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Occupy Hedgeye

Conclusion:  So far, Occupy Wall Street is a smallish group of rabble rousers, but they have gained serious traction in a short period of time and are worth monitoring as a potential political and financial sector factor.  A key catalyst to watch will be October 15th, which is the day of global demonstrations for Occupy Wall Street.

 

“If you put every single left-wing cause into a blender, this is the sludge you’d get.”

          - Fox News, October 1st, 2011

 

“Don't blame Wall Street, don't blame the big banks, if you don't have a job and you're not rich, blame yourself!"

          - Herman Cain, October 2nd, 2011

 

“I came down here to educate myself.... There's a huge void between the rich and the poor in this country.”

          - Susan Sarandon, September 30th, 2011

 

“We're tired of the greedy sons of bitches taking our money. Does this movement have legs? Shit, Look around you!"

          - Leader of Service Employees International Union, October 5th, 2011

 

No, Hedgeye isn’t currently occupied.  In fact, we’ve included a photo of our headquarters in New Haven as pictorial proof that we don’t even have any protestors outside the beautiful Taft Mansion.  All joking aside, we did want to spend some time both quantifying and characterizing the growing Wall Street protest.

 

Occupy Hedgeye - 1a

 

It’s not yet apparent that these protests will have a major impact on the banking system, which is where their reforms are most focused, or the economy generally, but the movement is increasingly showing that it has potential.  Further, as the quotes we’ve highlighted above suggest, the true catalyst coming out of this movement could be an acceleration of class warfare rhetoric heading into the 2012 election season.

 

The Occupy Wall Street protest is headquartered in Zuccotti Park, more commonly known as “Liberty Park Plaza”.  This is a plaza located just north of Wall Street in downtown Manhattan and is highlighted in the map below.  Many believe that the Occupy Wall Street movement has its inspirations in the Arab Spring and, in particular, the protests in Tahir Square in Cairo.  The specific catalyst for the protest appears to have originated with a Canadian based anti-consumer magazine, Adbusters, which floated the idea of occupying Wall Street to its email list in late July of 2011.

 

 Occupy Hedgeye - d2

 

The Occupy Wall Street protest began on September 17thin New York.  In a relatively short period of time, the protest has gained national and global media coverage.  As well, the footprint of the protest had broadened dramatically.  In just three weeks, the protest has done the following:

 

  • Acquired 59,130 followers on Twitter (@OccupyWallSt);
  • Acquired 17,435 attendees on Facebook;
  • Held key demonstrations in the following cities : Manhattan, Los Angeles, Boston, Chicago, Philadelphia, Miami, Portland (Maine and Oregon), Seattle, Denver, Calgary, Toronto, and Montreal;
  • Received celebrity support from Susan Sarandon, Cornel West, Russell Simmons, Margaret Atwood, Alec Baldwin, George Soros, and Joseph Stiglitz;
  • Demonstrated in 70 cities globally;
  • Received union support from  14 of the largest labor unions in the United States; and
  • Received political support from Congressman Ron Paul, Senator Bernie Sanders, and former Senator Russ Feingold.

 

The central demand of the organization appears to be for President Obama to “ordain a Presidential Commission tasked with ending the influence money has over our representatives in Washington."  Beyond that the pervasive theme appears to be in protesting the richest 1% of Americans and their purported greed.  In fact, when interviewed, leaders of Occupy Wall Street commonly refer to themselves as “the other 99%,” which suggests that they represent a broad segment of the U.S. demographic.  As far as we can determine, the group, to date, is largely made up of the left of the left wing, youth, and those underemployed.  As a case in point, Marxist Slavoj Zizek spoke to the group this morning.

 

To be clear, it is not apparent that there is any organization behind the movement that will make it overly effective, or that there is truly a coherent view, other than that “money” and “Wall Street” are bad.  To wit, this weekend an Occupy Wall Street group met in Atlanta and invited Congressman John Lewis to speak to them.  He has been a member of congress since 1987 and is widely considered a leader in the American civil rights movement.  As the video below shows, which is admittedly anecdotal, this segment of Occupy Wall Street could not even decide whether they should led Congressman Lewis peak to them.

 

http://www.youtube.com/watch?v=3QZlp3eGMNI&noredirect=1

 

Despite the lack of organization, Occupy Wall Street is garnering mindshare.  In the chart below, which we borrowed from Google Trends, we would highlight the growth in traction that the movement has received in a very short period of time.   Not surprisingly, as can be seen by the location of the largest amount of searches, the group is gaining the majority of its traction in more liberal areas.  Most notably on this front would be Austin, which is home to the 7thmost searches for “Occupy Wall Street”, but is only the 35thlargest metropolitan region in the United States.

 

 Occupy Hedgeye - d3

 

Analogies are already being made to the Tea Party.  As of yet, those analogies are somewhat inaccurate.  The Tea Party proved itself, even if a minority group, to be organized both politically and monetarily, which allowed the group to effect change in the 2010 election.  To be truly effective, Occupy Wall Street will need money (they purportedly have $40,000 in the bank), the one key thing they appear to be protesting. 

 

That being said, as the chart below shows, Occupy Wall Street does appear to be getting comparable traction in the media as the Tea Party did after roughly the same period of time.  In terms of actual organization, the two groups are both loosely affiliated regional groups with no central leadership.  The key differences so far though seem to be funding (the billionaire Koch brothers are a key backer of the Tea Party) and a more coherent set of concerns and issues.

 

The cohesiveness that the Tea Party was able to build in short order led to a number of key electoral victories in 2010, including:

 

-          Marco Rubio defeating Charlie Crist for Senate in Florida;

-          Scott Brown won Ted Kennedy’s seat in Massachusetts;

-          Rand Paul won a Kentucky Senate seat; and

-          Numerous primary and congressional seat victories.

 

 Occupy Hedgeye - d4

 

It’s too early to tell whether Occupy Wall Street will have real impact beyond disrupting the tourist flow in New York.  The media, though, is certainly giving the platform a voice.  Should fundraising and organization follow, Occupy Wall Street may be an interest group with a loud and disruptive voice in the 2012 elections.

 

Daryl G. Jones

Director of Research


European Risk Monitor: Big Bazooka Cometh

Positions in Europe: Short EUR-USD (FXE); Short Italy (EWI)


How the European sovereign debt and banking contagion crisis churns… Sunday’s meeting between Merkel and Sarkozy on measures to recapitalize European banks targeted the announcement of a bailout bazooka (size and scope still undermined) by the G20 Summit on November 3/4 in Cannes. That gives us a runway of 3.5 weeks of indecision—and while today’s rally across European equity markets and in the EUR-USD pair reflects “hope” in a bailout’s impact on capital markets, from here we’re positioned to short or fade these intermediate term rallies that the inevitable Bazooka will not be able to address—that is the deeper structural problems that cannot be cured with the snap of a finger or the stroke of the pen.

 

As the banking news out of Dexia and Erste over the last days has captured headlines, what’s clear is that so long as sovereigns remain at risk (and here we’re focused on Italy and Spain beyond the much smaller but critical risks of Greece, Portugal and Ireland), the European banking system will remain at risk due to its interconnectedness.

 

Keith re-shorted Italy via the etf EWI and the EUR-USD via FXE in the Hedgeye Virtual Portfolio today. Our thesis on Italy hasn’t changed and we’d point you towards our work titled “Shorting Italy (EWI)” on 9/30 for review. The EUR-USD remains in a decidedly Bearish Formation, which Keith highlighted in today’s Early Look. In short, such a set-up sees the current price below the long term TAIL line, intermediate term TREND line, and immediate term TRADE line. While we’re seeing intraday strength above $1.36 today, the set-up gives us strong downside conviction (see chart below).

 

European Risk Monitor: Big Bazooka Cometh - 1. EURBEAR

 

We continue to keep our eye on European risks via government bond yields and sovereign CDS. Looking at government yields, the 6% yield line on 10 year government bonds remains a critical one that historically has market a breakout level (see chart below).  Italy and Spain have maintained a level below 6% since the ECB restarted the SMP on August 8th, and currently trade at 5.57% and 5.01%, respectively, but look for any gains towards 6% to cause much market consternation.

 

European Risk Monitor: Big Bazooka Cometh - 1. yields   a

 

European Sovereign CDS – European sovereign swaps were tighter week over week. German and French sovereign CDS spreads tightened by 15% and 7% respectively from last Monday to today.

 

European Risk Monitor: Big Bazooka Cometh - 1. ak 1

 

European Risk Monitor: Big Bazooka Cometh - 1. ak 2

 

European Financials CDS Monitor – Bank swaps mostly tightened in Europe last week.  Swaps tightened for 26 of the 40 reference entities. The average tightening was 2.0%, or 10 basis points, and the median tightening was 3.3%.

 

European Risk Monitor: Big Bazooka Cometh - 1. ak 5

 

Matthew Hedrick

Senior Analyst


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 78.51%

Squeezage: SP500 Levels, Refreshed

POSITION: Long Utilities (XLU), Short Consumer Staples (XLP)

 

What felt like the best position (short beta) into Friday’s close, probably feels like the worst position right about now.

 

As with all things beta in a bear market, this too shall pass. Provided that the SP500 fails in the immediate-term TRADE zone of 1186-1193 that I have outlined below and, of course, that the TREND (1228) and TAIL (1266) lines of resistance remain overhead…

 

The bullish news is that in the immediate-term the SP500 just made a higher-low on Friday (from its Short Covering Opportunity (1099) low) of last Tuesday. For the immediate-term TRADE, I’m now using a TRADE zone of support of 1145-1167 (see chart).

 

The bearish news about the immediate-term is that the immediate-term is subject to change in the immediate-term.

 

For now, we have Squeezage.

KM

 

Keith R. McCullough
Chief Executive Officer

 

Squeezage: SP500 Levels, Refreshed - spx neue


BLOW OUT GOLDEN WEEK

Golden Week daily table revs surpass HK$1 billion

 

 

No sign of a Macau slowdown through Golden Week.  Macau table revenues were HK$10.85 billion through the first 10 days of the month, equating to HK$1,085 million per day.  Last year, Golden Week produced average table revenues of HK$780 million per day so we saw a 39% increase in that metric this year.  Our preliminary full month estimate for October, including slots, is HK$25-26 billion which would equate to a 36-42% YoY increase.  Obviously, October should be a monthly record.  We would note that our full month projection assumes a sharp deceleration in GGR per day following the end of Golden Week.

 

We are hearing that hold percentage was a little higher than normal.  The one negative may be that the numbers seem to be fueled by VIP.  Mass, particularly on the low end, was a little disappointing to the operators. 

 

For market share, Galaxy was the clear standout while MGM and SJM were disappointing.  

 

BLOW OUT GOLDEN WEEK - oct


THE M3: GOLDEN WEEK VISITATION; S'PORE JULY VISITATION; SEPT CHINA HOUSING PRICES; COTAIJET

The Macau Metro Monitor, October 10, 2011

 

 

VISITORS UP ON NATIONAL DAY HOLIDAY Macau Business

More than 775,000 visitors passed through Macau during Golden Week, an increase of 13.3% YoY.  Among the total arrivals, about 580,000 were from mainland China, a surge of 22.3%.  The daily average number of occupied rooms was 18,730, an increase of 8.67% YoY.  The average occupancy rate of three-to-five-star hotels during Golden Week reached 88.46%, a slight decrease of 1.54% points YoY.  ADR of three-to-five-star hotels in Macau saw a 23.7% YoY rise to MOP 1,760 (US$220).

 

JULY SINGAPORE VISITOR ARRIVALS STB

Singapore visitor count reached 1.27MM people in July 2011, an increase of 16.2% YoY.  Mainland Chinese visitors hit 184k, rising 56% YoY.

 

THE M3: GOLDEN WEEK VISITATION; S'PORE JULY VISITATION; SEPT CHINA HOUSING PRICES; COTAIJET - SPORE

 

CHINA HOUSING PRICES INCH LOWER WSJ

According to China Real Estate Index System, September housing prices in 100 major cities in China were down 0.03% MoM, after a largely flat MoM reading in August.  The data provider said a survey of property developers and real-estate agencies showed that the average home price in September was a touch lower at 8,877 yuan ($1,392) per square meter from 8,880 yuan in August and but slightly higher than July's 8,874 yuan.

 

COTAIJET TO INCREASE FARES Macau Business

The Macau government has approved CotaiJet’s request to increase its fares.  Starting Wednesday, CotaiJet will increase normal seat fare prices by MOP17 (US$2.1) to MOP180.  In first class, prices will go down by MOP7 to MOP390.  Macau residents will be able to enjoy an MOP11 to MOP15 discount.  CotaiJet requested the fare increase due to rising fuel prices and overall inflation.


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