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8 STORIES: HEDGEYE IN THE NEWS

Takeaway: Here's a look at some of the top stories involving Hedgeye this week. Making waves (especially big ones) is fun.

Two Of The Most Notorious Folks On Financial Twitter Got Into A Huge Fight

8 STORIES: HEDGEYE IN THE NEWS - news2

(Business Insider) - Two of Twitter's most notorious characters, Keith McCullough, the CEO of Hedgeye, and anonymous financial blogger ZeroHedge got in an epic spat on Twitter last night and it's still continuing this morning. 

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Is Kinder Morgan a Trap or a Treasure?

8 STORIES: HEDGEYE IN THE NEWS - news1

(Yahoo Finance) - It could be the boldest, most controversial call on Wall Street since Meredith Whitney (incorrectly) hexed the municipal bond market on 60 Minutes in 2010. This time, the target is Kinder Morgan (KMI) and the broader universe of MLP's (or master limited partnerships), and the messenger is a little known analyst Kevin Kaiser, at Connecticut-based Hedgeye Risk Management. In both cases, the bedrock of the institutional investing establishment has not taken kindly to the message.

 

"This isn't rocket science. It's just us reminding people what GAAP accounting is," says Keith McCullough, founder and CEO of Hedgeye, in the attached video. "When we get into the short side of something, it's not about scaring people or end-of-the-world type stuff. I'm looking for an expensive stock that everybody owns that's going to run into some issues."

 

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Hedgeye's McCullough: Low Oil, Strong US Dollar Could Weaken Russia's Putin

8 STORIES: HEDGEYE IN THE NEWS - news3

(Newsmax) - A strengthening of the dollar and a significantly lower oil price are weapons President Barack Obama could one day use against Russian President Vladimir Putin, leading to the United States dealing from a position of strength, according to Keith McCullough, founder of investment-research firm Hedgeye Risk Management.

 

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Young analyst draws Wall Street ire taking on Kinder Morgan

8 STORIES: HEDGEYE IN THE NEWS - news4

(Reuters) - Kevin Kaiser, a 26-year-old analyst only three years into his first job out of the Ivy League, jolted Wall Street last week with a pithy email taking aim at North America's largest oil and gas pipeline and processing company - Kinder Morgan.

 

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Why a 26-year-old analyst has managed to rattle Wall Street

8 STORIES: HEDGEYE IN THE NEWS - kk9

(Quartz) - On Sept. 9, Reuters reported that Kevin Kaiser of Hedgeye Risk Management had sent shares of Kinder Morgan, North America’s third largest energy company, reeling 6%. Kaiser had emailed clients advising them to short the stock (i.e., bet it would fall). The following day, Kaiser published a full report on the company, arguing that it was overvalued. In the two days since, Kinder Morgan’s share price has rallied and then fallen sharply.

 

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Should Obama turn Larry Summers loose on Putin?

8 STORIES: HEDGEYE IN THE NEWS - news5

(AEI) - Keith McCullough of investment firm Hedgeye Risk Management offers a novel suggestion for Washington to deal with that pesky authoritarian and newspaper columnist Vladimir Putin.Here is a bit from a recent interview:

 

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FBN’s Charlie Gasparino Discusses Kinder Morgan with Hedgeye's Kevin Kaiser

8 STORIES: HEDGEYE IN THE NEWS - news6

(Fox Business) - Hedgeye analyst Kevin Kaiser spoke with FOXBusiness Network's Charlie Gasparino about his recent report on Kinder Morgan.


Kaiser said, "Kinder Morgan's issues are very concerning" and that the "entire MLP sector is sort of a regulatory nightmare." When asked whether Kaiser thinks Kinder Morgan is doing anything illegal Kaiser said, "I am not saying that anything is illegal here. I think there are some very misleading statements with some of the non-GAAP financials." Kaiser discussed further that he doesn't think Kinder Morgan's stock is safe for investors.

 

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Wall Street’s 6-Day Winning Streak Can Continue Says McCullough

8 STORIES: HEDGEYE IN THE NEWS - bull

(Yahoo Finance) - Not two weeks ago market historians had us bracing for impact and on guard for a disastrous September. So far nothing could be further from the truth. Stocks continue to erase August's losses and what seemed ominous and scary a few days ago isn't quite as fearsome anymore.

 

"I think it can continue," says Keith McCullough, CEO of Hedgeye Risk Management in the attached video, "and I think the reasons are about as straight forward as they've ever been."

 

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The Implications of Larry Summers

Takeaway: Nobody in the history of mankind has been more dovish than Ben Bernanke. On the margin, Summers is hawkish.

Editor's note: What follows below is a brief excerpt from Hedgeye CEO Keith McCullough's Morning Macro Call. For more information on Hedgeye's research products please click here.

 

The Implications of Larry Summers - summ

 

Good morning. The top three things in my notebook this morning are definitely being infected, affected, defected by the concept of Larry Summers being the new head of the Fed.

 

Now I don’t personally like the guy; we don’t hang out. But, these top three things, Gold, Oil and 10-Year Bond Yields—some of these things don’t like Larry Summers.

 

Larry Summers—are you the enemy of Gold? Look at gold just getting smoked.

 

As you know, gold has been crashing this year.  It’s down 22% for the year-to-date.

 

This concept that Larry Summers would take over from Ben Bernanke—of course what matters most is what happens on the margin—Summers would be marginally hawkish. There is no doubt about that.  And, on an absolute basis versus Janet Yellen—all of Larry Summers’ issues set aside—he would be uber-hawkish versus her.

 

Bottom line is that this would be uber-bearish for the BFF (“Best Friend Forever") of gold that is Ben Bernanke. They are BFFs.  

 

It’s over.

 

The Implications of Larry Summers - drake1


Editor’s note: This next excerpt comes from a question asked by a listener at the conclusion of Keith’s remarks.


QUESTION: Why does everyone believe that Larry Summers will be hawkish? Isn’t he part of the same Ivy League network of Keynesian economists that produced Ben Bernanke and Paul Krugman?

 

MCCULLOUGH: Oh, of course! Do not confuse this man as being anything other than who he is.

 

But everything that happens in Macro, happens on the margin. I did not learn this at Yale by the way. All of these guys are Keynesians. It’s what derivative of a raging Keynesian you are that matters most.

 

We’re talking about Ben Bernanke and Janet Yellen being about as far left on the spectrum of that weigh scale that you can find.

 

There are a few things about Larry Summers to note. First off, he’s not that far left. Second, he likes to be very prickly, about what he thinks and when. And number three, he’s not going to pander to some regional Fed chair guy like Kocherlakota from Minneapolis.

 

Summers is the kind of guy who went in and told Obama, “Look, I’ll end the madness of it all. I’ll end some of the bubbles. I’ll be prickly.” Now, I’m adding an “L” and a “Y” there as opposed to saying what you really might call the guy.

 

Look nobody in the history of mankind has been more dovish than Ben Bernanke. So on the margin, Summers is hawkish.


COMMODITY CHARTBOOK

The charts below illustrate some of the important commodity trends for the restaurant industry.

 

Notable Trends:

  • Coffee prices ticked up +1.9% over the past week, but are down -38% on a year-over-year basis and remain a tailwind for SBUX, DNKN, GMCR, KKD, THI and other coffee retailers.  We expect this tailwind to continue for the remainder of the year.
  • Chicken wings are up +0.3% over the past week, as football season enters its nascent stages and MCD is in the process of rolling out Mighty Wings nationwide.
  • Dairy costs are up over the past week.  A continuation of this trend could create some margin pressure for CAKE, TXRH and others with expsoure to dairy costs.
  • Beef prices are down over the past week and have been trending down YTD, offering CMG, WEN, JACK and others reason to be optimistic on COGS over the intermediate-term.
  • Corn and wheat prices continue to provide retailers, restaurants and consumers with lower food costs than a year ago.
  • Gasoline prices fell -0.9% over the past week, but are up +7.5% YTD. We will continue to monitor this trend, as any sustained increase or decrease in gas prices could have a signicant impact on the direction of discretionary spending.

COMMODITY CHARTBOOK - table

COMMODITY CHARTBOOK - Correlationtable

COMMODITY CHARTBOOK - gas long term

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COMMODITY CHARTBOOK - crb long term

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COMMODITY CHARTBOOK - corn

COMMODITY CHARTBOOK - wheat

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COMMODITY CHARTBOOK - rice

COMMODITY CHARTBOOK - cattle

COMMODITY CHARTBOOK - breast

COMMODITY CHARTBOOK - wings

COMMODITY CHARTBOOK - coffee

COMMODITY CHARTBOOK - cheese block

COMMODITY CHARTBOOK - milk

 

 

 

Howard Penney

Managing Director

 


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.65%
  • SHORT SIGNALS 78.62%

CATALYSTIC BYD

Takeaway: Favorable macro backdrop, margin expansion, and numerous catalysts

It's been awhile since we've seen so many positive catalysts for this sell side whipping boy

 

 

Just A Teaser

I’m in Las Vegas for meetings and wanted to relay at least one highlight before I start day 2.  I’ve come away very positive on Boyd Gaming.  We will expound on our thesis points in upcoming posts but since some of the catalysts are fresh, time is of the essence.

 

We still worry about the regional markets and the declining base of slot players.  However, BYD maintains significant exposure to the Las Vegas locals market, an incremental positive in our opinion given the positive macro offset to tough nationwide casino demographics.  Even in the regional markets where we are less sanguine, BYD seems to have significant room for cost cutting and thus, margin improvement.  In New Jersey, Borgata is spending less and gaining market share.  And speaking of New Jersey, we cannot forget the future, which is in online gaming.  Only a handful of companies can boast of first mover advantages - and they are huge - in the future of federal or multi-state internet poker.  BYD is one of them.

 

So with a return to revenue growth in the LV Locals market and likely margin improvement everywhere, we actually could see earnings upside for the first time in a long time for BYD.  Investment ratings are mostly neutral, leaving plenty of room for upgrades, especially with potentially a positive earnings surprise and higher guidance combined with the reactive nature of many on the sell side.

 

Here are some upcoming catalysts:

 

Catalysts:

  • New Jersey tax court ruling should occur this month
    • It’s not in the numbers or guidance but a favorable property tax adjustment could result in $10m+ in annual EBITDA at Borgata.  Moreover, the last 4 years are being challenged so Borgata could also receive a $40-50m tax rebate.
  • G2E and DB/UBS investor conference in Vegas starting on 9/23
    • We expect BYD to show well and exude optimism
  • Earnings release in late October
    • We believe BYD is on track to beat consensus and provide solid guidance and commentary.
  • November approval for online gaming in New Jersey
    • New Jersey online gaming is a positive for Borgata and a marginal positive for BYD.  More importantly, BYD should have a great head start if and when online gaming rolls out nationally.  Online is the future people.

The M3: BLOOMBERRY MGMT CHANGE; CROWN SRI LANKA; LUXURY SALES; HENGQIN LAND; S'PORE UNEMPLOYMENT

THE MACAU METRO MONITOR, SEPTEMBER 13, 2013


 

BLOOMBERRY RESORTS CHANGING CASINO MANAGEMENT BusinessWorldOnline.com

Bloomberry Resorts has terminated its management contract with Global Gaming Philippines LLC (GGAM), alleging a material breach of contract.  According to the disclosure statement, Bloomberry states "GGAM has not spent any material time in attending to the management of Solaire and has failed to perform its obligations and deliverables under the MSA (management service agreement)...However, many members of existing management team are very capable and will continue to manage Solaire effectively without GGAM and its representative."  Bloomberry is now looking to replace Solaire COO Michael French with an "experienced casino hotel executive."  GGAM denied Bloomberry's allegations and stated the termination of the management agreement was a breach of contract. 

 

SRI LANKA APPROVES PACKER'S CROWN CASINO DEAL macaubusiness.com

Lake Leisure Holdings, a joint venture by Crown Ltd and Rank Entertainment Holdings Pvt Ltd., received approval from Sri Lanka's government to develop a two-tower resort for US$350MM.

 

MACAU, HK OFFSET SLOWER RICHEMONT SALES IN CHINA macaubusiness.com

Swiss luxury goods maker Richemont SA reported the annual growth in sales in the Asia-Pacific region slowed to 4% in the first five months of this year from 12% a year earlier. Reduced sales reflected a slowdown in the mainland but was offset by growth in Macau and Hong Kong.

 

REAL ESTATE INVESTORS PLOT BIG RETURNS ON HENGQIN macaubusiness.com

Gemdale Corp has begun selling phase II of a low-density development on Hengqin at "The Doorway" starting at MOP1,037 a square foot.

 

UNEMPLOYMENT REMAINS LOW IN SINGAPORE channelasianews.com

The unemployment remained low, at 2.1% in June 2013, up slightly from 1.9% in March 2013.

 



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