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Shiller Warns U.S. Home Prices Could Go 'Negative Nationally' [Flashback: We Were First]

Takeaway: We were first and we remain the bears on the U.S. housing market.

Home price growth, as measured by the Case-Shiller 20-city composite, slowed for a ninth consecutive month, decelerating -120bps sequentially to +5.6% year-over-year. The rate of deceleration in August is largely consistent with trend as the last four months have been -150bps, -130bps, -130bps and -120bps as the rate of improvement in HPI has decelerated from +12.4% YoY to +5.6%.

 

For the record, Hedgeye managing director Josh Steiner highlighted back in August why we were (and remain) bearish on the U.S. housing market. 

 


September's Polar Vortex? Durable Goods/Retail Sales Slowing into 4Q

Headline durable goods declined -1.3% sequentially, the second consecutive month of negative growth, and decelerated on both 1Y and 2Y basis. 

 

Sure, the drop in commercial aircraft orders and communication equipment (both volatile components) led the softness but, overall, it just wasn’t a strong report.  Almost every sub-aggregate reported negative MoM growth and most decelerated on a year-over-year and 2Y ave basis as well. 

 

Durable goods ex-Defense & Transports were down -0.5% sequentially, Core Capital Goods dropped the most in 8 months and Durables ex-Defense & Aircraft – i.e. the stuff the average household purchases – was down for a second consecutive month - the 1st such instance since the polar vortex/weather distortion peak in Jan/Feb. 

 

It’s worth noting also that the rise in consumer credit has followed the slope of durable goods consumption in recent quarters as household spending on durable goods has helped buttress soft’ish growth in services/non-durables consumption.  A retreat in durables spending would weigh on both credit growth and aggregate PCE heading into 4Q.  

 

So, while the labor and income data has held steady, the spending and mfg data is slowing from a second derivative perspective as we head into 4Q.   

 

If you agree with our view that it's the rate of change, or slope of the line, that matters in front-running market and economic inflections then the traversing from “Good” to “Okay” in the domestic macroeconomy as the preponderance of the ROW transitions from “Okay” to “Poor”  as growth slows and disinflation predominates is not your cue to buy the top end of a late-cycle rally with leverage.

 

A lot of myopic speculation coming down the pike with the Trick-or-Treat double header of FOMC & 3Q GDP on deck to close out the week……     

 

"Learn to separate the majors from the minors. A lot of people don't do well because they major in minor things."

 

September's Polar Vortex?  Durable Goods/Retail Sales Slowing into 4Q - Durables Ex Def   Air

 

September's Polar Vortex?  Durable Goods/Retail Sales Slowing into 4Q - Core Cap Goods

 

September's Polar Vortex?  Durable Goods/Retail Sales Slowing into 4Q - Revolving Credit vs Durables

 

September's Polar Vortex?  Durable Goods/Retail Sales Slowing into 4Q - Eco Summary 102814

 

September's Polar Vortex?  Durable Goods/Retail Sales Slowing into 4Q - Durables Table

 

 

Christian B. Drake

@HedgeyeUSA


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

GLPI Q3 2014 EARNINGS CALL NOTES

Takeaway: We like the valuation but struggle to find a catalyst

"Easy pickings and no hard work, life doesn't work like that...  hang in long enough to get lucky"  -- Peter Carlino

PREPARED REMARKS

Happy to report a good quarter.

 

$6m higher variance to guidance

  • Rents from Columbus & Toledo $700,000 better
  • Perry & Baton Rouge $1.3 million
    • Perryville cannibalization due to Horseshoe opening was less but not changing outlook
    • Baton Rouge performing better, not sure why, market seems more rational on marketing spend and reinvestment
  • 1x income tax true up for 2013 = ~$2 million
  • accruals for executive bonus, which is dependent on acquisitions, revered ~$2 million from bonus due to Meadows lawsuit.

 

Meadows Acquisition

  • Interest was robust from operators
  • Discovered financial information was unreliable & false
  • Forced to end operator discussions
  • Approached Cannery, no response
  • Filed Suit including: fraud & breach of contract
  • Seeking returns of $10 million consulting fee as well as potentially cancellation of purchase
  • Not take lawsuit lightly
  • Due to lawsuit, will not comment further

 

Q&A

Q: Regional gaming outlook, state of industry, easier comps?

  • Appears to be a bottom in the market, not robust recovery, no shortage of people on the floor, but industry not collapsing, will settle out over time 

Q: Deal flow, process, timing & pace of transactions

  • Unique issues with Meadows and transaction, have general view that no deal is better than a bad deal, will proceed with great caution for shareholders
  • Recognize what PENN did to split off the REIT changed industry, elevated the value of others as well and have some companies and assets trading at comps to GLPI which makes acquisitions more difficult - others applied unrealistic multiple to valuations
  • Will work to identify an operator in advance at a known price

Q: Need to add more people for add'l due diligence?

  • Due diligence not a staffing issue, rather unique representations that were cause for concern
  • Always use outside resources to evaluate transactions

Q: Accelerated views on acquisitions outside of regional gaming?

  • Way too early to look beyond regional gaming for acquisitions

Q: Thoughts on impact from National Harbor on Perryville?

  • Expect a decline but reasonably modest.  Don't believe significant impact on Perryville, more likely negative impact on Horseshoe and Maryland Live

Q: Potential for competition in the market, impact on competitive advantage?

  • GLPI mgmt not convinced BYD and PNK will convert/establish a REIT - too difficult a process.  Look forward to competing.  Expect GLPI will be better rated credit, better rent coverage and lower leverage -- so GLPI a better more formidable competitor

Q: Financing capacity available as long as Meadows transaction up in the air?

  • No limit on size or number of deals, expect to finance 50% debt and 50% equity.  Don't feel their capacity is limited 

Q: Rent escalator, subject to adjustments - is the escalator day-to-day?

  • Press release data is unadjusted.  Within Master Lease calls for various adjustments, will be close, encouraged may still receive escalator.  Need final results from PENN through October 31, 2014

Q: Business attributes of non-gaming acquisitions.

  • Theater chain is not priorities 1, 2, or 3
  • Have looked at some other things, not a priority
  • Take 3x's the effort to think about opportunities outside of gaming

Q: Identifying an operator on the front end, limit GLPI on large portfolios?

  • Yes, a complexity and reality. Need to demonstrate ability to handle large acquisitions. Will consider using TRS to facilitate trade as well as loan structuring opportunities as well. GLPI well equipped to handle complex transactions

Q: Upstate NY opportunities?

  • Provided build to suit package to one operator in the Southern Tier area. Would like to own on the backside of construction.  Disclosed Traditions in Binghamton area

Q: Other green field opportunities?

  • Not many in limited license jurisdictions. Green fields few and far between

Q: ISLE - what factor influenced decision to outcome?

  • Unable to answer, if a property is out there, considered alive and simply won't comment.  GLPI looked.  Not comment further?

Q: Meadows - attempt to recast acquisition price?

  • Owners not willing to talk from get go. 

Q: Aging of database and demographic changes?

  • Younger people will gamble but not on same games their parents played. Seeing evolution of gambling, albeit slowly. Seen shift from tables to slots, now seeing shift back to table games

Call Today | Ebola is in New York City; Should We Be Worried?

Takeaway: Our Healthcare team has extended the invite for this event. Feel free to call in today at 1pm EDT

Call Today | Ebola is in New York City; Should We Be Worried? - HE H ebolanyc

The Hedgeye Healthcare team will be hosting a specialist call with Dr. Jeffrey Shaman today at 1:00pm EDT to learn more about  the current Ebola virus situation in the U.S. and specifically New York.  

  

What are the real versus perceived risks? Will things get worse? How will we know when its getting better?   

 

Dr. Shaman will provide an informed perspective to better understand recent developments, including the global response in Africa, the handling of confirmed cases in the U.S. and Spain, the naming of a Ebola Czar, as well as what we should expect in the immediate future. We'll discuss Dr. Shaman's research on forecasting and controlling the ongoing outbreak in Africa, the probability of a significant outbreak outside of Africa, and the timeline for bringing the disease under control, which Dr. Shaman estimates will take another 12 to 18 months.   

 

 

CALL DETAILS

In the interest of public service, this call will be open and free of charge.

  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 651216#
  • Materials: CLICK HERE (the slides will be available approximately one hour prior to the start of the call)

Contact for more information.

 

 

ABOUT JEFFREY SHAMAN, PhD

Dr. Shaman is an Associate Professor in the Department of Environmental Health Sciences at Colombia University, a junior faculty fellow of the Earth Institute, a faculty fellow of the Institute for Social and Economic Research and Policy, and a member of the Center for Environmental Health in Northern Manhattan. He is also affiliated with the International Research Institute for Climate and Society.  Dr. Shaman received a BA in biology from the University of Pennsylvania, and an MA, M.Ph. and PhD in climate science from Columbia University. He was a NOAA post-­-doctoral fellow in climate and global change at Harvard University.

 

His research interests include: infectious disease, vector and pathogen ecology, health in the indoor and built environment, large-­-scale climate dynamics, the hydrologic cycle, and climate and disease forecast. Much of his present research focuses on developing model-­-inference systems for the forecast of infectious diseases, including influenza, West Nile virus and Ebola. 


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Editor's note: This unlocked edition of Daily Trading Ranges was originally sent to subscribers on October 28, 2014 at 07:44. Click here to learn more and to subscribe.

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BEARISH TRENDS

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