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December Snow - Modest Help for Drought Conditions

December was a useful month in terms of snowfall across the Midwest – 68.4% covered by snow with an average depth of 3.2 inches (National Weather Service).   There was no snow cover in November (not a particularly constructive month in terms of remedying drought conditions) and very little in December 2011 as well (2.3% covered by snow), so snow season is better begun than it was last year.

 

While constructive, the December snowfall only represents the equivalent of about ½ inch of rain – snowfall in January and February will have to be measured in feet in order to provide substantial relief to the drought conditions that still linger across much of the United States.

 

We remain bearish on corn fundamentally, and the commodity remains bearish trade and trend on our model. However, the persistent drought conditions bear watching as we progress through the winter.

 

December Snow - Modest Help for Drought Conditions - Drought January1

 

 

Robert  Campagnino

Managing Director

HEDGEYE RISK MANAGEMENT, LLC

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JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES

Takeaway: The labor market continues to improve, and at a slightly accelerated pace as of this latest week. Expect ongoing tailwinds through February.

Back on Track

This morning's initial jobless claims number is meaningful in that it reflects two weeks of data. The previous week's numbers were estimated due to the omission of 19 states, including California and Texas, due to the holidays. 

 

Importantly, the data is reasonably strong, continuing a trend we've seen since September, adjusting for the one-time effects of Hurricane Sandy. As a reminder, we expect claims will continue to improve through February and should decline to a level in the 340-350k range on a 4-week rolling basis. Then, we would expect tailwinds to reverse to headwinds in March, as has been the case for the last three years. See the first chart below for an illustration of the trend.

 

Recall that to ferret out the noise of seasonality distortions, we look at the annual change in rolling NSA claims. Last week the NSA YOY change was -6%, which compared with -5.9% in the previous week. A larger negative number represents accelerating improvement. 

 

The Numbers

Initial jobless claims rose 12k to 372k from 360k. The prior week's number was revised up by 12k to 362k from 350k. Normally we look at the unrevised vs. unrevised for apples to apples comparisons, but this week, due to the missing states, we're comparing unrevised to revised. Rolling claims rose 0.25k WoW to 360k. 

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 1

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 2

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 3

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 4

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 5

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 6

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 7

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 8
 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 9

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 10

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 11

 

 

Joshua Steiner, CFA

 

Robert Belsky


INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES

Takeaway: The labor market continues to improve, and at a slightly accelerated pace as of this latest week. Expect ongoing tailwinds through February.

Back on Track

This morning's initial jobless claims number is meaningful in that it reflects two weeks of data. The previous week's numbers were estimated due to the omission of 19 states, including California and Texas, due to the holidays. 

 

Importantly, the data is reasonably strong, continuing a trend we've seen since September, adjusting for the one-time effects of Hurricane Sandy. As a reminder, we expect claims will continue to improve February and should decline to a level in the 340-350k range on a 4-week rolling basis. Then, we would expect tailwinds to reverse to headwinds in March, as has been the case for the last three years. See the first chart below for an illustration of the trend.

 

Recall that to ferret out the noise of seasonality distortions, we look at the annual change in rolling NSA claims. Last week the NSA YOY change was -6%, which compared with -5.9% in the previous week. A larger negative number represents accelerating improvement. 

 

The Numbers

Initial jobless claims rose 12k to 372k from 360k. The prior week's number was revised up by 12k to 362k from 350k. Normally we look at the unrevised vs. unrevised for apples to apples comparisons, but this week, due to the missing states, we're comparing unrevised to revised. Rolling claims rose 0.25k WoW to 360k. 

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - seasonality

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Rolling NSA

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Raw

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Rolling

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - NSA

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - rolling nsa 2

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - S P

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - FED

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Recessions

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - linear

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - YoY NSA

 

Yield Spreads - 4Q12 Was 6 bps Better QoQ

The 2-10 spread rose 7.4 basis points WoW to 157 bps. The fourth quarter of 2012 saw the 2-10 spread average 143 bps, which was +6 bps higher than 3Q12.

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - 2 10

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - 2 10 QoQ

 

Financial Subsector Performance

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

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Subsector performance

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Companies

 

Joshua Steiner, CFA

 

Robert Belsky


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CHART[S] DU JOUR: COTAI VS PENINSULA

Divergence continues – but only in Mass

 

  • New Cotai properties have driven considerable divergence in YoY growth in both Mass and VIP
  • However, the VIP divergence has been short-lived.  Peninsula VIP volume growth is approaching Cotai VIP volume growth despite the fact that the market will not lap the opening of Sands Cotai until April 2013
  • New properties are still driving engine behind the Mass market growing above mid teens

 

CHART[S] DU JOUR: COTAI VS PENINSULA - v

 

CHART[S] DU JOUR: COTAI VS PENINSULA - c2


The Next Level

Client Talking Points

Grabbing The Bull By The Horns

Yesterday was one hell of a rally. The S&P 500 held its line of support at 1419 and then ripped to within 0.8% of its September 2012 intraday high (Bernanke Top, anyone?) All it took was a little deal on the fiscal cliff. No biggie. Oh yeah - The Russell 2000 closed up +2.9%, making an ALL-TIME high at 873. Keith’s multi-duration S&P sector model is blowing gaskets like a Looney Tunes clock spinning a hundred times a minute; all nine sectors are bullish on all three durations (TRADE, TREND, TAIL) for the first time since December of 2011. This is huge. Anyone who shorted yesterday’s rally got their face ripped off. 

 

So what happens next? There is a very good opportunity for the big guys - the asset managers - to move capital out of bonds and into stocks. Earning 50 basis points a year isn’t generating alpha, but participating in a full on bull rally will, provided you manage your risk. With #GrowthStabilizing, stocks on the rise and a housing market in recovery, we’re just a catalyst away from taking this market even higher.

Asset Allocation

CASH 55% US EQUITIES 18%
INTL EQUITIES 15% 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

“Buy stocks, sell bonds” -@KeithMcCullough

QUOTE OF THE DAY

“Democracy is a device that ensures we shall be governed no better than we deserve.” -George Bernard Shaw

STAT OF THE DAY

Private Sector Employment rises more than expected, up 215,000 in December.


Q4 GLOBAL HOTEL TRANSACTIONS (UUP/LUXURY)

Scarce transactions close out the year, though volume was better  

 

 

Upper upscale (UUP) & Luxury Transaction Trends for Q4 2012 

  • Q4 2012 worldwide hotel transaction volume (UUP & Luxury brands) was $3.2 billion, up from Q3 2012's $2.7 billion, and higher than Q4 2011's $1.3 billion. 2012 transaction volume reached almost $10 billion, lower than the $11 billion in 2011.
  • The number of US luxury/UUP hotel transactions was 9 in Q4 2012 compared with 12 in Q3 2012 and 9 in Q4 2011. 
  • The number of non-US luxury/UUP hotel transactions was 3 in Q4 2012, compared with 6 in Q3 2012 and the 11 in Q4 2011.
  • There were two portfolio deals: 1) The Government of Singapore Investment Corp. bought the Grand Wailea on Maui, the La Quinta Resort & Club and PGA West golf course in La Quinta, Calif., the Arizona Biltmore Resort & Spa in Phoenix - which are all managed by Waldorf Astoria Management under Hilton Worldwide’s Waldorf Astoria Hotels & Resorts brand - and Claremont Resort & Spa in Berkeley, CA.  The seller was a joint venture led by Paulson & Co. which had taken over the properties in a bankruptcy deal as part of a $600 million restructuring of Morgan Stanley's real estate funds.  The hotel properties then filed for Chapter 11 bankruptcy protection. 2) Host hotel's European JV bought five hotels from Whitehall - Paris Marriott Rive Gauche Hotel & Conference Center, Renaissance Amsterdam Hotel, Renaissance Paris La Defense Hotel, Renaissance Paris Vendome Hotel, and the Courtyard Paris La Defense West – Colombes. 
  • Relative to a seven quarter trailing average, US average price per key (APPK) in the UUP segment is in-line at $266k.  Non-US APPK in the UUP segment moved to $360k, 15% higher than its seven quarter trailing average. 

Other Chain Scale Trends for Q4 2012

  • There were two large M&A transactions:  1) Apple REIT 6 was sold to BRE Select Hotels Corp (a Blackstone affiliate). 2) InTown Suites was sold to Starwood Capital Group.
  • According to Fitch, the hotel delinquency rate in November was 9.83%, lower than the 10.82% seen in August.  The delinquency rate remains well below the relative high of 14% seen in Q3 2011.

Q4 GLOBAL HOTEL TRANSACTIONS (UUP/LUXURY) - uup4

 

Q4 GLOBAL HOTEL TRANSACTIONS (UUP/LUXURY) - l1

 

Q4 GLOBAL HOTEL TRANSACTIONS (UUP/LUXURY) - c


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