Takeaway: The Athletic Black Book. Tuesday, 12/16 at 11:00am ET.
On Tuesday, December 16, we’ll be hosting a call to review our next Black Book, which will be focused on the Athletic footwear and apparel space. Specific names include Nike, Adidas, UnderArmour, Foot Locker, Hibbett, Dick’s, and Finish Line – which collectively offer up a good mix of longs and shorts. We’ll follow up closer to the date (which is two days before when Nike will likely print it’s 2Q earnings) with a full agenda of the issues we’ll cover.
Key Topics Will Include:
Takeaway: Looking for a positive pivot to our year long short thesis but with numbers and sentiment heading south, we're definitely not there yet
Explaining the big move lower in the HK listed Macau stocks
The HKSE-listed Macau gaming operator stocks were down big in HKSE trading today, possibly for a variety reasons. We're not sure how well circulated among the investment community, but we've just learned of a government immigration sweep taking place earlier this week in Macau. We remain negative overall on the stocks at least until Q4 and 2015 estimates are reduced dramatically.
While the Hang Seng Index fell almost 1% today, the HKSE-listed Macau gaming operators were down significantly more:
While there may have been multiple reasons for such a large move downward, we're most concerned with news of the immigration sweep. We haven't seen any news articles - we heard about it this am from a contact in Macau last night - so we're not sure how much it contributed to the stock move.
Apparently, mainland Chinese immigration officials conducted an immigration sweep through Macau casinos, bars, and restaurants a few nights ago and took several thousand Chinese visitors into custody for overstaying their transit visas. These detainees where then relocated back into Mainland China.
Combined with yesterday's news of the new Transit Visa scheme, the sweep indicates that Macau/China are serious about the cleaning up Macau before the China President's visit in a few weeks. VIPs are likely to stay away this month which could dampen GGR even more than the 20-25% YoY decline we're forecasting.
Aside from the overall drop in the Hang Seng and the immigration sweep, other factors likely impacted the HK Macau stocks overnight:
And the hits just keep coming. US listed Macau stocks should be heading lower this morning and over the near-term. We're looking for a positive pivot to our almost year long short thesis but with numbers and sentiment heading south, we're definitely not there yet.
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TODAY’S S&P 500 SET-UP – December 3, 2014
As we look at today's setup for the S&P 500, the range is 46 points or 1.67% downside to 2032 and 0.55% upside to 2078.
CREDIT/ECONOMIC MARKET LOOK:
MACRO DATA POINTS (Bloomberg Estimates):
WHAT TO WATCH:
COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)
The Hedgeye Macro Team
This note was originally published at 8am on November 19, 2014 for Hedgeye subscribers.
“Believe on this day that I will have been cut to pieces, and you not much later than I…”
That’s a quote from the latest leadership, strategy, and #history book I have started to read. It’s one of the Greek classics that I’ve been wanting to study for a long time – Xenophon, The Anabasis of Cyrus.
It’s been a classic year of #divergences in Global Macro risk management (Long Bond TLT +18% vs Russell 2000 flat YTD). So ending it any other way than putting myself on the front line, willing to be cut to pieces by SP500 (SPY) bulls, is right where I want to be.
The SPY is the most widely shorted equity security in US history. In all of her manifestations you’ll find hedge fund victories and defeats. While I’ve been on the “short the Russell” road for most of this year, now I’m here, saying sell it. That is #timestamped.
Back to the Global Macro Grind…
I’ll get to the fundamental research view in a minute (both growth and inflation slowing, at the same time), but first I will draw my price, volume, and volatility sword on this matter:
In other words, even if I was a raging bull on US growth equity fundamentals (like I was in 2009 and 2013), I’d still have signaled sell into yesterday’s no-volume-short-covering-capitulation-overbought highs.
Back to the fundamentals – here are the Top 3 things confirming our bearish view on US domestic GROWTH:
And here are the Top 3 things confirming our bearish view of INFLATION expectations:
Then there’s sentiment (which I could give you a hocus pocus “survey” on) or use the only one that back-tests as a legitimate contrarian indicator in my 15 years of notebooks (the II Bull/Bear Spread):
To put that Bull/Bear Spread in context:
A) That’s +103% from where it was when perma equity bulls were in the fetal position on October 13th
B) That’s just inside of the all-time wide to the bullish side
#Agreed. All-time is a long time. And that’s precisely why I’m willing to be cut to pieces by anyone who wants to put their own money (not other people’s) on the naked long side of SPY, from here until I say stop.
I’d be happy to publish your bull case to all readers of the Early Look. Remember though, your cost basis is going to be yesterday’s SPX close of 2051. This is the arena of accountability. My timing may prove to be fatal, but there’s no place I’d rather be.
Our immediate-term Global Macro Risk Ranges are now:
UST 10yr yield 2.28-2.35%
WTI Oil 73.34-76.62
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer
"What if all your money was in the Russell 2000 this year?" asked CEO Keith McCullough in today's Morning Newsletter. "That would suck. After doing literally nothing (flat for 4 straight weeks in November), the Russell #Bubble got pounded for a -1.7% loss yesterday, falling back to -0.9% for 2014 YTD."
Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.