GLD: Adding Gold to Investing Ideas

Takeaway: We are adding Gold to Investing Ideas.

Please note that we are adding Gold (GLD) to Investing Ideas today.


Our macro team will outline our bullish thesis in this weekend's edition. 

GLD: Adding Gold to Investing Ideas - Gold cartoon 07.23.2014

McCullough: Don’t Buy Most Expensive Bubble We’ve Seen Since Beginning of Mankind | $BABA


In today's edition of RTA Live, Hedgeye CEO Keith McCullough did not mince words when asked about Alibaba.

RTA Live is available exclusively to Real-Time Alerts subscribers.

January 29, 2015


In today's edition of RTA Live, Hedgeye CEO Keith McCullough ran through the Real-Time Alerts positions as of 10:30AM ET and answers subscriber questions on $RH, $BABA, and more.


Takeaway: The last time jobless claims were this low it was the year 2000. $45 oil, however, continues to take its toll on energy states.

Below is the detailed breakdown of this morning's initial claims data from Joshua Steiner and the Hedgeye Financials team. If you would like to setup a call with Josh or Jonathan or trial their research, please contact 


Claims Match Y2K Lows, While Energy State Labor Weakness Persists 

Total initial claims showed an impressive decline in the latest week, falling -80k Y/Y to 265k (SA) and putting in their lowest reading since 2000.  NSA claims, meanwhile, were lower by -22% Y/Y on a single week basis. There don't appear to be any special factors in the report.  


It's worth noting that while Y2K started out decently from an equity market performance standpoint, the S&P 500 was down 10% by the end of that year and went on to lose another 13% in 2001 and 23% in 2002.


For the last several weeks we've been calling out the performance of the eight energy states (AK, LA, NM, ND, OK, TX, WV, WY) to gauge whether labor conditions there are diverging from the country as a whole. In the latest week it appears the spread between the country and the basket of energy states remained steady at around 15 points. For reference, we've indexed the two series back to May of last year and we're interested in the spread between the two indices. The two charts below illustrate this dynamic.






The Data

Prior to revision, initial jobless claims fell -42k to 265k from 307k WoW, as the prior week's number was revised up by 1k to 308k.


The headline (unrevised) number shows claims were lower by -43k WoW.

Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -8.25k WoW to 298.5k.


The 4-week rolling average of NSA claims, another way of evaluating the data, was -9.2% lower YoY, which is a sequential improvement versus the previous week's YoY change of -8.0%







Joshua Steiner, CFA


Jonathan Casteleyn, CFA, CMT


Takeaway: Net yields guidance uninspiring and European commentary a little tenuous

The chart below describes one reason why there was mismodeling for fuel and how the Street missed FX impact.


RCL Q4 2014 CONF CALL NOTES - rcl1


For your reference, we have reattached our past pricing survey. 



  • On track for Double-Double Program
  • Pleased with Quantum and Anthem - experienced healthy bookings and are large drivers of 2015 results
  • Oasis-class RC vessels and Solstice-class continue to improve on performance
    • That's not new. What about the pre-2006 ships?
  • Guest satisfaction at record levels in 2014
  • SkySea JV will happen in mid-2015
  • All unit cost increases in 2015 is attributable to ramping in China
  • Celebrity:  EDGE ships in 2018/2020
  • Will divest older tonnage as opportunities arise
  • Ended 2014 with best forward booking status in company history 
    • Maybe because of an earlier Wave this year
  • Close-in bookings in F4Q were more sluggish than expected.  Caribbean is the culprit.
  • 2015 Wave:  still early but overall encouraged
  • Once lap 1Q 2015, yield on all products are expected to be up mid-single digits.
  • Capital allocation tools: stock buyback and increasing dividend
  • RCL: 'at the pump' prices have lagged brent prices but have now finally caught up. Also uses inventory on FIFO basis.
  • Typically 4-6wk lag for at the pump prices for RCL
  • 4Q:  2.7% net yields (slower Caribbean, non-holiday price reductions)
    • Onboard rev:  +4.9% (strong sailings on New Year sailings and strong beverage packages)
    • NCC:  better back office costs and crew movement costs
    • Would have come in better than guidance if not for currency, net of fuel 
  • 1Q 2015
    • Caribbean capacity:  up 8% YoY (70% of capacity); promotions stimulating close-in demands.  Quantum performing well but short and 7 night Caribbean itineraries have been challenging.
  • 2Q 2015
    • RCL Caribbean capacity: -2%; industry capacity: -4% YoY
  • 2Q-4Q
    • APDs up YoY due to Australia and Asia
  • 2015
    • Caribbean capacity: up slightly (44% of capacity)
    • Bookings doing very well
  • Caribbean yields: down mid-single digits in Q1, up low single digits in Q2
  • 2015 Europe 
    • Capacity:  +5% YoY;  bookings over last few months are doing well; recent demand have been strong in US and UK bookings; expect mid-single digit yields (but this is influenced by Allure being in Europe this summer season)
      • But what about pricing?
  • 2015 Asia:  15% of total capacity
    • Expect yields up low-mid single 
  • 2015 NCC ex fuel:  +1% or better 
  • Change in presentation:  Pullmantur financials historically been reported on a 2-month lag.  Could change to real-time in 2H 2015 but the effect is immaterial.
  • 1Q 2015:  Higher marketing spending during Wave


Q & A

  • What happens to Double Double if FX continues to pressure earnings?
    • Not a new factor. 
  • Everything positive in the last couple of months.
  • Tone is positive. Wave is strong and typical.
  • Oil Forward curve in contango
  • 2015 onboard forecast:  driven by Quantum/Anthem.  O3b technology has helped customer spending on internet packaging. 
  • Expect Alaska pricing is doing well and bookings too
  • Australia:  a lot of capacity going there so there is some stress on yields
  • Value-added vs discounts:  more bundled packages like Celebrity 1-2-3 Go
    • Proving very popular with consumers and travel agents since it increases their commissions
    • Could have a little reduction on onboard revenue
  • Last few weeks in January:  pleased with Wave.  Seeing good volume.  Saw some declines after France attacks but only for a few days.  
  • Europe:  much more balanced view; if they had not seen 2014, they would be euphoric.
    • Right, so really hard comps - Mgmt tone shaky here.
  • European itineraries: 2/3 of European guest come from local economics
    • Shift more sourcing to North America passengers
    • Incremental demand from European customers:  a little bit of dip from Paris tragedy but demand is in-line.
  • CCL/RCL in China - need to educate Chinese consumer.  Overall industry is growing
  • Q4 2014:  more promotional than expected
  • How much did holiday shift added to Q4 yields?  Immaterial (bp point or two)
  • 4Q Other income line:  excluding the $33.5m in tax reform benefits, the rest is TUI's results

BABA: Hammer and Nail (F3Q15)

Takeaway: Only two key themes matter. The mobile hammer is crushing its business, and stalling Tmall mix shift is the nail in the coffin.


  1. The Mobile Hammer: BABA's mobile GMV percentage experienced its sharpest y/y growth in its reported history.  In turn, BABA's ad monetization rates got hammered, and its y/y revenue growth in its core marketing segment decelerated precipitously to 19% vs. 32% in the prior quarter.  There will be a lot of sell-side noise about mobile being a long-term opportunity.  It's not, it's a secular headwind.
  2. The Tmall Nail (in the Coffin): The key metric that we were keying in on, and the only thing that was keeping us on the sidelines on the short side was growing Tmall GMV mix shift, which had been propelling Commission revenue growth well in excess of GMV growth.  That sputtered out this quarter, suggesting Tmall mix shift is no longer a secular tailwind, which means its growth prospects are now more dependent on its GMV, which is where we are decidedly bearish.  



BABA's mobile GMV percentage experienced its sharpest y/y growth in its reported history.  In turn, BABA's ad monetization rate (GMV take-rate) got hammered on a y/y basis, and estimated y/y growth on its core marketing segment decelerated precipitously to 19% vs. 32% in the prior quarter. 


BABA: Hammer and Nail (F3Q15) - BABA   Ad Monetization 4Q14


So why is mobile a headwind? BABA’s ad prices are determined through on online auction platform, which means its vendors set the price. Vendors are not willing to pay comparable rates for mobile ad clicks as they are for desktop clicks.  


We suspect the reason why mobile ad rates are lower is because vendors are getting a lower ROI on that ad spend, likely mobile is how China's less affluent access the internet access, and those consumers must be inherently more selective with their purchases.  BABA's own metric suggest as much, with mobile representing the majority of buyers, but the minority of GMV


BABA: Hammer and Nail (F3Q15) - BABA  Mobile User   GMV F3Q15


Moving forward, BABA's next wave of user growth will come from a less-affluent consumer, meaning the pricing pressure across its core marketing segments will only get worse.  So while there will be some sell-side noise touting mobile as a long-term opportunity, it's because they don't understand who that mobile consumer is.  Mobile is not an opportunity, it's a secular headwind.  See notes below for more detail.


BABA: Model Facing Secular Pressure

12/04/14 09:17 AM EST

[click here]


BABA: What the Street is Missing

11/26/14 08:03 AM EST

[click here]




The key metric that we were keying in on this quarter was Tmall GMV mix shift, which had been propelling Commission revenue growth well in excess of GMV growth.  


The reason is that BABA charges commissions on Tmall transactions, so if a greater percentage of GMV flows to Tmall, BABA has more GMV to tax.  In turn, even if BABA's core marketing segment is under pressure, commission revenues could compensate alongside growing Tmall mix.  That is what has kept us on the sidelines on the short side.


However, that sputtered out this quarter.  Tmall GMV mix only increased by 2.6 percentage points y/y vs. its historical tend of 5+ percentage point.  In turn, commission revenue growth slowed precipitously, exposing the weakness in BABA's core marketing segment.  


BABA: Hammer and Nail (F3Q15) - BABA   Tmall GMV   F3Q15

BABA: Hammer and Nail (F3Q15) - BABA   GMV vs. Commissions F3Q15


In short, we don't see Tmall Mix Shift as long-term secular tailwind.  That means BABA's growth prospects are now even more dependent on its GMV, which is where we are decidedly bearish.




Let us know if you have any question, or would like to discuss in more detail. 


Hesham Shaaban, CFA




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