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THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – April 29, 2014


As we look at today's setup for the S&P 500, the range is 42 points or 1.25% downside to 1846 and 0.99% upside to 1888.                                                

                                                                              

SECTOR PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:

 

THE HEDGEYE DAILY OUTLOOK - 10

 

CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 2.28 from 2.27
  • VIX closed at 13.97 1 day percent change of -0.64%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7:45am: ICSC weekly sales
  • 8:55am: Redbook weekly sales
  • 9am: S&P Case-Shiller 20 City Home Prices m/m, Feb., est. 0.8% (prior 0.85%)
  • 10am: Consumer Confidence Index, April, est. 83.2 (prior 82.3)
  • 10am: Senate Banking Committee to vote on Fed nominees Fischer, Powell and Brainard

GOVERNMENT:

    • President Obama at Manila’s Fort Bonifacio, returns to U.S.
    • 10am: Supreme Court may release opinions;
    • 10am: Senate Banking Committee to vote on Fed nominees Fischer, Powell and Brainard
    • 11am Supreme court  hears cellphone privacy case arguments
    • Budget hearings/panels/testimony 10am:
    • Treasury Sec Jack Lew, House Appropriations subcmte
    • Education Sec. Arne Duncan, House Education Cmte
    • SEC Chairwoman Mary Jo White, House Financial Services Cmte
    • 1pm: Deputy Treasury Sec. Sarah Bloom Raskin delivers first policy address, on economy, student loans, in Baltimore
    • U.S. ELECTION WRAP: Grimm Re-Election; Keystone Vote; NRA Battle

WHAT TO WATCH:

  • Shire rises after report Allergan is preparing takeover offer
  • French industry minister Montebourg meets Alstom unions today
  • France refers Alstom to AMF financial regulator: Le Monde
  • Netflix to pay Verizon for faster access to broadband network
  • IBM annual meeting; watch for buyback, div. announcements
  • U.S. targets Putin inner circle with new round of sanctions
  • Vevo owners said close to hiring Goldman to explore sale
  • Energy Future board said to vote for bankruptcy w/lender deal
  • Yahoo to debut two video shows to draw more viewers to website
  • TomTom boosts 2014 rev., profit targets; shrs jump
  • Northern Trust reports SEC subpoena over securities lending
  • Global swap regulators said to hold closed-door industry talks
  • Eurozone April Economic Confidence falls to 102; est. 102.9
  • U.K. 1Q GDP rises to 0.8%; est. 0.9%

AM EARNS:

    • 3D Systems (DDD) 8am, $0.15
    • Affiliated Managers Group (AMG) 7:10am, $2.38
    • AGCO (AGCO) 8am, $0.74
    • AGL Resources (GAS) 8am, $1.82
    • Archer-Daniels-Midland Co (ADM) 7am, $0.74
    • Boston Scientific (BSX) 7am, $0.18 - Preview
    • Bristol-Myers Squibb (BMY) 7:30am, $0.43 - Preview
    • Cameco (CCO CN) 8:30am, C$0.11 - Preview
    • CIT Group (CIT) 6am, $0.88
    • Coach (COH) 7am, $0.61 - Preview
    • Consol Energy (CNX) 7am, $0.19
    • Cummins (CMI) 7:30am, $1.67 - Preview
    • Cumulus Media (CMLS) 9am, ($0.01)
    • Diebold (DBD) 8am, $0.24
    • Eaton (ETN) 6:30am, $1.00
    • Forest Laboratories (FRX) 7am, $0.43 - Preview
    • Goodyear Tire & Rubber (GT) 7:30am, $0.60 - Preview
    • Harris (HRS) 6:30am, $1.19
    • HCA Holdings (HCA) 8:29am, $0.85 - Preview
    • Hudson City Bancorp (HCBK) 8am, $0.07
    • Huntsman (HUN) 6am, $0.39
    • Ironwood Pharmaceuticals (IRWD) 7:05am, ($0.44)
    • LKQ (LKQ) 7am, $0.34
    • LyondellBasell Industries (LYB) 7am, $1.74
    • Marriott Vacations Worldwide (VAC) 8am, $0.56
    • Martin Marietta Materials (MLM) 7:01am, ($0.34)
    • McGraw Hill Financial (MHFI) 7:10am, $0.87
    • Merck & Co (MRK) 7am, $0.79 - Preview
    • MGM Resorts (MGM) 8am, $0.09
    • Oshkosh (OSK) 7am, $0.83
    • Paccar (PCAR) 8am, $0.76 - Preview
    • Parker Hannifin (PH) 7:30am, $1.63
    • Rayonier (RYN) 8am, $0.46
    • Rockwell Automation (ROK) 7am, $1.44
    • Sensata (ST) 6am, $0.56
    • Sprint (S) 7am, ($0.08)
    • TransAlta (TA CN) 7:45am, C$0.12
    • TRW Automotive Holdings (TRW) 7am, $1.65
    • UDR (UDR) 8am, $0.00
    • United Therapeutics (UTHR) 6am, $1.60
    • Valero Energy (VLO) 7:49am, $1.39 - Preview
    • Waddell & Reed (WDR) 6:59am, $0.86
    • Xylem (XYL) 7am, $0.32

PM EARNS:

    • ACE (ACE) 4:01pm, $2.15
    • Aflac (AFL) 4:12pm, $1.58
    • Axis Capital Holdings (AXS) 4:05pm, $1.33
    • CH Robinson Worldwide (CHRW) 4:15pm, $0.61
    • Cloud Peak Energy (CLD) 4:10pm, ($0.04)
    • Concur Technologies (CNQR) 4:10pm, $0.09
    • DreamWorks Animation (DWA) 4:02pm, ($0.14)
    • Dun & Bradstreet (DNB) 4:15pm, $1.31
    • eBay (EBAY) 4:15pm, $0.67 - Preview
    • Edison International (EIX) 4pm, $0.82
    • EXCO Resources (XCO) 4:01pm, $0.03
    • Express Scripts (ESRX) 4:01pm, $1.01 - Preview
    • Fiserv (FISV) 4:01pm, $0.74
    • Genworth Financial (GNW) 4:30pm, $0.36
    • Macerich (MAC) 4:30pm, $0.13
    • Marriott International (MAR) 4:30pm, $0.51
    • MB Financial (MBFI) Aft-Mkt, $0.41
    • Methanex (MX CN) 10pm, $1.90
    • Mueller Water Products (MWA) 4:20pm, $0.07
    • NCR (NCR) 4:02pm, $0.48
    • Owens-Illinois (OI) 4:04pm, $0.61
    • Panera Bread (PNRA) 4:05pm, $1.52
    • Questar (STR) 4:24pm, $0.47
    • RenaissanceRe Holdings (RNR) 4:23pm, $2.91
    • RF Micro Devices (RFMD) 4pm, $0.09
    • Riverbed Technology (RVBD) 4:05pm, $0.23
    • Seagate Technology PLC (STX) 4:01pm, $1.25
    • SolarWinds (SWI) 4pm, $0.36
    • TECO Energy (TE) 4:15pm, $0.23
    • Trulia (TRLA) 4:24pm, ($0.13) - Preview
    • Twitter (TWTR) 4:12pm, ($0.03)
    • United States Steel (X) 6:29pm, $0.30
    • US Silica Holdings (SLCA) 4:30pm, $0.35
    • Verisk Analytics (VRSK) 4:10pm, $0.55
    • Yamana Gold (YRI CN) Aft-Mkt, $0.04

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Norilsk CEO Says Nickel Supply Concerns on Sanctions Overstated
  • Brent Rebounds on Ukraine After Biggest Loss in Month; WTI Gains
  • Oil Used in Twix Threatened by Drought on Palm Crop: Commodities
  • Corn Rises for Third Day as U.S. Planting Behind Five-Year Pace
  • Gold Declines Before Fed’s Meeting as Ukraine Crisis Assessed
  • Copper Trades Near Seven-Week High Before Fed Meeting Starts
  • Coffee Gains While Sugar Drops as Soft Traders Await Fed Meeting
  • Kansas Wheat Turning Brown Shows Drought Damage for Winter Crops
  • Copper Deficit May Come Early If Price Plunge Sticks: Bull Case
  • Indian Imports, Currency Crises, Fed Taper Drive Demand For Gold
  • Gunvor Opens Unit in Shanghai Zone to Target Commodities Growth
  • Exxon’s $900 Billion Arctic Prize at Risk After Ukraine: Energy
  • Crops to Livestock Outpace MOO ETF on Drought: Chart of the Day
  • Iron Ore Drops to Seven-Week Low Amid China-Financing Concern

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 6

 

GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EUROPEAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 

 

 

 

 

 

 

 

 

 


April 29, 2014

April 29, 2014 - Slide1

BULLISH TRENDS

April 29, 2014 - Slide2

April 29, 2014 - Slide3

April 29, 2014 - Slide4

April 29, 2014 - Slide5

April 29, 2014 - Slide6

April 29, 2014 - Slide7

April 29, 2014 - Slide8

BEARISH TRENDS

 

April 29, 2014 - Slide9

April 29, 2014 - Slide10

April 29, 2014 - Slide11
April 29, 2014 - Slide12


VIDEO | Real Conversations: McCullough Talks with Top Private Investor

Takeaway: Here are the first two parts of a four part interview between private investor Buddy Carter and Hedgeye CEO Keith McCullough.

In the first of four parts of a wide-ranging interview with Buddy Carter, a private investor and former proprietary trader at Goldman Sachs, Carter discusses how to find the best resources in a radically changing global information landscape with Hedgeye CEO Keith McCullough.

 

 

In the second of four parts in a wide-ranging interview with CEO Keith McCullough, private investor Buddy Carter, a former proprietary trader at Goldman Sachs, talks how about technology has changed the pace and the way we consume financial information.

 


investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

SHORT THE KOREAN WON?

Takeaway: We think the BoK is gearing up to ease monetary policy and/or intervene in the FX market to arrest KRW appreciation.

CONCLUSIONS:

 

  1. Our GIP model sees the South Korean economy in Quad #3 (i.e. Growth Slowing as Inflation Accelerates) over the next few quarters, a catalyst that should weigh on inflows into the nation’s capital markets.
  2. Moreover, we see both growth and inflation undershooting official and consensus targets over the intermediate term. Slowing growth in the US, Japan and “Old China” should cap exports gains (i.e. the primary driver of Korea’s 1Q14 GDP growth acceleration) going forward and annualized FX strength – particularly in 2Q and 3Q – should limit the impact of global cost-push inflation from the commodities markets.  
  3. To the extent our models are proven correct, we would anticipate a dovish/interventionist policy response out of the BoK in the currency market at some point over the intermediate term. That would be an easy “sell”, given the KRW’s material outperformance on a 1D, 1W, 1M, 3M, 6M, 1Y, 18M and 3Y basis.
  4. Our FX valuation models see downside in the KRW vis-à-vis the USD on the order of 5-6% on a REER basis and 7-9% on a carry basis. Historical correlations suggest deltas of this magnitude in the currency market are likely to weigh on the Korean equity market as well as the country’s USD debt.
  5. That being said, however, we’re not raging bears on either asset class. South Korea has proven unsurprisingly resilient to changes in foreign portfolio flows into EM economies in recent years, which is very much in line with our proprietary EM crisis risk modeling work. Additionally, what the KOSPI lacks in dividend yield support, it makes up for in sheer [perceived] cheapness that may continue to perpetuate a fairly consensus intuitional bid into the nation’s stock market.

 

SHORT THE KOREAN WON? - SOUTH KOREA

 

SHORT THE KOREAN WON? - 2

 

SHORT THE KOREAN WON? - 3

 

SHORT THE KOREAN WON? - 4

 

SHORT THE KOREAN WON? - FX

 

SHORT THE KOREAN WON? - 8

 

SHORT THE KOREAN WON? - 9

 

SHORT THE KOREAN WON? - 5

Source: Bloomberg


SHORT THE KOREAN WON? - 10

 Source: Bloomberg

 

SHORT THE KOREAN WON? - 7

Source: IMF

 

SHORT THE KOREAN WON? - 12

 

SHORT THE KOREAN WON? - 13

 

SHORT THE KOREAN WON? - 14

 

Feel free to ping us with any follow-up questions. Have a great evening,

 

DD

 

Darius Dale

Associate: Macro Team


Poll of the Day Recap: 64% Wouldn’t Friend Facebook Stock

Takeaway: 64% NO; 36% YES

Poll of the Day Recap: 64% Wouldn’t Friend Facebook Stock - dislike

 

Right now, 43 analysts have a “Buy” rating on Facebook and nine have “Holds” – there are zero “Sells.” Shares are currently trading at 14X revenues (with advertising revenues set to slow meaningfully through 2014 according to Facebook management). Hedgeye CEO Keith McCullough believes that “as revenue growth slows, this wacky 14x revenue multiple should compress.”
 

That said, we wanted to get your opinion by asking in today’s poll: Would you buy Facebook right now?
 

At the time of this post, 64% of voters said NO; 36% YES.
 

Several NO voters agreed that the timing isn’t right either because of #bubblesbursting, or the market being too risky, as this voter explained, “Technically the chart needs more time to base and consolidate before stepping in to buy. Second, the Nasdaq is in a downtrend presently, which is leading the market, and therefore, initiating a buy here would be trying to catch a falling knife or going against the path of least resistance. There are much better plays out there right now, but $FB will be on my watch list.”
 

Another person who voted NO said, “The multiple to ARPU at Facebook is still ~80x. Mature subscription businesses (i.e. Satellite TV) trade at multiples of ~3-4x. Facebook will have to grow ARPU 20 fold just to grow into its current valuation. That's a tall order for a small business, let alone a company of FB's size.”
 

Additionally, a different NO voter pointed out that “the business model might be powerful, but everything has a price. There have been 411 insider transactions since the IPO for net proceeds of $15.2 billion. Only one of those was an insider Buy – and that was at $21.03 for a million bucks. That's only 0.01% of the total cumulative Insider Transaction value – and was at a price that's 63% below current levels. If Insiders won't buy, then why should I?”
 

Those who took the opposite stance and voted YES said:

  • “Facebook is going beyond the traditional social network they've built thus far, and will do what Google is doing by buying companies that extend beyond the scope of their core business.  Google took the first steps with Nest, while Facebook did it with Oculus; there'll be a lot more of this.  Soon they'll both look like modern versions of General Electric.”
     
  • “As a small business owner, it is a very inexpensive way to advertise/promote to a targeted customer group.  This will help add revenue to FB, as well as, their other strategic plans. Long term buy.”
     
  • “I voted yes because analysts have price targets around $84.00 and I believe FB is investing in the next generation of relevant technologies. It's not about the teenagers anymore.” 
     
  • “I voted yes because Zuckerberg is in agreement with Hedgeye that his stock is overvalued. Using FB shares as a currency to enter new markets is a good thing.  He is not content with just being a social network and over time the bears will be proven wrong.  Oculus VR is a fantastic technology that is being underestimated by the main stream media. Facebook continues to eat Google and Yahoo's lunch in display ad revenue.  They have turned a much maligned Instagram acquisition into an engine for growth.  Sometimes companies that have the most long term potential appear overvalued, I understand the bear thesis, but do bears really understand the bull case?”
     
  • “I believe the stock with reach 80 - 85 in the next year.  Zuckerberg is too vain to do anything but succeed.”

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VIDEO | Penney: Why Panera Bread Is One of My Best Ideas on the Short Side | $PNRA

Hedgeye Managing Director and Restaurants analyst Howard Penney walks investors through the reasons why he added Panera Bread as a "Best Idea" on the short side over a year ago, ahead of its earnings report tomorrow night.


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