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August 27, 2013

August 27, 2013 - dtr2

 

BULLISH TRENDS

August 27, 2013 - 10yr

August 27, 2013 - spx

August 27, 2013 - dax

August 27, 2013 - dxy

August 27, 2013 - euro

August 27, 2013 - oil

 

BEARISH TRENDS

August 27, 2013 - eem

August 27, 2013 - VIX

August 27, 2013 - yen

August 27, 2013 - natgas
August 27, 2013 - gold

August 27, 2013 - copper


THE M3: JULY CHANGI VISITATION; JOCKEY CLUB; HOTEL SUPPLY; UNEMPLOYMENT

THE MACAU METRO MONITOR, AUGUST 27, 2013

 

 

MONTHLY BREAKDOWN OF PASSENGER MOVEMENTS Changi Airport

Singapore's Changi Airport reported a 4% rise YoY in passenger movement in July 2013.

 

THE M3: JULY CHANGI VISITATION; JOCKEY CLUB; HOTEL SUPPLY; UNEMPLOYMENT - CHANGI

 

LOSS-MAKING JOCKEY CLUB CLOSES FOUR BETTING CENTRES Macau Business

The Macau Jockey Club will close four of its seven off-course betting centres next month.  The club did not offer a reason but the Gaming Inspection and Coordination Bureau told the newspaper: “The Macau Jockey Club has responded to the needs of the community by removing several off-course betting stations away from the residential areas.”  The bureau denied it had ordered the closures.

 

ELEVEN HOTELS UNDER CONSTRUCTION, 27 MORE PLANNED Macau Business

Eleven hotels in Macau were under construction at the end of 2Q 2013, the Lands, Public Works and Transport Bureau says.  The bureau says another 27 hotel projects are pending approval from the government.  The 11 hotels under construction will add another 6,200 rooms to the city’s inventory.  Three of those hotels being built in Cotai will add the bulk of the rooms, some 5,326 rooms.  The 27 hotels at the planning phase would add another 16,700 rooms.

 

MACAU EMPLOYMENT SURVEY FOR MAY-JULY 2013 DSEC

More people were looking for work during the Summer Holiday, causing the unemployment rate for May-July 2013 to increase slightly by 0.1% from April-June, at 1.9%.  Total labor force was 366,000 in May-July 2013 and the labor force participation rate stood at 72.6%.  Total employment reached 359,000, up by 1,900 from the previous period.  Analyzed by industry, employment in the Construction sector posed a marked increase of 1,500.


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – August 27, 2013


As we look at today's setup for the S&P 500, the range is 27 points or 0.83% downside to 1643 and 0.80% upside to 1670.               

                                                                                                                

SECTOR PERFORMANCE


THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 2.40 from 2.42
  • VIX  closed at 14.99 1 day percent change of 7.22%

MACRO DATA POINTS (Bloomberg Estimates):

  • 6:50am: Fed’s Williams speaks on monetary policy in Sweden
  • 9am: S&P/Case Shiller 20 City Home Price Index M/m, June, est. 1% (prior 1.05%)
  • 9am: S&P/CS 20 City Composite Y/y, June, est. 12.1%
  • 10am: Richmond Fed Manuf. Index, Aug., est 0 (prior -11)
  • 10am: Consumer Conf. Index, Aug., est. 79 (prior 80.3)
  • 11am: Fed to buy $4.25b-$5.25b in 2017-2018 sector
  • 11:30am: U.S. to sell 4W bills
  • 1pm: U.S. to sell $34b 2Y notes

GOVERNMENT:

    • CMS, HHS hold 2nd semi-annual meeting of Advisory Panel on Hospital Outpatient Payment, 9am
    • Under Sec. of Commerce for Intl Trade Francisco Sanchez visits Brazil, Uruguay to promote U.S. oil, gas exports

WHAT TO WATCH:

  • Pershing hires Citi to sell entire J.C. Penney stake
    • Ackman’s Pershing sells J.C. Penney stake for $504m
  • U.S. girding for Syria move vows to hold Assad liable
  • Seeks Greek permission for Syria campaign: Kathimerini
  • PetroChina says 3 executives resign amid government probe
  • German Aug. IFO confidence beats ests, at 16-month high
  • India may decide on Mylan’s bid for Strides
  • Daimler to invest $2.7b to expand China production
  • Japan’s ANA to buy stake in Myanmar airline

EARNINGS:

    • Avago Tech (AVGO) 4:05pm, $0.66
    • Bank of Montreal (BMO CN) 6:30am, $1.53 - Preview
    • Bank of Nova Scotia (BNS CN) 7:30am, $1.31 - Preview
    • Brown Shoe (BWS) 7am, $0.22
    • Donaldson (DCI) 7am, $0.45
    • DSW (DSW) 7am, $0.79
    • Heico (HEI) 5:12pm, $0.47
    • Regis (RGS) 6am, $0.12
    • Sanderson Farms (SAFM) 6:30am, $2.66
    • Tiffany & Co (TIF) 7am, $0.74
    • TiVo (TIVO) 4:01pm, $(0.10)
    • Wet Seal (WTSLA) 4:05pm, $0.01
    • WMS Industries (WMS) 4pm, $0.31
    • Workday (WDAY) 4:05pm, $(0.18)

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Garry Jones Named as Chief Executive of London Metal Exchange
  • Coffee Reserves Seen at 2000 Low on Indonesian Rain: Commodities
  • Brent Rises to Five-Month High on Syria Clash, Libya Supply Loss
  • Gold Climbs to Two-Month High on ETP Holdings, Syrian Tensions
  • Money Managers Boost Cocoa Net Long to 54,382 Contracts Aug. 20
  • Copper Declines After Biggest Gain in Stockpiles in Two Months
  • Russia, Kazakhstan Boost Gold Reserves as Mexico Sells, IMF Says
  • Robusta Coffee Rises as Reserves May Decline; White Sugar Gains
  • Copper’s 340,000 Metric Ton Surplus an Overhang on Market, Price
  • Rebar Climbs as Industrial Profits Strengthen Economic Outlook
  • China Boosts Rapeseed Imports as Global Oilseed Output Rises
  • Shell South African Shale Drive Riles Farmers Over Water: Energy
  • Grain-Carrier Rates Rising as Crop Cargoes Near Record: Freight
  • Record Gold in India Seen Hurting Jewelry Demand as Rupee Slumps

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

 

 

 

 

 

 

 

 

 

 

 

 


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Disorderly Risks

“What they lacked was a science of disorder and randomness.”

-George Gilder

 

Gilder could have been writing about adults making life decisions inasmuch as he was alluding to both Keynesian and Hayekian policy makers who still don’t get the core chaos theory concept of non-linearity. If you don’t know what I am talking about, have kids.

 

Both life and market risks are grounded in uncertainty. You can take whatever precautions you want; you can be as proactively prepared as you think you can be – but it’s always the surprise of new information that drives decision making.

 

You cannot learn how to embrace uncertainty in a textbook. You have to learn this game by playing it. Since disorder and randomness typify markets, your risk management process should attempt to absorb that dynamism.

 

Back to the Global Macro Grind

 

Three big macro things have really changed in the last 3 months:

  1. Bond Yields in the USA, Germany, and the UK have been rising alongside their respective stock markets #surprise
  2. Growth Stocks (Low Dividend Yield, High EPS Growth, High Short Interest) have been crushing Slow-Growth Stocks
  3. Asian Emerging Market stocks have been dramatically underperforming US Growth Stocks

That sounds a little disorderly, no?

 

If you are bullish on “growth” doesn’t your local pie chart “diversification” manufacturer have you buying “Emerging Markets”? Or are they re-positioning that bad asset allocation decision to you now as something that looks “cheap.” #ThesisDrift

 

In Hedgeye-Jedi speak, “cheap” gets cheaper when:

 

A)     Country Inflation (or costs in the case of a company) Accelerates

B)      Real (inflation adjusted) Growth Slows

 

Back-test it with Apple (AAPL) and you’ll get my point. It doesn’t matter how “good” a company is if it’s about to see:

 

A)     Revenue Growth Slow (versus peak)

B)      Margins Compress (versus peak)

 

When you get A + B, you get multiple compression.

 

Conversely, in our proprietary GIP Model (Growth, Inflation, Policy), when a country:

 

A)     Sees Growth go from slowing to stabilizing to accelerating … and

B)      Is the recipient of inflation slowing via currency appreciation…

 

You get equity market multiple expansion. Look at the chart of any raging “growth” stock that is USA centric (SBUX, TSLA, DDD, NFLX, OPEN, SODA, etc.) and you’ll get what I mean.

 

Simple, right? Even a hockey player can do it.

 

Yes, in hindsight, most things macro are easier to see looking backwards. It’s in observing the chaotic system of colliding global macro market trends (where Growth and Inflation patterns develop) that you get an edge. It’s a grind.

 

Let’s go back to explaining why the aforementioned point #3 (#AsianContagion) has come to be. What’s happening this morning was as obvious in June as it is today:

  1. Indonesia’s Rupiah continues to crash; down big this morning -4.3% (for a currency, that is a lot!)
  2. India’s Rupee continues to crash as well, down another -1.9% this morning

As a country’s currency gets crushed, #InflationAccelerates and #GrowthSlows – then you get:

  1. Indonesia’s stock market down another -4% overnight (down -15% for the month-to-date)
  2. India’s stocks market down another -3.1% overnight (-11.5% since July 23rd)

Sure, it may seem disorderly and random that Asian “growth” markets can dislocate from US domestic growth stocks. It may appear random to the Macro Tourist who doesn’t stare at the matrix of currency and correlation risk like we do all day too.

 

But the other big point about disorder and randomness embedded in chaos theory is that there is a deep simplicity to it all, in hindsight.

 

Our immediate-term Risk Ranges are now as follows (we have 12 Big Macro risk ranges in our Daily Trading Range product now too):

 

UST 10yr Yield 2.71-2.93%

SPX 1

EEM 32.07-38.99

VIX 13.03-15.44

USD 80.93-81.80

Copper 3.30-3.39

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Disorderly Risks - chart

Disorderly Risks - vp


Consensus Wrong on #RatesRising

Consensus has been telling you over and over again that our top Q3 Macro Theme #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, high yielding, stocks maybe, but not US growth stocks.

 

Consensus Wrong on #RatesRising - Sector Performance

 

That style factor is why the Nasdaq and Russell 2000 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.


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