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THE M3: BIRD FLU RESEARCH; SMOKING CONTROL LAW

THE MACAU METRO MONITOR, AUGUST 7, 2013

 

 

H7N9 BIRD FLU IN LIKELY CHINA SPREAD BETWEEN PEOPLE, RESEARCHERS FIND NBC NEWS

According to research published in the British Medical Journal (BMJ), it was very likely that the H7N9 flu virus that emerged in eastern China this year was transmitted directly from human-to-human.  "To our best knowledge, this is the first report of probable transmissibility of the novel virus person-to-person with detailed epidemiological, clinical and virological data," the scientists wrote.

 

Experts commenting on the research said while it did not necessarily mean H7N9 is any closer to becoming the next flu pandemic, "it does provide a timely reminder of the need to remain extremely vigilant."  The scientists who led the study stressed, however, that the virus has not yet gained the ability to transmit from person to person efficiently - meaning the risk is very low that it could cause a human pandemic in its current form. 

 

The new bird flu virus, which was unknown in humans until February, has so far infected at least 133 people in China and Taiwan, killing 43 of them, according to the World Health Organization.

 

GOV'T PLANNING TO REVISE SMOKING CONTROL LAW Macau Daily Times

Lei Chin Ion, director of the Health Services, said, “We are now collecting opinions and our work is progressing well, so we will conduct a first revision of the law in 2015.”  Lei Chin Ion said that, following an assessment period, the government will reveal what kind of measures will be applied to casinos that do not meet air quality standards.  He said that the administrative regime predicts the reduction or removal of smoking areas for casinos that do not comply with the Health Bureau standards. 

 

This month it was revealed that 28 casinos failed the first air quality test conducted by the Health Services Bureau.  Those casinos had to undergo a second test and the Bureau is currently analyzing the results and looking to decrease the size of some smoking areas.



Coaching Corrections

“A coach is someone who can give correction without causing resentment.”

-John Wooden

 

I’ve been blessed with great coaches and teachers in my life. They were never easy on me. Their criticisms didn’t cause any resentment either. To the contrary, they drove me to improve. Trusting your coaches is the first step toward opening your mind.

 

I make a lot of mistakes. And since I’m the front man for this Hedgeye show, that means every mistake I make is front-and-center in the arena of public market debate. That’s not a bad thing. That’s right where I want to be.

 

What I do isn’t for everyone. I get that. But the first 5 years of building this firm alongside my teammates has given me a keen appreciation for having the opportunity to make mistakes in an open and accountable forum. It speeds my learning process.

 

Back to the Global Macro Grind

 

One of the toughest things to do in US Equities in 2013 has been to coach myself through market corrections. The new normal correction can last anywhere from 4 hours to 4 days. I know, it’s end of the world type stuff. Remember, nothing is normal.

 

So, from its all-time closing high of 1709 in the SP500 last week, what will the latest US stock market “correction” be?

 

A)     -0.9% to 1693?

B)      -1.9% to 1676?

C)      -4.6% to 1630?

 

Yes, that is a Hedgeye Poll. If you have time, ping me with A, B, or C. One of the most important aspects of working in an open/transparent forum of debate is collaboration. I’m pretty sure the days of opaque #OldWall sentiment checks are dead.

 

Since I actually need to #timestamp an answer to this question, I’ll choose B.

 

That’s the highest probability choice because the S&P futures already showed me they can snap my mo mo line of 1693 support this morning. And there’s very little fundamental and/or quantitative evidence that 1630 is in play, yet.

 

What is the “mo mo” line?

 

That’s the line I use to front-run the machines. It’s home brewed. It’s my most immediate-term risk management duration. It’s especially useful for day-trading, scalping, etc. Label me long-term cycle guy or Mucker, I’m cool with both. Better to scalp, than be scalped.

 

Put another way, across our core risk management durations:

  1. SP500 immediate-term mo mo line of support = 1693; and 1714 is resistance (our Daily Risk Range)
  2. SP500 immediate-term TRADE support = 1676
  3. SP500 immediate-term TREND support = 1630

The upside down of the is US Equity front-month volatility (VIX):

  1. VIX mo mo risk range = 11.71-13.72
  2. VIX immediate-term TRADE resistance = 14.64
  3. VIX immediate-term TREND resistance = 18.98

In other words, the bullish TREND in US Equities (and bearish TREND in Fear) isn’t in the area code of being challenged, yet. Therefore, if contextualized within the framework of our risk management process, you woke up every morning reminding yourself to not “fight the TREND”, I’d wholeheartedly agree with that. I’d rather fight the Fed than fight things like math and/or gravity.

 

One of the biggest challenges I have personally is trying to communicate risk management strategies to clients who all have different risk profiles, holding periods, etc. Through consistent feedback and criticism though, I’ve learned that there’s only one answer to this challenge: keep doing what I do - be Duration Agnostic, and keep working on communicating what that process means.

 

In my humblest of dreams, that would be my happiest retirement: that my teammates and I were successful in not only communicating our multi-factor, multi-duration Global Macro risk management process – but that the players and peers that we coached trusted us.

 

Trust isn’t allocated. You have to re-learn how to earn it, every day. We have a long road of learning and teaching ahead.

 

Our immediate-term Risk Ranges are now as follows (*we have 12 Macro Risk Ranges in our Daily Trading Ranges tool now too – as an example, this morning I’ve attached all of them; the bracketed “bullish” or “bearish” comment is on our TREND duration (3 months or more) whereas the range itself is on our most immediate-term duration):

 

UST 10yr 2.56-2.73% (bullish on yield)

SPX 1 (bullish)

Nikkei 137 (bullish)

FTSE 6 (bullish)

 

VIX 11.71-13.72 (bearish)

USD 81.49-82.43 (bullish)

Euro 1.31-1.33 (bullish)

Yen 97.01-98.94 (bearish)

 

Brent 107.23-109.79 (bullish)

NatGas 3.21-3.46 (bearish)

Gold 1 (bearish)

Copper 3.05-3.18 (bearish)

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Coaching Corrections - Chart of the Day

 

Coaching Corrections - Virtual Portfolio


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THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – August 7, 2013


As we look at today's setup for the S&P 500, the range is 38 points or 1.26% downside to 1676 and 0.98% upside to 1714.                                    

                                                                                           

SECTOR PERFORMANCE


THE HEDGEYE DAILY OUTLOOK - 1A

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 2.33 from 2.34
  • VIX closed at 12.72 1 day percent change of 7.43%

 

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: Mortgage Applications, Aug. 2 (prior -3.7%)
  • 11am: Fed to buy $1.25b-$1.75b debt in 2036-2043 sector
  • 10:30am: DOE Energy Inventories
  • 1pm: U.S. to sell $24b 10Y notes
  • 1:40pm: Fed’s Pianalto speaks on monetary policy in Cleveland
  • 3:00pm: Consumer Credit, June, est. $15b (prior $19.6b)
  • Bank of Japan sets target rate, 2014 monetary base rate

GOVERNMENT:

    • 6:30am: Quinnipiac Univ. N.J. likely voter poll on Senate race; including Democratic, GOP primary voters
    • 3:50pm: President Obama delivers speech to troops at Camp Pendleton in Calif.

WHAT TO WATCH:

  • Amgen said to boost Onyx Pharmaceuticals bid to $130/shr
  • Mead Johnson to pay $33m to end China formula probe
  • Disney profit little changed, “Lone Ranger” hits film unit
  • Bats said glitch yday was network issue, not w/ software
  • Direct Edge, Nasdaq exchanges also had issues yday
  • Anadarko doubles qtr div. to 18c/shr from 9c, est. 11c
  • Wal-Mart may bid for Li Ka-Shing’s ParknShop: Reuters
  • TPG, Carlyle, GIC may bid for H.K.’s Quality Healthcare: SCMP
  • Omnicom Investor sues over merger with Publicis Groupe
  • Yuan advances to 19-yr high on PBOC fixing, convertibility bet

EARNINGS:

AM EARNS:

    • AMETEK (AME) 7am, $0.52
    • AOL (AOL) 7am, $0.43
    • Ariad Pharmaceuticals (ARIA) 7:35am, $(0.40)
    • Avnet (AVT) 8am, $0.96
    • Carlyle Group (CG) 6:30am, $0.55
    • Cimarex Energy (XEC) 6am, $1.27
    • CommonWealth REIT (CWH) 6:28am, $0.64
    • Devon Energy (DVN) 8am, $0.95 - Preview
    • Duke Energy (DUK) 7am, $0.93
    • Gogo (GOGO) 7:30am, $(0.37)
    • HollyFrontier (HFC) 7:30am, $1.39
    • Icahn Enterprises (IEP) 8am, No est
    • ING US (VOYA) 5:55am, $0.63
    • Lexington Realty Trust (LXP) 7:30am, $0.24
    • Marsh & McLennan (MMC) 7am, $0.67
    • Melco Crown (MPEL) 7:51am, $0.27
    • Molex (MOLX) 7:30am, $0.35
    • Newcastle Investment (NCT) 6:30am, $0.11
    • Pepco Holdings (POM) 6:03am, $0.23
    • Ralph Lauren (RL) 8am, $1.94
    • Sinclair Broadcast (SBGI) 7:30am, $0.15
    • SunEdison (SUNE) 6am, $(0.15)
    • Time Warner (TWX) 7am, $0.76
    • Valeant Pharmaceuticals (VRX CN) 6am, $1.28

PM EARNS:

    • Agrium (AGU CN) 5:30pm, $4.97 - Preview
    • American Water Works (AWK) 4:15pm, $0.61
    • Array BioPharma (ARRY) 4:19pm, $(0.13)
    • ARRIS Group (ARRS) 4pm, $0.26
    • Brookdale Senior Living (BKD) 4:43pm, $-
    • CenturyLink (CTL) 4:07pm, $0.66
    • Concho Resources (CXO) 5pm, $1.00
    • Continental Resources (CLR) 4:37pm, $1.25
    • Corrections Corp of America (CXW) 4:10pm, $0.65
    • Diamond Resorts Intl (DRII) After-Mkt, No est.
    • DryShips (DRYS) 4:05pm, $(0.07)
    • Energy Transfer Equity (ETE) 5:05pm, $0.54
    • Energy Transfer Partners (ETP) 5:09pm, $0.47
    • Fifth Street Finance (FSC) 4:28pm, $0.28
    • Franco-Nevada (FNV CN) 5:18pm, $0.21
    • Frontier Communications (FTR) 4:01pm, $0.06
    • Fusion-io (FIO) 4:05pm, $(0.03)
    • Green Mountain Coffee (GMCR) 4pm, $0.76
    • Groupon (GRPN) 4pm, $0.02
    • Halozyme Therapeutics (HALO) 4:05pm, $(0.14)
    • MarkWest Energy (MWE) 4:01pm, $0.22
    • MBIA (MBI) 4:01pm, $0.14
    • Mondelez Intl (MDLZ) 4:01pm, $0.34 - Preview
    • Polypore Intl (PPO) 4:01pm, $0.39
    • Prudential Financial (PRU) 4:07pm, $1.99
    • Redwood Trust (RWT) 4:15pm, $0.34
    • SolarCity (SCTY) 4:01pm, $(0.38)
    • St Joe (JOE) 4:01pm, $0.02
    • Sun Life Financial (SLF CN) 5:10pm, C$0.66
    • Tesla Motors (TSLA) 4:01pm, $(0.20)
    • Transocean (RIG) 4:30pm, $1.08
    • Tronox (TROX) 5:43pm, $(0.05)
    • WageWorks (WAGE) 4:05pm, $0.17

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • JPMorgan Sued With Goldman Sachs in Aluminum Antitrust Case
  • p Commodities Market, Industry News »             
  • Palmer’s ‘Mad’ Mine Costs China on Learning Curve: Commodities
  • Gold Drops to Three-Week Low on Speculation Fed to Trim Stimulus
  • Wheat Declines as Iraq, Egypt Shun Grain From U.S. in Tenders
  • Copper Falls on Speculation Fed Will Opt to Limit Debt Purchases
  • WTI Crude Fluctuates Amid Signs of Declining U.S. Inventories
  • Rebar Climbs to Three-Month High as Iron Ore Prices Gain
  • Bank of America’s Blanch Says WTI Crude Could Fall $8 to $10
  • Palm Oil Declines to One-Week Low as Peak-Output Cycle Begins
  • BHP’s CEO Sees US Shale Expansion as Mineral Demand Grows
  • Silver ETF Holdings Approach Record and Critical Price Levels
  • Palladium’s Pennant Pattern Signals Increase: Technical Analysis
  • Easy Cash Ebbs for $300 Billion Asean Port-to-Rail Cost: Freight
  • Corn in U.S. Seen by Cordonnier at Risk of Damage From Frost

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - 6

 

GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EUROPEAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 

 

 

 

 

 

 

 


THE M3: SMOKING CONTROL LAW

THE MACAU METRO MONITOR, AUGUST 7, 2013

 

 

GOV'T PLANNING TO REVISE SMOKING CONTROL LAW Macau Daily Times

Lei Chin Ion, director of the Health Services, said, “We are now collecting opinions and our work is progressing well, so we will conduct a first revision of the law in 2015.”  Lei Chin Ion said that, following an assessment period, the government will reveal what kind of measures will be applied to casinos that do not meet air quality standards.  He said that the administrative regime predicts the reduction or removal of smoking areas for casinos that do not comply with the Health Bureau standards. 

 

This month it was revealed that 28 casinos failed the first air quality test conducted by the Health Services Bureau.  Those casinos had to undergo a second test and the Bureau is currently analyzing the results and looking to decrease the size of some smoking areas.


Just Charts: Eye-Catching Industrial Data (8/6)

Summary

 

Broader Industrial data have gotten resoundingly stronger since May.  Since the 2009 recovery, most measures of U.S. industrial growth had shown a relatively steady deceleration.  Recent data appear to break that trend.  As always, industry specific data vary. 

  • Nonresidential construction has been notably weak, but the Architectural Billings Index suggests that we should see a rebound in coming months.
  • North American Heavy Truck orders (preliminary) in July do not show much impact from new Hours of Service regulations.
  • Intermodal rail carload growth appears likely to follow the ISM New Orders index higher in coming weeks.
  • Fastenal’s Average Daily Sales have continued to decelerate through July, while small business credit conditions have continued to ease.

 

ISM New Orders

 

The rebound in new order activity in both the Manufacturing and Non-Manufacturing ISM indices appears to be a meaningful breakout.  However, these measures also spiked higher in February 2013, only to fade in the following months.  Nonetheless, strength in this measure is an encouraging sign amid recent stall-speed industrial activity.

 

Just Charts: Eye-Catching Industrial Data (8/6) - tw1

 

 

Durable Goods Orders

 

The February 2013 spike in the ISM Manufacturing New Orders sub-index was not well reflected in several other measures of industrial order activity, including Durable Goods Orders.  The coinciding upward move in July Durable Goods Orders provides support for the higher ISM New Orders reading.

 

Just Charts: Eye-Catching Industrial Data (8/6) - tw2

 

 

Heavy Truck Orders

 

Preliminary North American Class 8 truck orders were relatively tame in July.  A potential decline in truck demand from new Hours of Service (HOS) regulations, which became effective July 1, could set-up a buying opportunity for high quality truck OEMs, like PCAR.  We will monitor the next few months, which are seasonally higher volume than July, for any HOS-related weakness/opportunity.

 

Just Charts: Eye-Catching Industrial Data (8/6) - tw3

 

 

Nonresidential Construction


A notable pocket of weakness has been nonresidential construction.  The weakness is in part due to reduced government spending and a slow recovery in certain commercial real estate markets.  Nonresidential construction tends to be ‘late cycle’ and may pick-up later this year.

 

Just Charts: Eye-Catching Industrial Data (8/6) - tw4

 

 

Architectural Billings Index (ABI)

 

The ABI only turned slightly positive in August of 2012 and typically leads non-residential construction activity by 9-12 months.  If the index performs as a leading indicator in the current environment, nonresidential construction should strengthen through the back half of 2013.

 

Just Charts: Eye-Catching Industrial Data (8/6) - tw5

 

 

Residential Home Improvement Spending

 

In contrast to nonresidential, construction spending on residential home improvement continues to spike higher, following a long period of stagnation after the housing bust.

 

Just Charts: Eye-Catching Industrial Data (8/6) - tw6

 

 

Fastenal Average Daily Sales

 

Fastenal’s average daily sales growth has continued to decelerate, failing to reflect the bounce in the ISM or Durable Goods measures.  While that could just be a lag between industrial orders and FAST sales, we think that easing credit conditions have been and will remain an important headwind.

 

Just Charts: Eye-Catching Industrial Data (8/6) - tw7

 

 

NFIB Credit Conditions

 

Business credit continues to ease.  Industrial supply companies served as an attractive source of working capital during the tight credit conditions following the financial crisis.  As credit conditions thaw, industrial supply companies may see that tailwind turn into a growth headwind.

 

Just Charts: Eye-Catching Industrial Data (8/6) - tw8

 

 

Intermodal Rail Carload Growth

 

Intermodal Rail Carload growth has not yet reflected recent strength in the ISM and Durable Goods new orders readings.  Looking at the historical relationship between new orders and intermodal rail volumes, we would expect to see a pick-up in coming weeks.  

 

Just Charts: Eye-Catching Industrial Data (8/6) - tw9

 

 


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