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MACAU: STILL TRACKING DOWN 20-25% IN OCT

Takeaway: Oct share shifts likely due to hold. However, VIP volumes could be moving away from the US operators in the coming months

VIP share shifts coming? Read on...

 

 

Please see our note:  http://docs.hedgeye.com/HE_Macau_Down_10.28.14.pdf


THE HEDGEYE MACRO PLAYBOOK

Takeaway: Our Macro Playbook is a daily 1-page summary of our core ETF recommendations, investment themes and proprietary quantitative market context.

CLICK HERE to view the document. In today’s edition, we highlight:

 

  1. Why the nature of the bounces across various sectors, style factors and country exposures throughout the DM Equities space portend poorly for consensus expectations of a year-end rally
  2. Quantifying and contextualizing the breakdown in across various segments of the energy complex in advance of our 11am call with Dr. Leonardo Maugeri; ping sales@hedgeye.com for access

 

Best of luck out there,

 

Darius Dale

Associate: Macro Team


#Nice Behavior

This note was originally published at 8am on October 14, 2014 for Hedgeye subscribers.

“It would be nice to think that such bad behavior will never happen again.”

-Daniel Alpert

 

Some people are nice in this business. Some people are mean. I tend to be nice to subscribers, children, and dogs. I guess I have a not so nice tweet-streak in me for pundits who aren’t accountable. Hockey players can be mean that way.

 

The aforementioned quote comes from a non-hockey-non-consensus economics book I have been waiting to review called The Age of Oversupply, by Dan Alpert from Westwood Capital. It’s an outside the box, but reasonable way to consider #deflation.

 

Dan is one of the nice guys who holds himself accountable to his clients. He is also on a short list of people who were appropriately bearish on things like supply in 2008. The main contention in his book is that oversupply is here to stay. That appears right, for now.

 

Back to the Global Macro Grind

 

Some of the #MoBros on Twitter have been calling me a meany for calling their levered-long-momentum positions in small cap and/or social (non profit publicly listed companies) stocks #Bubbles. But Dan is down with that – he calls them what they are too.

 

The Great Credit Bubble may have burst, but the age of oversupply hasn’t ended – and won’t anytime soon. Abundant labor, excess capital, and cheap money are here to stay.” (The Age of Oversupply, pg 18)

 

By my math, the only way to unwind the excess and stupid-valuation-storytelling associated with these cheap moneys is via lower prices for #bubble stocks. Yesterday’s US stock market volume was revealing on that front:

 

  1. Total US Equity Market Volume (total exchange + OTC + OTCBB) was +6.2% vs. its 3 month average
  2. Total Exchange Volume was +44% vs. its 3 month average
  3. Total Traded Value (Russell 3000) was +30% vs. its 4 month average

 

That’s three different ways we try to look at equity market volume in real-time. When it comes to the pick-toggling junk bond #bubble, finding real-time volume read-throughs is more like finding Waldo.

 

Today’s Chart of The Day (exhibit 51 in our Q4 Macro Themes deck) is a picture of what I am trying to hammer home in terms of the relationship volume has with inflated prices – Total Exchange Volume vs Russell 3000 TTM P/E multiple.

 

Punch-line: this is the most expensive and illiquid market since the caveman.

 

“So” how does expensive illiquidity sync with oversupply of labor, capital, etc.? Unfortunately, when Japanese, European, and US growth is slowing (all at the same time), I think what that means is pretty straightforward:

 

  1. Deflation of illiquid equity bubbles
  2. Re-flation of premiums paid for liquidity (JGBs, Bunds, Treasuries)
  3. And a whole whack of revisionist sell-side economics excuse-making along the way

 

You see, until this market snapped the backs of the Moving Monkeys (point and click single-factor time/price charts using things like the “50 and 200 day” moving averages), they didn’t have to pay attention to things like books, volume, or volatility.

 

After a +138% rip in US equity volatility (VIX since the Russell #Bubble topped on July 7th, 2014), they need to start reading!

 

To be clear on timing, since we’re now probing:

 

A)     Immediate-term TRADE overbought signals in VIX (risk range = 17.78-24.98)

B)      Immediate-term TRADE oversold signals in SPX and RUT (SPX risk range = 1849-1937)

 

I don’t want you to be shorting US stocks and buying TLT with the 10yr Yield at its YTD lows (2.21%) today.

 

I just want you to, objectively, rewind the risk management tapes and learn something from what a baseline 3-factor model (price, volume, and volatility) was signaling for, well, most of 2014.

 

For OCT to-date, the #Quad4 deflation in US equity sector styles levered to inflation and/or growth expectations looks like this:

 

  1. Energy Stocks (XLE) down -10.65%
  2. Basic Material Stocks (XLB) down -9.03%
  3. Industrial Stocks (XLI) down -6.79%

 

That’s precisely what you should see in #Quad4. Mr. Market is telling you that both growth and inflation expectations are slowing, at the same time. Unless you are overweight Cash, Treasury Bonds, and Munis, that is not #nice portfolio behavior.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr yield 2.20-2.39%

SPX 1849-1937

RUT 1042-1081

VIX 17.78-24.98
USD 84.99-86.64

Gold 1211-1241

 

Best of luck out there today,

KM

 

#Nice Behavior - 10.14.14 Volume vs. Russell PEs


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 80.28%
  • SHORT SIGNALS 78.51%

THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – October 28, 2014


As we look at today's setup for the S&P 500, the range is 140 points or 6.15% downside to 1841 and 0.99% upside to 1981.                               

                                                                                                

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: 1.89 from 1.88
  • VIX closed at 16.04 1 day percent change of -0.43%

 

MACRO DATA POINTS (Bloomberg Estimates):

  • FOMC starts 2-day meeting
  • 7:45am: ICSC weekly sales
  • 8:30am: Durable Goods, Sept, est 0.5% (pr -18.2%, rev -18.4%)
  • 8:55am: Redbook weekly sales
  • 9am: S&P/Case-Shiller 20 City m/m, Aug., est. 0.18% (pr -0.5%)
  • 10am: Consumer Confidence Index, Oct., est. 87 (prior 86)
  • 10am: Richmond Fed Mfg Index, Oct., est. 11 (prior 14)
  • 11:30am: U.S. to sell 4W bills
  • 1pm: U.S. to sell $29b 2Y note
  • 4:30pm: API weekly oil inventories

 

GOVERNMENT:

    • 8:30am-4pm: U.S. Chamber of Commerce hosts cybersecurity summit
    • 9am: Interior’s Jewell delivers keynote remarks at National Congress of American Indians Annual Convention; Atlanta
    • 9:30am: U.S. Chamber of Commerce releases report on risk-based pricing in consumer lending
    • U.S. ELECTION WRAP: Runoff Scenarios and Senate Control; Polls

 

WHAT TO WATCH:

  • Ackman’s $5.3 Billion Allergan Bet Examined Before Ouster Vote
  • Apple’s Cook, Alibaba’s Ma Talk Marriage of Mobile Payments
  • Alibaba’s Ma Targets Hollywood Studio Partners in Content Push
  • T-Mobile Raises 2014 Subscriber Forecast After Beating Ests.
  • Regal Entertainment Exploring Alternatives; 3Q Adj. EPS Beats
  • GM to Build Volt Electric Drive, Invest $300m in Michigan
  • Twitter CEO Says Adding Users Top Priority as Growth Slows
  • Sanofi SlumPS on Forecast for Flat Diabetes Sales Next Year
  • Madison Square Garden Mulls Plan to Split Into 2 Companies
  • Money Mkts Split With Economists on Fed Interest-Rate Outlook
  • Largest U.S. Banks See Worst Outflow of Money in ETF Since 2009
  • Detroit to Learn Fate of $7 Billion Debt-Cutting Plan Nov. 7
  • CDC Toughens Monitoring Guidelines for People With Ebola Risk

 

AM EARNS:

    • Aetna (AET) 6am, $1.58
    • Agco (AGCO) 8am, $0.63
    • Alere (ALR) 7:30am, $0.52
    • Ametek (AME) 7am, $0.61
    • Arch Coal (ACI) 7:45am, ($0.41) - Preview
    • AutoNation (AN) 7:30am, $0.86
    • Centene (CNC) 6am, $0.99
    • CIT (CIT) 6:30am, $0.89
    • Coach (COH) 7am, $0.45 - Preview
    • Consol Energy (CNX) 6:45am, $0.18 - Preview
    • Corning (GLW) 7:15am, $0.38
    • Cummins (CMI) 7:30am, $2.28 - Preview
    • Ecolab (ECL) 8:05am, $1.20
    • EI du Pont de Nemours (DD) 6am, $0.53 - Preview
    • FirstMerit (FMER) 7:30am, $0.37
    • Freeport-McMoRan (FCX) 8am, $0.61 - Preview
    • Harris (HRS) 6:30am, $1.09
    • HCA (HCA) 8:30am, $1.17
    • Laboratory of America (LH) 6:41am, $1.75
    • Marsh & McLennan (MMC) 7am, $0.53
    • Martin Marietta (MLM) 8:20am, $1.70
    • MeadWestvaco (MWV) 7:25am, $0.54
    • MSC Industrial Direct (MSM) 7:30am, $1.01
    • Noble Energy (NBL) 7:27am, $0.36 - Preview
    • Paccar (PCAR) 8am, $0.96 - Preview
    • Parker-Hannifin (PH) 7:30am, $1.67 - Preview
    • Pfizer (PFE) 7am, $0.55 - Preview
    • PG&E (PCG) 9:02am, $1.14
    • Schnitzer Steel (SCHN) 8am, $0.31
    • Sensata Technologies (ST) 6am, $0.62
    • Sherwin-Williams (SHW) 7am, $3.22
    • Sirius XM (SIRI) 7:01am, $0.02 - Preview
    • Spirit Airlines (SAVE) 6am, $0.97
    • Starwood Hotels (HOT) 6am, $0.65
    • Synergy Resources (SYRG) 6am, $0.13
    • TD Ameritrade (AMTD) 7:30am, $0.36
    • Timken (TKR) 7:25am, $0.66
    • TRW Automotive (TRW) 7am, $1.69
    • United Therapeutics (UTHR) 6am, $1.79
    • Vishay Intertechnology (VSH) 7:30am, $0.28
    • Wabtec (WAB) 7:56am, $0.89
    • Waddell & Reed Finl (WDR) 6:59am, $0.92
    • Whirlpool (WHR) 6am, $3.13
    • Xylem (XYL) 7am, $0.52 - Preview

 

PM EARNS:

    • Aflac (AFL) 4:06pm, $1.43
    • AGL Resources (GAS) 5:30pm, $0.30
    • American Financial (AFG) 5pm, $1.14
    • Ameriprise Financial (AMP) 4:07pm, $1.96
    • Anadarko Petroleum (APC) 4:05pm, $1.27
    • Arthur J Gallagher (AJG) 4:13pm, $0.68
    • Aspen Technology (AZPN) 4:10pm, $0.27
    • CH Robinson Worldwide (CHRW) 4:15pm, $0.81
    • Chemtura (CHMT) 4:37pm, $0.30
    • Cincinnati Financial (CINF) 4:02pm, $0.71
    • CNO Financial (CNO) 4:05pm, $0.32
    • Dun & Bradstreet (DNB) 4:15pm, $1.72
    • Dyax (DYAX) 4:01pm, ($0.06)
    • Eagle Materials (EXP) 4:15pm, $1.03
    • Edison Intl (EIX) 4pm, $1.35
    • Electronic Arts (EA) 4:01pm, $0.53 - Preview
    • Equity Residential (EQR) 4:53pm, $0.33 - Preview
    • EXCO Resources (XCO) 4:08pm, $0.01
    • Express Scripts (ESRX) 4:25pm, $1.29 - Preview
    • Facebook (FB) 4:05pm, $0.40 - Preview
    • Fiserv (FISV) 4:01pm, $0.84
    • Gilead Sciences (GILD) 4:05pm, $1.93 - Preview
    • Green Plains (GPRE) 4:48pm, $0.96
    • Hatteras Financial (HTS) 4:02pm, $0.58
    • InvenSense (INVN) 4:06pm, $0.16
    • Kimco Realty (KIM) 4:01pm, $0.14
    • Macerich (MAC) 4:01pm, $0.20
    • Marriott Intl (MAR) 4:30pm, $0.62
    • McKesson (MCK) 4pm, $2.73
    • Mueller Water Products (MWA) 4:25pm, $0.12
    • Newfield Exploration (NFX) 4:01pm, $0.50
    • Owens-Illinois (OI) 4:04pm, $0.73
    • Panera Bread (PNRA) 4:05pm, $1.42
    • PriceSmart (PSMT) 4pm, $0.73
    • SM Energy (SM) 5:15pm, $1.47
    • SolarWinds (SWI) 4:07pm, $0.43
    • Total System Services (TSS) 4pm, $0.52
    • Trinity Industries (TRN) 4:05pm, $0.86
    • TriQuint Semiconductor (TQNT) 4:02pm, $0.24
    • UDR (UDR) 4:01pm, $0.06
    • United States Steel (X) 4:10pm, $1.20
    • Verisk Analytics (VRSK) 4:10pm, $0.64
    • Vertex Pharmaceuticals (VRTX) 4:01pm, ($0.65)
    • Western Digital (WDC) 4:15pm, $2.04
    • Willis (WSH) 4:30pm, $0.17
    • Wynn Resorts (WYNN) 4:05pm, $1.82

 

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Russian Mining Tycoons Seek to Trim Debt as Sanctions Sting
  • Soybean Meal Climbs to Four-Month High on Demand to Fatten Hogs
  • Crop Slump Sending Farmers to Wheat as Best Option: Commodities
  • Gold Trades Above Two-Week Low on Fed Outlook to Physical Buying
  • Nickel Advances in London Following Six Sessions of Declines
  • Rice Drops 3.1% in Chicago Trading to Lowest Since October 2010
  • Wheat Gains for Second Day on Australian, Russian Crop Concerns
  • Steel Rebar Holds Losses as Iron Ore Futures Slump to Record Low
  • Goldman Sees Nickel Rally Following a Drop in Pig Iron Output
  • Palm Oil Jumps Most in Seven Weeks on Malaysia Biodiesel Demand
  • Alpiq’s Former Head of Trading Erik Saether Joins Sweden’s Sweco
  • Cocoa Falls to Three-Month Low in London; Arabica Coffee Slides
  • Japan’s Sendai Vote Signals Quickening Pace on Reactor Restarts
  • Rice Exports From India Seen Plunging 30% as Harvest Contracts

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


October 28, 2014

October 28, 2014 - Slide1

 

BULLISH TRENDS

October 28, 2014 - Slide2

October 28, 2014 - Slide3

 

 

BEARISH TRENDS

October 28, 2014 - Slide4 

October 28, 2014 - Slide5

October 28, 2014 - Slide6

October 28, 2014 - Slide7

October 28, 2014 - Slide8

October 28, 2014 - Slide9

October 28, 2014 - Slide10

October 28, 2014 - Slide11


Equity Market Bounce

Client Talking Points

S&P SECTORS

The sector variance in the U.S. stock market has completely blown out – yesterday’s -2.1% drop in Energy (XLE) to -5.3% year-to-date vs. Healthcare (XLV) hanging out at the rafters +0.1% to +17.8% year-to-date has a lot to do with #Quad4 deflation.

COPPER

Copper is bouncing to lower-highs this morning as Chinese stocks had their 1st up day in 6; looks like a selling opportunity anywhere north of $3.09/lb – which is consistent with our SELL Old China (buy New China) theme + commodity deflation.

EUROPE

After opening “up” yesterday, then getting smoked into the close, they bounce them again as Sweden cuts rates to 0.00% - yet everyone knows that isn’t going to do a darn thing for the economy; keep selling European equities on green.

Asset Allocation

CASH 65% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 4%
FIXED INCOME 27% INTL CURRENCIES 4%

Top Long Ideas

Company Ticker Sector Duration
EDV

The Vanguard Extended Duration Treasury (EDV) is an extended duration ETF (20-30yr). U.S. real GDP growth is unlikely to come in anywhere in the area code of consensus projections of 3-plus percent. And it is becoming clear to us that market participants are interpreting the Fed’s dovish shift as signaling cause for concern with respect to the growth outlook. We remain on other side of Consensus Macro positions (bearish on Oil, bullish on Treasuries, bearish on SPX) and still have high conviction in our biggest macro call of 2014 - that U.S. growth would slow and bond yields fall in kind.

TLT

We continue to think long-term interest rates are headed in the direction of both reported growth and growth expectations – i.e. lower. In light of that, we encourage you to remain long of the long bond. The performance divergence between Treasuries, stocks and commodities should continue to widen over the next two to three months. As it’s done for multiple generations, the 10Y Treasury Yield continues to track the slope of domestic economic growth like a glove. We certainly hope you had the Long Bond (TLT) on versus the Russell 2000 (short side) as the performance divergence in being long #GrowthSlowing hit its widest for 2014 YTD (ex-reinvesting interest).

RH

Restoration Hardware remains our Retail Team’s highest-conviction long idea. We think that most parts of the thesis are at least acknowledged by the market (category growth, real estate expansion), but people are absolutely missing how all the pieces are coming together to drive such outsized earnings growth over an extremely long duration. The punchline of our real estate analysis is that a) RH stores could get far bigger than even the RH bulls seem to think, b) Aside from reconfiguring 66 existing markets, there’s another 19 markets we identified where the spending rate on home furnishings by people making over $100k in income suggests that RH should expand to these markets with Design Galleries, and c) the availability and economics on large properties for all these markets are far better than people think. The consensus is looking for long-term earnings growth of 28% -- we’re looking for 45%.  

Three for the Road

TWEET OF THE DAY

TREASURIES: 10yr = 2.25%, remains in crash mode, -26% YTD (long $TLT)

@KeithMcCullough

QUOTE OF THE DAY

Sometimes it's just enough to smile sincerely.

-Mike Dolan

STAT OF THE DAY

66%, the percentage of teams to win the World Series after winning Game 5 and breaking a 2-2 tie. The San Francisco Giants did just that Sunday night, and they play the Kansas City Royals tonight in Game 6.


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