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Client Talking Points

INDONESIA

The world’s 4th largest country (by population) continues to flash bearish divergences vs something like #WeimarNikkei (which was up +2.6% overnight giving US futures a bid.) Jakarta down -0.4% all the while. It is down -15.4% since May 20.  #EmergingOutflows continues.

FTSE

The FTSE is up +1% here this morning with the DAX up about the same. The FTSE is back above its TREND line of 6371, whereas the DAX is still below hers of 8262. The capital flows out of Commodities, Debt, and Emerging Markets are looking for parking spots right now. These are two to watch. #liquidity

UST 10YR

The10-year is down 9 basis points on the week so far to 2.65%. This gives Gold a bit of a bid off the year-to-date lows. Correlation risk remains obvious from USD to rates to commodities and Emerging Markets. The 10-year risk range is 2.56-2.74%. Higher-lows and higher-highs #bearish for bonds.

Asset Allocation

CASH 51% US EQUITIES 21%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 28%

Top Long Ideas

Company Ticker Sector Duration
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. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.

MPEL

Gaming, Leisure & Lodging sector head Todd Jordan says Melco International Entertainment stands to benefit from a major new European casino rollout.  An MPEL controlling entity, Melco International Development, is eyeing participation in a US$1 billion gaming project in Barcelona.  The new project, to be called “BCN World,” will start with a single resort with 1,100 hotel beds, a casino, and a theater.  Longer term, the objective is for BCN World to have six resorts.  The first property is scheduled to open for business in 2016. 

HCA

Health Care sector head Tom Tobin has identified a number of tailwinds in the near and longer term that act as tailwinds to the hospital industry, and HCA in particular. This includes: Utilization, Maternity Trends as well as Pent-Up Demand and Acuity. The demographic shift towards more health care – driven by a gradually improving economy, improving employment trends, and accelerating new household formation and births – is a meaningful Macro factor and likely to lead to improving revenue and volume trends moving forward.  Near-term market mayhem should not hamper this  trend, even if it means slightly higher borrowing costs for hospitals down the road. 

Three for the Road

TWEET OF THE DAY

US growth stocks continue to be where it’s at (Russell hits all-time high again yest); rest of world all over the place

@KeithMcCullough

QUOTE OF THE DAY

The two most important days in your life are the day you are born and the day you find out why. – Mark Twain

STAT OF THE DAY

Since Bernanke first raised the possibility of tapering in May 22, the yield on 10-year Treasury notes has risen to 2.64% on July 8 from 2.04%. Treasuries lost the most since 2009 in the first half of the year and posted their longest run of quarterly declines since 1999. (Bloomberg)