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Athletic FW Uptick

Takeaway: Performance categories returned to +HSD growth this week.

On the heels of recent volatility in athletic footwear retail names, this week’s athletic footwear sales came in better on the margin though underlying trailing 3-week figures decelerated reflecting the third consecutive week of industry sales declines.


Importantly, performance categories where FL and FINL are over-indexed were up +7.4% on the week compared to the broader industry down -3.7% reflecting a sharp rebound from last week and a return to a HSD growth trajectory.


The key brands of note continue to be Nike, Brand Jordan, and Under Armour who all gained share this week. We remain positive on NKE and FL and cautious on UA near-term.

 

Athletic FW Uptick - FW Table1

 

Athletic FW Uptick - FW 1Yr

 

Athletic FW Uptick - FW Table2

 

Athletic FW Uptick - FW Table3

 

Athletic FW Uptick - FW Spread

 


Keeping It Real

Client Talking Points

Calling The Shots

When we make calls or trades at Hedgeye, we make sure to timestamp everything we do. It's easy to say you saw a trend coming and put on a fantastic trade, but anyone can do that. We've only had four double digit losses out of several hundred trades this year and that's pretty damn good. Back in March, we made our Growth Slowing call that eventually turned into Earnings Slowing in Q3. With the housing market and stock market beginning to recover and commodities deflating, we're now in the camp of Growth Stabilizing. The fiscal cliff will play a big role in where we go from January and further out but right now, that's where we stand.

Asset Allocation

CASH 52% US EQUITIES 24%
INTL EQUITIES 12% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 12%

Top Long Ideas

Company Ticker Sector Duration
NKE

Our competitors are neutral to bearish on the name ahead of earnings, but we think they’re missing the bigger picture. We think concerns over the shoe cycle rolling over are overdone. With R&D in the mid-teens, NKE has the ability to drive the ‘sneaker cycle’ in a case of “the tail wagging the dog”. We also think $NKE is a candidate for releasing a special dividend when they report EPS next week.

SBUX

Uncertainty in US from a macro perspective (jobless claims uptick) gives us pause from TRADE perspective although coffee prices will serve as a tailwind going forward. Company is becoming more complex, taking on risk as it acquires new brands. Longer-term, we view Starbucks, along with YUM, as one of the most attractive global growth stories in our space.

FDX

Margins are in a cycle trough as the USPS is on the brink. FDX is taking more share in the U.S. and following the recent $TNT news flow we think $UPS is in a tough spot.

Three for the Road

TWEET OF THE DAY

"Like most successful buy-side pros, my forecasts change daily b/c risk does" -@KeithMcCullough

QUOTE OF THE DAY

"What we anticipate seldom occurs; what we least expected generally happens." -Benjamin Risaraeli

STAT OF THE DAY

The 10-year Treasury yield hit 1.78% this morning, a seven week high.


Materials & Dial-in Information for Expert Call with John Taylor

Materials & Dial-in Information for Expert Call with John Taylor - taylorcallNEW

 

We will be hosting an expert conference call today, December 18th, at 1:30pm EST featuring Professor John B. Taylor of Stanford University. Professor Taylor is a highly regarded scholar known for his research on the foundations of modern monetary theory and policy, which has been applied by central banks and financial market analysts around the world. In the call entitled, Will Monetary Policy Take Us Over the Fiscal Cliff?, Professor Taylor will discuss our nation's current fiscal situation and the policy actions that are essential to augment our economy.

 

Please CLICK HERE to obtain a copy of the presentation and dial in 5-10 minutes prior to the 1:30pm EST start time using the number provided below. If you have any further questions email .

  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 485213#

 

KEY TOPICS WILL INCLUDE:

  • Economic problems still remain detrimental to the nation's economic stability following the Presidential Election    
  • Continued policy to not deleverage has hindered economic growth
    • Fiscal, regulatory, and monetary
    • A drag will continue even if the fiscal cliff is avoided
  • Risks are two sided
  • A change in policy will bring back strong growth and stability

  

ABOUT JOHN TAYLOR:

  • Currently a Professor of Economics at Stanford University and a Senior Fellow in Economics at the Hoover Institution
  • Formerly served on the President's Council of Economic Advisers and as a member of the Congressional Budget Office's Panel of Economic Advisers
  • Served as Under Secretary of Treasury for International Affairs from 2001- 2005
  • Oversight of the International Monetary Fund and the World Bank
  • Responsible for coordinating financial policy with the G-7 countries
  • Accredited author, his latest the winner of the 2012 Hayek Prize, entitled: "First Principles: Five Keys to Restoring Americas' Prosperity"
  • Received numerous awards for his work as a researcher, public servant, and teacher
    • Awarded the Alexander Hamilton Award for his overall leadership at the U.S. Treasury, the Treasury Distinguished Service Award for designing and implementing the currency reforms in Iraq, and the Medal of the Republic of Uruguay for his work in resolving the 2002 financial crisis 

 


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.

THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – December 18, 2012


As we look at today's setup for the S&P 500, the range is 17 points or 0.79% downside to 1419 and 0.39% upside to 1436.       

                                                                                                                                                        

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 1.52 from 1.52
  • VIX closed at 16.34 1 day percent change of -3.88%
  • BONDS – our global growth model moved from #GrowthSlowing to #GrowthStabilizing in the last few weeks; that’s why I sold all our Fixed Income positions and even bought AAPL yesterday. UST 10yr yield shoots higher again this morn to 1.78%, comfortably above my TREND level of 1.69%; immediate term oversold on bonds = 1.80%; immediate-term TRADE overbought in US stocks = 1436 SP500.

MACRO DATA POINTS (Bloomberg Estimates):

  • 7:45am/8:55am: ICSC/Redbook weekly retail sales
  • 8:30am: Current Acct Bal, 3Q, est. -$103.0b (prior -$117.4b)
  • 10am: NAHB Housing Market Index, Dec., est 47 (prior 46)
  • 11am: Fed to purchase $1.5b-$2.25b notes in 2036-2042 sector
  • 11:30am: U.S. Treasury to sell 4-wk bills
  • 1pm: U.S. Treasury to sell $35b 5-yr notes
  • 2pm: Fed to sell $7b-$8b notes in 2015 sector
  • 4:30pm: API inventories

GOVERNMENT:

    • House, Senate in session
    • Hawaii Sen. Daniel Inouye dies at 88
    • Executives from NYSE, Euronext, NASDAQ, Credit Suisse testify at Senate Banking panel hearing on computerized trading
    • Commerce Dept. expected to announce final countervailing duties on wind-tower imports from China, Vietnam delegation led by Chinese Vice Premier Wang Qishan for talks
    • NRC staff meets officials from Southern California Edison on restart of San Onofre nuclear plant near San Diego, 1pm

WHAT TO WATCH

  • Obama tax concessions signal potential bipartisan budget deal with Boehner
  • Apple loses bid for sales ban on Samsung devices in U.S.
  • Cerberus to sell gunmaker Freedom stake after school massacre
  • U.S. retail gasoline hit lowest price in a yr on supply gain
  • AIG raises $6.45b as AIA shrs priced in top half of range
  • Wal-Mart probes Mexico license issue as NYT reports bribery
  • Amgen expected to plead guilty to federal charges, U.S. says
  • Morgan Stanley fined $5m by Massachusetts on Facebook IPO
  • Hedge fund managers convicted by jury of insider-trading scheme
  • Google’s Android in office fails to match wider mkt traction
  • China said to set growth target at 7.5% for 2nd yr
  • UBS Libor settlement, charges may be announced
  • Spain Oct. bad loans ratio 11.23% vs 10.71% in Sept.
  • U.K. Nov. inflation remains at 2.7% on utility costs, food prices

EARNINGS:

    • Sanderson Farms (SAFM) 6:30am, $0.32
    • FactSet Research (FDS) 7am, $1.23
    • Jefferies (JEF) 8am, $0.32
    • Oracle (ORCL) 4pm, $0.61
    • Heico (HEI) 4:10pm, $0.43

 

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Gold Advances as U.S. Budget-Deal Optimism Spurs Commodities
  • Goldman Bullish With Hedge Funds Amid Citi Warning: Commodities
  • Oil Advances a Third Day After Progress on U.S. Budget Agreement
  • Swaps Diverge from Stock Analysts Seeing Rally in Ships: Freight
  • EU Rapeseed Growers Eye Output Gain as Germany Boosts Planting
  • Copper Falls in London Amid U.S. Budget Talks, Rising Stockpiles
  • Japan Seeks Least Milling Wheat in 11 Weeks From U.S., Canada
  • Palm Oil Drops as Falling Malaysian Exports Signal Weak Demand
  • Rebar Advances to Five-Month High as Lending in China to Climb
  • Essar May Stop Diesel Exports at Second-Largest Indian Plant
  • Polymetal Sees Platinum Attractive Amid South African Strikes
  • Sugar Production in India Climbs 2% to 4.9 Million Metric Tons
  • China to Start Agricultural Product Futures Price Index: Xinhua
  • China Tin Consumption, Output Seen Rebounding in 2013 by ITRI

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 6

 

EUROPEAN MARKETS


THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS


CHINA – day 2 of follow through in Chinese A-share buying after the +4.3% melt-up that got the Shanghai Comp back to bullish TREND (2096 is now support), but the Chinese data overnight is a reminder that there’s a big difference b/t #GrowthStabilizing (reality) and growth ripping (not happening), so just keep that in mind – Foreign Direct Investment (FDI) dropped -5.4% y/y in NOV in China.

 

SINGAPORE – the Straits Times Index (STI) didn’t make higher-highs on one of the more surprising fundamental bearish data points I have seen in weeks on the global economy – Singapore non-oil exports dropped -2.5% y/y in NOV (versus recovering +7.9% y/y in OCT). With everything Asia moving to immediate-term TRADE overbought, good spot to book some gains.

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 



Animal Kingdom

“In the animal kingdom, the rule is eat or be eaten; in the human kingdom, define or be defined.”

-Thomas Szasz

 

If 2012 has driven you right batty, I highly recommend reading the Classical Liberal work of the late psychologist, Thomas Szasz. Particularly in our profession, you have to be proactive in defining your process.

 

Make no mistake, on #OldWall there was a big business in being perma. There were Perma-Bulls and Perma-Bears. Now, on #WallSt2.0, there are Perma-Risk Managers who understand risk isn’t “on or off.”

 

Risk is always on. And it moves both up and down, fast.

 

Back to the Global Macro Grind

 

In the animal kingdom (Canadian Junior Hockey), I learned the rule of taking a punch square in the face, fast. In the human kingdom (Wall Street), I’m re-learning the rules every day. Define your process, and evolve it as the game does. The rules are always changing.

 

In the last week, I hope I’ve been crystal clear in both communicating and acting on what our Global Macro Process has been signaling on global growth. To review 2012:

  1. #GrowthAccelerating = our call until January 24th when Bernanke imposed his Policy To Inflate (JAN25)
  2. #GrowthSlowing = our call starting in late-Feb, early March as food and oil prices ripped consumers, globally
  3. #GrowthStabilizing = mid-Nov to early-Dec, as commodity deflation takes hold, consumption stabilizes

I use hash-tags on #Twitter to hold myself accountable to the #TimeStamps implied by both our Research and Risk Management views. If you follow the Perma-Bull and Perma-Bear guys closely, you’ll notice that they are constantly changing their thesis.

 

Top down, our Global Macro Process has 3 big factors (our GIP model):

  1. GROWTH
  2. INFLATION
  3. POLICY

The aforementioned shifts in GROWTH are happening faster right now because that’s what Big Government Intervention does:

 

A)     It shortens economic cycles

B)      It amplifies market volatilities

 

All the while, Keynesian government policy makers are trying their very best to ramp #2 (asset INFLATION) via #3 (POLICY to inflate via currency devaluation).

 

Japanese bureaucrats are so impressed by what Bernanke appeared to have achieved at the September 2012 highs (3% higher in the SP500 at 1474, where inflation slowed growth), that they just convinced their people to burn their currency at the stake. For that, the Nikkei is +14.6% in the last month, but real (inflation adjusted) Japanese growth is slowing.

 

If POLICY makers of the Keynesian Kingdom want to really get this party started, they should go full Krugman/Chavez on these markets. Then Perma-Bulls will really be right for all the wrong reasons (after torching their currency, Venezuela’s stock market is up +305% YTD).

 

Back to the process, the asset allocation, net exposure, and sector moves we have made in the last month are as follows:

  1. We’re net short commodities and commodity related equities
  2. We’re net long consumption and consumer related companies profiting from commodity deflation
  3. We cut out asset allocation to Fixed Income to 0% on Friday

To be clear, before I rile up pension funds, this is how I think about asset allocation with my own money. Since I can (and often do) go to cash, I have no problem selling something down to 0% if I think the asset class and/or security has a rising probability of a draw-down.

 

Always remember Rule #1 – don’t lose money (Buffett, pre being politicized).

 

From a Risk Management Process perspective, this is where my multi-duration signals play a huge role. When something signals bearish TRADE and TREND (like US Treasury Bond Yields did last week), and the Global Macro Research Process confirms it, I sell.

 

I also buy things when they are immediate-term TRADE oversold (bought AAPL $502.50 yesterday), but that’s a different risk management strategy, on a shorter-term duration. Our longer-term risk management decision was to sell APPL on September 28th.

 

In a profession where I see less and less people who actually know what it is that they do, I think there is a tremendous opportunity for all of us to evolve and attempt to explain what it is that we do. People want to trust us – and we don’t need animals eating us.

 

Our immediate-term Risk Ranges for Gold, Oil (Brent), Copper, US Dollar, EUR/USD, UST 10yr Yield, AAPL, and the SP500 are now, $1, $105.95-108.94, $3.64-3.71, $79.36-79.99, $1.29-1.31, 1.69-1.80%, $501-532, and 1, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Animal Kingdom - Chart of the Day

 

Animal Kingdom - Virtual Portfolio


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