Client Talking Points
Evidently #RatesRising too fast makes consensus very nervous; especially those poor souls who still remain levered long the slow-growth, yield-chasing asset allocation the Fed had them in. The 10-year Treasury yield is backing off its immediate-term TRADE overbought zone of 2.86-2.91%. So this morning should provide a de-stresser on that front; Utilities (XLU) are already down -5.2% already for the month!
Boom! Indonesia is down -11% in just three days as the Rupiah hits a 4-year low and #DebtDeflation takes hold. This is how the ball bounces in our #AsianContagion Q3 Macro Theme. It is both interesting and sad to see it playing out in India (Rupee broke 64 vs US Dollar this morning... new lows) and Indonesia, but not at all surprising. We called this.
Sneaky 1-month squeeze to watch as the net short position in Copper went away last week (CFTC futures/options contracts). The question now becomes whether copper will be able to overcome the @Hedgeye TREND line of $3.39/lb? Not today. This is an important commodity to watch as a proxy for the entire commodity complex which has reflated this month.
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Top Long Ideas
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.
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.
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
QUOTE OF THE DAY
“I know from experience that nobody can give me a tip or a series of tips that will make more money for me than my own judgment.” -Jesse Livermore
STAT OF THE DAY
Hubris? Herbalife and J.C. Penney have cost Bill Ackman's Pershing Square an estimated $1 billion or so (The Economist)