prev

BOOK REVIEW: ANTIFRAGILE

Takeaway: Buy the book. A must read.

I’ve had many of you ask me for my thoughts on Nassim Taleb’s latest risk management book, Antifragile. So, in the spirit of the main criticism I’d give the book (it’s repetitive), here are some brief notes (< 1000 words = Top 50 highlights):

 

Summary Thoughts

  1. He doesn’t like academic/unaccountable government policy. Neither do I.
  2. He likes the recent work of Dan Kahnemann (Thinking, Fast and Slow). So do I.
  3. He’s transitioning from market practitioner to philosopher. I wouldn’t do that.

Bottom line: Buy the book. A must read as we continue to narrow the gap between Chaos Theory and Behavioral Finance.

 

BOOK REVIEW: ANTIFRAGILE - antif

 

Content Highlights

 

  1. “I’d rather be dumb and antifragile than extremely smart and fragile” (pg 4) Wall St “smart” is changing
  2. “anything that has more upside than downside from random events is antifragile; the reverse is fragile (pg 5)
  3. “This is the tragedy of modernity… those trying to help are often hurting us the most (pg 5) #agreed
  4. I.A.N.D (International Association of Name Droppers)” (pg 6) #funny
  5. “academics with too much power and no real downside and/or accountability” (pg 6) #yep
  6. “Less is more and usually more effective”, cites Steve Jobs  (pg 11); good advice, #practice it
  7. “only practitioners (or people who do things) tend to spontaneously get to the point” (pg 13)
  8. “Table 1: The Central Triad (3 Types of Exposures” (pgs 24-27) very #thoughtful/concise on Behavioral Econ
  9. “We are all… similarly handicapped, unable to recognize the same idea…” (pg 39) good pt on #context #bias
  10. “Abundance is harder for us to handle than scarcity” (pg 42)
  11. Equilibrium, Not Again” (pg 60) solid complexity theory (Stuart Kaufman) reference vs #Keynesian
  12. “Leopards… are not instructed by personal trainers on the “proper form” to lift a deer up a tree” (pg 73) #true
  13. “you learn from the errors of others…” (pg 73),  #important lessons, especially on Wall St
  14. National Entrepreneur Day” (pg 79) #Obama, please read
  15. “what is made to fly will not do well on the ground… volatility comes from volare, “to fly” in Latin” (pg 81)
  16. “Nature loves small errors… humans don’t.” (pg 85) #evolve
  17. “those experiencing a brand of variations called chaos can be stabilized by adding randomness to them” (pg 103)
  18. “For a theory is a very dangerous thing to have… Theories are superfragile.” (pg 116) #awesome quotes
  19. “Men feel good less intensely than bad.” (pg 155) good quote by Livy in the context of #Seneca’s thoughts
  20. Seneca’s Barbell” (pg 161) #important pg to read related to your #Cash position and #Drawdown risk
  21. “An agent does not move except out of intention for an end.” (pg 169) #quote from St Thomas Aquina
  22. Convex Tinkering” (pg 182) makes an #excellent risk mgt pt on asymmetry with a picture
  23. “Life is long Gamma” (pg 184) would love to hear the anti-free market #answer to that
  24. “Risk taking ain’t gambling, and optionality ain’t lottery tickets” (pg 185) this ain’t Kansas, and I ain’t Toto
  25. “Few want to jeopardize their jobs and reputation for the sake of change” (pg 192) #truth
  26. “Evolution does not rely on narratives, humans do” (pg 207) #money quote
  27. Table 4: “The difference between teleological and optionality” (pg 214) good thinkers framework
  28. Chapter 15 = “History Written by the Losers” #rant
  29. “The difference between humans and animals lies in the ability to collaborate” (pg 233), bingo #collaboratio
  30. “Nokia … began as a paper mill” (pg 235), #re-learn, find a way to win
  31. “Trial and error is freedom.” (pg 246) #RiskMgt101
  32. “You are taking the joy of ignorance out of out of the things we don’t understand” (pg 253) Fat Tony to Socrates
  33. “What is not intelligible to me is not necessarily unintelligent” (pg 256) #Nietzsche
  34. “It would be like prostitutes listening to technical commentary by nuns” (pg 264) Bernanke, comments?
  35. “Smile! A better way to understand convexity and concavity” (pg 272) #pics summarize hundreds of pages
  36. “Squeezes are exacerbated by size” (pg 279) think #HedgeFundBubble, Short Interest, etc.
  37. “If you have favorable asymmetries, or positive convexity… in the long run you will do reasonably well” (pg 300)
  38. “Innovation is saying no to 1,000 things.” (pg 305) quotes Steve #Jobs again
  39. “we are moving into the far more uneven distribution of 99/1 across many things that used to be 80/20” (pg 306)
  40. “absence of literary culture is actually a marker of future blindness” (pg 314) on some #techies vs the classics
  41. Medicine, Convexity, and Opacity” (pg 337), you can skip this chapter unless you like to rip on doctors
  42. “mention of the fragilista journalists Friedman or Krugman can lead to explosive bouts of anger” (pg 362) #lol
  43. Chapter 23 = “Skin In The Game” (pg 375) 1st three pages and Table 7 of this chapter #excellent
  44. “a person is only as respectable … as the downside he is willing to face for the sake of others” (pg 376) #skin
  45. “you can’t feel insulted by a dog” (pg 380) #woof
  46. “in traditional societies even those who fail have a higher status than those who are not exposed” (pg 383)
  47. “Isn’t this unethical?” (pg 413) crushes Princeton’s Alan #Blinder for his conflicts of interest as an academic
  48. “Everything gains or losses from volatility. Fragility is what loses from volatility and uncertainty” (pg 421) #conclusion
  49. “Prometheus is long disorder; Epimetheus is short disorder” (pg 422) #conclusion
  50. “living things are long volatility. The best way to verify that you are alive is by checking if you like variations” (pg 423)

MCD: SIGNS OF LIFE? MAYBE (MAYBE NOT)

Clients often remind us that we’ve had a great call on MCD this year, but also prod us not to get carried away with our bearish bias.  Admittedly, this is not an easy feat – but, as the facts change, so will our call.  Our intention is always to remain flexible in our coverage.


That being said, our bearish bias has not changed.  Below we highlight four recent events and their potential implications.

  1. The stock outperformed the S&P 500 over the past month
  2. The current Mighty Wings promotion
  3. Changes in the Eurozone
  4. Personnel changes in the U.S.

Stock Price Performance – MCD is up +2.8% over the past month, outperforming the S&P 500 and its quick-service peer group by 80 bps and 200 bps, respectively.  Given that the stock had underperformed the S&P 500 by -20.9% YTD, we knew the slightest whiff of good news would push the stock higher.  So where is the good news coming from?

 

Mighty Wings – MCD hasn’t generated as much buzz around a limited-time offer (LTO) since the McRib promotion.  But, at the end of the day, it is just a LTO.  The recent buzz might create a month or so of stronger sales trends, but we don’t view this promotion as a game changer for the company.  Selling chicken wings may temporarily boost sales, but, in the long run, we fear that it will end up inflicting more harm than good.  Asking the currently disgruntled franchisee community to prepare yet another product, with a slower than normal preparation time, will only add to the service issues the company is already experiencing.  In our view, this is likely to lead to further deterioration of the MCD brand.

 

MCD: SIGNS OF LIFE? MAYBE (MAYBE NOT) - MCD US SSS

 

 

Changes in the Eurozone – MCD has been trading better since the release of August comps on September 10th.  Global trends in August were stronger due in large part to better than expected results in Europe.  The company reported Europe same-store sales growth of +3.3%, on top of +3.1% growth a year ago, as the UK, Russia, and France were strong.  Several of the MACRO indicators we monitor in Europe continue to show improvement in the region, specifically in Germany, MCD’s most important European region.  Today, the forward-looking German Consumer Confidence Indicator from the GfK Survey rose to 7.1 for October, surpassing consensus expectations.  GfK notes that, “despite a fall in income expectations, German consumers are almost euphoric when it comes to their propensity to consume.”  Investors also got some good news from Italy, another market that has given MCD considerable headaches in the past.  Today, Italy’s Consumer Confidence Index jumped to 101.1, its highest level since June 2011.

 

MCD: SIGNS OF LIFE? MAYBE (MAYBE NOT) - MCD EURO SALES

 

MCD: SIGNS OF LIFE? MAYBE (MAYBE NOT) - cons conf

 

MCD: SIGNS OF LIFE? MAYBE (MAYBE NOT) - MCD Chart4

 

MCD: SIGNS OF LIFE? MAYBE (MAYBE NOT) - germany income expect

 

 

Personnel Changes in the U.S. – Yesterday we learned that MCD’s Neil Golden plans to retire early next year.  Given the importance of MCD’s marketing message, it is clear that the company does not have its act together, particularly in its most important region, the U.S.  Despite the recent limited-time offer of Mighty Wings, McDonald’s continues to struggle in the region.

 

 

Summary

The stock is having a strong month and Europe is looking stronger, on the margin, for the company.  However, the U.S. continues to struggle and we believe it will be a while before the company returns to high-single digit EPS growth.

 

MCD: SIGNS OF LIFE? MAYBE (MAYBE NOT) - mcd chart6

 

 

 

Howard Penney

Managing Director

 


What’s New Today in Retail (9/25)

Takeaway: Athletic footwear data looking weak. FNP deal pothole. Alibaba comes to NYSE? JCP/Disney. Adidas, Sears Canada, M, AMZN, CROX, TGT

EVENTS TO WATCH OVER THE NEXT 24 HOURS

 

BBBY - Earning's Call: Wednesday 9/25/13 5:00pm 

HMB - Earning's Call: Thursday 9/26/13 2:00am

 

ECONOMIC DATA

 

NPD Footwear Data

Takeaway: The athletic footwear industry continues to put up lackluster weekly retail POS results. The latest week was -1.4% per NPD – not good. The only positive is that average selling price is still +3.4%, which is good to see, as ASP degradation is the first sign of a protracted (and unmanageable) slide in industry sales.  Nike’s print tomorrow should offer up additional color on the space.   

 

What’s New Today in Retail (9/25) - chart5 9 25

What’s New Today in Retail (9/25) - chart4 9 25

 

U.K. Retail Sales Rise at Fastest Pace in 15 Months, CBI Says

(http://www.bloomberg.com/news/2013-09-25/u-k-retail-sales-rise-at-fastest-pace-in-15-months-cbi-says.html)

 

  • "U.K. retail sales rose at the fastest pace in 15 months in September, boosted by grocery and furniture stores, according to an index by the Confederation of British Industry."
  • "A gauge of annual sales growth increased to 34, the highest since June 2012, from 27 in August, the London-based lobby said today. Economists had forecast a drop to 23, according to the median of nine estimates in a Bloomberg News survey. Retailers expect sales to maintain their momentum next month."
  • "A gauge of the volume of orders placed with suppliers climbed to 14 in September from 10 in August and a measure of sales volumes for the time of year rose to 12 from 10. A three-month moving average of sales jumped to 26 from 15."
  • "The CBI’s survey of 61 retailers was conducted between Aug. 28 and Sept. 11."

 

Takeaway: This synchs with comments from Foot Locker and Sports Direct that the UK is clearly getting better on the margin.

 

COMPANY NEWS

FNP, JOEZ - M&A Deals Stalling Near Finish Line

(http://www.wwd.com/business-news/mergers-acquisitions/ma-deals-stalling-near-finish-line-7183770?module=hp-topstories)

 

FNP:

  • "The frontrunners to acquire Lucky and Juicy have both dropped out... The firm, which declined to comment Tuesday, is still working to sell the brands."
  • "In the case of Lucky, the weakening outlook at the business appears to have been a key factor in the last-minute change in M&A dance partners. Fifth & Pacific had been in exclusive talks with private equity firm Advent International for Lucky, but the deal fell apart 'on the one-yard line' late last month, according to one of several financial sources, who confirmed that the deal fell through."
  • "Even as Advent stepped out, one source said, at least three other players have moved to the fore and are vying for Lucky, although their identities could not be confirmed."
  • "At Juicy, sources said that IDG Capital dropped out of the bidding last week. Talks intensified between Fifth & Pacific and IDG in August, and Authentic Brands Group was seen as a backup bidder. Now it looks as if Authentic could leap to the forefront. Calls to Authentic for comment were not returned."

 

FNP Takeaway: It goes without saying that this is a bump in the road for FNP.  But as it relates to the sale of Lucky and Juicy Coture – whether they go for $600mm or $800mm is fairly meaningless in the grand scheme of things for this company. Will it move the stock by a buck or two up or down? Yes. Around $0.85 per share for every $100mm to be precise. But either way the proceeds will be enough to completely eliminate FNP’s debt burden 2x over. Then you’re left with a debt free Kate Spade, which is a brand that is nearing $1bn, and headed to $3bn-$4bn, with all the capital it needs to grow.  Still a very big idea.  A sell-off in the wake of the M&A news is all we’d need to once again get much louder on the name.

 

JOEZ:

  • "Meanwhile, the Hudson deal has been delayed by a month as Joe’s worked to secure financing."
  • "The deal, in which publicly held Joe’s would pay $97.6 million in cash and convertible notes for the assets of privately held Hudson Clothing Holdings Inc., was unveiled on July 15 and originally was expected to close by Aug. 31. When details couldn’t be hammered out in time for a Sept. 15 deadline, a waiver was granted extending the date to Sept. 30."
    "CIT Group, which has provided day-to-day financing to both companies, remains committed to the deal, according to market and financial sources. A second lender, believed to be Goldman Sachs, has withdrawn, with the transaction moving toward completion with the participation of Garrison Investment Group in Goldman’s place."

 

Alibaba - Alibaba Said to Plan U.S. IPO After Hong Kong Talks Break Down

(http://www.bloomberg.com/news/2013-09-25/alibaba-group-talks-with-hong-kong-over-ipo-said-to-break-down.html)

 

  • "Alibaba Group Holding Ltd. is moving toward an initial public offering in the U.S. after talks for a Hong Kong listing broke down following management’s proposal to keep control in a share sale, according to two people familiar with the matter."
  • "China’s largest e-commerce company is seeking U.S. law firms to help with an IPO and hasn’t hired banks yet, said one of the people, who asked not to be identified because the process is private. Alibaba is likely to choose the New York Stock Exchange, another person said."
  • "Investment banks have valued Alibaba at as much as $120 billion, which would make it the third-biggest Internet company behind Google Inc. and Amazon.com Inc. based on market capitalization."

Takeaway: Whether you care about the on-line space or not, you need to pay attention to Alibaba. It is bigger than Amazon and eBay combined, and absolutely dominates Chinese e-commerce. Not only is it dominant, but it also does an incredible job with brand presentation. Certain US Premium and Luxury brands that have yet to go into China are evaluating having Alibaba host its site instead of building fulfillment operations organically. They’d never in a million years consider that with Amazon.  Let us know if you want to talk in greater detail about this one.  

 

JCP - Tragic JC Penney Story Gets a Touch of Disney Magic

(http://finance.yahoo.com/blogs/breakout/tragic-jc-penney-story-gets-touch-disney-magic-154656564.html)

 

  • Disney’s "store within a store" will begin in JCP stores around the country this week.
  • "The Disney mini-stores are a legacy of former JC Penney CEO Ron Johnson's vision to transform the retailer into a collection of shops maintained by different vendors. This is no ordinary licensing deal with generic Disney merchandise that can be found at any retailer. The concept was originally conceived to give Disney 750 to 1,000 square feet of space crammed with exclusive merchandise."

 

Takeaway: Out of any JCP shop-in-shop, this is potentially the most productive space as it spans apparel, toys and collectibles. Also, let’s not forget the fact that Disney now owns the Star Wars license.  

What’s New Today in Retail (9/25) - chart6 9 25

What’s New Today in Retail (9/25) - chart7 9 25

   

ADS - adidas D Rose 4 – Officially Unveiled

(http://sneakernews.com/2013/09/22/adidas-d-rose-4-officially-unveiled/)

 

  • Adidas unveiled its newest iteration of the D Rose collection on Sunday at the United Center in Chicago. The "D Rose 4" will retail for $140 and will hit stores 10/10/2013.

 

What’s New Today in Retail (9/25) - chart1 9 25

 

M - Macy's Ship-From-Store Scales Up To 20,000-Plus Daily Orders

(http://www.fierceretail.com/story/macys-ship-store-scales-20000-plus-daily-orders/2013-09-24)

 

  • "Macy's has nearly doubled the size of its ship-from-store program over the summer and may now be handling tens of thousands of orders per day, according to the Cincinnati Enquirer."
  • "The department store chain has added fulfillment departments to 200 stores this summer, increasing the total to 500. One store in the Cincinnati area, which has been part of the ship-from-store program since 2012, on a typical day ships 50 to 60 orders to Macy's customers who ordered items that they wanted to buy in another Macy's store that was out of stock. If that's typical, Macy's could be shipping between 25,000 and 30,000 orders every day from the 500 stores. (Macy's hasn't given out actual numbers for the ship-from-store program.)"
  • "That's a typical day. During one of the chain's one-day sales, the volume is typically 75 to 100 orders. During the holiday season after Thanksgiving, the store handles 300 to 400 orders a day."

 

VNCE - Vince IPO Planned for Up to $200 Million

(http://www.wwd.com/business-news/financial/vince-ipo-planned-for-up-to-200-million-7183854?module=hp-topstories)

 

  • "The company filed a confidential filing in July with the Securities and Exchange Commission that was made public late Tuesday. The filing, which said shares will trade under the symbol 'VNCE', did not state how many shares will be issued nor at what price."
  • "The filing was made by Apparel Holding Corp., which holds the Vince business and the nonVince businesses under the Kellwood umbrella. Following the IPO, Vince will become Vince Holding Corp. The non Vince businesses will be under the Kellwood Holding Corp umbrella."
  • "For the six months ended Aug. 3, Vince posted net income of $2.4 million on net sales of $114.7 million."
  • Vince is a contemporary apparel brand for men and women.

 

SCC - Change at top of Sears has landlords eyeing leases

(http://www.theglobeandmail.com/report-on-business/change-at-top-of-sears-has-landlords-eyeing-leases/article14508296/#dashboard/follows/)

 

  • "Sears Canada Inc.’s move to replace its chief executive officer with a former turnaround specialist has landlords weighing the prospect of buying back more of the retailer’s coveted leases to make way for new rivals."
  • "Sears confirmed on Tuesday The Globe and Mail’s report that CEO Calvin McDonald was leaving 'to pursue an opportunity with a leading international company,' without naming it. He is being replaced by chief operating officer Douglas Campbell."
  • "Landlords have been in talks with Sears about the possibility of buying back prized leases from the struggling retailer, industry sources said. Already, Sears has sold a handful of its leases, raising almost $400-million. The landlords are hankering to regain control of the properties because of Sears’ weak results, the stores’ prominent mall locations, their low rents, and the scarcity of prime retail space."

  

AMZN - Amazon Refreshes Kindle Line With Fire HDX

(http://online.wsj.com/article/SB10001424052702303759604579095743303332998.html)

 

  • "[AMZN]...is staying the course with a new line of Kindle Fire tablet computers that undercuts competitors like Apple Inc.'s iPad on price, and appears designed largely to drum up sales for other services such as digital music and e-books."
  • "The company plans to unveil on Wednesday two new versions of its tablets—the Kindle Fire HDX—available with 7-inch or 8.9-inch screens."
  • "The Kindle Fire HDX starts at $229 for the 7-inch version and $379 for the 8.9-inch version, and models with 4G wireless connectivity are $100 more each"

 

TIF - Frederic Cumenal Appointed President of Tiffany

(http://investor.tiffany.com/releasedetail.cfm?ReleaseID=792927)

 

  • "[TIF] has appointed Frederic Cumenal to the position of President of Tiffany & Co. and also appointed him to a newly-created seat on the Company's Board."
  • "In his new role, Mr. Cumenal, 54, will retain his regional responsibilities and will assume responsibility for the Design, Merchandising and Marketing functions. Mr. Cumenal will continue to report directly to Mr. Kowalski…"
  • Frederic Cumenal joined Tiffany in March 2011 from LVMH where he was the President and CEO of Moet and Chandon.

Takeaway: LVMH is a hot-bed for talent sourcing. In January 2012 Daniel Lalonde left LVMH to become the head of International for Ralph Lauren.  

 

CROX, VFC - Media Bank: Crocs Says 'Relax'...

(http://www.wwd.com/footwear-news/markets/media-bank-crocs-says-relax-reeboks-revolution-7183330?module=Footwear%20News-Markets-second)

 

  • "Crocs is giving millennials a reason to kick back and relax. [Crox] declared Sept. 28 International Comfort Day... As part of Crocs’ initiative this Saturday, retail stores throughout the Americas, Europe and Asia will offer consumers a 20 percent discount. The company also will donate 20,000 pairs of shoes to individuals in need."
  • "Timberland is bringing some lightheartedness to the workplace. For the brand’s Pro line of workboots, advertising firm The Martin Agency created a range of TV spots that depict industrial 'work fails.'"
  • "The ads debuted this week on a variety of cable networks, and microsite Stayonyourfeet.com also launched in conjunction with the commercials."

 

Takeaway: With Timberland, we get it. Crocs – not really.  

 

TGT - Target Introduces Target Ticket, a Family-Friendly Digital Video Service

(http://pressroom.target.com/news/target-introduces-target-ticket-a-family-friendly-digital-video-service)

 

  • "[TGT] announced that Target Ticket, its new digital video service, is available to guests nationwide."
  • "Target partnered with Common Sense Media, a San Francisco-based non-profit organization best known for its reviews of movies and television shows. Through the partnership, Target Ticket gives guests access to thousands of reviews, making it easier for parents to choose the right content for their children."

INDUSTRY NEWS

 

Consumers Are Talking…Are Brands Listening?

(http://therobinreport.com/consumers-are-talking-are-brands-listening/)

 

  • "Once consumers became comfortable purchasing apparel online, brands and retailers sought to enhance the experience through social media sharing options, crowdsourcing — and online customer comments sections. What may have begun as a means of increasing sales via search engine optimization has grown to be a barometer of what’s in and what’s out of favor with the buying public."
  • "Cotton Incorporated set out to quantitatively measure these customer comments, and the result – the Cotton Incorporated Customer Comment Project – reveals what makes apparel consumers rant or rave about their purchases."
  • "Ultimately, the project looked at a collection of more than 200,000 customer comments from 25 key retailer websites including: mass market retailers; chain, department and specialty stores; online-only retailers; and sports specialty stores."
  • "Kantar Retail’s Anne Zybowski, vice-president of retail insights, says comments boards are a high priority for some retailers…'We’ve seen some retailers whose redline or clearance items correlate with a product’s negative online review.'"
  • "The Customer Comments Project also revealed some surprising findings about key products. Positive ratings for denim jeans are the lowest compared to other major categories studied, and uncover significant consumer dissatisfaction with negative textile issues, as well as fiber substitution away from cotton."
  • "Now that cotton prices have stabilized, those retailers who turned to synthetics may want to consider switching back to natural fibers like cotton – or risk the wrath of their customers, who can turn to those very sites to share their discontent with a ready audience."

 

What’s New Today in Retail (9/25) - chart2 9 25

What’s New Today in Retail (9/25) - chart3 9 25

 

Three Nations Pledge $24M for Bangladesh Factory Plan

(http://www.wwd.com/business-news/government-trade/three-nations-pledge-24m-for-bangladesh-factory-plan-7183413?module=hp-topstories)

 

  • "Canada, the Netherlands and the U.K. have signed an agreement with the International Labor Organization to boost labor inspection and upgrade building and fire safety in Bangladesh’s garment sector."
  • "The three nations 'combined pledged $24.3 million' in support of the ILO-led plan, officials and diplomats familiar with the details of the program, launched in New York during the annual meeting of the United Nations General Assembly, told WWD."
  • "The ILO plan is supported by other parallel initiatives focused on the ready-made sector in Bangladesh, namely the Accord on Fire and Building Safety in Bangladesh that was signed by some 80 global clothing brands and retailers, and covers 1,800 factories, and the Alliance for Bangladesh Worker Safety, a binding five-year undertaking by North American apparel companies and retailers to improve safety in more than 500 factories."

 

 

 


GET THE HEDGEYE MARKET BRIEF FREE

Enter your email address to receive our newsletter of 5 trending market topics. VIEW SAMPLE

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.


Kinder Morgan and Regulated Pipelines: Expert Call on Rates, Regulation, Safety, and MLPs

Continuing our work and research on Kinder Morgan, midstream MLPs, pipeline safety, and FERC rates and regulations, we will host an expert call on October 8th at 11am EST with Elisabeth Meyers.

 

Elisabeth Meyers is the founding principal of Myers Energy International.  An energy lawyer with twenty years of experience, she specializes in the regulation of oil and natural gas pipelines and represents companies before federal and state regulatory agencies with respect to rate and regulatory issues.  She has litigated before the FERC, the California Public Utilities Commission, the U.S. Courts of Appeals, and the U.S. Supreme Court.  She advises on pipeline safety compliance issues under the U.S. Department of Transportation's Pipeline and Hazardous Materials and Safety Administration regulations.  Her clients have included major oil companies; a state regulatory commission; a producer trade association in rulemakings restructuring the natural gas industry; oil refineries; farmers in the mid-west seeking interconnects with interstate pipelines; independent producers and marketers of oil, natural gas, and natural gas liquids with respect to various regulatory and related transactional issues; municipalities and municipal gas distribution systems, and chemical manufacturers. 

 

Ms. Meyers also has extensive knowledge of Kinder Morgan, as she litigated against SFPP in ground-breaking rate cases before the CPUC and FERC in the mid 2000s.

 

A FEW TOPICS FOR DISCUSSION WILL INCLUDE:

  • What’s the current state of pipeline regulation in the US?  How does the regulation of oil/product lines differ from natural gas?
  • History of pipeline regulation…  Where have we come from and where might we be going?
  • Pipeline safety and compliance…  Are companies spending enough on maintaining their pipelines?  Are they spending too much just to increase the rate bases (“gold-plating”)?  Is a certain level of spend mandated or regulated?
  • The growing prevalence of MLPs…  What’s it mean for US energy infrastructure, consumers, and investors?
  • MLPs, income taxes, and regulated rates…  Are MLPs “tax-advantaged” securities?  Why does the FERC permit an income tax allowance for MLPs?
  • And more...

 CALL DETAILS:

  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 616394#
  • There will be no slides associated with this call

 

Kevin Kaiser

Senior Analyst


Dollar Debauchery Implications

Client Talking Points

US Dollar

Here's a simple market observation: Down Dollar, Down Rates = Down Stock Market now for 4 consecutive days. Make sure you've got that one straight. Our Fed Chief Ben Bernanke is both un-elected and unaccountable. So don’t worry about him being held responsible for this re-rating of US growth expectations. Want to blame somebody? Blame Congress.

UST 10YR

No surprise here: Bond yields are down once again this morning to 2.64%. Down Dollar, Down Rates are an explicit #GrowthSlowing expectations signal. So is the Yield Spread (10-year minus 2-year) which has compressed 21 basis points since Larry Summers bowed out to Bernanke-Yellen. Decisions have consequences.

OIL

Brent took a skinny dip below our long-term TAIL risk line of $108.57. Then it popped right back up to $109.35. So, while the water looks warm and inviting, I’m not shorting Oil until this TAIL break is confirmed for more than a day. We're watching this one very closely.

Asset Allocation

CASH 49% US EQUITIES 16%
INTL EQUITIES 20% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 15%

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.

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.

TROW

Financials sector senior analyst Jonathan Casteleyn continues to carry T. Rowe Price as his highest-conviction long call, based on the long-range reallocation out of bonds with investors continuing to move into stocks.  T Rowe is one of the fastest growing equity asset managers and has consistently had the best performing stock funds over the past ten years.

Three for the Road

TWEET OF THE DAY

Dollar and Rates falling remains a new threat to US #GrowthSlowing @KeithMcCullough

QUOTE OF THE DAY

"Whoever controls the volume of money in any country is absolute master of all industry and commerce." -James A. Garfield, President of the United States

STAT OF THE DAY

Americans are pessimistic about the course of the country, with 68% saying it’s headed in the wrong direction, the most in two years, according to the poll of 1,000 adults conducted Sept. 20-23.(Bloomberg)


real-time alerts

real edge in real-time

This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.

next