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A BETTER WEEK IN MACAU

Macau gaming revenues were much better in the 2nd week of December than the first.  Daily table revs averaged HK$1,033 million, up 33% over the comparable period last year, and 9% better than the 1st 9 days of this December.  We believe both volumes and hold percentage contributed to the strength.  We had already accounted for the improving results, thus our full month GGR forecast remains unchanged at YoY growth of +10-16%.

 

As expected, market shares have normalized from week 1 although LVS now shows the biggest delta over recent trend.  Wynn and MGM are also above trend thus far in December.  WYNN and LVS remain our favorite Macau stocks.

 

A BETTER WEEK IN MACAU - m1

 

A BETTER WEEK IN MACAU - m2


What's New Today in Retail (12/16)

Takeaway: Ullman named Chair of Dallas Fed Board. Sign of limited term at JCP? H&M crushes – everyone. AMZN goes after COST Sam’s. ADDDY M DEST BRBY

COMPANY NEWS

 

ADS, SPD - Mike Ashley could buy 5% stake in Adidas after it stopped Sports Direct from selling Chelsea kit

(http://www.thisismoney.co.uk/money/news/article-2524260/Mike-Ashley-buy-5-stake-Adidas.html?ICO=most_read_module)

 

  • "Mike Ashley, billionaire founder of Sports Direct, could buy a 5 per cent stake in Adidas in retaliation for the sportswear manufacturer’s decision not to provide his stores with replica Chelsea Football Club kits next season, according to a report."
  • "Sales of Chelsea products are worth up to £10million a year to Sports Direct so Adidas’s move prompted a sharp fall in the share price."

 

Takeaway: The list of people and companies Mike Ashley has crossed in his storied career is very long. He traditionally goes for the jugular -- even when it's not necessary.  Not a guy you want to be a major shareholder of your company, Adidas.

 

HMB - Sales development in November 2013 and Fourth Quarter 2013

(http://about.hm.com/en/news/newsroom/news.html/en/financial-reports/2013/12/1499889.html?categoryPath=hm:filters/categories/corporate)

 

  • "The H&M Group total sales including VAT increased by 21 percent in local currencies in November. Sales in comparable units increased by 10 percent. The strong sales development in November has been positively affected by calendar effects of approximately 3 per cent and by favourable weather."
  • "In the fourth quarter of 2013, i.e. 1 September to 30 November, sales including VAT increased by 13 percent in local currencies compared to the corresponding quarter last year. Sales in comparable units increased by 3 percent in the fourth quarter."

 

Takeaway: Weather or no weather, the reality is that H&M is annihilating almost every other apparel retailer in the world. We wonder if Lululemon cares that H&M is coming out with a Yoga line?

 

M, DEST - Destination Maternity's Exclusive Deal with Macy's

(http://www.wwd.com/fashion-news/fashion-scoops/new-deal-7314480)

 

  • "Destination Maternity Corp. will become the exclusive provider of maternity and nursing apparel for macys.com, beginning late January."
  • "Destination Maternity operates leased departments in over 600 Macy’s locations, which typically carry a combination of Motherhood Maternity, A Pea in the Pod, A Pea in the Pod Collection and Jessica Simpson Maternity branded merchandise."

 

Takeaway: This is much more of a  win for DEST than for M. Will this make more pregnant women shop at Macy's? Probably not, The reality is that there will be a better selection at DEST's own web site. But for the women shopping Macy's anyway, and are looking for maternity clothes, on the margin it will obviously benefit DEST.  What we don't know is the extent to which Macy's will stipulate that DEST has to change/minimize the offering on its own site in order to win this deal.

 

JCP - Mike Ullman Named Chairman of Dallas Federal Reserve Bank

(http://www.wwd.com/fashion-news/fashion-scoops/adding-a-chair-7314448)

 

  • "The Federal Reserve Board on Friday designated the chairs at the 12 Federal Reserve Banks for 2014. Myron E. 'Mike' Ullman 3rd, who is chief executive officer of J.C. Penney Co. Inc., was named chairman of the Dallas Federal Reserve Bank."
  • "Ullman was appointed to the Dallas Fed Board in 2008, and was deputy chairman in 2011."

 

Takeaway: Huh? This one is a head scratcher. Apparently the Federal Reserve Board does not care much about a) the stock price of the company for an executive that gets such a prestigious appointment, or b) the fact that the person has a 100 hr/week job and can't (or shouldn't) offer up the time that this appointment arguably needs. One interesting point is that perhaps Ullman wouldn't have accepted this appointment if he planned on being at JCP for too much longer.

 

AMZN - Amazon said to launch Pantry to take on Costco, Sam's

(http://www.usatoday.com/story/tech/2013/12/12/amazon-pantry/4001707/?source=email_rt_mc_body&app=n)

 

  • Amazon.com is working on a new business called Pantry that will help it expand further into the giant consumer package goods market and take on warehouse club stores Costco and Wal-Mart's Sam's Club, according to three people familiar with the effort. Pantry...is currently set to launch in 2014, the people said on condition of anonymity. They did not want to be identified because Amazon's plans are still private."
  • "The service will be targeted at existing members of Amazon's Prime shipping program. It will launch with about 2,000 products typically found in the center of grocery stores, such as cleaning supplies, kitchen paper rolls, canned goods like pet food, dry grocery items like cereal and some beverages."
  • "Amazon will let Prime shoppers put as many of these items into a set sized box, up to a specific weight limit. If the products fit and they don't exceed the maximum weight, Amazon will ship the box for a small fee."

 

Takeaway: This was a form of retail destruction waiting to happen. We have no doubt that AMZN will succeed in this realm -- our only question is whether it can do so profitably. If you think about it, the model is very similar to Costco. Pay an up front membership fee (in AMZN's case, it's Prime) for the right to buy goods just a few margins points above cost.  Our only concern is how long AMZN will be comfortable operating at a loss while it establishes a foothold. Our bet is anywhere between 3-5 years (about the time when they plan to have drones delivering their packages -- yes, it's still painful to write that).

 

AMZN - Amazon Doubles Ecommerce Webstore Fees Next Year

(http://www.ecommercebytes.com/cab/cab/abn/y13/m12/i13/s02)

 

  • "...Amazon is significantly raising the cost of operating a Webstore next year, perhaps a sign that the company is more confident of the offering."
  • "The monthly fee will double for all merchants, and those using Amazon Webstore who also sell products through the Sell on Amazon program will pay double the current transaction fee as well, bringing it in line with Webstore-only merchant transaction fees."
  • "The new fees go into effect on February 4, 2014."

 

Takeaway: The merchants using Webstore have literally no recourse here. What are they going to do -- change up their outbound logistics and find a partner that might be as efficient as AMZN?  Their only hope is if Alibaba gets aggressive in wanting to steal away the business. Alibaba is much better at branding than it's US competitor. But unfortunately, it still lacks the consumer penetration.

 

FOSL, SHLD - NASDAQ OMX Group, Inc. : Annual Changes to the NASDAQ-100 Index

(http://www.4-traders.com/NASDAQ-OMX-GROUP-INC-10173/news/NASDAQ-OMX-Group-Inc--Annual-Changes-to-the-NASDAQ-100-Index-17614539/)

 

  • "As a result of the re-ranking, the following five securities will be removed from the Index: Fossil Group, Inc. (Nasdaq:FOSL), Microchip Technology Incorporated (Nasdaq:MCHP), Nuance Communications, Inc. (Nasdaq:NUAN), Sears Holdings Corporation (Nasdaq:SHLD) and DENTSPLY International Inc. (Nasdaq:XRAY)."

 

Takeaway: Anyone surprised?

 

BRBY - Burberry Unveils Beauty Box Concept

(http://www.wwd.com/beauty-industry-news/retailing/burberry-unveils-beauty-box-concept-7314056)

 

  • "Burberry Beauty Box, a new retail concept that sells the brand’s makeup, fragrance and accessories, has landed in Covent Garden here."
  • "The company plans to roll out Beauty Box to more locations. It is the first retail concept to launch after Burberry took its beauty business in-house, acquiring its license rights back from Inter Parfums SA at the end of 2012."

 

What's New Today in Retail (12/16) - chart1 12 16

 

Takeaway: Definitely one to watch. Whenever Burberry does anything new we take notice. The only knock on the concept is that consumers in this space want variety in brands as well as products. That's why the cosmetics counters at department stores are often the most profitable parts of the store. We question whether Burberry can scale this concept profitably as it it intends.

 

AMZN, WMT, AAPL - Amazon is top US retailer on Pinterest this Christmas shopping season

(http://www.itnewsonline.com/showrwstory.php?storyid=12359)

 

  • "Amazon.com is the most popular US online retail site when it comes to having web content shared on Pinterest, the pin-board style social network, in the run up to Christmas 2013. In a study of ten top US retail sites[1], images and pages from Amazon.com are being shared most frequently on Pinterest, with Walmart and Apple taking second and third positions respectively."
  • "Content from Amazon.com currently generates the highest average number of pins (shares) per week[2] (16,360) on Pinterest, followed by Walmart.com (5,778) with Apple.com (3,871) taking third place. The findings come from a study by digital marketing software and services specialist, Searchmetrics."
  1. amazon.com, 16,360 pins per week, 1,740,314 total pins, 5,637 followers
  2. walmart.com, 5,778 pins per week, 529,992 total pins, 33,337 followers
  3. apple.com, 3,871 pins per week, 1,111,959 total pins, 1,597 followers
  4. qvc.com, 325 pins per week, 54,935 total pins, 42,683 followers
  5. staples.com, 307 pins per week, 17,252 total pins, 2,025 followers
  6. bestbuy.com, 281 pins per week, 60,630 total pins, 4,047 followers
  7. netflix.com, 202 pins per week, 7,802 total pins, 445 followers
  8. sears.com, 29 pins per week, 1,511 total pins, 190 followers
  9. officedepot.com, 27 pins per week, 2,635 total pins, 1,994 followers
  10. dell.com, 9 pins per week, 2,715 total pins, 1,160 followers

 

CA - Carrefour to Create Shopping Mall Group

(http://www.wwd.com/retail-news/financial/carrefour-to-create-shopping-mall-group-7315248)

 

  • "Carrefour said it had signed a memorandum of understanding with real estate investment firm Klépierre to buy 127 shopping malls in France, Spain and Italy for a total of 2 billion euros, or $2.7 billion at current exchange."
  • "The world’s second-largest retailer behind Wal-Mart Stores Inc. said it planned to create a company that will encompass a total of 172 shopping malls adjoining its hypermarkets in Europe."

 

INDUSTRY NEWS

 

Visa, MasterCard $5.7 Billion Swipe Fee Accord Approved

(http://www.bloomberg.com/news/2013-12-13/visa-mastercard-swipe-fee-accord-approved-by-u-s-judge.html)

 

  • Visa Inc. and MasterCard Inc. won approval for a $5.7 billion settlement that ended years of litigation with U.S. merchants over allegations that credit-card swipe fees are improperly fixed.
  • "Dozens of large retailers, including Wal-Mart Stores Inc., Amazon.com Inc. and Target Corp., as well as major airlines, health insurers and other consumer businesses criticized the deal. Some said the amount should have been higher and that a legal release preventing future lawsuits was written too broadly."
  • "Shortly after Gleeson issued his order, retailers and trade associations that opposed the deal including Wal-Mart, Amazon.com, 7-Eleven Inc., Barnes & Noble Inc. filed notices that they will appeal the decision."

 

British high street footfall drops 3.4% before Christmas retail rush

(http://www.theguardian.com/business/2013/dec/16/christmas-british-high-street-footfall-drops)

 

  • "Britain's high streets have suffered their biggest drop in shopper numbers for more than a year, according to a report that indicates a slow start to the festive retail season."
  • "The British Retail Consortium's latest numbers also showed a drop in footfall for out-of-town shops and for shopping centres, echoing sales data that has pointed to a tentative mood among Christmas shoppers."
  • "The BRC's figures, supplied by Springboard, revealed a 3.4% annual drop in footfall for high streets from September to November, the sharpest fall since August 2012."
  • "For November alone, footfall was down 2.9% on a year ago across all shop types. This matched October's drop and was largely caused by a 4.2% fall in high-street shoppers."

 


German PMIs Strong!

This morning we received preliminary December Manufacturing and Services PMIs for Germany, France, and the Eurozone aggregate. The data showed broad improvement in Germany (services slightly lighter) and the Eurozone month-over-month, while France declined, which is in-line with our Q4 macro themes #EuroBulls and #GrowthAccelerating in the UK and Germany:

  • Germany PMI Manufacturing 54.2 DEC Prelim (exp. 53) vs 52.7 NOV
  • Germany PMI Services 54 DEC Prelim (exp. 55.3) vs 55.7 NOV
  • France PMI Manufacturing 47.1 DEC Prelim (exp. 49) vs 48.4 NOV
  • France PMI Services 47.4 DEC Prelim (exp. 48.7) vs 48 NOV
  • Eurozone PMI Manufacturing 52.7 DEC Prelim (exp. 51.9) vs 51.6 NOV
  • Eurozone PMI Services 51 DEC Prelim (exp. 51.5) vs 51.2 NOV
  • Eurozone PMI Composite 52.1 DEC Prelim (exp 51.9) vs 51.7 NOV

German PMIs Strong! - a. pmi

 

 

For more on our global macro outlook, please see my colleague Darius Dale’s recent note “#GrowthSlowing (Lots of Charts)”.

 

Domestically in Germany, over the weekend there were further coalition agreements between the center-left Social Democrats and Merkel's conservative party, including key appointments. Merkel could be official confirmed as Chancellor as soon as tomorrow, nearly three months after the election.

  • Wolfgang Schaeuble will maintain his post as Finance Minister (expected)
  • Ursula von der Leyen named Defense Minister – formerly the Labor Minister. We think Merkel may be tapping her as the CDU’s next Chancellor candidate with this appointment
  • SPD Chairman Sigmar Gabriel head of newly configured Economy Ministry

DAX Levels

  • We continue to like German equities via the etf EWG. The DAX held our quantitative intermediate term TREND line of support at 8,876 last week. We’ll be watching for evidence of strength (and a buying opportunity) via an improving positive correlation between the EUR/USD and the DAX.

German PMIs Strong! - eur usd

 

 

EUR/USD Levels

  • Trading above its quantitative TRADE, TREND, and TAIL levels = Bullish breakout. etf (FXE)
  • Supported by Fed’s expectation to push out taper = Dollar bearish
  • Supported by positive data from Eurozone (for more see a recent note “Just Charts - #EuroBulls”)

German PMIs Strong! - a. Eur Levels

 

Matthew Hedrick
Associate 


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MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR

Takeaway: The latest week of data showed a continuation of the prior week's cooling trend.

Risk measures remain benign overall, hence the title of this week's note. Rising commodity prices are one of the few negative developments. In the last month commodity prices have risen 2.1% with oil now playing a more notable role in that increase. That being said, we continue to see few red flags across the risk landscape. 

 

Financial Risk Monitor Summary

 • Short-term(WoW): Positive / 4 of 13 improved / 1 out of 13 worsened / 8 of 13 unchanged

 • Intermediate-term(WoW): Positive / 6 of 13 improved / 3 out of 13 worsened / 4 of 13 unchanged

 • Long-term(WoW): Positive / 4 of 13 improved / 2 out of 13 worsened / 7 of 13 unchanged

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 15

 

1. U.S. Financial CDS -  Swaps were generally tighter for US Financials last week, but widened significantly at bond insurers MBIA and Assured Guaranty. Mortgage Insurers MTG & RDN were tighter on the week with Radian posting the largest one week improvement at -19 bps.

 

Tightened the most WoW: RDN, COF, PRU

Widened the most WoW: MBI, AGO, CB

Tightened the most WoW: RDN, WFC, TRV

Widened the most MoM: AGO, MBI, XL

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 1

 

2. European Financial CDS - European banks resumed their winning ways last week, posting another sharp improvement. Spanish and Italian bank swaps led the charge lower. On a month-over-month basis, the average EU bank is trading 17 bps tighter (9%) tighter.

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 2

 

3. Asian Financial CDS - Indian banks remain the yo-yo of international banking systems. This week swaps were down sharply across the Indian banking complex. Chinese bank swaps have been trending slowly tighter. Japanese bank swaps were notably tighter on the week.

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 17

 

4. Sovereign CDS – Sovereign swaps were tighter throughout much of Europe last week. Italy and Spain saw sovereign swaps tighten 17 and 15 bps, respectively. Elsewhere in the world, swaps were little changed.

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 18

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 3

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 4

 

5. High Yield (YTM) Monitor – High Yield rates rose 1.4 bps last week, ending the week at 6.03% versus 6.02% the prior week.

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 5

 

6. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 2.0 points last week, ending at 1832.

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 6

 

7. TED Spread Monitor – The TED spread fell 0.2 basis points last week, ending the week at 18.1 bps this week versus last week’s print of 18.3 bps.

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 7

 

8. CRB Commodity Price Index – The CRB index rose 0.6%, ending the week at 280 versus 278 the prior week. As compared with the prior month, commodity prices have increased 2.1% We generally regard changes in commodity prices on the margin as having meaningful consumption implications.

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 8

 

9. Euribor-OIS Spread – The Euribor-OIS spread widened by 1 basis point to 10 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. 

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 9

 

10. Chinese Interbank Rate (Shifon Index) –  The Shifon Index fell 24 basis points last week, ending the week at 3.46% versus last week’s print of 3.7%. The Shifon Index measures banks’ overnight lending rates to one another, a gauge of systemic stress in the Chinese banking system.

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 10

 

11. Markit MCDX Index Monitor – Last week spreads widened 7 bps, ending the week at 90 bps versus 83 bps the prior week. The Markit MCDX is a measure of municipal credit default swaps. We believe this index is a useful indicator of pressure in state and local governments. Markit publishes index values daily on six 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. We track the 16-V1.

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 11

 

12. Chinese Steel – Steel prices in China rose 0.5% last week, or 16 yuan/ton, to 3,568 yuan/ton. We use Chinese steel rebar prices to gauge Chinese construction activity, and, by extension, the health of the Chinese economy.

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 12

 

13. 2-10 Spread – Last week the 2-10 spread tightened 1 basis point to 254 bps. We track the 2-10 spread as an indicator of bank margin pressure.

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 13

 

14. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 0.8% upside to TRADE resistance and 1.2% downside to TRADE support.

 

MONDAY MORNING RISK MONITOR: QUIET HEADING INTO THE NEW YEAR - 14

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 


"Mortgage Mayhem" - Larry Platt Will Discuss the Implications of Coming 2014 Rule Changes

"Mortgage Mayhem" - Larry Platt Will Discuss the Implications of Coming 2014 Rule Changes - Platt

 

Mortgage Mayhem?

Please join the Hedgeye Financials Team, Josh Steiner and Jonathan Casteleyn for a candid conversation with industry authority Larry Platt on the Implications of Forthcoming Rule Changes in 2014.

 

Tomorrow, December 17th at 1:00 pm EST we will host our next installment in the Hedgeye Financials Thought Leader Roundtable Series. Our guest will be mortgage industry authority Larry Platt from the law firm of K&L Gates.  

 

 

KEY TOPICS WILL INCLUDE:

  1. From where will the loans come? By virtually all accounts, limiting lending to QM lending will freeze out a large swath of the next generation of home buyers.  
    • Who wants to invest in an industry where the volume just isn't there?  What is the likelihood that lending will occur outside of the QM/QRM box?
  2. Is secured lending dead? Have the dramatic increases in servicing requirements and the virtual infeasibility of foreclosing on a delinquent borrower converted a secured loan to an unsecured loan and is the typical interest rate on a mortgage loan with an unenforceable mortgage too low to take the risk?  
    • Note that there now is a federal cause of action to stop a foreclosure based on an alleged violation of the ability to repay requirements, loan originator comp restriction and certain of the new servicing regs. Do servicers get paid enough to handle default servicing? What impact has this had on the servicing market?
  3. Is it too dangerous to do business with the federal government?  For anybody who thinks non-QM lending is risky, some believe that making and servicing FHA-insured loans is probably the riskiest thing out there these days.   
    • Imprecise rules with uneven application and political enforcement is a recipe for a financial bloodbath.  Many of the private investors believe that FHA lending and servicing is simply too risky.   
    • Unlike the risk of expropriation from third world countries, one can't buy political risk insurance to protect against the risks.  And to the extent that the GSEs are considered the government, the risk intensifies.
  4. Will the CFPB prevent you from making money? Some might want to applaud the relative even-handedness of the CFPB in both its rulemaking and supervisory efforts.  As we start to move more down the enforcement path, should we be so optimistic?   
    • This is particularly true with respect to the broad remedies available to the CFPB, including (i)  in certain circumstances its statutory rights to go upstream against owners and to assert aiding and abetting claims against third parties and (ii) virtually unfettered broad authority to bring UDAP claims.  Will it be balanced in its approach?
  5. When will the private securitization market return?  Where are we on GSE reform?  Hard to make or purchase loans if there is no ultimate take out investor?  
    • Even the most optimistic originators, who will build to anybody's specifications, can't or won't make loans that they ultimately can't sell.  Who wants to make a loan at par that it only can sell at a discount from par the next day?

 

ABOUT LARRY PLATT:

Larry Platt is a partner at K&L Gates LLP and concentrates his legal practice in representing purchasers and sellers of mortgage companies and mortgage-related assets, counseling clients on federal and state consumer credit laws, defending clients in government enforcement actions, and representing clients in governmental public policy matters. From 2007 to 2013, Chambers USA, an independent and research-based guide to the legal profession, ranked K&L Gates as having one of the leading financial services practices in the country. Most recently, the group earned a national, "Band 1" ranking for "Financial Services Regulation: Consumer Finance (Compliance & Litigation)." Mr. Platt is consistently ranked by Chambers USA and in 2013, he was listed under Financial Services Regulation: Consumer Finance (Compliance) (Star Individuals) and Financial Services Regulation: Consumer Finance (Litigation) (Band 1).  Mr. Platt was listed in the 2012, 2013 and 2014 Best Lawyers in America guides in the area of banking and finance law.

 

Representative Work: 

  • Bank of America: Sale of over $400 billion in mortgage servicing rights.
  • MetLife Bank: Sale of approximately $70 billion in mortgage servicing rights.
  • LaSalle Bank: Sale of capital stock of ABN AMRO Mortgage Group, Inc., including $240 billon in mortgage servicing rights.
  • Washington Mutual Bank: Sale of $140 billion in mortgage servicing rights to Wells Fargo Bank, N.A.
  • Barclays Bank PLC: Purchase of mortgage servicing business of HomEq Servicing Corporation, including $40 billion in servicing rights.
  • TD Banknorth, N.A.: Negotiation of "private label," origination outsource arrangement with PHH Mortgage Corporation.
  • KB Home: Sale of substantially all of the assets of mortgage company subsidiary to Countrywide Home Loans, Inc., along with execution of long term joint venture for future origination of mortgage loans.
  • GMAC Mortgage Corporation: Purchase of substantially all of the assets of a wholesale mortgage lender, Pacific Republic Mortgage Corporation.
  • The Principal Financial Group, Inc.: Sale of capital stock of Principal Residential Mortgage, Inc.
  • Merrill Lynch Mortgage Capital: Purchase of capital stock of loan servicer, Wilshire Credit Corporation.
  • Wells Fargo Home Mortgage Corporation: Purchase of servicing platform of GE Capital Mortgage Services, Inc., with a separate subserving platform, and purchase of approximately $35 billion in servicing rights from First Union Mortgage Corporation.

 

ABOUT K&L GATES:
K&L Gates LLP comprises more than 2,000 lawyers who practice in 48 offices located on five continents.  For the third year, K&L Gates was named among top two firms for first-tier rankings in the annual U.S. News-Best Lawyers "Best Law Firms" survey, In 2012, Corporate Board Member magazine, in association with FTI Consulting, Inc., ranked K&L Gates as one of the top 25 law firms in its annual list of "America's Best Corporate Law Firms." The 2013 BTI Consulting Group survey of corporate counsel included the firm in its "BTI Client Service 30," an elite ranking that recognizes the leading law firms in driving superior client relationships according to general counsel.

 

 

CONTACT

Please email  to learn more about this call. Attendance on the call is limited. Please note if you are not a current subscriber to our Financials research there will be a fee associated with this call.         


What's That Smell?

Client Talking Points

JAPAN

The problem with Bernanke's Buck Burning (for Japan) is that equals Yen up. And Yen up means Nikkei down. Witness Japanese stocks down 1.6% overnight after snapping its immediate-term TRADE line of @Hedgeye 15,242 support. The Net short (futures/options) position in Yen is -129,614 contracts. Currencies have consequences.

GERMANY

After another rock solid economic data point (German PMI for December rose to 54.2 versus 52.7 in November), they are back buying the DAX after it held @Hedgeye TREND support of 8876 last week. Euro up, DAX up was losing its correlation, so let’s watch this today.

EUR/USD

After a modest correction, the Euro continues to power forward again this morning. That makes sense – on the margin Q4 German data is better than the US data (still accelerating versus US #GrowthSlowing). Oh yeah, one other thing... they don’t have Bernanke or Janet Yellen.

Asset Allocation

CASH 44% US EQUITIES 8%
INTL EQUITIES 8% COMMODITIES 8%
FIXED INCOME 8% INTL CURRENCIES 24%

Top Long Ideas

Company Ticker Sector Duration
FXB

Our bullish call on the British Pound was borne out of our Q4 Macro themes call. We believe the health of a nation’s economy is reflected in its currency. We remain bullish on the regime change at the BOE, replacing Governor Mervyn King with Mark Carney. In its October meeting, the Bank of England voted unanimously (9-0) to keep rates on hold and the asset purchase program unchanged.  If we look at the GBP/USD cross, we believe the UK’s hawkish monetary and fiscal policy should appreciate the GBP, as Bernanke/Yellen continue to burn the USD via delaying the call to taper.

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.

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

WSJ says market "not in a bubble" - got it

@KeithMcCullough

QUOTE OF THE DAY

"Logic will get you from A to B. Imagination will take you everywhere." - Albert Einstein

STAT OF THE DAY

Investors are dumping gold-backed exchange-traded products at the fastest pace since the securities were created a decade ago, mirroring the steepest price drop in 32 years. Holdings in the 14 biggest ETPs plunged 31% to 1,813.3 metric tons since the start of January, the first annual decrease since the funds started trading in 2003. (Bloomberg)


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