The Game Of Risk

Client Talking Points

Play The Hand You’re Dealt

The market is very much like a poker game at a casino: you have to play the hand you’re dealt. Monday and Tuesday of this week, we bought US equities. Yesterday, we sold ‘em. Today, we’ll follow the risk and the range combined with our fundamental research to make a decision on what we’re going to do. This recent bull market is so driven to continue going up and to the right that the Chicago PMI numbers out today may not even make a dent in the SPX. It’s important to keep an eye on other asset classes, too.


If bonds and gold keep declining and stocks keep going up, we’ve got the growth the market is looking for. Throw in $130 a barrel oil and now you have a problem as global consumption growth stalls. It all revolves around The People of this great country. If gas prices are $6 a gallon and bread and milk cost $10 combined at the grocery store, they will not be going out and buying shoes, iPhones and other goods.

Housing Recovery

We continue to see recovery in the housing market with data point after data point coming out each week that signals that the recovery is underway. Inventory is falling, prices are going up, people are taking out mortgages and buying homes; things are good. This recovery may soon trickle over to the regional banks who are involved with housing. Hedgeye Financials Sector Head Josh Steiner put out a note on TCF Financial (TCB) yesterday summed up by this:


"TCB remains a favorite long idea of ours on an ongoing housing recovery which is just starting to have a powerful influence on fundamentals."


Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

We believe ASCA will receive a higher bid from another gaming competitor. Our valuation puts ASCA’s worth closer to $40.


With FedEx Express margins at a 30+ year low and 4-7 percentage points behind competitors, the opportunity for effective cost reductions appears significant. FedEx Ground is using its structural advantages to take market share from UPS. FDX competes in a highly consolidated industry with rational pricing. Both the Ground and Express divisions could be separately worth more than FDX’s current market value, in our view.


HOLX remains one of our favorite longer-term fundamental growth companies given growing penetration of its 3D Tomo platform and high leverage to the 2014 Insurance Expansion from the Affordable Care Act.

Three for the Road


“One theme I'm noticing in earnings this season... "performed well despite challenging times" has replaced hand-wringing.” -@HerbGreenberg


“Physicists like to think that all you have to do is say, these are the conditions, now what happens next?” -Richard P. Feynman


U.S. consumer spending rose 0.2% in December as incomes jumped 2.6%, most in eight years.

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

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Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

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GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

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Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

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Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

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Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

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People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

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UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

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Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

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Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

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An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

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Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

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