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Cartoon of the Day: Moon Shot

Cartoon of the Day: Moon Shot - Kuroda cartoon 02.20.2015

Bank of Japan Governor Haruhiko Kuroda earlier today said that he likes his chances of achieving the central bank's 2% inflation target. In related news... we don't.

LINN Will Lose More than $1 Billion in 2015 | 4Q14 Results, Guidance, and 10-K Recap

Link to Report: LINN Will Lose More than $1 Billion in 2015 | 4Q14 Results, Guidance, and 10-K Recap


Summary Bullets

  • We expect LINN Energy’s oil and gas business to lose $(1.2)B and generate no CFFO in 2015.  EBITDAX = interest expense.  The hedge book will generate $1.0B of “cash flow,” which is what will fund $600MM of CapEx and $417MM of distributions in 2015.
  • LINE and LNCO are worth $0.  We value LINN between $4.7B - $6.5B.  Its net debt is $10.3B.  
  • “DrillCo” and “AcquisitionCo” are unlikely to solve any of LINN’s problems.
  • We believe true maintenance CapEx to be ~$1.0B - $1.1B per year.  LINN will only spend $600MM in 2015.
  • A capital efficiency and reserve replacement analysis is included in the note.
  • A detailed review of the 10-K is included in the note.


Kevin Kaiser

Managing Director


Retail Callouts (2/20): JWN, Ports, ANN, VFC, BBY

Takeaway: Removing JWN from our long bench with the company guiding flat earnings in 2015 and the stock at 20x P/E.



JWN - 4Q14 Earnings: Removing From Long Bench


Takeaway: We added JWN to our long bench on 10/16 following our Department Store Black Book. There are a lot of things to like about the name: e-commerce proficiency, brand portfolio, and square footage growth. But, we couldn’t get comfortable with the fact that it was operating in a space that has grown at a -2% CAGR over the past 20 years and needs to see 93mm square feet not just close, but exit the industry all together over the next 5 years. Since that time, the stock is up about 11%, in-line with the S&P. Now the company is guiding the mid-point of the earnings range to flat on 8% revenue growth. Either the company is sandbagging or this name is uninvestable trading up here at 20x next year's earnings. We're removing it from the long bench.

Retail Callouts (2/20): JWN, Ports, ANN, VFC, BBY - 2 20 chart1

Retail Callouts (2/20): JWN, Ports, ANN, VFC, BBY - 2 20 chart2





Report: West Coast ports running at 50%-60% of capacity; retailers stockpile inventory



ANN - Ann Taylor Parent Said to Be Working With JPMorgan on Sale



VFC - VF Settles ITC Laser Denim Case



KORS - Report: Michael Kors joins Snapchat



BBY - Best Buy adds Curbside app service in Bay Area stores



H2O Plus Names Joy Chen CEO


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Keith's Macro Notebook 2/20: Nikkei | Greece | Euro


Hedgeye Director of Research Daryl Jones shares the top three things in Keith's macro notebook this morning.

Keith's Daily Trading Ranges, Unlocked

This is a complimentary look at Daily Trading Ranges - our proprietary buy and sell levels on major markets, commodities and currencies sent to subscribers every weekday morning by CEO Keith McCullough. It was originally published February 20, 2015 at 08:36. Click here to learn more and subscribe.

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The Nikkei, Greece and The Euro

Client Talking Points


The Japanese Nikkei-225 is at roughly 15 year highs, up about 2.3% for the week. Bank of Japan Governor Haruhiko Kuroda came out and reiterated his call on the 2% inflation target, the reality is that it will be very difficult for the Japanese to hit this inflation target. They will need to implement more dovish policy. Kuroda however, believes he has lots of options. We will have to wait and see what kind of impact his actions have on the real economy. 



It is a relatively slow day in Global Macro but Greece is causing a lot of controversy. Eurozone Finance Ministers are meeting today in Brussels to discuss the Greek bailout; Greece has requested to have its loan agreements extended another 6 months. Some newspapers are reporting that Greece may exit the Eurozone, but the reality is that nobody seems to have a clear indication of what will really happen.


The Euro seems to be driven by the chaos surrounding Greece. It is down about 50 basis points today, down 650 basis year-to-date vs. the USD and down 1,752 basis point in the last year. That is a staggering move for a currency (despite PMIs coming in better than expected). 

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

You want to own the Vanguard Extended Duration Treasury (EDV) in this current yield-chasing, growth slowing environment. The trend in domestic growth continues to signal growth slowing, and the counter-TREND moves we’ve seen over the last few weeks (@Hedgeye TREND is our view on a 3-Month or more duration) remain something to fade until we can see more follow-through that growth is trending more positively (second-derivative positive).


Low-volatility Long Bonds (TLT) have plenty of room to run. Late-Cycle Economic Indicators are still deteriorating on a TRENDING Basis (Manufacturing, CapEX, inflation) while consumption driven numbers have improved. Inflation readings for January are #SLOWING. We saw deceleration in CPI year-over-year at +0.8% vs. +1.3% prior and month-over-month at -0.4% vs. -0.3% prior. Growth is still #SLOWING with Real GDP growth decelerating at -20 basis points to +2.5% year-over-year for Q4 2014.The GDP deflator decelerated -40 basis points to +1.2% year-over-year.

Three for the Road


Real Conversations: How @Firefly_Space Founder Tom Markusic Is Changing the New Space Paradigm https://www.youtube.com/watch?v=0QmYH0IQdy8&feature=youtu.be&t=1s… w/ @KeithMcCullough



The man who does not read has no advantage over the man who cannot read.

-Mark Twain


3.3 million people in 2013 earned at or below the federal minimum wage, according to the Bureau of Labor Statistics. 

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