prev

It Happened

This note was originally published at 8am on December 11, 2012 for Hedgeye subscribers.

“It would all be as if nothing had happened.”

-Michael Sallah & Mitch Weiss

 

That’s a quote from the end of the book I cited in last week’s Early Look,  Tiger ForceA True Story of Men and War. It’s a true story about American war crimes in Vietnam (Pulitzer Prize, 2004). Sadly, it’s how a lot of cover up stories involving the #PoliticalClass end.

 

“The Pentagon had decided that is was better to cover up what had happened. Let the country move on… there would be no press conferences. There would be nothing at all… and so it was.” (page 306)

 

To be fair, maybe our central planning overlords do know what’s best for the country. But maybe they don’t. All I know is that whether it’s Bernanke, Geithner, or Petraeus – as Canadian-American Patriots, it’s our responsibility to keep questioning.

 

Back to the Global Macro Grind

 

I’ve been questioning Bernanke and Geithner’s Keynesian Policy To Inflate via US Dollar Debauchery for 6 years. Even if they refuse to acknowledge what has happened publicly, proving this out has been a daily dog fight – and I’m proud to have done the work.

 

All-time highs in food and energy prices? It Happened in the last 6 years. It all happened under Bernanke and Geithner’s watch. Causality was both fiscal (debt/deficit spending) and monetary (money printing). They both deserve their #FairShare of the blame.

 

As Bernanke and Paulson promised “shock and awe” rate cuts and bank bailouts, the all-time high in Oil prices happened during the economic crisis (2008). Think about that. Then think about why Gold and Food prices hit their all-time highs in 2011 and 2012, respectively as net long positions in futures & options commodity positions hit all-time highs (twice) in 2012.

 

All-time is a long-time. It Happened.

 

Now, deflating these policy mistakes, and popping the bubble in commodity price expectations, perversely, becomes the American and Global consumer’s greatest opportunity to get a real-time tax cut. I like that. If you don’t take car service to D.C. to work every day on US tax moneys and have all your meals bought and paid for, you should too.

 

From a Global Macro perspective, I also like the following positions:

  1. LONG Consumption
  2. SHORT Commodities

Perma marketers can attempt to label me whatever they want. Our clients only pay us if A) we are helping them avoid blowups and B) we are helping them get things right. Never mistake “negativity” with reality. Reality is that, since we launched our Bernanke’s Bubbles Theme, it started happening – the commodity bubble has started to pop, faster, and louder.

 

Since Bernanke’s Top (September 14th, 2012 when he decided to print to infinity and beyond), the CRB Commodities Index (19 commodity basket) is down -8.7%. That compares with the SP500 that is now down only -3.8%. Some global equity markets (like Germany’s DAX, which is crushing the Dow YTD) are now up versus their early September highs.

 

The US Dollar, of course, has been up for 8 of the 11 weeks since Bernanke’s last decision. Tomorrow’s FOMC meeting offers him an opportunity to get out of the way. We’ll see if he has the political spine to do that now that the election is out of the way.

 

All the while, you have had great buying opportunities presented by the #PoliticalClass and their cliff babbling along the way. Our critics will be the last to remind you that on the Hedgeye Best Ideas Conference Call on November 15, 2012, 6 of our 8 Best Ideas were actually longs. Timing matters. And we have a great deal of pride focusing on it.

 

To review, our 6 LONG US Equity Ideas have returned, on average, +9.9% (versus SP500 +5% off the lows) during the same period:

  1. International Game Technology (IGT) – Todd Jordan idea = +14.3%
  2. C&J Energy Services (CJES) – Kevin Kaiser idea = +12.4%
  3. Jack in The Box (JACK) – Howard Penney idea = +10.4%
  4. Paccar (PCAR) – Jay Van Sciver idea = +6.5%
  5. Nike (NKE) – Brian McGough idea = +8.0%
  6. TCF Financial (TCB) – Josh Steiner idea = +4.8%

That’s not a victory lap. That’s just the score. In what most would agree is a tough alpha generation environment, It Happened.

 

And I think, for me at least, it’s really important to highlight all the great work the men and women who grind it out for us every day do. They are both resilient and adaptive. They are also transparent and accountable. And for that, I am thankful to have the opportunity to work alongside them each and every day.

 

Our immediate-term Risk Ranges (support and resistance) for Gold, Oil (Brent), Copper, US Dollar, EUR/USD, UST 10yr Yield, and the SP500 are now $1684-1719, $105.99-109.26, $3.62-3.72, $80.01-80.51, $1.28-1.30, 1.59-1.65%, and 1405-1421, respectively.

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

It Happened - Chart of the Day

 

It Happened - Virtual Portfolio


TRADE OF THE DAY: IGT

Today we bought International Game Technology (IGT) at $13.99 a share at 10:03 AM EDT in our Real-Time Alerts. IGT remains one of our top long ideas in gaming and we’re buying back the stock after selling it higher earlier this month. We like the entry price and are confident the stock can go higher.

 

TRADE OF THE DAY: IGT  - TOTD


HOLX: Healing America

Hologic (HOLX) is one of our top long ideas for 2013 as the company’s long-term growth prospects outweigh potential near-term weakness.  Longer-term, the company could be one of the stronger beneficiaries from the Affordable Care Act beginning in 2014 from a growing pool of newly-insured individuals.  Those bulk of these individuals will be in the 18 to 64 age group, which utilizes women’s healthcare (HOLX’s core market) more than most other healthcare services. In the near-term, we’re concerned about a potential slowdown in utilization and the lingering effects of Hurricane Sandy. However, both of these factors are temporary in nature.

 

HOLX: Healing America - HOLX   MQSA Facilities   Unit Growth   4Q12

 

HOLX: Healing America - HOLX   Tomo Tracker 12 15 12


real-time alerts

real edge in real-time

This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.

Implications of the Affordable Care Act; Healthcare Expert Call

Implications of the Affordable Care Act; Healthcare Expert Call - KenBur.dialin

 

The Hedgeye Healthcare Team, led by Tom Tobin, will be hosting an expert conference call Thursday, January 3rd, at 1:00pm EST featuring industry expert Ken Burdick, former Senior Executive of United HealthGroup and Chief Executive Officer and President of Blue Cross Blue Shield of Minnesota.

The call will analyze the impact of the Affordable Care Act across the healthcare industry, addressing the opportunities and risks associated with the implementation of the Patient Protection and Affordable Care Act. Ken Burdick has more than 25 years of experience in managed healthcare and his insight to the implementation of this act will be extremely insightful and constructive in managing risk across the managed care names. 



KEY TOPICS WILL INCLUDE:

  • Will employers drop coverage? Penalties? Taxes?
  • Insurers versus exchanges
  • Consolidation among providers and payers  

    

Please dial in 5-10 minutes prior to the 1:00pm EST start time using the number provided below. A link to the presentation will be distributed before the call, if you have any further questions email .

  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 939528#

 

ABOUT KEN BURDICK:

  • Served as SVP of Medicaid Business at Coventry Health Care Inc. and managed its Medicaid and Behavioral Health (MHNet) businesses
  • Served as President and CEO of Blue Cross and Blue Shield of Minnesota
  • October 1995 to May 2009 employed by UnitedHealth Group
    • May 2008 to May 2009, served as the CEO of Secure Horizons, a Medicare business
    • November 2006 to May 2008, served as the CEO of United Healthcare's Commercial Business
    • April 2004 to November 2006, served as CEO of United Healthcare's Southwest Region and President of United Healthcare Public Sector
    • January 2000 to April 2004, served as the CEO of United Healthcare of Arizona
    • Prior to 2000, served as the head of the national underwriting organization for all lines of business and the general manager of the central Texas operation 
    • Served as the CEO and President of United HealthCare Services, Inc.
  • Director of United Biologics, LLC since October 2012
  • Serves as a Director of A.T. Still University of Health Sciences
  • Serves on the Board of Directors for Preferred Homecare and PASR, a non-profit Board advancing school readiness throughout Minnesota
  • Earned his bachelor's degree from Amherst College and a law degree from University of Connecticut School of Law  

EZPW: End Of The Golden Age

Pawn shops like EZ CORP (EZPW) are particularly sensitive to the price of gold. Think about how many people come in to pawn or sell gold jewelry or scrap it for cash. With the price of gold sinking week-after-week as the great commodity bubble deflates, pawns are getting hit. But it’s not just the price of gold that’s causing headaches for EZPW, it’s gold volumes. Since Q312, gold volumes have fallen off a cliff and have yet to recover. It’s a problem that will materially affect earnings going forward hence our short position on EZPW in our Real-Time Alerts. Another company that will bare the brunt of the decline in volumes is Cash America (CSH).

 

EZPW: End Of The Golden Age - EZPW GOLD VS VOL S

 

EZPW: End Of The Golden Age - ez slide


Go Forth And Conquer

Client Talking Points

Managing Risk

As the transition from #GrowthSlowing to #GrowthStabilizing continues, commodities will keep deflating in price as the number of total CFTC net long contracts declines along with the price of gold, silver and other assets. This whole #GrowthStabilizing thing is good for America, but isn’t very welcome by those who are long gold and/or Treasuries. Corn is getting clobbered, along with wheat, soybeans and other commodities now that investors are realizing you can’t just pump out more rounds of quantitative easing to artificially inflate prices. Keep an eye on gold, as it snapped our long-term TAIL risk line of $1671 last week and has fallen considerably in price since then. Same goes for the CRB Commodities Index, which remains in a bearish formation.

Dollar Holler

The US dollar has been up for 9 of the past 13 weeks, which certainly doesn’t help commodity bulls. A strong dollar helps strengthen America, so those of you who are trading the commodity deflation cycle, hats off. Our range for the EUR/USD at the moment remains at $1.31-1.33. 

Asset Allocation

CASH 55% US EQUITIES 21%
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

“The 12 Days Of Trading" On the 1st day of trading the markets gave to me, a spike from high frequency' bit.ly/Y6WqQO” -@bclund

QUOTE OF THE DAY

“Whenever you find that you are on the side of the majority, it is time to reform.” -Mark Twain

STAT OF THE DAY

London Stock Exchange to pay $482 million for a 60% stake in LCH.Clearnet.


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 80.28%
  • SHORT SIGNALS 78.51%
next