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Client Talking Points

EMERGING

EEM is not the perfect ETF representing the Emerging Markets short call, but it’s the most widely held. And guess what? It's for sale right now, provided that we continue to see pressure on Emerging Market currencies. We do think we will continue to see #GrowthSlowing on a real-inflation adjusted basis in EM. Basically, we are as bearish on EM as we are bullish on US Growth (QQQ). Yes I know. It's weird, but it's working.

INDIA

India is the poster child of currency crisis developing into a current account deficit problem (as overall growth slows and inflation accelerates). India’s Sensex was hit hard down -3.1% overnight. It's down -11.5% since mid July. That said, it actually outperformed Indonesia and the Philippines overnight which were smoked for big -3.9% and 4% losses, respectively. Don't forget: #AsianContagion is one of Hedgeye's top Q3 Macro Themes. It's working out well for us, not so much for them.

OIL

We don’t like everything US Equities. In fact, we definitely don’t like slow growth sectors like Utilities and Consumer Staples. Not at all. The number one thing that concerns me on growth stocks is Oil being so sticky up here. $108.11 is the long-term TAIL risk line for Brent, and SPY just failed at my immediate-term TRADE line of 1671 resistance. We are watching this relationship closely.

Asset Allocation

CASH 34% US EQUITIES 24%
INTL EQUITIES 22% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 20%

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

COMMODITIES: Gold and Oil continue higher; rarely a good thing for Global Growth expecations @KeithMcCullough

QUOTE OF THE DAY

"I'd rather roll the bones at Mohegan Sun than try to trade some of these 2013 commodity blowups." -Keith McCullough

STAT OF THE DAY

Average 401(k) balances were up more than 10% in Q2. Fidelity Investment's average 401(k) balance came in at $80,600 at the end of the second quarter of 2013 -- up more than 10% from the same time last year, according to a report released Tuesday by Fidelity, which represents 12.4 million U.S. workers.