -2.1% yesterday, moves back into the red YTD (bearish TAIL remains)
  8. CANADA – TSX Composite cracked its TREND support of 12,131 this week, down -1.6% yesterday post Obama’s presser

Sure, that’s just a snapshot of globally interconnected risk across the majors of Global Equity markets. But guess what – if you look at what’s happening in Commodities and Currencies, from a volatility perspective, it’s even worse.

 

We’ve said this for a very long time, and I’ll say it again this morning – the USD arresting a 40-year decline is the most asymmetric risk that can occur, across asset classes, to what you’ve been used to for the last 10 years of your investing life.

 

Yes, there’s a lot going on. It’s a lot of hard and humbling analytical work to contextualize – which makes it next to impossible if the media and political elite refuse to acknowledge our voices. Rise up, and help us help them understand this together.

 

Our immediate-term risk ranges for Gold, Oil (Brent), Copper, US Dollar, EUR/USD, UST 10yr Yield, and the SP500 are now $1, $108.19-111.10, $3.41-3.47, $80.58-81.33, $1.26-1.28, 1.53-1.68%, and 1, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Learn Together - Chart of the Day

 

Learn Together - Virtual Portfolio


Early Look

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