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WEDNESDAY: CRUISE LINE SPEAKER CALL

On Wednesday, January 28 at 11:00am EST, the Hedgeye Gaming, Lodging, and Leisure team will host Mike Driscoll, Editor-In-Chief of Cruise Week to discuss current demand trends.  Mike has extensive contacts throughout the travel agent community and should provide relevant and timely commentary.  In line with our standard format, prepared commentary will be followed by an email Q&A session.

 

The topics of discussion include:

  • Wave 2015 bookings/pricing
  • Travel agent expectations
  • New ship premiums
  • Customer demographics
  • Destinations: What’s hot/what’s not

For conference call details, please contact  

 

Biography

Mike Driscoll is editor-in-chief of Cruise Week, published since June '95. Its readers include most of the top cruise sellers in the industry, industry analysts, and cruise line executives and employees. Mike has covered travel trade issues for more than 25 years. Before Cruise Week, he was the editor of ASTA Agency Management for seven years and is a graduate of the Medill School of Journalism at Northwestern University. Driscoll also studied writing at Trinity College, Oxford, England.


MID-JANUARY 2015 WAVE PRICING SURVEY

Takeaway: European pricing in 2015 is weakening. We saw it particularly with the RC brand in January.

CALL TO ACTION

With oil falling to a new low last week (Brent at $48), the fuel cost tailwind continues for the cruisers. At some point, oil will stop going down and investors may have to contend with potentially softer than expected cruise demand. The latest pricing survey on Wave continues to signal choppiness with European pricing leading the slowdown. Our survey corroborates recent commentary from some of our travel agent contacts.

 

 

Please see our detailed note: 

http://docs.hedgeye.com/HE_Cruise_Pricing_JAN2015_Wave.pdf


European Banking Monitor: Euro-QE Drives Swaps Tighter Across the Board

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email 

 

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European Financial CDS - Swaps were tighter across the board for Europe's banks last week on ECB asset purchases.  Russia's Sberbank was the only issuer on our list below whose swaps widened.  Notably, Greek swaps tightened significantly, but now with the Syriza party's victory, the stability of the country's economy is even more uncertain.

 

European Banking Monitor: Euro-QE Drives Swaps Tighter Across the Board - chart1 european financials CDS

 

Sovereign CDS – Sovereign swaps were sharply tighter across Europe last week as EUQE assauged concerns. Italian sovereign swaps tightened by -16.7% (-21 bps to 105 bps) while Spanish swaps tightened 12 bps to 77 bps. 

 

European Banking Monitor: Euro-QE Drives Swaps Tighter Across the Board - chart2 sovereign CDS

 

European Banking Monitor: Euro-QE Drives Swaps Tighter Across the Board - chart3 sovereign CDS

 

European Banking Monitor: Euro-QE Drives Swaps Tighter Across the Board - chart4 sovereign CDS

 

Euribor-OIS Spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread tightened by 4 bps to 9 bps.

 

European Banking Monitor: Euro-QE Drives Swaps Tighter Across the Board - chart5 euribor OIS spread

 

Matthew Hedrick

Associate

 

Ben Ryan

Analyst

 


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 80.28%
  • SHORT SIGNALS 78.51%

Commodities Weekly Sentiment Tracker

Note: Using the z-score in the tables below as a coefficient of variation for standard error helps us flag the relative market positioning of the commodities in the CRB Index. It is not intended as a predictive signal for the reversion to trailing twelve month historical averages. For week-end price data, please refer to “Commodities: Weekly Quant” published at the end of the previous week. Feel free to ping us for additional color.    

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1.       CFTC Net Futures and Options Positioning CRB Index: The Commodities Futures Trading Commission (CFTC) releases “Commitments of Traders Reports” at 3:30 p.m. Eastern Time on Friday. The release usually includes data from the previous Tuesday (Net Positions as of Tuesday Close), and includes the net positions of “non-commercial” futures and options participants. A “Non-Commercial” market participant is defined as a “speculator.” We observe the weekly marginal changes in the overall positioning of “non-commercial” futures and options positions to assess the directionally-biased capitulation risk among those with large, speculative positions.

  • The SUGAR, ORANGE JUICE, and GOLD markets experienced the most BULLISH relative positioning changes week-over-week
  • The WHEAT, COTTON, and SOYBEANS markets experienced the most BEARISH relative positioning changes week-over-week

Commodities Weekly Sentiment Tracker - chart1 sentiment

 

2.       Spot – Second Month Spread: Measures the market expectation for forward looking prices in the near-term.

  • The BRENT, CORN, and LEAN HOGS markets are positioned for HIGHER PRICES near-term
  • The HEATING OIL, SILVER, and LIVE CATTLE markets are positioned for LOWER PRICES near-term

Commodities Weekly Sentiment Tracker - chart2 spot 2nd month basis

 

3.       Spot – 1 Year Spread: Measures the market expectation for forward-looking prices between spot and the respective contract expiring 1-year later.

  • The BRENT CRUDE, WTI CRUDE, and NATURAL GAS markets are positioned for HIGHER PRICES in 1-year  
  • The LIVE CATTLE, LEAN HOGS, and COCOA markets are positioned for LOWER PRICES in 1-year  

Commodities Weekly Sentiment Tracker - chart3 spot 1yr spread

 

4.       Open Interest: Aggregate open interest measures the amount of opened positions in all actively traded futures contract months. Open interest can be thought of as “naked” or “directionally-biased” contracts as opposed to hedgers scalping and providing liquidity. Most of the open interest is created from large speculators or participants who are either: 1) Producers/sellers of the physical commodity hedging their cash market exposure or 2) Large speculators who are directionally-biased on price.


Commodities Weekly Sentiment Tracker - chart4 open interest

 

Ben Ryan

Analyst


Risk Managing Global #Deflation

Client Talking Points

OIL

#1 read-through from the Mario Draghi move was more, not less, #deflation – there are a lot of ways to play this, but obviously pressing the short side of WTI Oil is one of them, -1.6% this morning (after a -7.2% down week) to $44.95 and no support to lower-lows – there’s still a massive net LONG position of +324,642 futures/options contracts in crude.

#DEFLATION

Reported, big time, in Spain this morning with a -3.7% year-over-year PPI (vs. -1.5% last) and Finland -1.8% year-over-year – remember that A) Mario Draghi is not going to be able to arrest this, B) it’s bad for many corporate top-lines tied to pricing and C) will freak out the Fed (see Hilsenrath article this morning which comes my way on pushing out the dots) – BUY TLT.

 

FINANCIALS

On last week’s beta bounce, the first sector we signaled SELL on (Real Time Alerts) wasn’t Energy, it was the Financials – consensus is dead wrong on both rates and the yield spread compression born out of being wrong on rates – 10s/2s Yield Spread hitting fresh 12 month lows today at 128 basis points – SELL KRE and XLF.

 

*SPECIAL ALL-DAY LIVE EVENT ***NEW EVENT DATE JANUARY 28TH

WATCH and INTERACT with CEO Keith McCullough and Hedgeye's analysts as they discuss the stock market, economy and more all in real-time. They will answer your questions live via email, phone, Twitter and chat throughout the entire trading day. 

   

Special appearances by market experts, including best-selling "Currency Wars" author James Rickards, money manager Michael Holland, Jones Trading chief market strategist Michael O'Rourke and many more. CLICK HERE to sign up.

Asset Allocation

CASH 53% US EQUITIES 4%
INTL EQUITIES 3% COMMODITIES 0%
FIXED INCOME 32% INTL CURRENCIES 8%

Top Long Ideas

Company Ticker Sector Duration
EDV

The Vanguard Extended Duration Treasury (EDV) is an extended duration ETF (20-30yr). As our declining rates thesis proved out and picked up steam over the course of the year, we see this trend continuing into Q1.  Short of a Fed rate hike, there’s no force out there with the oomph to reverse this trend, particularly with global growth decelerating and disinflationary trends pushing capital flows into the one remaining unbreakable piggy bank, which is the U.S. Treasury debt market.

TLT

The Vanguard Extended Duration Treasury (EDV) is an extended duration ETF (20-30yr). As our declining rates thesis proved out and picked up steam over the course of the year, we see this trend continuing into Q1.  Short of a Fed rate hike, there’s no force out there with the oomph to reverse this trend, particularly with global growth decelerating and disinflationary trends pushing capital flows into the one remaining unbreakable piggy bank, which is the U.S. Treasury debt market.

HOLX

Hologic (HOLX) is a name our Healthcare Sector Head Tom Tobin has been closing monitoring for awhile. In what Tom calls his 3D TOMO Tracker Update (Institutional Research product) of U.S. facilities currently offering 3D Tomosynthesis, month-to-date December placements signaled a break-out quarter after a sharp acceleration in October and slight correction to a still very high rate in November. We believe we are seeing a sustained acceleration in placements that will likely drive upside to Breast Health throughout FY2015. Tom’s estimates are materially ahead of the Street, but importantly this upward trend in Breast Health should lead not only to earnings upside, but also multiple expansion and a significant move in the stock price.

Three for the Road

TWEET OF THE DAY

RUSSIA: leads #deflation's losers this am, down -4.5% (UAE -3.6%, Norway -0.7%) #NoWorries

@KeithMcCullough

QUOTE OF THE DAY

Practice isn't the thing you do once you're good. It's the thing you do that makes you good.

-Malcolm Gladwell

STAT OF THE DAY

The Euro is getting burnt to a crisp, -3.1% week-over-week, to -7.4% year-to-date, while the U.S. Dollar is  up +2.7% on the week to +5.2% year-to-date.


Monday Mashup: EAT, SONC and More

Monday Mashup: EAT, SONC and More - 1

 

Recent Notes

01/20/15 Post-MLK Day Mashup: SBUX, MCD on Tap

01/23/15 SBUX: Closing Best Idea Short

 

Events This Week

Wednesday, January 28th

  • EAT earnings call 10am EST

Thursday, January 29th

  • SONC Annual General Meeting

 

Chart of the Day

Monday Mashup: EAT, SONC and More - 2

 

Recent News Flow 

Tuesday, January 20th

  • BJRI upgraded to buy at KeyBanc with a $52 PT.
  • CAKE upgraded to outperform at William Blair.
  • CHUY Vice President of Operations Southeast, Frank Biller, has resigned from his position.  Mr Biller will remain with the company in an advisory role.
  • EAT downgraded to hold at Wunderlich with a $65 PT.
  • PNRA downgraded to hold with a $185 PT.

Wednesday, January 21st

  • MCD FY15 and FY16 estimates reduced at Janney, citing its latest franchisee survey.
  • RUTH completed the previously announced sales of Mitchell's to Landry's.

Thursday, January 22nd

  • COSI CFO Scott Carlock resigned to pursue other opportunities.  Richard Bagge will serve as interim CFO, while the company works with an executive search firm to find a new full-time CFO.
  • JBFCF Philippine's largest food company, Jollibee Foods said it is keen to buy a U.S. quick-service chain worth at least $1 billion and may partner with a PE firm to do so.  We believe KKD, JACK, PLKI, SONC, WEN, LOCO and FRGI are all in play.
  • JMBA announced the expansion of its Whole Food Nutrition and Fruit & Veggie smoothie lines with the introduction of two new flavors: Amazing Greens and Greens 'n Ginger.
  • SBUX announced that current board member Kevin Johnson will assume the vacant position.  Schultz noted that, while Johnson’s responsibilities will mirror Alstead’s, he will be more heavily involved on the digital side of the business than his predecessor.  Johnson formerly served as a President at Microsoft and, more recently, as CEO of Juniper Networks. 

Friday, January 23rd

  • BLMN announced that director, and former Bain managing director, Mark Nunnelly provided the company with notice of his resignation, effective February 15, 2015.
  • CBRL Senior Vice President of Strategic Initiatives, Edward Greene, notified the company that he plans to retire from his position around November 2, 2015.  The firm is conducting a search for a new Senior Vice President, Marketing.

 

Sector Performance

The XLY (+3.2%) outperformed the SPX (+3.0%) last week.

Monday Mashup: EAT, SONC and More - 3

 

Monday Mashup: EAT, SONC and More - 4

 

Quantitative Setup

From a quantitative perspective, the XLY remains bullish on an intermediate-term TREND duration.

Monday Mashup: EAT, SONC and More - 5

 

Casual Dining Restaurants

Monday Mashup: EAT, SONC and More - 6

 

Monday Mashup: EAT, SONC and More - 7

 

Quick Service Restaurants

Monday Mashup: EAT, SONC and More - 8

 

Monday Mashup: EAT, SONC and More - 9


Early Look

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