• run with the bulls

    get your first month

    of hedgeye free


Lower-Highs: SP500 Levels, Refreshed

POSITIONS: Long Bonds (FLAT), Long US Dollar (USD); Short Industrials (XLI) and Utilities (XLU)


At the beginning for the year, the bull case was growth “is back” – then, as growth slowed, it was earnings (“stocks are cheap”, using the wrong numbers). And earnings slowed. Now the bull case is government.




Across our core risk management durations, here are the lines that matter to me most:

  1. Intermediate-term TREND resistance = 1419
  2. Immediate-term TRADE resistance = 1406
  3. Long-term TAIL support = 1364

In other words, the Risk Range across durations is widening as the expectation for more government catalysts are heightening.


Waiting on Obama to speak,



Keith R. McCullough
Chief Executive Officer


Lower-Highs: SP500 Levels, Refreshed - SPX

Bulls, Bears and BRICs

We're pleased to present the question and answer session from this morning's investment call held for subscribers. Hedgeye CEO Keith McCullough discusses the slowdown occurring in BRIC countries (Brazil, Russia, India, China), noting that China's equity market has declined double digits over the last three years. Russia is without a doubt the worst market right now with high beta and a rough investing climate. Also discussed is bullish and bearish sentiment in the market and the Shanghai and Hang Send Indices. You can listen to the full audio from our Q&A session below.



In preparation for ISLE's F2Q 2013 earnings release Thursday, we’ve put together the recent pertinent forward looking company commentary.



Isle of Capri Casinos, Inc. Opens Isle Casino Cape Girardeau (10/31)




  • "While we've been able to mitigate the economic issues at most of the properties in the portfolio through our continuing cost containment measures, our results in Pompano and Kansas City were impacted by an increasing competitive environment."
  • "We also continue to experience construction disruption in Vicksburg and Lake Charles as we focus on asset renewal, and by road construction in Black Hawk."
  • "We received good news from the Supreme Court in Pennsylvania last week and are finally looking forward to starting construction of our Lady Luck property at the Nemacolin Woodlands Resort in Western Pennsylvania. At the point that we're able to do so, it will be 9 to 12 months before our flagship Lady Luck welcomes our first guests."
  • "Shortly after the end of the quarter, we completed the refinancing of the 7% subordinated notes which were due in 2014 with a new subordinated debt issue due 2020. Our nearest maturity is now 2016. Related to this refinancing, we will incur charges of approximately $3 million in the second quarter on the underwriting discounts and various fees related to the financing."
  • "Interest expense for the balance of the year is now expected to be approximately $66 million."
  • [Midwest] "I can't specifically say we're seeing it related to the drought; we have seen a pullback just like the rest of the group has, probably since the end of the first calendar quarter. So I can't pinpoint anything specifically to the drought or farming."
    • "You don't know how many people sold forward. And then the other thing is, to the extent that there is yield in the fields, the corn is at pretty live prices right now. So how all that balances out, I think it's really going to be into the fall before we know the full impact."
  • [Florida] "There is promotional war right now they started out when they opened with two to three promotional mail offers a month, now they're up to 10 to 12. So they are up over 300% just with their mailing to their customers and that's what we're facing."
  • [Depreciation guidance of $76-78MM for FY 2013] "We're still on target for what we expected for the 12 months."
  • [Annual corporate cost run rate] "$40 million (includes $6 million of stock comp)."
  • [$50 million maintenance capex guidance]  "We've been running in the $40 million to $50 million range in any given year. I think that that's probably a pretty good number."
    • "We're comfortable with where the slot floor is now. We're up to speed at all of our properties or most of our properties where the slot floor needs to be."
  • [Lake Charles] "But we do expect the margins to increase. We started the fan club in the quarter, we have some additional expenses there with some comp reserves that we left because they are such heavy table play in that market that we made a decision to leave some comp residual in their accounts. So we're tweaking all of that along with our marketing spend and our labor to find to your point where we really need to be post-Crown and where that labor and marketing needs to settle in."
  • "I think the issue in Mississippi right now is really being driven by Lula. We are continuing to modify the way we act at the property. The way we market the property down there and operate to kind of find the right mix on this volume, but you know, we really just have seen what I believe now
    appears to be kind of a permanent diminution in that market."
  • "In Vicksburg, we're under some pretty heavy construction disruption right now with – redoing our casino floor and some of the couple of the restaurant products there.  The re-branding there that's getting done and the renovations have had a pretty good impact on the property in the quarter. And that should start to subside as this stuff finishes up later this year."
  • [New Black Hawk competitor] "We've had a great communication with them in terms of just moving forward as our neighbor. We installed a new sign. We got their permission to put up a big truck in middle of the road to kind of impact what they did for a week. Everything we've done with them has been positive, but we haven't seen any promotional challenges or anything that would cause us any concern."
  • [Black Hawk improving margins] "I think we're seeing good results from the hotel rooms that we've been able to refurbish. And so I think we've been up against some pressure with the rest of the market. Instead of being the first stop with the highway construction, we became the last stop as traffic got rerouted. And I think our marketing promotions have been developed in such a way that they take into account people that show up rather than a sunk cost for promotion. So, I think we've tailored a lot of what we did this quarter in a more efficient way, better yielding in the hotel, better food product, able to raise some prices in our buffet and things like that. So, I think we've been able to overcome that along with a tax increase July 1."

investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

Return Of Rebar

The price of spot Chinese steel rebar has undergone a sharp drop in price since August of 2011 and continues to head lower month-after-month. While the price bounced back in August of this year, it was a dead cat bounce and quickly sold off. The price of rebar once correlated tightly with Brent crude oil until the Federal Reserve began quantitative easing which inflated the price of oil but not Chinese steel. Chinese steel is not a financialized market like oil markets have become, so investors can’t pile into Chinese steel as an “inflation hedge.” For the correlation to return, Brent crude would have to come down significantly and rebar would have to increase in price to some degree.


Return Of Rebar - REBAR

It Only Takes One

Client Talking Points

One Catalyst

It's easy to look at a major even that's occurred during a trading day and blame that for whatever direction the market decided to go. For instance, many people yesterday thought Harry Reid's comments sunk the market. But in reality, there's more going on behind the scenes. Growth continues to slow, earnings are under pressure and we face a political bubble that's quite unique in regards to the fiscal cliff. All these things (and many others we fail to mention here) all factor in to trading and markets. It's easy to pick a target and lay the blame on it, but it's pointless in ways.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

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.


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.


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


“Wells notice to Stevie Cohen…imminent wrist slap" -@ZH_Crown


“What we call 'Progress' is the exchange of one nuisance for another nuisance.” -Havelock Ellis


GETCO offers to buy Knight Capital (KCG) for $3.50 a share.

China Surprise


Hedgeye CEO Keith McCullough appeared on CNBC's Fast Money last night and did a web extra clip discussing what lies ahead for the commodity markets and China. Keith noted that there are three big factors that come into play: China, copper and bond yields. Global growth continues to slow and investors who believed that China had bottomed got smoked when they didn't realize that "cheap stocks" can always get cheaper.

Watch Keith's full breakdown on the markets in the clip posted above.

the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.