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A New Idea

“Where is the knowledge we have lost in information?”

-T.S. Eliot

 

That’s the opening quote from the latest book I cracked open on an airplane this week – The Idea Factory, by Jon Gertner. I did 3 cities (Kansas City, Denver, and Minneapolis) in 3 days and came up with a new idea for the next crisis – prayer.

 

Whether you like it or not; whether you have realized that the Fed completely missed its opportunity to taper or not; whether you agree that the US government is getting dumber with market and economic information or not – newsflash:  it doesn’t matter.

 

All that matters today is what the next un-elected-central-planner-in-Chief-of-your-hard-earned-currency thinks. While hope is not a risk management process, many still hope Janet Yellen won’t be as “dovish” as Bernanke. If she walks and quacks like a dove, she’s not a hawk. She will redefine a new species of accountability ducking doves.

 

Back to the Global Macro Grind

 

In textbook Fed front-running form, the US stock market got a leak intraday yesterday as to what Yellen was going to say and ripped to another new all-time high. Gold and Bonds went up too. Everyone was a winner!

 

But who is everyone?

 

I think we all know the answer to that question. And this, sadly, is not a new idea in the world either. Marxist/Socialist political regimes have plundered The People across centuries. The power of information is no longer in entrepreneurial ideas, it’s in having insider knowledge on the next central plan.

 

Since Obama didn’t get the asymmetric risks embedded in Obamacare, there’s less than a 1% chance he will be in the area code of comprehending the long-term TAIL risks associated with the Bernanke Bond Bubble. But don’t worry about that, for now. Buy the damn bubble (#BTDB), and pray you aren’t the one without a chair when the music stops.

 

I’m not kidding, as my Canadian sniffer caught a downwind leak of the Yellen’s pending plan, I:

  1. Bought Bonds (TLT)
  2. Bought Gold (GLD)
  3. Bought Utilities (XLU)

In other words, I bought everything that I was short for the better part of the last year on my other 2013 New Idea that the Fed was going to finally get out of our way (and taper).

 

Do you think I’m crazy? I do.

 

In fact, I spread a full 1/3 of the Hedgeye Asset Allocation across 4 asset classes at 8% each. Crazy Eights!

  1. Commodities 8%
  2. Fixed Income 8%
  3. International Equities 8%
  4. US Equities 8%

With a little dovish leaky-peaky from the boys who worked for and/or hang with Dudley’s Goldman boys at the New York Fed (I believe they are all old and young boys, but don’t quote me on that), why not roll the bones? Spreading our bets around a casino where everyone wins takes down our “VAR” too!

 

People who don’t make money in down markets love to talk about “Black Swans”, but they have yet to make it a known known to The American People that this eventual bond market crash isn’t a TAIL risk at all. Our risk management process considers it a rising probability in 2014-2015.

 

And what are all the poor souls who are long the PIMCO “total return” fund going to do when they realize that it was lathered up with the a sub-asset “class” within the Bernanke Bond Bubble that people won’t be able to get out of (MBS)?

 

Or was the plan always that the New York Fed was going to buy the Bond Bull Lobby time to get out? Was the plan to change the goal posts every time non-linear economies surprise these central planners’ forecasts? Evidently, it was.

 

So pull up a seat. Meet your maker -Janet Yellen - the Mother of All Doves. She’ll outline why, despite the USA running +2.84% GDP in Q313, that her unaccountable definition of the economy is “far from potential.”

 

She’ll make up some new rules. She’ll look real serious about it too. Because when her MBS (mortgage backed security) bond bubble pops, this is going to be very serious. That’s why my best New Idea is recommending prayer.

 

Our immediate-term Risk Ranges are now:

 

UST 10yr Yield 2.66-2.82%

SPX 1

VIX 12.12-14.46
USD 80.43-81.39

Pound 1.59-1.61

Gold 1

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

A New Idea - Chart of the Day

 

A New Idea - Virtual Portfolio


$KSS Misses Big, McGough Nails It

Kohl's (KSS) shares are deep in the red this morning after a bad earnings miss. Hedgeye Retail Sector Head Brian McGough nailed this call. Check out video below. Go to the 3:10 mark for his take on Kohl's. 

 


investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

November 14, 2013

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BULLISH TRENDS

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BEARISH TRENDS

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THE M3: S'PORE FINES; PARADISE ENTERTAINMENT; GAMING TAXES; SEPT PACKAGE TOURS

THE MACAU METRO MONITOR, NOVEMBER 13, 2013

 

 

MBS, RWS FINED FOR BREACHES OF SOCIAL SAFEGUARD MEASURE Channel News Asia

The Casino Regulatory Authority of Singapore (CRA) has fined MBS S$337,500 and RWS S$190,000.  The authority said the fines are for breaches of social safeguard measures that it detected for the period of May 1, 2012 to December 31, 2012.

 

By law, the two companies need to keep certain groups of Singapore citizens and permanent residents from entering its casinos, including those without valid entry levies, those banned from entering the casinos by an exclusion order, and those under 21 years of age.

 

PARADISE ENTERTAINMENT SEES 35% SALES GROWTH ON CASINO BOOM Bloomberg

Paradise Entertainment, the supplier of gambling equipment in Macau, said it expects sales to grow at least 35% in 2014 as casino operators plan to buy more electronic table games to boost their profitability.  Casino companies are ordering more electronic equipment and replacing lower-yielding betting tables with new games that allow more players to bet simultaneously, Chairman and Managing Director Jay Chun said.  The new games would aid revenue next year when no new casino is scheduled to open, added Chun, who expects “strong replacement and new orders.”  Paradise expects sales for its slot machines to rise above 40% next year.

 

Paradise Entertainment's biggest clients include Sands China, SJM Holdings and MPEL.  Paradise Entertainment also manages the Kam Pek Paradise casino under the license of SJM.  Located next to Casino Lisboa, Kam Pek Paradise casino has 37 gaming tables, more than 900 live multi-game machines and over 300 slot machines.  It aims to operate two more casinos in the Chinese city, Chun said, without disclosing details.

 

The company currently accounts for 20% of the slot machine market in Macau and 60% of the electronic live table games market.

 

GOVT CAUTIOUS ON 2014 SPECIAL GAMING TAX TAKINGS Macau Business

Macau government expects revenue of MOP115.5 billion (US$14.4 billion) from the special gaming tax in 2014.  The sum is 25% more than budgeted for 2013.  The government tends to make conservative predictions about the growth of the gaming industry.  Its revenue from the special gaming tax this year will probably be greater than the amount it expects to get next year.  The proposed budget for next year envisages total revenue of MOP153.6 billion, 14% more than budgeted for this year, and spending of MOP77.6 billion, 6% less.

 

PACKAGE TOURS AND HOTEL OCCUPANCY RATE FOR SEPTEMBER 2013 DSEC

Visitor arrivals in package tour surged by 26.0% YoY to 944,188 in September 2013.  Visitors in package tour mostly came from Mainland China (759,272), with 272,532 from Guangdong Province, followed by Taiwan (56,789); Hong Kong (35,650); and the Republic of Korea (35,610).

 

There were 98 hotels and guesthouses operating at the end of September 2013, providing 27,807 guest rooms, up by 6.7% YoY.  The average length of stay of guests held stable as September 2012, at 1.3 nights.


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – November 14, 2013


As we look at today's setup for the S&P 500, the range is 20 points or 0.90% downside to 1766 and 0.22% upside to 1786.                                                   

                                                                            

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: 2.43 from 2.40
  • VIX closed at 12.52 1 day percent change of -2.34%

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: Init. Jobless Claims, Nov. 9, est. 330k (prior 336k)
  • 8:30am: Nonfarm Productivity, 3Q, est. 2.2% (prior 2.3%)
  • 8:30am: Trade Balance, Sept., est. -$39.0b (prior -$38.8b)
  • 9am: Fed’s Plosser speaks on monetary policy in Washington
  • 9:45am: Bloomberg Consumer Comfort (prior -37.9)
  • 10am: Senate Banking Committee meets on Yellen nomination
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural gas storage
  • 11am: DOE inventories
  • 11am: Fed buys $2.75b-$3.5b in 2020-2023 sector
  • 12:45pm: Bundesbank’s Nagel speaks in Wart, Germany
  • 1pm: U.S. sells $16b 30Y bonds
  • 1:45pm: BoE’s Miles speaks in Dallas

GOVERNMENT:

    • 9:30am: House Energy and Commerce Cmte meets on EPA’s greenhouse-gas standards for new power plants
    • 10am: House Science Cmte hears from EPA Administrator Gina McCarthy on transparency, accountability
    • 10am: House Education and Workforce Cmte holds hearing on effects of health-care law on schools
    • 3:30pm: President Obama speaks on economy in Cleveland

WHAT TO WATCH:

  • Yellen says U.S. economy must improve before Fed tapers QE
  • Cisco 2Q adj. EPS, revenue ests. miss analyst estimates
  • Cisco suppliers, peers fall post-mkt after 2Q view misses ests.
  • Boeing’s largest union rejects swapping pensions for 777X
  • Facebook said to offer $3b for Snapchat to attract teens
  • Pershing, Berkshire among those to file as 13F deadline approaches
  • Samsung said to plan Galaxy smartphone with wraparound display
  • Lilly triples investment in growing mkt for diabetes products
  • Berkowitz seeks to acquire two insurers from Fannie, Freddie
  • GM CEO Akerson may step down as soon as next yr, Reuters says
  • Apollo, Lee said to explore Capella Healthcare buyout: Reuters
  • Redfin raises $50m in funding led by Tiger, T. Rowe Price
  • HP, Google suspend Chromebook 11 sales after overheating reports
  • HUD said to fail in bid to sell $450m of FHA mortgages
  • Houghton Mifflin raises $219m pricing IPO below range
  • Europe recovery wanes as Germany slows, French GDP falls
  • British retail sales unexpectedly declined 0.7% in Oct.
  • Japan slowdown flashes warning to Abe as reforms await

AM EARNS:

    • B2Gold (BTO CN) 6:30am, $0.03
    • CGI Group (GIB/A CN) 6:30am, C$0.61
    • Finning Intl (FTT CN) 8am, C$0.52
    • Helmerich & Payne (HP) 6am, $1.40
    • Kohl’s (KSS) 7am, $0.86 - Preview
    • Manchester United (MANU) 7am, $0.01
    • Paladin Labs (PLB CN) 6:30am, C$0.64
    • Sally Beauty (SBH) 7am, $0.39
    • TransDigm Group (TDG) 7am, $1.71
    • Tyco Intl (TYC) 6am, $0.52 - Preview
    • Viacom (VIAB) 6:45am, $1.44 - Preview
    • Wal-Mart Stores (WMT) 7am, $1.13 - Preview

PM EARNS:

    • Agilent Technologies (A) 4:05pm, $0.76
    • Algonquin Power & Utilities (AQN CN) Aft-mkt, C$0.02
    • Applied Materials (AMAT) 4pm, $0.18
    • Boardwalk REIT (BEI-U CN) 4:10pm, C$0.82
    • Matthews Intl (MATW) 4:10pm, $0.74
    • Nordstrom (JWN) 4:04pm, $0.67 - Preview
    • Power of Canada (POW CN) 12:05pm, C$0.64
    • Youku Tudou (YOKU) 5pm, $(0.20)

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Gold Seen Flowing East as Refiners Recast Bars for Asian Buyers
  • Starbucks Costs Retreat in Coffee Bear Market Slump: Commodities
  • Commodities Revenue at Top 10 Banks Seen Dropping 14% This Year
  • IEA Sees Libya, Iraq as Growing Risks to Oil Market Balance
  • China Gold Jewelry Demand Jumps as WGC Restates 1,000-Ton Target
  • WTI Crude’s Discount to Brent Widest Since April as Supply Rises
  • Copper Swings Between Advances, Declines on Europe Data, Yellen
  • Sumitomo Metal’s Taganito Project Ships First Nickel to Japan
  • Mistry Sees Steady Palm Oil Prices After Output Trails Estimates
  • Robusta Coffee Falls as Vietnam Harvest Advances; Sugar Retreats
  • Oil Producers Overtaking Refiners on Flood of U.S. Shale: Energy
  • India’s Gold Imports Slump in Third Quarter to Lowest Since 2009
  • Fortescue Pays Bonds Early in Rising Star Push: Australia Credit
  • Gold Demand Fell 21% Last Quarter as Investors Sold ETP Holdings

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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