Here's how we think the Bureau of Labor Statistics REALLY calculates the monthly jobs number.
Takeaway: Our Macro Playbook is a daily 1-page summary of our investment themes, core ETF recommendations and proprietary quantitative market context.
Long Ideas/Overweight Recommendations
Short Ideas/Underweight Recommendations
QUANT SIGNALS & RESEARCH CONTEXT
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TRACKING OUR ACTIVE MACRO THEMES
#Quad4 (introduced 10/2/14): Our models are forecasting a continued slowing in the pace of domestic economic growth, as well as a further deceleration in inflation here in Q4. The confluence of these two events is likely to perpetuate a rise in volatility across asset classes as broad-based expectations for a robust economic recovery and tighter monetary policy are met with bearish data that is counter to the consensus narrative.
Oil: More Downside? (11/5)
#EuropeSlowing (introduced 10/2/14): Is ECB President Mario Draghi Europe's savior? Despite his ability to wield a QE fire hose, our view is that inflation via currency debasement does not produce sustainable economic growth. We believe select member states will struggle to implement appropriate structural reforms and fiscal management to induce real growth.
#Bubbles (introduced 10/2/14): The current economic cycle is cresting and the confluence of policy-induced yield-chasing and late-cycle speculation is inflating spread risk across asset classes. The clock is ticking on the value proposition of the latest policy to inflate as the prices many investors are paying for financial assets is significantly higher than the value they are receiving in return.
Best of luck out there,
Associate: Macro Team
About the Hedgeye Macro Playbook
The Hedgeye Macro Playbook aspires to present investors with the robust quantitative signals, well-researched investment themes and actionable ETF recommendations required to dynamically allocate assets and front-run regime changes across global financial markets. The securities highlighted above represent our top ten investment recommendations based on our active macro themes, which themselves stem from our proprietary four-quadrant Growth/Inflation/Policy (GIP) framework. The securities are ranked according to our calculus of the immediate-term risk/reward of going long or short at the prior closing price, which itself is based on our proprietary analysis of price, volume and volatility trends. Effectively, it is a dynamic ranking of the order in which we’d buy or sell the securities today.
Yesterday the Macro Team hosted a special “Behind the Curtain” conference call with Michael McFaul, one of the world’s foremost experts on Russia and Vladimir Putin. Until earlier this year, McFaul was the U.S. Ambassador to Russia and held closed-door meetings with Putin and his top lieutenants before finally stepping down out of concern for his family and his own safety.
If you missed it, click here for a full video replay podcast.
Below we offer key take-aways and summary from McFaul’s prepared remarks and a robust Q&A session (starting at 31:24).
McFaul On the Big Question – Why are we having this conflict with Russia in 2014?
On Putin and Move into Crimea:
East vs West on Policy:
On Putin and Support:
Could Moscow see Uprising Like in Kiev?
Russia Turning East:
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.
Tickers: MGM, WYNN, HLT, NCLH
MGM/WYNN – Officially awarded MA licenses. Both companies intend to break ground next year and have the casinos open by 2017. WYNN paid its $85 million license fee up front while MGM will pay its fee on November 17. Also, the MA gaming commission voted to extend the southeastern region deadline from December 1 until the end of January.
Takeaway: ROI is the question
HLT – (Ithaca Journal) Ithaca Common Council unanimously endorsed proceeding with a land transaction for a new hotel in the block immediately east of the Commons. Council on Wednesday voted to authorize transfer of city ownership of a 32-space parking lot at 320-324 E. State/Martin Luther King Jr. St. to the city’s community-development arm. The resolution also authorized the Ithaca Urban Renewal Agency to enter formal negotiations with Lighthouse Hotels for the city-owned property at the site. Lighthouse proposes a 120-room, seven-story Hilton Canopy hotel. The $19 million project would have a cafe-bar and a restaurant.
Takeaway: Hilton's first openly discussed Canopy - a brown-field redevelopment and at cost per key of approximately $158,000.
WYN – announced it completed a term securitization transaction involving the issuance of $325 million of asset-backed notes. Sierra Timeshare 2014-3 Receivables Funding LLC issued $255 million of A rated notes and $70 million of BBB rated notes. The notes were backed by vacation ownership loans and had coupons of 2.30% and 2.80%, respectively, for an overall weighted average coupon of 2.41%. The advance rate for this transaction was 88.5%.
Takeaway: Slightly higher interest rates (5-10 bps) than VAC's recent securitization.
NCL – priced $680m senior notes at par (5.25%) maturing Nov 2019
CCL – CEO Gerald Raymond Cahill sold 25,002 shares of the stock on Monday, November 3 at an average price of $40.09 and now directly owns 87,337 shares in the company.
CHH - COO Patrick Pacious sold 33,947 shares on Monday, November 3 at an average price of $53.25 and following the sale and now directly owns 99,211 shares.
Grand Prix – Macau Grand Prix Committee coordinator Costa Antunes revealed that this year’s sale of Grand Prix (Nov 13-16) tickets has exceeded expectations, with tickets for the main stand already sold out. The organizer of the 61st Macau Grand Prix has also predicted that the event will attract more people to Macau this year.
Takeaway: Shouldn't impact visitation that much
California – North Fork Rancheria may still offer Class II games or it may ask the Bureau of Indian Affairs to approve Class III games, despite a failed Nov referendum. Station Casinos was to manage the casino.
Takeaway: Persistence can pay off
Hedgeye Macro Team remains negative Europe, their bottom-up, qualitative analysis (Growth/Inflation/Policy framework) indicates that the Eurozone is setting up to enter the ugly Quad4 in Q4 (equating to growth decelerates and inflation decelerates) = Europe Slowing.
Takeaway: We're seeing bottoms up slowing in Europe cruise pricing in our monthly survey. Europe has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely. Following CCL's earnings release, we recently turned negative on those stocks based on the negative European thesis.
Hedgeye Macro Team remains negative on consumer spending and believes in muted inflation, a Quad4 set-up. Following a great call on rising housing prices, the Hedgeye Macro/Financials team is decidedly less positive.
Takeaway: We’ve found housing prices to be the single most significant factor in driving gaming revenues over the past 20 years in virtually all gaming markets across the US.
Takeaway: The UST 10YR Yield is at 2.38% this morning, it remains in crash mode for 2014.
The UST 10YR Yield is at 2.38% this morning. It remains in crash mode for 2014 (down -21% from 3.03% where it started the year), so today’s jobs report really matters – if only because there’s so much asymmetry in SPY vs. everything else in the world.
Immediate-term downside risk in the UST 10YR Yield to 2.22% as outlined in Daily Trading Ranges - we remain very bullish on the Long Bond (TLT, EDV, etc).
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