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THE WEEK AHEAD

The Economic Data calendar for the week of the 7th of April through the 11th of April is full of critical releases and events.  Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.

 

THE WEEK AHEAD - the week


Poll of the Day Recap: Jobs Report, Schmobs Report

According to today’s Labor Department figures, the U.S. created 192,000 jobs in March and the unemployment rate remained unchanged at 6.7%. Consensus expected an increase of 200,000 non-farm jobs.
 

With that said, we asked in today’s poll, Do you trust the jobs report?
 

At the time of this post, 75% responded NO; 25% said YES.
 

Of those that voted NO, they said history provided enough evidence not to trust the report. One noted that the report “comes out way too quickly and is revised way too often. I believe they had to do a massive restatement of the numbers a couple years ago.”

 

Another asked, “How can one trust those who deliberately avoid plummeting participation rates because those #s contradict their propaganda?”
 

While some voted NO, they felt that didn’t diminish the report’s use. “I don't trust the reported number itself, but it's probably consistently off, so as an indicator, it has some value.”
 

One commenter explained their choice more simply: “I believe in the jobs number, the inflation rate, and the Easter Bunny.”
 

Over in the YES group, one responder explained, “I don't trust it as a reliable sample of the number of jobs created. It might be a flawed sample and even more flawed methodology. But unlike government metrics like inflation, this one is at least consistently flawed. If we can game the incremental change in something that is consistently flawed, then I have a consistent use for it.”

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VIDEO | #TweetKeith: You Asked, I Answered

 

 

Hedgeye CEO Keith McCullough answers the top three questions from his Twitter followers including whether investors should be worried about a brewing market bubble.


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Q2 2014 Macro Themes Conference Call - What's Next for the U.S. Consumer?

Q2 2014 Macro Themes Conference Call - What's Next for the U.S. Consumer? - HE MT 2Q14

 

Hedgeye's Macro Team will be hosting our highly-anticipated Quarterly Macro Themes conference call on Tuesday, April 8th at 1:00pm EDT. Led by CEO Keith McCullough, the presentation will detail the three most important macro trends we have identified for the quarter and related investment opportunities.

 

Q2 2014 MACRO THEMES OVERVIEW

  • #ConsumerSlowing: The cyclical increase in consumer spending growth from the 2009 lows is under pressure. Rising food prices and a stagnating USD continue to squeeze average Americans on the margin. Given the potential for further USD depreciation and a continuation of global commodity inflation as a real macro risk, we think U.S. consumption growth will slow as it bumps up against difficult compares heading into 2Q and beyond.
  • #StructuralInflation: Following up on our cyclical #InflationAccelerating theme, we are focusing now on structural inflationary pressures embedded in the U.S. economy. Much like in Japan, zero percent interest rate policy has fueled a broad-based portfolio re-balancing away from financing economic growth to reach for additional yield in slow-growth assets. This is fueling systemic underinvestment in both human and physical capital. However (unlike in Japan), the USD's long-term downward trend adds an additional layer of inflationary pressure due to an increased reliance on imported goods and services amid capacity constraints abroad.
  • #HousingsSlowdown:  We have been big housing bulls over the last 18 months. But the party is ending. Asymmetry in being long has flattened.   Price follows demand on a lag and demand is slowing as affordability declines, regulatory changes drag on liquidity, and institutional interest ebbs.  We will walk through our updated view on the Supply/Demand/Price dynamics prevailing in the housing market and our forward outlook for prices. 

 

CALL DETAILS

  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 212497#
  • Materials: CLICK HERE (the slides will be available approximately one hour prior to the start call)

 

Ping  for more information.


CRUISE PRICING SURVEY: DICEY Q2

The large capacity increase in Q2 for the Caribbean is clearly impacting pricing

 

 

OVERALL SURVEY SENTIMENT

  • RCL:  Neutral
  • NCLH:  Negative
  • CCL:  Not applicable

 

CALL TO ACTION

RCL continues to be a mixed bag with strong pricing power in Europe but weakness in the Caribbean.  NCLH’s high exposure to the Caribbean will pressure company yields particularly in 1H 2014.

 

SUMMARY

Our most recent pricing survey focused on RCL and NCLH, since CCL just reported earnings last week.  While overly conservative in our opinion, CCL’s guidance was certainly disappointing.  RCL's pricing power resides in Europe and pricing in the region strengthened even further in March.  However, RCL is not immune to the weakness in Caribbean pricing, particularly for FQ2.  For NCLH, its FQ2 Caribbean pricing continued to slip in March. We estimate NCLH has approximately 83% and 46% exposure to the Caribbean in FQ1 and FQ2, respectively.

 

RCL

  • Caribbean
    • Glaring tumble in FQ2 pricing as seen in Chart 1
      1. Celebrity pricing fell off a cliff for FQ2.  Thankfully, it only accounts for 9% of RCL’s Caribbean itineraries.
      2. For the RC brand, pricing for late April/early May itineraries was hit hard across the fleet.
    • Starting with June, pricing in the Caribbean looks pretty healthy
    • Quantum pricing for Nov/Dec remain unchanged
    • Anthem pricing for 2015 remain unchanged
    • Pullmantur pricing steady

Chart 1

CRUISE PRICING SURVEY: DICEY Q2 - 1

  • Europe
    • Chart 2 shows strong YoY pricing for all quarters.  In Chart 3, on a sequential basis, there was a price drop in FQ2 but that is more than offset by gains in FQ3 and FQ4.
      • RC brand – pricing up high double-digits for F2Q and high single/low double digits YoY for F3Q-F4Q 
      • Celebrity pricing making strides.  Sequential positive momentum continued at the end of March.
      • Azamara pricing was mixed
      • Pullmantur pricing showed good growth considering very easy comps
  • Alaska
    • Both RC brand and Celebrity improved slightly on sequential pricing.  YoY, pricing remains down modestly.

Chart 2

CRUISE PRICING SURVEY: DICEY Q2 - 2

 

Chart 3

CRUISE PRICING SURVEY: DICEY Q2 - 3

 

 

NCLH

Chart 4 shows overall, NCL pricing fell slightly at the end of March. 

  • Caribbean
    • Discounting didn’t stop as March progressed.  We’re particularly worried about FQ2. 
    • Getaway’s 2Q pricing maintains a healthy premium over its existing fleet but it’s misleading because its comp brands (Sun, Pearl, Sky, Epic) pricing fell again, -8% on average since early March and -27% since February guidance while Getaway pricing declined 18% since February.  Getaway premiums for 4Q was steady around 28%.  Compared with Epic, its 6% higher.
    • Breakaway 3Q premium remain in the low single digits for F3Q and +26% for 4Q.
  • Alaska
    • Pricing was relatively stable.  YoY, pricing remains modestly lower.
    • NCLH has 10% and 19% exposure to Alaska in FQ2 and FQ3.
  • Europe pricing looks outstanding for the summer
  • Hawaii summer pricing took a hit in FQ2

Chart 4

CRUISE PRICING SURVEY: DICEY Q2 - 4

 

STOCK VS SURVEY

 

CCL 

Survey has been mostly bullish for Carnival since the major pivot from the 10/14/13 survey.

 

CRUISE PRICING SURVEY: DICEY Q2 - 5

 

RCL

Survey has suggested mixed signals for RCL in the past 6 months

 

CRUISE PRICING SURVEY: DICEY Q2 - 6

 

NCLH

Survey has been bearish on NCLH since the 02/12/14 survey

 

 

CRUISE PRICING SURVEY: DICEY Q2 - 7


ROUND NUMBERS & RETRACEMENTS: MARCH EMPLOYMENT

We’re grinding on wrapping up our 2Q14 Macro themes presentation (call next Tuesday) so we’ll keep the March Employment review tight here.  Some notable callouts along with a visual summary below:

 

  • Decent Absolute, Bad Growth: Both the NFP and Private payroll figures missed the round +200K estimate.  While the absolute numbers (& the revisions) were decent, growth (2Y ave) in NFP and private payrolls posted their lowest rates since November 2012 and August 2011, respectively. 
  • No Policy Shift:  Okay absolute + better sequentially = no change on the current policy path in the immediate term.  Next FOMC meeting announcement is April 30th.  
  • Retracement:  We have added exactly 8.9M private payrolls since the Feb 2010 trough in NFP employment.  We officially eclipsed the prior Jan 2008 peak in total private employment for the first time this month
  • Wage Growth Slowing:  Ave hourly private sector earnings decelerated -10bps sequentially to +2.1% YoY.  Similarly, hourly earnings growth for non-supervisory and production employees decelerated -20bps sequentially on both a 1Y and 2Y basis.  A slowdown in wages does not augur strength for forward consumption growth (nominal PCE growth is running +3.0% as of Feb), particularly with savings rates near historic lows and wealth effect ebbing. 
  • Weather:  BLS reported 148K out of work due to bad weather in March.  This is up from the +117K reported in March of last year but exactly equal to the 10Y average of 148K.  Weather distortion was real but its rearview.
  • Seasonality:  1Q14 diverged negatively from the strong prior seasonal trends of the last 4 years.  Seasonality will shift to a modest headwind from here. 
  • State & Local Gov’t:  A 7th consecutive month of positive growth for collective state/local government employment.  Positive employment growth and higher spending at the federal level should continue to support aggregate gov’t sourced income growth in 2014 (~17% of total). 
  • Employment by Age:  All age cohorts (20-64YOA) showed accelerating employment growth in March.  For 1Q14, growth in total CPS employment is up 1.4% YoY – accelerating 80bps sequentially.  

 

ROUND NUMBERS & RETRACEMENTS:  MARCH EMPLOYMENT - Summary Table Emp march

 

ROUND NUMBERS & RETRACEMENTS:  MARCH EMPLOYMENT - Nominal Earnings

 

ROUND NUMBERS & RETRACEMENTS:  MARCH EMPLOYMENT - Employment Bad Weather March

 

ROUND NUMBERS & RETRACEMENTS:  MARCH EMPLOYMENT - NFP Seaonality

 

ROUND NUMBERS & RETRACEMENTS:  MARCH EMPLOYMENT - Employment by Age March

 

ROUND NUMBERS & RETRACEMENTS:  MARCH EMPLOYMENT - Unemployment Rate March

 

ROUND NUMBERS & RETRACEMENTS:  MARCH EMPLOYMENT - State   Local Gov t March

 

 

Christian B. Drake

@HedgeyeUSA


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 80.33%
  • SHORT SIGNALS 78.49%
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