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WWW: Presentation Materials for 1pm Call

Takeaway: See attached link to presentation materials for today's 1pm conference call on WWW.

See attached link to presentation materials for today's 1pm conference call on WWW.

CALL DETAILS

  • Date: Monday, May 20th at 1:00pm EDT
  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 465419#
  • Materials:CLICK HERE

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MACAU KEEPS PACE

We are keeping our 15-20% growth forecast for the full month of May following another solid week in Macau.  Daily table revenue averaged HK$885 million the past 7 days, up 22% YoY.  Month to date ADTR has climbed 18% YoY.

 

In terms of market share, MPEL, our favorite stock in the group, was the significant mover from last week with share growing to 14.1%, right in-line with recent trend.  MGM and Wynn continue to track above trend, while SJM and LVS are below.

 

MACAU KEEPS PACE - FF

 

MACAU KEEPS PACE - aa


Weimar Nikkei

Client Talking Points

Weimar Nikkei

The Nikkei jumped another 1.5% overnight, and Japanese equities are up 77.3% since November. Wow. That’s what happens a country debases its currency. Yields on Japanese government bonds (JGBs) rose 5 basis points overnight, and now are above Keith’s long-term TAIL risk line of 0.81% to 0.85%.

Gold and Silver

Silver prices are down 4% this morning, the biggest percentage move this morning. Gold itself is immediate-term oversold now that consensus is starting to lean on the short side (74,432 short contracts in the CFTC futures/options data this morning is the highest since the data has been available in 2006.)

Asset Allocation

CASH 39% US EQUITIES 18%
INTL EQUITIES 18% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 25%

Top Long Ideas

Company Ticker Sector Duration
IGT

Decent earnings visibility, stabilized market share, and aggressive share repurchases should keep a floor on the stock.  Near-term earnings, potentially big orders from Oregon and South Dakota, and news of proliferating gaming domestically could provide near term catalysts for a stock that trades at only 11x EPS.  We believe that multiple is unsustainably low – and management likely agrees given the buyback – for a company with the balance sheet and strong cash flow as IGT.  Given private equity’s interest in WMS (they lost out to SGMS) – a company similar to IGT that unlike IGT generates little free cash – we wouldn’t rule out a privatizing transaction to realize the inherent value in this company.  

WWW

WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. 

FDX

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.

Three for the Road

TWEET OF THE DAY

As volatility seeps into the Japanese government bond complex, the game of interconnected risk rolls on.”-- @KeithMcCullough

QUOTE OF THE DAY

“If you’re going through hell, keep going.” – Winston Churchill

STAT OF THE DAY

$1.1 billion, the price that Yahoo! Reportedly is paying for Tumblr


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

European Banking Monitor: Greece Inflects To The Upside

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .

 

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European Financial CDS - Major widening (+205 bps) at Greek bank EFG Eurobank caused the average European bank swap to widen by 2 bps, but the median was actually tighter by 6 bps. French, Italian and Spanish banks continued to post overall, steady improvement.

 

European Banking Monitor: Greece Inflects To The Upside - rr. banks

 

Sovereign CDS – Sovereign swaps were modestly tighter around the globe last week with the exception of Japan and Spain, where swaps widened by 6 and 1 bps, respectively. Despite the sharp increase, Japanese swaps remain 3 bps below their levels from one month ago.

 

European Banking Monitor: Greece Inflects To The Upside - rr. sov 1

 

European Banking Monitor: Greece Inflects To The Upside - rr. sov 2

 

European Banking Monitor: Greece Inflects To The Upside - rr. sov 3

 

Euribor-OIS Spread – The Euribor-OIS spread widened by 1 bps to 14 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 

 

European Banking Monitor: Greece Inflects To The Upside - rr. euribor

 

ECB Liquidity Recourse to the Deposit Facility – The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  

 

European Banking Monitor: Greece Inflects To The Upside - rr. facility

 

 

 

 

 

 


Podcast: Keith Talks Bernanke, Weimar Nikkei and More

 

Keith gets fired up this morning, talking through a number of topics this morning ranging from the Fed to gold to the Nikkei.



MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE

Takeaway: We've been focused on HY lately as a potential canary. High yield backed up 8 bps last week. There are few other cautionary signs, however.

Key Takeaways:

 

* High Yield – High Yield rates rose 8.4 bps last week, ending the week at 5.31% versus 5.22% the prior week. This is the first time in a long time that we've seen high yield move up and the fastest rate of increase year-to-date. While the move isn't especially large, it represents an inflection so we'll be keeping a close eye on HY from here.

 

2-10 Spread – Last week the 2-10 spread widened 17 bps to 173 bps. While the widening of the yield curve offers modest reprieve for lenders, the associated 8 bps back-up in conventional mortgage rates tamps down refi demand as well as GOS margins.

 

* European Financial CDS - Major widening (+205 bps) at Greek bank EFG Eurobank caused the average European bank swap to widen by 2 bps, but the median was actually tighter by 6 bps. French, Italian and Spanish banks continued to post overall, steady improvement.

 

* U.S. Financial CDS -  This was the first week in a long time that mortgage insurer swaps (PMI, RDN) didn't drop meaningfully, a barometer of stabilizing sentiment around the housing market's recovery. 

 

Financial Risk Monitor Summary

 • Short-term(WoW): Positive / 5 of 12 improved / 1 out of 12 worsened / 7 of 12 unchanged

 • Intermediate-term(WoW): Positive / 9 of 12 improved / 2 out of 12 worsened / 2 of 12 unchanged

 • Long-term(WoW): Positive / 4 of 12 improved / 0 out of 12 worsened / 9 of 12 unchanged

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 15

 

1. U.S. Financial CDS -  This was the first week in a long time that mortgage insurer swaps (PMI, RDN) didn't drop meaningfully, a barometer of stabilizing sentiment around the housing market's recovery. To be fair, RDN was lower by 3 bps. Big banks were all tighter, led by Citi, BofA and MS, dropping 7, 6 and 6 bps, respectively. It's also interesting to note the 8 bps widening in spreads on Sallie Mae. We couldn't help but notice last week a greater-than-usual volume of negative press on the student loan industry.

 

Tightened the most WoW: MBI, AGO, UNM

Widened the most WoW: TRV, XL, SLM

Tightened the most WoW: MBI, BAC, AXP

Tightened the least MoM: MET, UNM, WFC

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 1

 

2. European Financial CDS - Major widening (+205 bps) at Greek bank EFG Eurobank caused the average European bank swap to widen by 2 bps, but the median was actually tighter by 6 bps. French, Italian and Spanish banks continued to post overall, steady improvement.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 2 2

 

3. Asian Financial CDS - Asian financial swaps were mixed last week with Chinese banks posting very narrow increases, while most of Japan and India's banks were tighter.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 17

 

4. Sovereign CDS – Sovereign swaps were modestly tighter around the globe last week with the exception of Japan and Spain, where swaps widened by 6 and 1 bps, respectively. Despite the sharp increase, Japanese swaps remain 3 bps below their levels from one month ago.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 18

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 3

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 4

 

5. High Yield (YTM) Monitor – High Yield rates rose 8.4 bps last week, ending the week at 5.31% versus 5.22% the prior week.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 5

 

6. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 0.8 points last week, ending at 1805.7.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 6

 

7. TED Spread Monitor – The TED spread rose 0.7 basis points last week, ending the week at 24.06 bps this week versus last week’s print of 23.41 bps.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 7

 

8. Journal of Commerce Commodity Price Index – The JOC index rose 0.2 points, ending the week at 3.46 versus 3.2 the prior week.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 8

 

9. Euribor-OIS Spread – The Euribor-OIS spread widened by 1 bps to 14 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 9

 

10. ECB Liquidity Recourse to the Deposit Facility – The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 10

 

11. Markit MCDX Index Monitor – Last week spreads tightened 4 bps, ending the week at 57.7 bps versus 61.3 bps the prior week. The Markit MCDX is a measure of municipal credit default swaps. We believe this index is a useful indicator of pressure in state and local governments. Markit publishes index values daily on six 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. We track the 16-V1. 

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 11

 

12. Chinese Steel – Steel prices in China fell 0.6% last week, or 21 yuan/ton, to 3563 yuan/ton. We use Chinese steel rebar prices to gauge Chinese construction activity, and, by extension, the health of the Chinese economy.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 12

 

13. 2-10 Spread – Last week the 2-10 spread widened to 173 bps, 17 bps wider than a week ago. We track the 2-10 spread as an indicator of bank margin pressure.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 13

 

14. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 1.0% upside to TRADE resistance and 2.4% downside to TRADE support.

 

MONDAY MORNING RISK MONITOR: HIGH YIELD SMOKE - 14

 

Joshua Steiner, CFA


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