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Jim Cramer's [Lack of] Integrity #Timestamped

FLASHBACK: Remember When Jim Cramer and His Minions Slandered Hedgeye and Our Short Call On Linn Energy? We Do. Here’s What Has Happened Since.

 

Jim Cramer's [Lack of] Integrity #Timestamped - 36

 

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We take great pride in the integrity of our work here at Hedgeye. We don’t like it when people like CNBC’s Jim Cramer falsely accuse us of orchestrating bear raids (an SEC violation), or when lackeys of his like a junior varsity reporter at Business Insider imply we are “breaking the law” simply because our research team makes a compelling and comprehensive call to short a particular company’s stock.

 

What we do like is when the dust settles and the scoreboard proves our investment call 100% right and our accusers wrong.

 

You may recall Hedgeye Energy Analyst Kevin Kaiser first began warning investors about accounting shenanigans at Linn Energy toward the end of March 2013. Kaiser argued the stock was worth about $15, when it was trading a little under $40.

 

Well, that clearly didn’t sit well with Cramer who was long the stock in his charitable trust and advised people to buy it in his Action Alerts product. A battle ultimately ensued between Hedgeye CEO Keith McCullough and Cramer on Twitter, TV and online/print.

 

Cramer actually called us “unscrupulous” and went so far as accusing Hedgeye of violating the 1934 Securities Exchange Act in an article on his website and Twitter. He also attacked Kaiser’s work, not based on anything having to do with his analysis, but because he was too young according to Cramer. He also had Linn Energy’s CEO come on his “Mad Money” show to defend his company. Here’s a taste.

 

Jim Cramer's [Lack of] Integrity #Timestamped - cramer1

 

Jim Cramer's [Lack of] Integrity #Timestamped - cramer3

 

So what’s happened since Cramer slandered Hedgeye and told investors to stay long Linn Energy?

 

Take a look below.

Click image to enlarge.

Jim Cramer's [Lack of] Integrity #Timestamped - linn energy

 

Bottom line? Shares of Linn Energy are down 39% since Kaiser made his call in March 2013, while shares of its sister company LNCO are down 47%.

 

*For the record, since Cramer penned his ridiculous (libelous) piece on June 19, 2013, shares of Linn Energy (LINE) have plunged 30%, while shares of LNCO have fallen even further, dropping 43%.

 

Nice work, Jim. #Booyah


Real Conversations: A Dire Appraisal of Our ‘Broken Global Economy’

 

Dan Alpert, economic policy expert, author of “The Age of Oversupply,” and founding Managing Partner of investment bank Westwood Capital, discusses the dangerous global economic challenges the world is facing stemming from flawed government and central bank interventions with Hedgeye CEO Keith McCullough.


Cartoon of the Day: Behind the 8-Ball

Can a horrendous economy be "printed" away? Abe seems to think so. We disagree.

 

Cartoon of the Day: Behind the 8-Ball - Abenomics cartoon 11.18.2014

 


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 80.32%
  • SHORT SIGNALS 78.48%

DKS – Quick Take – Still Broken

Takeaway: Our 2 cents – This company is growing because it could, not bc it should. The financial model needs to change, but won’t. Still a short.

Nothing came from the numbers or the conference call that dissuades us from being short this stock. Yes, it was an in-line print, which is a slight victory for a company that has missed four of the past eight quarters. But 9% revenue growth deleveraging to 1% EBIT growth is anything but impressive. In fact, the two categories that are hurting the comp the most – guns and golf – are two of the categories where Dick’s Brick & Mortar stores should have the best competitive advantage (ie you don’t buy a Mossberg 12-guage or a $500 Taylor-Made driver on Amazon).  Our point here is that DKS is adding new stores because it could – not because it should. Current store count is 691, and management will continue to march toward 1,100. That’s a bad idea. We think that the company should stop growing and change up its financial model to maintain its footprint and buy back stock. But that’s not what it will do.

 

We think that near-peak gross margins can’t co-exist for long with peak productivity and a trough SG&A ratio. In fact, the company leveraged SG&A this quarter by 40bps on only a 1% comp. That’s not sustainable.  We understand that this is a ‘best in breed’ company, but so is Macy’s, and we wouldn’t touch that one either. We’ll see where consensus numbers shake out over the next few days to determine how loud we should get on the short side.

 

DKS – Quick Take – Still Broken - dks q comp

DKS – Quick Take – Still Broken - dks sigma


NAHB - HOUSING BEGINS TO TURN THE CORNER

Takeaway: Homebuilder optimism continues to percolate as more signs of light at the end of housing's tunnel begin to emerge.

Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume.

 

NAHB - HOUSING BEGINS TO TURN THE CORNER - Compendium 111814

 

Today's Focus: November NAHB HMI (Builder Confidence Survey)

Home builder confidence rose to 58 on the NAHB HMI Index in November, a +4pt increase vs September and just under the 9-year high reading recorded in September. 

 

It has taken the balance of the year but confidence has retraced back to the pre-polar vortex levels observed in the July to December period of 2013.   What hasn’t rebounded - despite some intermittently solid reports out of a selection of the publicly traded homebuilders - is actual, aggregate new home sales which have done virtually nothing over the TTM.    

 

Perhaps builder’s are co-opting our top down view and considering the implications of a 2nd derivative stabilization in HPI in conjunction with progressively easier volume comps and looser regulation but, given the ongoing divergence between confidence and construction YTD, we’re more inclined to view the November advance in sentiment as a simple continuation of trend. 

 

  • Sub-Indices:  After declining in October, all 3 sub-indices rose MoM with the magnitude of increase in Current Sales (+5pts) outpacing more modest increases in Current Traffic (+4pts) and 6M Expectations (+2pts) and driving a moderate sequential compression in the “optimism spread”. 
  • Regional: Builder Confidence gained across all regions with the 12 point gain in the Northeast – the largest sequential change in a year and the 2nd largest since 2010 -  being the most notable.

 

We’ll get the housing starts/permits data for October tomorrow, but with SF starts up just 2.8% YoY on ave YTD and permits middling, we don't see much upside for single family construction to close out the year. 

 

 

NAHB COMMENTARY: 

“Growing confidence among consumers is what’s fueling this optimism among builders,” said NAHB Chairman Kevin Kelly.  “Members in many areas of the country continue to see increasing buyer traffic and signed contracts.”

 

“Low interest rates, affordable home prices and solid job creation are contributing to a steady housing recovery,” said NAHB Chief Economist David Crowe. “After a slow start to the year, the HMI has remained above the 50-point benchmark for five consecutive months, and we expect the momentum to continue into 2015.” 

 

BOTTOM LINE - THE CALL HAS BEEN WORKING BUT THE DATA'S TURNING

Our bearish call on housing thus far in 2014 has been playing out as the XHB remains the worst performing sector YTD. That said, many of the negative dynamics that we flagged earlier this year have largely or completely played out and we're now seeing some signs of light at the end of the tunnel (see the volume of "green" in the compendium at the top of this note). We'll be hosting a call in early December to update our views on housing heading into 2015. 

 

NAHB - HOUSING BEGINS TO TURN THE CORNER - housing performance

 

 

NAHB - HOUSING BEGINS TO TURN THE CORNER - NAHB LT 

 

NAHB - HOUSING BEGINS TO TURN THE CORNER - NAHB SubIndices 

 

NAHB - HOUSING BEGINS TO TURN THE CORNER - NAHB Optimism Spread 

 

NAHB - HOUSING BEGINS TO TURN THE CORNER - NAHB Regional 

 

NAHB - HOUSING BEGINS TO TURN THE CORNER - NAHB Northeast 

 

NAHB - HOUSING BEGINS TO TURN THE CORNER - NAHB vs NHS

 

About the NAHB HMI:

The Housing Market Index (HMI) is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. The monthly survey has been conducted for 30 years. The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next 6 months as well as the traffic of prospective buyers of new homes. The HMI is a weighted average of separate diffusion indices for these three key single-family series. The HMI can range from 0 to 100, where a value over 50 implies conditions are, on average, improving, a value below 50 implies conditions are worsening, and an index value of 50 indicates that the housing market is neither improving nor worsening.

 

 

Joshua Steiner, CFA

 

Christian B. Drake

 


Small Caps Are Getting Smacked Around Again? No Worries! Right?

Editor's note: This is an excerpt from Hedgeye morning research. Click here for more information on how you can subscribe.

 

The Russell 2000 is down almost -2% in the last 5 days, but the world’s consensus hedge (SPY) isn’t down (yet), so no worries.

 

Right?

 

Small Caps Are Getting Smacked Around Again? No Worries! Right? - ben

 

From both a liquidity and volume perspective, this is simply a rewind of the movie you saw in late September (decelerating volume on UP days for SPX). For the record, total U.S. Equity market volume was down -26% vs. its 1-month average yesterday.

 

In other words, tread carefully. Mr. Market may be about to high-five your face.


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