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INITIAL CLAIMS: CHUGGING ALONG

Takeaway: Last week's labor market soft patch proved short-lived as this week's data has resumed its pace of steady improvement.

Editor's note: This is an excerpt from Hedgeye Risk Management research. For more information and to learn how to join the Hedgeye Revolution click here.

 

INITIAL CLAIMS: CHUGGING ALONG - jobs3

2013 in Review

With all but one week of 2013 now in the books, the labor data is showing a non-seasonally adjusted year-over-year improvement of 8.2% on a full-year basis. For comparison, 2012 was better by 8.1% versus 2011. This morning's data point showed a 9.0% improvement y/y while the rolling 4-wk average is better by 10.2%. By most accounts the labor data remains strong and shows ongoing improvement. Last week we had flagged a speed bump in the data, but this morning's numbers suggest that a speed bump may have been all that it was.

 

We continue to expect that the strengthening labor market data will exert ongoing upward pressure on long-term rates. This morning the 10-year treasury yield is at 2.99%, just one basis point away from its September 5 high. We've demonstrated how bank stocks are very positively correlated to 10-year yields while homebuilders are very negatively correlated. For more on that, see our publication from 11/22/13 entitled #Rates-Rising: A Current Look at Rate Sensitivity Across Financials. (Ping sales@hedgeye.com for access).

The Data

Prior to revision, initial jobless claims fell 41k to 338k from 379k week-over-week (WoW), as the prior week's number was revised up by 1k to 380k.

 

The headline (unrevised) number shows claims were lower by 42k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 4.25k WoW to 346.75k.

 

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -10.2% lower YoY, which is a sequential improvement versus the previous week's YoY change of -7.7%.

 

INITIAL CLAIMS: CHUGGING ALONG - stein2

 

INITIAL CLAIMS: CHUGGING ALONG - stein1


Daily Trading Ranges, Unlocked

This note was originally published December 26, 2013 at 08:07 in Daily Trading Ranges

 

Editor's note: This is a complimentary look at Hedgeye's Daily Trading Ranges product. For more information and to subscribe click here.

 

Daily Trading Ranges, Unlocked - dtr1

BULLISH TRENDS

Daily Trading Ranges, Unlocked - 2A

Daily Trading Ranges, Unlocked - 3A

Daily Trading Ranges, Unlocked - 4A

Daily Trading Ranges, Unlocked - 5A

Daily Trading Ranges, Unlocked - 6A

Daily Trading Ranges, Unlocked - 7A

Daily Trading Ranges, Unlocked - Slide8

Daily Trading Ranges, Unlocked - Slide9

Daily Trading Ranges, Unlocked - Slide10

 

BEARISH TRENDS

Daily Trading Ranges, Unlocked - Slide11
Daily Trading Ranges, Unlocked - Slide12

 


All Time (Is a Long Time)

Client Talking Points

U.S.

There were some epic shorts in 2013 (Gold and Bonds) - just not the ones consensus pundits called for. If only the 2013 perma bears could figure out what happened! Bottom line is you were either long growth (US stocks) and short fear (Gold, Bonds, VIX) or you were not. Meanwhile, the S&P 500 is notching a new all-time high today at 1838. As we like to say here at Hedgeye, all-time is a long time.

SPX

We're going to continue to hammer on the importance of getting style factors and sector allocations correct in 2014. Simply avoiding the most underperforming sectors would have been a boon for anyone’s portfolio in 2013. Of the 9 major U.S. equity stock market sectors, the outperformance between the top performing sector of Consumer Staples and the worst performing Sector of Utilities was more than 2,000 basis points! Simply getting the allocation to those two sectors correctly weighted, would have made any equity manager’s year.

Asset Allocation

CASH 45% US EQUITIES 15%
INTL EQUITIES 15% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 25%

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

TREASURIES: Bond Yields continue to rip Bond Bulls a new one #RatesRising @KeithMcCullough

QUOTE OF THE DAY

"Playing it safe is the riskiest choice we can ever make."

-Sarah Ban Breathnach

STAT OF THE DAY

The top five performing global equity markets for the year were as follows:

  • Venezuela +478%
  • Dubai +102%
  • Argentina +88%
  • Abu Dhabi +58%
  • Japan +56%


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INITIAL CLAIMS: CHUGGING ALONG NICELY HEADING INTO 2014

Takeaway: Last week's labor market soft patch proved short-lived as this week's data has resumed its pace of steady improvement.

2013 in Review

With all but one week of 2013 now in the books the labor data is showing a non-seasonally adjusted year-over-year improvement of 8.2% on a full-year basis. For comparison, 2012 was better by 8.1% versus 2011. This morning's data point showed a 9.0% improvement y/y while the rolling 4-wk average is better by 10.2%. By most accounts the labor data remains strong and shows ongoing improvement. Last week we had flagged a speed bump in the data, but this morning's numbers suggest that a speed bump may have been all that it was.

 

We continue to expect that the strengthening labor market data will exert ongoing upward pressure on long-term rates. This morning the 10-year treasury yield is at 2.99%, just one basis point away from its September 5 high. We've demonstrated how bank stocks are very positively correlated to 10-year yields while homebuilders are very negatively correlated. For more on that, see our publication from 11/22/13 entitled #Rates-Rising: A Current Look at Rate Sensitivity Across Financials.

 

The Data

Prior to revision, initial jobless claims fell 41k to 338k from 379k WoW, as the prior week's number was revised up by 1k to 380k.

 

The headline (unrevised) number shows claims were lower by 42k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 4.25k WoW to 346.75k.

 

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -10.2% lower YoY, which is a sequential improvement versus the previous week's YoY change of -7.7%

 

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Yield Spreads

The 2-10 spread rose 6 basis points WoW to 258 bps. 4Q13TD, the 2-10 spread is averaging 240 bps, which is higher by 6 bps relative to 3Q13.

 

INITIAL CLAIMS: CHUGGING ALONG NICELY HEADING INTO 2014 - 15

 

INITIAL CLAIMS: CHUGGING ALONG NICELY HEADING INTO 2014 - 16

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 


THE M3: MGM COTAI AND MACAU DIVERSIFICATION; NEW CENTURY HOTEL SEIZED

THE MACAU METRO MONITOR, DECEMBER 26, 2013

 

 

'HALF' MGM COTAI FLOOR FOR ENTERTAINMENT: CEO Macau Business Daily

“Our Cotai project is more like a series of theatres or a series of galleries, where we can actually bring things.  It’s probably in excess – just for the entertainment pieces – of 50% of the floor space. But the way we’re going to do that is it’s going to be interspersed with other activities,” said MGM China CEO Grant Bowie.

 

Macau watchers know that after years locally of ‘motherhood and apple pie’ speeches on the benefits of diversifying Macau’s economy away from hardcore casino gambling, this time the central government in Beijing appears to be really serious about achieving it.  President Xi Jinping mentioned it again last week when he met Macau’s CEO Fernando Chui Sai On.  So did Bai Zhijian, director of the Liaison Office of the Central People’s Government, at the anniversary celebrations on Friday marking Macau’s 1999 handover from Portuguese administration.

 

Simply putting an art gallery in a casino won’t in itself achieve Beijing’s goal. But the Macau government is likely to reward those casino operators that show greatest willingness to assist it in the diversification drive.

 

NEW CENTURY SEIZED OVER DEBTS TO TRAVEL AGENCY BOSS Macau Business Daily

The New Century Hotel, Taipa, has been seized for unpaid debts that were due the owner of a Macau-based travel agency, according to a judgement of the Court of First Instance.  Hoi Cheng Nga, head of Macau-based Energy Travel Agency Ltd, had sued Empresa Hoteleira de Macau Lda – the Macau-registered operator of New Century.  Within the grounds of the hotel is Greek Mythology Casino, which operates under the gaming concession of Stanley Ho Hung Sun’s Sociedade de Jogos de Macau SA.

 

 

 




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