The Best of This Week From Hedgeye

Here's a quick look at some of the top videos, cartoons, market insights and more from Hedgeye this past week.


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

In Thursday'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.



McCullough: You Can Front-Run The Fed

In the Q&A segment of Monday's Morning Macro Call for institutional investors, Hedgeye CEO Keith McCullough reveals how the Fed has tipped their hand courtesy of WSJ’s Jon Hilsenrath, discusses his expectations ahead of Wednesday's FOMC meeting, and reminds us what would happen should interest rates rise.


McCullough: I Don't Give One Iota About Greece

In this excerpt from Monday's Morning Macro Call for institutional subscribers, Hedgeye CEO Keith McCullough talks Greece's "fascinating" weekend developments and the effects of oil's continuing tumble.



 McCullough Phones It In to Maria: Why the Market’s Getting Spanked

As stocks were getting hit hard on Tuesday, Hedgeye CEO Keith McCullough explained to Fox Business “Opening Bell” host Maria Bartiromo what’s behind the market volatility and selloff.



The Best of This Week From Hedgeye - Deflation Fed football 1.28.15

If the Fed raised interest rates with the world slowing, and deflation doing what it's doing right now, well.... look out.



The Best of This Week From Hedgeye - Babba bubbles 1.29.15

Very few research firms have been cautious or negative on the BABA, but at Hedgeye, we’ve been on the other side of consensus.




The Best of This Week From Hedgeye - COD avoid sell short 1.27.15


Editor's note: This is a brief excerpt from Thursday's Morning Newsletter by CEO Keith McCullough. 

  1. Energy Stocks (XLE) got smoked for another -3.9% down day yesterday as Oil/Nat Gas continue to crash
  2. Financials (XLF) underperformed a -1.3% SPY, closing -1.8% on the day at -6.2% YTD
  3. Industrials (XLI) “outperformed” at -0.9% on the day but are down the same as SPY YTD at -3.1%

Since all 3 of these S&P Sectors remain on our “avoid, sell, short, etc.” list (they are both late-cycle and carry explicit Global #Deflation risks), I’ll just reiterate that call this morning – because it’s easy to.

Cartoon of the Day: #GDP Rainbows and Puppy Dogs? (Not So Much)

Cartoon of the Day: #GDP Rainbows and Puppy Dogs? (Not So Much) - GDP cartoon 01.30.2015

Contrary to what the economic Pollyannas might tell you about U.S. economic growth right now, it's not all rainbows and puppy dogs. Case in point: today's Q4 GDP report. In line with the Hedgeye macro team's forecast, 2014 full year GDP growth was +2.4%, not 5%.

Retail Callouts (1/30): DKS, GPS, Jones NY, KATE, Week's SIGMAs, WSM, SKX

Takeaway: We still see DKS LBO as a no go, NYPost agrees. GPS gets less "Creative". Jones NY Closing Stores. SIGMA Summary.



DKS - Dick’s Sporting Goods not for sale after all



Takeaway:  The NY Post says DKS is not being sold. So naturally it must be true. We never thought that an LBO made any sense, and therefore maintained our short on DKS in the face of the rumors. 


If we were Ed Stack (DKS CEO) we'd sell now if it were at all possible. The reality is that the margin structure of this business is in a secular decline. We get to a negative IRR at the current price, and we suspect that any private equity firm worth its salt is getting to similar values.


To be clear, our model assumes…

  1. DKS tops out at 900 stores by 2018, below management's 1,100 goal
  2. 2% comp store sales growth as e-commerce offsets negative store traffic.
  3. Gross Margins fall by 50bp annually as e-commerce dilutes profitability, and aggregate sales growth is not strong enough for DKS to leverage occupancy costs.
  4. EBIT margins fall from 8% today to 5% in 2018.


GPS - New Gap Brand President Restructures Marketing, Creative Director Role Eliminated



Takeaway:  This is obviously part of a much bigger brand and marketing restructuring, but it can't be a great sign that 'Creative Director' role is being eliminated by a brand that needs to be increasingly creative to fend off faster, more relevant, and more profitable competition.


Jones New York to close stores, end wholesale business



Takeaway:  We wonder if Sycamore was planning on this when they took JNY private? The deal to sell Stuart Weitzman to Coach came very soon after the buyout. Sycamore is acting fast to sell what they can, and shutter the perennial dogs.


KATE - Strong Q4, Remains a Best Idea Long

Takeaway: For our full note, KATE – Watch What They Do, Not What They Say, from yesterday morning CLICK HERE



SIGMA Summary:



Retail Callouts (1/30): DKS, GPS, Jones NY, KATE, Week's SIGMAs, WSM, SKX - 1 30 chart1




Retail Callouts (1/30): DKS, GPS, Jones NY, KATE, Week's SIGMAs, WSM, SKX - 1 30 chart2




Retail Callouts (1/30): DKS, GPS, Jones NY, KATE, Week's SIGMAs, WSM, SKX - 1 30 chart3




Retail Callouts (1/30): DKS, GPS, Jones NY, KATE, Week's SIGMAs, WSM, SKX - 1 30 chart5




Retail Callouts (1/30): DKS, GPS, Jones NY, KATE, Week's SIGMAs, WSM, SKX - 1 30 chart6



Retail Callouts (1/30): DKS, GPS, Jones NY, KATE, Week's SIGMAs, WSM, SKX - 1 30 chart7





WSM - Williams-Sonoma, Inc. Announces Election of Sabrina Simmons to Board of Directors



SKX - Pete Rose Enters a Hall, Just Not THE Hall, in Skechers' Super Bowl Commercial






NKE - Feds, NFL Grab $19.5M in Sports Fakes



SHLD - Sears cuts 115 jobs in effort to reduce expenses



ROST - Ross Stores Announces Departure Of Doug Baker, President, dd's DISCOUNTS






EBAY - Michael Kliger to Exit eBay Enterprises



FDO - Report: Family Dollar CEO to sell up to 2 million shares


Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

Keith's Macro Notebook 1/30: China | USD | UST 10YR


Hedgeye CEO Keith McCullough shares the top three things in his macro notebook this morning.

PODCAST | McCullough: Short (with Impunity) the "Booming Growth!" Cheerleaders and Mo-Mo Monkeys


In this must-listen, complimentary podcast of Hedgeye’s Morning Macro Call, CEO Keith McCullough discusses today’s lackluster GDP report,  the ‘horrific’ earnings season and where the best opportunities are right now around the globe.


PODCAST | McCullough: Short (with Impunity) the "Booming Growth!" Cheerleaders and Mo-Mo Monkeys  - ch5


LEISURE LETTER (01/30/2015)




  • Feb 2: Cod Manila Grand Opening
  • Feb 3:  GLPI 4Q CC
  • Feb 3: WYNN 4Q CC
    • ; pw: 57961245
  • Feb 12: MPEL 4Q CC
    • (1866) ; pw: MPEL
  • Feb 17: MGM 4Q CC
    • ; pw: 8870181

    headline story 

    Macau – The minister for Social Affairs and Culture in Macau, Alexis Tam Chon Weng restated the government’s determination to ban smoking anywhere in casinos to protect the health of gaming employees and patrons. The Health Bureau (SSM) is aiming to introduce a full smoking ban in casinos. This would mean that that smoking would be prohibited not only on mass gaming floors, but also within VIP rooms. Current smoking lounges would also be forced to close if the bill is approved.


    He added that SSM is hoping to finish revising the legislation and to submit it to the Legislative Assembly in the first half of 2015.


    According to a govt survey, over 70% of Macau residents back a full smoking ban. The survey also indicates that about 80% of casino workers agree with a full smoking ban that includes VIP rooms; about 85% of surveyed tourists also said that they are not against a full smoking ban.

    Mr. Tam revealed that the government met with the executives of casino operators to understand their views on the full smoking ban. Casino companies are hoping that the government will allow them to keep current smoking lounges, like those found in international airports which provide smokers with a separate smoking area. However, the Secretary stressed that the government stands firmly in its plan to implement a full smoking ban, meaning that smoking will be prohibited within the entire premises of casinos’ resorts, and that smoking lounges will therefore not be allowed. 

    Article HERE

    Takeaway:  We have warned for months of a possibility of a full-scale smoking ban. It looks like it will become a reality although implementation is not imminent.




    MPEL - has announced that it will give all its employees, except managers, a bonus equivalent to one month’s pay. An internal notice also says the company will promote some 1,300 employees or transfer them to its new Studio City casino-resort. The notice says Studio City will employ 9,000 workers when it opens.

    Article HERE

    Takeaway: At least it's not a 14th month bonus. No doubt labor costs will be higher in 2015. 


    Donaco Int - Boutique casino operator Donaco International Ltd has agreed to acquire the Star Vegas Resort and Club casino property in Poipet, Cambodia, for a consideration of US$360 million. The deal would be closed by April. Donaco is currently a one-property operator, running the Aristo International casino hotel in Lao Cai, in northern Vietnam.

    Article HERE


    GTECH - signs $800M term loan; further reduces size of bridge loan for IGT acquisition.  Bridge load size now at $4.9B from original $10.7B


    CCL (Princess) - A limited-time payday deals offer covers discounts on four cruises popular with UK holidaymakers and has been made available to encourage consumers to book over the next few days after they get paid for the first time in 2015.

    Article HERE

    Industry News

    Macau – Statistics and Census Service (DSEC) indicated that visitors on package tours totaled 1,190,000 in December 2014, up 35.8% YoY. Package tour visitors from Mainland China surged by 51.5% YoY to 991,000, with 328,000 coming from Guangdong Province, up by 17.4%.  

    Article HERE

    Takeaway:  No slowdown in the low-end, family, non-gaming oriented tourists coming to Macau


    Singapore fines - The Casino Regulatory Authority (CRA) has taken action against Marina Bay Sands and Resorts World Sentosa for admitting patrons who are not supposed to be in the casinos. MBS was fined a total of S$65,000 for six such instances between July 1 to Dec 1, 2013. The heavier fine of S$45,000 was imposed on MBS because it failed to keep out two persons under exclusion orders from its casino. The remaining S$20,000 penalty is for it allowing four patrons from overstaying their 24-hour entry levies.

    Article HERE


    Maryland - The Maryland Lottery and Gaming Control Commission unanimously voted Thursday to allow Casino Baltimore and Maryland Live! Casino at Arundel Mills Mall to each reduces their count of slot machines by 300, bringing the number of slots at the Baltimore facility down to 2,200, and the pool of machines at Maryland Live! to 3,922. The reductions will be completed by April 1.


    Article HERE

    Takeaway: Slot play per property may be topping out at Maryland due to a swarm of new competition lately.

    Cuba - Cuba Cruise offers ways for US citizens to cruise to Cuba

    Article HERE

    Takeaway:  Still many restrictions for US cruisers to travel to Cuba but at least cruise lines are thinking about it now.


    Hedgeye Macro Team remains negative Europe, their bottom-up, qualitative analysis (Growth/Inflation/Policy framework) indicates that the Eurozone is setting up to enter the ugly Quad4 in Q4 (equating to growth decelerates and inflation decelerates) = Europe Slowing.

    Takeaway:  European pricing has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely in 2015.


    Enter your email address to receive our newsletter of 5 trending market topics. VIEW SAMPLE

    By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.