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RCL – THE MATH BEHIND DOUBLE-DOUBLE

CALL TO ACTION

 

Granted, the cruise stocks will probably not go down as long as oil is falling 3% per day. However, we believe investors are baking in 2015/2016 estimates that are too high, certainly higher than current sell-side estimates.  Adverse foreign currency moves will eat into the fuel related EPS tailwind that appears to be already discounted into the stocks.  

 

In this note, we analyze the assumptions necessary for RCL to meet its Double-Double target on a ship-by-ship basis. Meeting or beating that target seems to be factored into the stock and while Double-Double is certainly achievable, cannibalization and a stronger dollar may be significant hurdles.

 

Please see more details in our note: CLICK HERE


Beware Big Divergences In Asia

Big divergences continue manifesting across Asian Equity markets.

 

Editor's note: This is a brief excerpt from Hedgeye research from this morning.

*  *  *  *  *  *  *

Beware Big Divergences In Asia - boog

 

In South Korea, the KOSPI was down another -1.3% overnight to -3.3% year-to-date. It remains bearish TREND (a duration of 3 months or more) here @Hedgeye. Meanwhile, the bounces in India and the Hang Seng were quite weak. As far as Thailand is concerned (straight down in December), it was down another full 1%.

 

We call this #GlobalGrowthSlowing.


Cartoon of the Day: Falling

Cartoon of the Day: Falling - Falling cartoon 12.10.2014

As Hedgeye CEO Keith McCullough has said on more than one occasion, "risk happens slowly at first, then all at once." Keep your head up out there.


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Abercrombie CEO Goes Down for the Count

Editor's note: In case you missed it, Abercrombie and Fitch CEO Mike Jeffries is out effective immediately. Here's the company press release. Hedgeye Retail Sector Head Brian McGough's Quick Take on ANF developments and the 70-year-old CEO's departure follows below.

 

Abercrombie CEO Goes Down for the Count  - af

QUICK Take FROM BRIAN MCGOUGH:

This was probably the most anticipated CEO departure in all of retail.

 

While it's great that the Board is now much higher quality and ANF can be run like a real company, the reality is that investors are still left with Abercrombie and Hollister -- brands that simply don't have the cache that they used to, or need to.

 

There will likely come a time to load up on this name. But that day will be when the brands, product, and distribution are re-positioned. That's going to take time. 

 

Abercrombie CEO Goes Down for the Count  - a1


Draghi Drugs at the JAN ECB Meeting? Nope!

The EUR/USD is getting a bid on breaking news from the FT on a leaked draft of the communiqué for next week’s EU Summit (DEC 18/19).  The draft (reposted below) would suggest that:

  • The European Council seeks greater coordination (which is to say agreement) with all member states and policy heads on economic policy, before “new” policy is issued
  • The meeting to discuss “agreement” is not planned until the February (12/13) Summit and could be pushed out to as far as June

Whether or not Draghi and the ECB can legally act as a lone wolf in issuing policy is still not completely understood, yet this communiqué signals to us an even higher probability that the ECB does not issue sovereign QE when it next meets in January. This should support the EUR/USD (see our quantitative levels below).

 

Remember that both ECB President Draghi and his VP Constancio targeted the potential for QE policy in the first quarter of 2015. (Also see our recent note Draghi Didn’t Deliver the “Drugs”!)

 

We suspect that the Bank will be testing the waters, certainly politically as Germany has raised a giant red flag against such a QE move, while it assesses: 1) the deterioration in economic fundamentals and 2) the inability of its concurrent programs (TLTRO, covered bond and ABS purchases) to support or inflect existing depressed conditions, as it seeks to attain greater economic policy coordination across all relevant parties.

 

Closer coordination of economic policies is essential to ensure the smooth functioning of the Economic and Monetary Union. Work on the development of concrete mechanisms for stronger economic policy coordination, convergence and solidarity is being taken forward. Heads of State or Government will exchange views on these matters at their formal meeting in February. The President of the Commission, in close cooperation with the President of the Euro Summit, the President of the Eurogroup and the President of the European Central Bank, will report at the latest to the June 2015 European Council.


Draghi Drugs at the JAN ECB Meeting?  Nope! - v. neu EUR

 

Matthew Hedrick

Associate


MACAU: NAVIGATING THE TRANSIT VISA

CALL TO ACTION

The recent enforcement of the transit visa should adversely impact Mass revenues. While difficult to forecast with precision, a 5-10% impact seems a reasonable estimation. We’ve seen reports that the impact will be immaterial but we disagree with some basic assumptions in that bullish analysis. Whether strict enforcement is temporary or long lasting – we see merits in the argument for both time frames – the impact is likely to dampen estimates and sentiment further here in December.  Thus, we reiterate our negative thesis on Macau stocks.

 

Please see more details in our note: CLICK HERE

 


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