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A Mind/Body Market Connection?

Takeaway: If stock market declines can put you in the hospital, maybe feeling bad (low confidence) really makes you feel bad!

In what must have been a time consuming exercise in data management (even by our standards), a study titled Worrying about the stock market: Evidence from hospital admissions by Joseph Engelberg and Christopher A. Parsons combed through 30 years daily hospital admissions and stock market data.  The authors make a remarkable conclusion on page 27:

 

"Over roughly three decades, we provide evidence that daily fluctuations in stock prices has an almost immediate impact on the physical health of investors."


A Mind/Body Market Connection? - mktfear 

If stock market declines can put you in the hospital, maybe feeling bad (low confidence) really makes you feel bad!

 

Charts and data can sometimes show you something that just doesn't "feel" quite right.  In this case, we are talking about the inverse relationship between medical spending and Consumer Confidence.  It's not new to us, but it's been easy to ignore, despite consistently showing up in multiple analysis across multiple durations and multiple company and economic factors.  

 

So, does a happy consumer go to the mall, while an unhappy one goes to the doctor?  It may be more true than we previously thought.  

 

Check out the chart below.

 

It reveals just how tight the relationship is. Specifically, that changes in Consumer Confidence lead Medical Utilization by 2 to 3 quarters.  The trajectory forecasts accelerating medical utilization for 2014.

 

A Mind/Body Market Connection? - tobin

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European Banking Monitor: Still More Good Than Bad

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 .

 

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European Financial CDS - Most of Europe's banks saw their swaps tighten last week but Greek banks were notably wider with Alpha Bank and National Bank of Greece tacking on 24 and 38 bps, respectively. Italian banks continue to show the greatest improvement on a month-over-month basis. 

 

European Banking Monitor: Still More Good Than Bad - z  banks

 

Sovereign CDS – Sovereign swaps tightened across the board last week. Portuguese, Italian and Spanish swaps tightened the most, falling 29, 21 and 19 bps, respectively. 

 

European Banking Monitor: Still More Good Than Bad - z. sov1

 

European Banking Monitor: Still More Good Than Bad - z. sov2

 

European Banking Monitor: Still More Good Than Bad - z. sov3

 

Euribor-OIS Spread – The Euribor-OIS spread tightened by 1 bps to 13 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: Still More Good Than Bad - z. euribor

 

Matthew Hedrick

Associate

 

 



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Forbes 30 Under 30: Kevin Kaiser - 30banner

 

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(CORRECTED) MACAU JANUARY PROJECTION

Macau is off to a strong start, albeit only 5 days of data with average daily table revenues of HK$1,057MM up 19% over the comparable week last year.

 

 

We are currently projecting full month gross gaming revenues (GGR) of HK$32.0 to HK$33.5 billion or +23-28% growth YoY.  This is probably more aggressive than the Street.  Our model takes into account seasonally adjusted sequential trends and other adjustments and has proven to be more accurate, in our opinion.

 

Last January, GGR increased only 7% on slightly below normal hold with VIP revenue actually declining YoY.  Chinese New Year falls on January 31st in 2014 versus February 10th last year.  Most of the gaming business associated with the celebration typically occurs beginning on “New Year’s Eve” and for the subsequent 10-14 days.  January 2014 should get a slight boost over 2013 but not much on a relative basis since most of celebration falls in February of both years. 

 

Market shares are in the 2nd table but are meaningless after only 5 days of data.  We continue to expect LVS to be the biggest share gainer in the coming months with Wynn Macau also increasing share, particularly on the Mass side.  SJM, MGM, and MPEL could be at risk for minor share loss.

 

(CORRECTED) MACAU JANUARY PROJECTION - m1

 

(CORRECTED) MACAU JANUARY PROJECTION - m2


MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD

Takeaway: Commodity price increases and European interbank risk both cooled off in the latest week once again giving the green light to Financials.

Summary: Last week we flagged rising commodity prices as the single thorn in the side of the ongoing rally/recovery in US Financials. This week that thorn was pulled out as commodity prices dropped 2.2% in the latest week bringing the month-over-month change to a decline of 0.4%. Elsewhere, the US yield spread continues to widen while default probabilities continue to fall. The noted backup in European interbank risk we flagged last week also cooled off as Euribor-OIS dropped 1 bp this week. 

 

On a short-term basis, we see improvement outpacing decline by a ratio of 5 to 1 across our various risk measures, while on an intermediate term basis, improvement is leading decline by 5 to 3.

 

Financial Risk Monitor Summary

 • Short-term(WoW): Positive / 5 of 13 improved / 1 out of 13 worsened / 7 of 13 unchanged

 • Intermediate-term(WoW): Positive / 5 of 13 improved / 3 out of 13 worsened / 5 of 13 unchanged

 • Long-term(WoW): Positive / 3 of 13 improved / 1 out of 13 worsened / 9 of 13 unchanged

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 15

 

1. U.S. Financial CDS -  Sallie Mae and Radian put up good weeks, as swaps tightened by 13 and 10 bps, respectively. Elsewhere in the US there was relatively little w/w action, though the bond guarantors did see their swaps widen slightly. 

 

Tightened the most WoW: SLM, WFC, RDN

Widened the most WoW: TRV, AGO, HIG

Tightened the most WoW: PRU, WFC, LNC

Widened the most/ tightened the least MoM: AGO, MBI, CB

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 1

 

2. European Financial CDS - Most of Europe's banks saw their swaps tighten last week but Greek banks were notably wider with Alpha Bank and National Bank of Greece tacking on 24 and 38 bps, respectively. Italian banks continue to show the greatest improvement on a month-over-month basis. 

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 2

 

3. Asian Financial CDS - Another mixed week for Asian Financial swaps. Indian banks reversed what had been a trend of steady improvement, rising an average of 16 bps last week while Chinese bank swaps were essentially unchanged.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 17

 

4. Sovereign CDS – Sovereign swaps tightened across the board last week. Portuguese, Italian and Spanish swaps tightened the most, falling 29, 21 and 19 bps, respectively. 

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 18

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 3

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 4

 

5. High Yield (YTM) Monitor – High Yield rates rose 3.2 bps last week, ending the week at 6.01% versus 5.98% the prior week.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 5

 

6. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 4.0 points last week, ending at 1840.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 6

 

7. TED Spread Monitor – The TED spread fell 1.2 basis points last week, ending the week at 17.2 bps this week versus last week’s print of 18.36 bps.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 7

 

8. CRB Commodity Price Index – The CRB index fell -2.2%, ending the week at 277 versus 283 the prior week. As compared with the prior month, commodity prices have decreased -0.4% We generally regard changes in commodity prices on the margin as having meaningful consumption implications.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 8

 

9. Euribor-OIS Spread – The Euribor-OIS spread tightened by 1 bps to 13 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: STILL MORE GOOD THAN BAD - 9

 

10. Chinese Interbank Rate (Shifon Index) –  The Shifon Index fell 38 basis points last week, ending the week at 3.13% versus last week’s print of 3.51%. 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: STILL MORE GOOD THAN BAD - 10

 

11. Markit MCDX Index Monitor – Last week spreads tightened 1 bp, ending the week at 88 bps versus 89 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: STILL MORE GOOD THAN BAD - 11

 

12. Chinese Steel – Steel prices in China fell 0.5% last week, or 16 yuan/ton, to 3,491 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: STILL MORE GOOD THAN BAD - 12

 

13. 2-10 Spread – Last week the 2-10 spread tightened to 260 bps, -1 bp tighter than a week ago. We track the 2-10 spread as an indicator of bank margin directionality.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 13

 

14. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 0.9% upside to TRADE resistance and 2.1% downside to TRADE support.

 

MONDAY MORNING RISK MONITOR: STILL MORE GOOD THAN BAD - 14

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 


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