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Client Talking Points

CHINA

Chinese exports were horrendous at -3.1% year-over-year in June. But don’t worry - Western style bailout begging is all over the tape. You want to buy China exposure on that? We don’t think there’s anything remotely close to Bernanke/Draghi style “stimulation” coming. Despite the Hang Seng’s positive +1% move into the close, it remains bearish TREND. For that matter, so does every other Asian Equity market with the exception of Japan.

DAX

Go ahead and ask German exporters if they care about negative year-over-year Chinese import demand. The DAX failed right at our TREND resistance of 8062. Meanwhile, the rest of European Equity markets with the exception of the FTSE all remain bearish TREND in our model. Greece? Still crashing big, down another -2.1%. It's down a whopping -29% since May 20. Troika that.

OIL

Brent Oil is back above our TAIL risk line of $108 and change this morning. That is easily the biggest threat to what has been solid US consumption aka #GrowthAccelerating for the last six months. Incidentally, oil is now back in the black year-to-date. We are watching this level very closely as it has serious implications.

Asset Allocation

CASH 57% US EQUITIES 18%
INTL EQUITIES 0% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 25%

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

Fundamentally, with Chinese #GrowthSlowing and Oil rising – not a good day to be buying US stocks

@KeithMcCullough

QUOTE OF THE DAY

"It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change" - Charles Darwin

STAT OF THE DAY

21%: The amount the yen has weakened against the dollar since Oct. 31, when Japanese Prime Minister Shinzo Abe started his campaign to lower the currency in an attempt to spur Japan. (Bloomberg)