PAR FOR THE 2014 COURSE: January Industrial Production

A sub-title in our analysis of the weekly Initial Jobless Claims data yesterday was:  #Deceleration:  Par for the 2014 Course.  HERE


And since I feel like I’ve written the same note highlighting the deceleration in the rate of improvement in the domestic, fundamental macro data about 20X to start 2014, it felt fitting to just recycle that Title also. 


INDUSTRIAL DECELERATION: That industrial production slowed in January isn’t particularly surprising given the soft ISM data and the slowing sales and rising inventory of auto’s  - See yesterday’s note for more detail  PANGLOSSIAN PIQUE: JANUARY RETAIL SALES


Consumer Durables, led by the 5% decline in vehicle production, was the biggest loser but Non-Durables, Business Equipment and Industrial Supply all decelerated on both a MoM and YoY basis.  Capacity Utilization slipped to 78.5% in January, with the -0.4% MoM decline the largest since August of 2012.


MAPPING THE SLOWDOWN:  We detail IP and Capacity Utilization data specifically in the table below but, with most of the significant data points for January now in, it’s probably more worthwhile to provide a summary refresh on the prevailing slope of improvement across the preponderance of the fundamental macro series. 


Perhaps the most efficient way to get a feel for the broader trend in the slope of growth is just to look at the Economic Summary Table (below) and simply observe if there is more ‘more red’ or ‘more green’ staring back at you. 


As can be seen, the sequential rate of improvement across most of the latest higher frequency data is Worse.    


Looking a little closer, even the data currently flagged as “Better” is less than inspiring. 


Let’s take a quick tour of each of the “Better’s” in turn: 


  • NFP:  NFP employment improved sequentially in January but that’s only because December was a brick.  Employment gains are decelerating vs the 3M/6M/12M averages. 
  • Consumer Confidence:  The data here has been middling and largely equivocal to start 2014.  The Conference Board measure improved in December, the preliminary Univ. of Michigan number for Feb was unchanged vs. January, and Bloomberg’s Weekly measure is tracking below the January average thus far in February. 
  • ISM Services:  ISM services improved in January but that was really only because it completely tanked in December as New Orders saw its largest sequential decline since 1980.  
  • Case-Shiller HPI:  Media pundits still (for whatever reason) love monitoring and citing the Case-Shiller home price data.  The fact is that the Case-Shiller HPI is one of the most lagging housing measures there is.  The “better” reading in the table below is actually a November number and we already have preliminary January Corelogic data – Home price growth as measured by Corelogic has been decelerating for 3 consecutive months.  
  • Inventories:  It’s a bit of a toss-up on whether to classify accelerating inventory growth as a positive or negative.  From a strict GDP accounting perspective, rising inventories can be a positive for reported growth.  However, when end demand is slowing and inventories are rising, the other side of that inventory build drags on both corporate profitability and reported economic growth.


So, on the back of the decelerations reported in Job Openings (JOLTS), Mortgage Purchase Applications, Retail Sales, and Initial Claims earlier in the week, Industrial Production and Capacity Utilization in January both deteriorated.


I haven’t checked but I’ll bet the dollar is down, gold is outperforming and #hashtags lamenting the distortive impacts of the weather are still in crescendo  – yep, par for the 2014 ……


Happy Valentines Day. Enjoy the long weekend


PAR FOR THE 2014 COURSE: January Industrial Production - Eco Summary 021414


PAR FOR THE 2014 COURSE: January Industrial Production - IC CU Table


PAR FOR THE 2014 COURSE: January Industrial Production - Confidence Table 021414



Christian B. Drake



[video] Keith's Macro Notebook 2/14: USD GOLD #EUROBULLS


In preparation for NCLH's FQ4 2013 earnings release Tuesday, we’ve put together the recent pertinent forward looking company commentary.




  • Breakaway operates a healthy premium to both ticket pricing and onboard spend 
  • The new ships are pricing at about a double-digit premium to the Epic, and the Epic has been pricing at a double-digit premium to the rest of the fleet. 

2014 NCC

  • Looking to 2014, expect adjusted net cruise cost excluding fuel to stabilize and decrease in the range of 1% to 2%, as NCLH return to our more normalized dry-dock schedule and new build launch expenses roll-over year-over-year.

2014 EPS

  • Expect earnings to grow approximately 60% in the coming year.

1Q 2014 

  • The first quarter is booked a little bit behind.  There is a couple of reasons for that. One being that the Easter break, which is a big time off especially in the Northeast is toward the end April this coming year versus it was March 31 for 2013. So, that booking momentum has changed a little bit into the second quarter.
  • Solid pricing for 1Q. Pricing is above the mid single digits.


  • Something that hopefully begins with a 4%, whether it's a low-4s or the mid-4s, it's too early to say


  • In the first couple of quarters in the Caribbean, we have a healthy pricing environment right now
  • It is a little bit more promotional.


  • Pricing has been a positive. Feeling pretty good about Europe right now.
  • Mid single-digit range is a fair assumption


  • Fourth quarter starting out is strong...has exceeded our expectations. Feel very confident with our onboard revenue.

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$UA: Nightmare In Sochi For Under Armour?

Takeaway: UA execs are swallowing Tylenol.

UA - Under Armour Suits May Be a Factor in U.S. Speedskating's Struggles In Sochi


$UA: Nightmare In Sochi For Under Armour? - ua

  • "These suits—designed by apparel sponsor Under Armour and billed before the Games as a competitive advantage—have a design flaw that may be slowing down skaters, according to three people familiar with the U.S. team."
  • "Vents on back of the suit, designed to allow heat to escape, are also allowing air to enter and create drag that keeps skaters from staying in the low position they need to achieve maximum speed, these people said. One skater said team members felt they were fighting the suit to maintain correct form."

Key Takeaway from Hedgeye Retail Analyst Brian McGough

Talk about a tough break for UnderArmour. When an athlete in any sport fails to win, it's an easy target to blame the equipment. Are the claims here valid? Possibly. But at this point, that's pretty much irrelevant. All a brand needs is for elite athletes to point a finger, accuse the product of being to blame, and the brand is going to end up with a public relations problem.

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Burn, Baby Burn!

Client Talking Points


The buck continues to burn. It's down -1.5% in the last 2 weeks after failing our Hedgeye TAIL risk resistance of 81.17 US Dollar Index. Don’t confuse the inflation embedded in that (CRB Index new highs this morning at +4.6% year-to-date) as growth. It's great for Utilities (XLU), but brutal for Consumers (XLY and XLP).


Ohh baby does Gold love US #GrowthSlowing. Dollar Down + Rates Down = Gold up +8.8% year-to-date! That was 2011 and that’s Q1 of 2014. Beta chasers are going to get smoked not learning the Q1 2011 lesson. Variance at both the US stock and sector and level is starting to rip.


What's that? $1.37 Euro and $1.67 Pound versus the US Dollar? Unlike US economic growth slowing on the margin, European growth actually continues to accelerate. People who claim a strong currency is “bad for Germany” certainly don’t have any economic (and/or European growth equity return) data to support that.

Asset Allocation


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We remain bullish on the British Pound versus the US Dollar, a position supported over the intermediate term TREND by prudent management of interest rate policy from Mark Carney at the BOE (oriented towards hiking rather than cutting as conditions improve) and the Bank maintaining its existing asset purchase program (QE). UK high frequency data continues to offer evidence of emergent strength in the economy, and in many cases the data is outperforming that of its western European peers, which should provide further strength to the currency. In short, we believe a strengthening UK economy coupled with the comparative hawkishness of the BOE (vs. Yellen et al.) will further perpetuate #StrongPound over the intermediate term.


Darden is the world’s largest full service restaurant company. The company operates +2000 restaurants in the U.S. and Canada, including Olive Garden, Red Lobster, LongHorn and Capital Grille. Management has been under a firestorm of criticism for poor performance. Hedgeye's Howard Penney has been at the forefront of this activist movement since early 2013, when he first identified the potential for unleashing significant value creation for Darden shareholders. Less than a year later, it looks like Penney’s plan is coming to fruition. Penney (who thinks DRI is grossly mismanaged and in need of a major overhaul) believes activists will drive material change at Darden. This would obviously be extremely bullish for shareholders and could happen fairly soon driving shares materially higher.

Three for the Road


The government has been very successful in convincing lemmings that there's no inflation @KeithMcCullough


There is giant untapped potential in disagreement, especially if the disagreement is between two or more thoughtful people. -Ray Dalio


Gold futures pushed higher in electronic trading Friday, trading at the highest levels since November. Gold for April delivery jumped $16.70, or 1.3%, to $1,316.70 an ounce, adding to a $5.10 gain Thursday on the Comex division of the New York Mercantile Exchange.

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