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European Banking Monitor: Onward & Upward

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .




European Financial CDS - Europe continues to dazzle. Only two EU financials widened last week, RBS (+1 bp) and Banco Popular (+19 bps). The rest of Europe was notably tighter. This continues a theme that's been in place for some time now. In fact, looking at the MoM trend, the mean/median change in EU financial CDS is tighter by 31/8 bps, respectively. 


European Banking Monitor: Onward & Upward - zz. bank cds


Sovereign CDS – Sovereign swaps were tighter around the globe last week with the sole exception of the US, where swaps were flat at 34 bps. The real takeaway is the MoM change, particularly in Europe. Consistent with our 4Q13 macro theme of #EuroBulls, Portugal, Spain and Italy are tighter MoM by 136 bps, 35 bps and 33 bps, respectively. 


European Banking Monitor: Onward & Upward - z. sov1


European Banking Monitor: Onward & Upward - z sov2


European Banking Monitor: Onward & Upward - z. sov3


Euribor-OIS Spread – The Euribor-OIS spread was unchanged last week at 12 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 


European Banking Monitor: Onward & Upward - z. euribor

[video] Why We’re Really At All-Time Highs


With RCL reporting this Thursday, we’re reporting the results of our most recent cruise pricing survey.  2013 is pretty much in the bag so we have few concerns regarding RCL’s Q3 earnings and Q4 guidance.  For RCL, it is 2014 we are concerned with, particularly in the first half.  RCL 2014 pricing looks weaker than CCL in Europe and Alaska.  As we noted in our note this morning, “SHIPS OF STOOLS NO LONGER,” we think RCL is now the stock at risk.    


Below are some observations from our proprietary pricing survey (>12,000 itineraries) for CCL, RCL, and NCLH.  We analyze YoY pricing, as well as relative TREND which is determined by comparing pricing relative to the last earnings/guidance date for a cruise operator i.e. CCL: 9/24; RCL: 7/25; NCLH: 7/29.  For a more quantitative analysis, please contact sales at .

  • CCL:  The good news is that the carnage seen in FQ1 2014 for the Caribbean didn’t get worse in mid-October.  The bad news is that any modest pricing gains for FQ2/FQ3 2014 seen in mid-September disappeared in mid-October.  Mgmt expects pricing to improve significantly in 2H 2014 for the Carnival brand so let’s hope this trend will reverse before Wave Season hits.  Europe pricing continues to be steady while early pricing for the 2014 Alaska cruise season has been quite robust.
  • RCL:  The data looks fine for the balance of 2013.  Our concern remains 2014.  Similar to Carnival, it looks like FQ1 2014 will be very weak in the Caribbean, while Europe and Alaska pricing will drag down FQ2/FQ3 performance.  Not surprisingly, Pullmantur was a notable laggard in mid-October.
  • NCLH:  Steady overall pricing but lower Getaway prices is not encouraging





Caribbean – Carnival brand

  • Pricing for the few FQ4 itineraries left was down double-digits YoY but slightly better relative to mid-September’s
  • FQ1 2014 pricing did not move much MoM with close to double-digit YoY declines
  • Summer 2014 pricing continued to be quite volatile.  After moving modestly higher on a relative basis in mid-September, FQ2 2014 pricing trend dropped sharply in mid-October.  On a YoY basis, pricing is now trending flat.  Early FQ3 2014 pricing also reversed course, giving back most of the pricing gains seen in mid-September


  • Costa FQ4 2013 YoY pricing continued to make gains on top of excellent growth.  Costa’s FY 2014 pricing was unchanged and TREND was stable.
  • Princess and Cunard brands saw modest pricing improvements while Holland America pricing did not move.
    • Interestingly, the new Royal Princess saw significant discounting, which was offset by pricing gains in other Princess brands.
  • Early modest pricing pressure for AIDA’s 2014 Western Europe/Mediterranean itineraries


  • Off to a great start in 2014 with Princess leading the charge.  Pricing was much higher on a YoY basis with TREND accelerating.

Asia, Mexico, South America

  • Asia 
    • Holland America and Costa maintained FY2014 pricing in mid-October
    • Princess pricing was slightly lower for FQ2 2014 but nicely higher for FQ3 2014
  • Mexico
    • Carnival brand pricing for FQ1 2014 remained modestly lower YoY but TREND had turned positive
    • Carnival brand pricing for FQ2 and FQ3 2014 TREND lost some steam but remain nicely higher YoY
  • South America
    • Costa’s pricing TREND was slightly higher.  Holland America continued its struggles with FQ4 2013 pricing down significantly and FQ2 2014 pricing lower.  Princess’s FQ1 2014 pricing TREND was roughly flat in mid-October.



  • RC brand:  FQ4 2013 YoY close-in pricing improved slightly.  FQ1 2014 pricing continued to be significantly lower –a trend seen since July.  Further out in 2014, it’s an unclear picture with slightly better FQ3 2014 pricing offsetting slightly weaker FQ2 2014 pricing; pricing TREND was stable for both quarters. 
  • Celebrity:  FQ4 2013 and FQ2 2014 pricing was slightly higher but FQ1 2014 prices were much lower.  Pricing TREND was stable for all quarters.
  • Pullmantur:  FQ1 2014 pricing fell slightly; however, significant discounting for FQ2 2014 itineraries remained


  • RC brand:  FQ2 2014 pricing had not improved much from mid-double digits declines.  Pricing TREND was stable.
  • Celebrity:  FQ2 2014 pricing remained lower substantially YoY with stable pricing TREND
  • Azamara:  2014 pricing improved modestly MoM
  • Pullmantur:  Rough seas for this brand in 2014.  The substantial FQ2 2014 price discounting had been extended to FQ3 and FQ4.  Western Europe and Baltic/North Seas regional pricing both look under pressure.  Price TREND was negative.


  • FQ2 2014:  RC brand & Celebrity pricing down double digits YoY. 
  • FQ3 2014:  RC brand pricing saw double-digits declines while Celebrity pricing was slightly positive

Asia and South America

  • Asia 
    • RC brand & Celebrity:  Pricing was nicely higher for FQ1 2014
    • Azamara:  Flat pricing
  • South America
    • RC brand & Celebrity:  Sparse itineraries but pricing was nicely higher for FQ1 2014



  • Close-in FQ4 2013 pricing deteriorated further in mid-October.  Pricing TREND for FQ1/FQ2 2014 was flat.
    1. Breakaway:  Steady pricing, maintained 35-40% pricing premium over Gem
    2. Getaway:  Pricing was slashed by the low teens in FQ1 2014.  Pricing premium over Epic and Sun reduced from 50-60% in mid-September to 30-40% in mid-October.


  • Steady 2014 pricing

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NJOY and Developing Trends in the E-Cigs Industry

We will host an expert call on electronic cigarettes with Craig Weiss, CEO of NJOY, on Wednesday, October 30th at 1:00pm EDT titled "NJOY and Developing Trends in the E-Cigs Industry." 




Mr. Weiss will contribute his expertise to Hedgeye's ongoing research on the electronic cigarette category.




  • Industry trends and the developing landscape
  • NJOY's company profile and share of the category
  • The regulator outlook for e-cigs in the U.S. and internationally
  • What the future holds for e-cigs



Before joining NJOY in June 2010, Craig Weiss, a U.S. Registered Patent Attorney, practiced law, where he focused on the drafting and prosecution of patent applications for medical device, eCommerce and business method inventions. Weiss has three patents to his name, including two for medical devices. He was also the managing member of a hedge fund focused on intellectual property. Weiss earned his law degree from Arizona State University and his bachelor's degree from the University of Pennsylvania.




NJOY is a private e-cig manufacturer, founded in 2006 and headquartered in Scottsdale, Arizona, with online sales and retail distribution in over 60,000 locations nationwide. NJOY has carved out a leading position in the category, offering a variety of rechargeable and disposable products in traditional tobacco and menthol varieties.  


In April 2010 the company announced that it received a $20MM investment from the private equity company Catterton Partners. In June 2013, a collection of investors, including Sean Parker (formally at Facebook), announced a $75MM investment in the company.




  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 959896#
  • Materials: CLICK HERE


Please email  for more information.


Takeaway: McDonald's remains on the Hedgeye Best Ideas list as a short.

McDonald's released its Q3 earnings this morning. Revenue missed. Management blamed a challenging global environment. Hedgeye Restaurant Sector Head Howard Penney? He's not buying it -- literally or figuratively.


Bearish TREND = 97.22, broken. 




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[video] Keith's Macro Notebook 10/21: China, Germany, US10YR

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