Client Talking Points
Consensus has been telling you over and over again that #RatesRising is going to kill the US stock market for about 9 months now. Well, it's certainly killing bonds, Emerging Markets, and slow-growth, low yielding, stocks maybe, but not US growth stocks. That style factor is why the QQQ and Russell outperformed the Dow again last week. It's 2.82% on the 10-year now with no resistance to 2.95%. This Hedgeye Q3 Macro Theme remains firmly intact.
The Doctor has been royally squeezed. After 24 consecutive weeks of holding a net short positions (CFTC futures/options contracts), Copper’s net position ripped +104% last week to a net long position of +14,356. Gold’s net long position expanded +29% week-over-week to +73,216. People love chasing price. Fade that.
If you want to be bearish on Equities, try the Asian (ex-Japan) trade. It was down -3.3% last week (down -8% year-to-date) vs QQQ +1.5%. Countries hostage to Burning Currency like Indonesia are moving -0.5% lower again this morning (now down -2.6% year-to-date). Let's call it what it is: #AsianContagion
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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
TWEET OF THE DAY
Fear? US Equity Volatility (VIX) -2.7% last week, still crashing at -22.4% YTD @KeithMcCullough
QUOTE OF THE DAY
"The fight is won or lost far away from witnesses - behind the lines, in the gym, and out there on the road, long before I dance under those lights." -Muhammad Ali
STAT OF THE DAY
Emerging-market stocks have lost more than $1 trillion since May. The MSCI Emerging Markets Index has fallen about 12 percent this year, compared with a 13 percent gain in the MSCI gauge of shares in advanced countries. (Bloomberg) #EmergingOutflows