Here's a quick look at some of the top videos, cartoons, market insights and more from Hedgeye this past week.
Real Conversations: Crisis Coming? Stockman on ‘Likely Global Recession’
David Stockman, the outspoken former Reagan budget director and bestselling author of “The Great Deformation,” sits down with Hedgeye CEO Keith McCullough to discuss a number of important subjects in this wide-ranging interview including consequences of what the Fed is currently doing and why a global recession may be in store.
EXCERPT | Are Global Central Banks Running Out Of Bullets? A Call with John B. Taylor
This is an excerpt from the Q&A portion of the Hedgeye Macro Team's conference call with Stanford University Professor John B. Taylor.
Contact firstname.lastname@example.org for access to the full call.
COMPLIMENTARY VIDEO | Hedgeye's Morning Macro Call with CEO Keith McCullough 11/12/14
We are pleased to present this complimentary peek behind-the-macro-scenes of Hedgeye's daily Morning Macro Call for institutional subscribers. Watch for a special appearance by retail analyst Brian McGough during the Q&A.
While you're at it...
Click here to subscribe to Hedgeye on YouTube. It takes one second (and it's free).
Hedgeye CEO Keith McCullough Warns About Bull on Fox Business: Beware of "Rainbows In Puppy Land"
Outspoken Hedgeye CEO Keith McCullough minced no words and pulled zero punches discussing the bull market run on Fox Business' "Opening Bell' Thursday morning, reminding viewers of the 'fetal position' many were in just a month ago.
Gambling central bankers across the globe are torching their currencies, inflating dangerous bubbles, and threatening markets and economic stability around the world.
On The Other Hand
On the one hand, gas prices have dropped for 46 straight days to their lowest level in four years.
How 'Bout That Weimar Nikkei!
"[T]hose who were long Japanese stocks for a centrally planned “economic recovery” (i.e. those who were down, in Nikkei terms -10-15% at one point this year before Abe/Kuroda devalued, again)," wrote CEO Keith McCullough in Thursday's Morning Newsletter, "have seen a +20% return from Japan’s October 17th low of 14,532 (as the economy continued to slow). 'So,' call being long Japan (or Germany’s stock market in 1924) for the wrong reasons, a win!"
Liquidity Traps = Bearish
Does Russia Pose a Threat to Stocks?
According to its top commander, NATO officials have seen Russian combat troops and military equipment entering Ukraine this week. This comes on the heels of increased tensions between Russia and the West over recent months, including a sharp uptick in Russian fighters and bombers flying missions over Europe.
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Takeaway: We are adding HCA to Investing Ideas.
Editor's note: We added HCA to Investing Ideas last Friday 11/7. What follows below is our reasoning from our Healthcare Sector Head Tom Tobin.
HCA $90 +
We flagged the divergence between High Yield and HCA at the end of September as a reason to take profits, and did just that a week later after being up 72%.
Since then, the stock has corrected approximately -12% on the back of a few sell side downgrades despite strong Q3 earnings.
Key data points that we follow continue to show a positive fundamental environment for hospitals and HCA in particular. We view recent weakness as a buying opportunity, as our model points to continued EBITDA upside versus consensus through 2015 and a stock that can trade north of $90.
Price and Estimates Trending Higher
One of the problems we identified with HCA heading into 3Q14 earnings was the strong bias to the long side on both the buyside and sellside. With a few downgrades, incremental fear from SCOTUS, and a -12% move in the stock, we are far more excited by the name on the long side. If operating fundamentals excluding ACA continue their modest recovery, consensus EBITDA in 2015 and 2016 look way to low.
HCA Admissions Growth ex-Exchange Strong
Recent concerns among the Hospital names and HCA in particular have centered on the Supreme Court (SCOTUS) review of the legality of subsidy distribution through Federal Exchanges. We’d make 2 points:
1) Handicapping the SCOTUS outcome is close to impossible and
2) Under an adverse SCOTUS ruling scenario, the headwind would be modest
Japan’s equivalent of Janet Yellen (his name is Haruhiko Kuroda) essentially said that Hedgeye Macro nailed it on our #GrowthSlowing call and that the Bank of Japan is at a “critical point to overcome deflation.” There’s that word again, #deflation.
Forget what 80 TRILLION is in the context of what the Germans did in the 1920s for a second (99% of people in this world don’t get the econ #history lesson anyway) and think about what this Panic Policy in Japan is going to do to the rest of the world’s economics in 2015
Takeaway: Retail sales not equal to Dept. Store #s. JWN better than the rest. TGT takes page from WMT playbook. NKE to players: don't mess with kicks.
Takeaway: A sequential tick up on both the 1 and 2 yr trend lines, though it wasn't reflected in the commentary we've heard from retailers over the past few days. Maybe the answer is as simple as people are buying less of what Department Stores are selling. If that answer works for M and KSS then it's good enough for us.
JWN - 3Q14 Earnings
Takeaway: The things that we like about JWN, in a space where we have an overwhelmingly negative view, all looked solid. 3.9% Revenue growth, 5% square footage growth, 22% DTC growth on the full-price banner, and 34% growth in Hautelook/Rack.com. After the week of earnings we've seen across the department store space the top line was all that mattered (+9% reported, ~+8% if you exclude the estimated Trunk Club benefit). But, the earnings algorithm was weak, 9% revenue growth translated into a 5% growth in earnings (ex. Trunk Club dilution EPS growth = 11%). The SIGMA trajectory is punk with inventories growing 15 percentage points ahead of sales and margins declining. That almost always equates to a negative margin event in the short term. We added JWN to the long bench on 10/16, but still aren't comfortable with a name operating in a space where we think 93mm square feet needs to disappear over the next 5 years.
TGT - Target Follows WMT E-comm Acquisition Playbook
Takeaway: TGT taking a page out of the WalmartLabs playbook. To keep score - WMT has acquired 15 small tech startups since 2010. Everything from a streaming video service to a recipe and meal planning service. TGT's acquisition strategy has been more company focused to date, i.e. chefs.com and dermstore.com. Maybe none of WMT's deals are homeruns but it has allowed the company to build its digital acumen through the acquisition of people and technology. TGT is way behind on this front and we'd point out has one of the worst dot.com track records in all of retail over the past 8 years.
NKE - Nike warns NFLers Not To Mess With Kicks
Takeaway: We don't blame Nike for reinforcing its endorsement policy and protecting its investment. The company is shelling out $220mm per year for the NFL deal on top of what it is paying its endorsees to wear it's gloves/cleats, and pay to wear fees. Players are billboards and that strategy doesn't work if you can't see the swoosh. Maybe the answer is neon colorways à la the London Olympics or the 2014 World Cup - though we doubt the NFL would let that fly.
KATE - Kate Spade Opens 1st West Coast Location
WMT - Wal-Mart Told Store Managers to Match Online Prices With Amazon
GPS - Old Navy Blasted for Higher Cost of Its Women’s Plus-Size Jeans
LULU - Lululemon pushing menswear, expansion
BABA - Alibaba's boutique shop 11 Main opens doors on mobile
AMZN - Hachette Looks Like the Winner as Its War With Amazon Ends
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