Nike Grabs the Bull with Johnny Football Deal

Takeaway: Though Nike is no-stranger to athletes causing controversy, Manziel belongs on the upper half of the risk management watchlist.

Johnny Manziel Signs Deal to Be Represented by Nike

Nike Grabs the Bull with Johnny Football Deal - johnny0

  • "Rovell's sources were not able to disclose the financial terms, but they did say the deal—which was negotiated by LeBron James' business partner Maverick Carter and Fenway Sports Group—is a multi-year offer that will be the most expensive for a rookie in this year's class."
  • "Manziel chose Nike over other companies such as Adidas, Under Armour and New Balance's Warrior brand."

Takeaway from Hedgeye’s Brian McGough:

Nike is likely looking at something in the vicinity of $20 million/year for Manziel. But one thing is for sure,


Nike is going to have to babysit this one.


True, they may have 'handlers' for all their high-value athletes, but the sports world knows all too well that things don't always go according to plan. See previous tabloid-rich events like:


1. Kobe Bryant and his sexual assault case (after which his Nike contract was re-written).

2. Tiger Woods and his -- whatever you call it -- case.

3. Lance Armstrong and his pathetic admission of basically lying his whole career.


Athletes -- even those considered squeaky clean -- are high risk assets. Something tells us that Johnny Manziel belongs on the upper half of the risk management watch list.

Join the Hedgeye Revolution.

Charts: EUR and GBP Rocket!

The EUR/USD and GBP/USD have ramped an impressive 1.96% and 2.15%, respectively, in the last month -- the performance is consistent with our Q4 2013 Macro Theme call of #EuroBulls (presented on 10/11/2013) and our bullish outlook on the British Pound since last November

Below we update our outlook on each currency cross:


  • ECB President Mario Draghi kept rates on hold this week (as expected) and did not issue any “new” non-standard measures, adding in its 2014 outlook for GDP to expand +10bps to +1.2%  (vs the previous forecast in December) and inflation to dip -10bps to 1.0%.
  • Broadly, we believe Draghi’s continued posture of “ready and willing to act” (to ensure the survival of the Eurozone at any cost and to keep financial conditions accommodative) will continue to support the common currency and strengthen investor confidence in the equity market #EuroBulls (etf FXE).
  • On the other side of the cross (USD) we expect Fed-head Janet Yellen to likely pull back on the tapering program to a more dovish position in response to our Macro call of  #GrowthSlowing that should weigh on the USD to the downside.
  • EUR strength reflects country/regional strength: Manufacturing and Services PMI continue to remain grounded above the 50 line (expansion). Services hit a 32-month high at 52.6 in February and Manufacturing grinded higher to 53.2.
  • Confidence up: Eurozone Feb Economic Sentiment Indicator rose to 101.2 in February (exp. 100.9) vs 100.9 in January. The Services Sentiment Indicator rose to 3.2 FEB (exp. 2.5) vs 2.3 JAN.
  • The deflation of inflation across the Eurozone (the current reading at 0.8% Y/Y) equates to more consumer purchasing power via lowering the consumption tax.
  • Other Data: Eurozone Retail Sales rose to 1.3% JAN Y/Y (exp. -0.2%) vs -0.4% DEC and the Eurozone Unemployment Rate maintains the 12% level. 
  • We remain marginal European equity bulls over US equities. Our preferred investment in the region is long German and UK equities (EWG and EWU) and long the Pound/USD (FXB).

Charts: EUR and GBP Rocket! - zzzz. eurrroooo



  • We remain bullish on the British Pound versus the US Dollar (etf FXB), 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).
  • The Bank maintaining the base interest rate at 0.50% this week along with its asset purchase program target (QE) 375B GBP.
  • 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. In the BOE’s Quarterly Inflation Report (in February) 2014 GDP was revised higher to 3.4% from 2.8% previously forecast.
  • PMIs remain one highlight: Manufacturing in February came in at 56.9 versus expectations of 56.8 and Services recorded 58.2 versus expectations of 58.0.
  • CPI has also moderated in recent months, currently at  1.9% in January Y/Y – we expect this cut in the consumption tax to continue to boost business and consumer confidence and with it consumption
  • The British Pound is holding its Bullish Formation, trading above its intermediate term TREND and long term TAIL levels of support.

Charts: EUR and GBP Rocket! - zz. Pound


Matthew Hedrick


VIDEO | Keith's Macro Notebook 3/7: EURO GOLD INDIA

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.46%
  • SHORT SIGNALS 78.35%

VIDEO | McCullough: What's Worrying Our Customers from California to NYC

Be Careful

Client Talking Points


The Euro is ripping versus the US Dollar. Both US fiscal and monetary policy dovish versus ECB President Mario Draghi who is starting to understand that a #StrongEuro means Consumption Tax Cut. That is driving stronger European growth. Risk range is signaling a higher-high of $1.39 now. #EuroBulls


That shiny, yellow metal called Gold loves it when inflation slows real US growth. At +12.1% year-to-date, Gold is beating the inflating CRB Index which is currently up +10.1% YTD. #InflationAccelerating in the USA is crystal clear now.


Dr Raj (who raised rates to fight inflation) gets it big time. And now, India’s stock market is starting to get it too. It has risen +1.9% overnight to lead what was a wet Kleenex session for anything China. Sensex is up +3.7% year-to-date and is on Hedgeye’s bullish TREND list.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

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.


Las Vegas Sands has transformed into that rare stock that should appeal to “Growth,” “Value”, and “Dividend/Cash Flow” investors alike. The stock now yields higher than the S&P 500 (43% sequential quarterly dividend increase), and the company is buying back $200 million + in stock a quarter, yet still retains a pristine balance sheet. The significant capital deployment opportunities can be funded out of annual free cash flow of nearly $4 billion. Management has indicated they are willing to raise leverage 1.5x which would still keep them well below industry average and if directed toward dividends, would result in a yield of over 6%. And we haven’t gotten to the $10-14 billion in mall assets that could be monetized. We know of no other stocks in consumer land that provide this combination of cash flow, growth, cash return to shareholders, and value levers.


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


COMMODITIES: continue to rip humanity a new one, +10% CRB Index YTD #InflationAccelerating @KeithMcCullough


"To conquer fear is the beginning of wisdom." - Bertrand Russell


Boeing has frozen defined-benefit pensions for 68,000 employees, including management and executives. From January 2016, the funds paid out by new Boeing pensions will be market-dependent. The switch affects non-unionised employees and follows a pension deal struck with unions in January. Boeing said the move would curb the "unsustainable growth" of its long-term pension liability. (BBC)




Monday-Thursday, March 10-13

  • 2014 Cruise Shipping Miami Conference

Monday, March 11

  • CZR 4Q 2013 conference call:  5 pm
  • STN 4Q 2013 conference call:  4:30 pm  

Tuesday, March 12

  • MTN FY2Q 2014 conference call:  4:30 pm

Friday, March 14

  • Hyatt Investor Day


SJM – Lagerfeld to model 3rd tower at Lisboa Palace Macau Business Daily

The hotel will have up to 270 guestrooms and suites in its own 20-storey tower as part of the HK$30 billion (US$3.87 billion) Lisboa Palace.  It’s described as the first luxury hotel “fully designed” by Mr Lagerfeld, and is expected to open in 2017.  The entire project at Lisboa Palace is due to have 2,000 rooms.  


Takeaway:  SJM at a competitive disadvantage being the last Cotai project to open in this latest supply surge


CZR – the former Harrah’s Rincon Casino & Resort completed a $160 million renovation and expansion as well as changed its name to Harrah’s Resort Southern California in Valley Center.  The property features a new 21 story, 430 room hotel and a 55,000 sq ft casino with 1,600 slots, 59 table games and a poker room.  Total hotel rooms now include 1,065 rooms and suites.


Takeaway:  Strengthening the brand via management contracts, while expanding the Total Rewards network.


HLT – Hilton Grand Vacations and Strand Capital announced the development and sales launch of Ocean 22 in Myrtle Beach, SC.  Ocean 22 by Hilton Grand Vacations Club will be a 24 story tower, featuring 220 luxury 1, 2, and 3 bedroom ocean view and ocean front suites. The property is scheduled to open in the summer 2015.


Takeaway:  Another capital light timeshare development that will add incremental timeshare management fees.  Timeshare undervalued?  


China says no casinos for resort island Hainan Reuters

Luo Baoming, Hainan's Communist Party chief, and Wang Yong, the mayor of resort city Sanya said that casinos will never be allowed to operate there.  The decision may dampen investment appetite from scores of international and national developers betting on stellar profits in the southern province.


Takeaway:  A positive for Macau but not a surprise

Las Vegas Culinary Workers Union 226 – 10,000 union workers will vote to go on strike on March 20th over higher benefits cost – union members voted to adopt the Obamacare Health Plan but are now unhappy over the premium costs each member will pay under the new healthcare plan. 


Takeaway:  Even the unions are turning against Obamacare.  Margins could be under pressure with higher labor costs yet slot revenues not growing.


Palms Las Vegas – will offer the 1st 24-hour checkout resort accommodations in Las Vegas.


Takeaway:  Interesting guest feature, but we wonder if such a feature should be priced at a premium to rack rate


Queensland, Australia – The Queensland government announced it received 19 registrations to bid for the licenses for the integrated casino and hotel developments.  Twelve of the companies are looking to develop in/near Brisbane – including Echo and Crown Resorts.  Detailed proposals are due to the government later this summer.


Takeaway:  A large scale, integrated resorts sounds like a great idea, but let’s recall, despite Brisbane’s location on the northeastern coast of Oz, it is still more than 3,800 miles from Singapore and 4,300 miles from Hong Kong – and is thus, less frequent destination for Asian gamblers.



Hedgeye remains negative on consumer spending and believes in more inflation.  Following  a great call on rising housing prices, the Hedgeye Macro/Financials team is turning decidedly less positive. 


Takeaway:  We’ve found housing prices to be the single most significant factor in driving gaming revenues over the past 20 years in virtually all gaming markets across the US.

Early Look

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