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REPLAY | Germany: Still Bullish

Earlier today Hedgeye’s European analyst Matthew Hedrick led a discussion on why we are still bullish on the German equity market.

 

Watch the for a video replay below.

 

Key take-ways from the call include:

  • QE is only just beginning; the euro will continue to weaken; Germany will disproportionately benefit due to exports; and asset classes like equities will inflate due to money creation
  • The German economy sits in the sweet spot to benefit from a weaker euro as its exports account for a monster 47% of German GDP
  • Since the ECB announced QE on 1/22/15 the correlation between the DAX and EUR/USD is -0.84, a strong negative correlation that we expect to persist as the ECB keeps its foot on the QE pedal for longer than its intended target (late 2016)
  • Recommending long the DAX (HEWG or EWG) and short EUR/USD (FXE)

REPLAY | Germany: Still Bullish - 1. GER

REPLAY | Germany: Still Bullish - 2. GER

REPLAY | Germany: Still Bullish - 3. GER


Cartoon of the Day: Beijing Bubble?

Cartoon of the Day: Beijing Bubble? - China cartoon 04.14.2014

"According to a Bloomberg report," Hedgeye's Daryl Jones wrote in today's Morning Newsletter, "margin debt in China, when adjusting for the relative size of the markets, is double that of the NYSE. With the Shanghai Composite trading at 20x earnings and GDP slowing, that is a tad disconcerting."

 


Dale: This Is Probably the Most Misunderstood Factor In Global Macro

Hedgeye Senior Macro Analyst Darius Dale discusses how to invest amid a slowing economy and secular stagnation with Fox Business anchor Maria Bartiromo on this morning's "Opening Bell."


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 80.33%
  • SHORT SIGNALS 78.49%

Why Golf Is Broken (And 5,000,000 U.S. Golfers Have Disappeared)

Why Golf Is Broken (And 5,000,000 U.S. Golfers Have Disappeared) - 22

 

WHY GOLF IS BROKEN 

 

While everyone basks in 21-year-old Jordan Spieth’s lights-out victory this weekend at Augusta, let’s keep one thing in perspective about the Golf Industry: We’re seeing a massive bifurcation in participation, and it’s not particularly healthy.

 

Simply put, a significantly smaller number of golfers are playing a far greater number of rounds. The number of golfers in the United States has declined by 5mm, or 16%, in the past six years. On the flip side, the number of rounds per player is up 12% to 19 rounds per year over that same period.

 

Why Golf Is Broken (And 5,000,000 U.S. Golfers Have Disappeared) - z99

 

Two factors explain away 80% of this drop. One is the ’07-’09 recession, which took the marginal golfer out of the game (‘core’ golfers will golf in any economy, weather, zombie apocalypse, or whatever…). Then just as the US emerged from a crippling recession (6/09), Tiger Woods fell from grace (11/09), thereby removing the biggest positive mass-marketing force the game has ever seen.   

 

Fortunately, what we call ‘core’ golfers (plays at least 8 times a year) accounts for about 56% of golfers, and 85% of spending. For the most part, this is a healthy demographic. But someone who plays 20, 30, or even 50 rounds per year almost certainly does not go to a Golf Galaxy or a Dick’s. They likely belong to a Club, and buy gear at the Club’s pro shop.

 

It’s the ‘non-core’ golfer (less than 8x per year) who uses mass channels, and that group has been decimated – accounting for almost all the decline in players over the past six years. Before the Recession/Tiger Debacle, there were 13.2mm ‘non-core’ golfers. Now there’s closer to 10mm. That’s roughly a 25% decline in a customer base for the mass golf retailers.   

 

Could they come back? Of course. But we’re going to need a lot more than Tiger passing the torch to Rory McIlroy, or UA’s Spieth crushing the field at the Masters.


Keith's Macro Notebook 4/14: Greece | Volume | Deflation

 

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


Greece, Germany and China

Client Talking Points

GREECE

There is increased speculation that the Greek government may default. The Greek Prime Minister’s office adamantly denied that it would pursue the strategy of defaulting on its debt. There are however, several leaks to major newspapers that Greek negotiations are not working out and that there is real potential of a default. Greece currently has more than 315 billion in Euro denominated debt outstanding. 

GERMANY

The German finance ministry upped their outlook for growth in 2016 to 1.6% from 1.5% in 2015.  We are holding an institutional conference call today at 11:00AM ET to detail why we still like Germany equities on the long side. CLICK HERE to watch a short segment in which Hedgeye's Director of Research, Daryl Jones, highlights the key points of our bullish thesis on German stocks ahead of today's call.

CHINA

China's GDP appears poised to miss expectations and debt is set to accelerate.  On the Chinese debt front there are actually two important points to highlight A) margin debt in China, when adjusting for the relative size of the markets, is double that of the NYSE; and B) leverage for Chinese companies is at the highest level since 2004 and debt relative to assets is that the highest level since 2007.

 

Asset Allocation

CASH 33% US EQUITIES 12%
INTL EQUITIES 15% COMMODITIES 0%
FIXED INCOME 32% INTL CURRENCIES 8%

Top Long Ideas

Company Ticker Sector Duration
MTW

Manitowoc  (MTW) is splitting the business into two companies. While the crane business receives the most attention in part due to its cyclicality and because they are well, more noticeable, Manitowoc’s other business, Foodservice equipment, is the larger of the two in terms of operating income (60% vs. 40% for Cranes). Several indicators are pointing towards upward momentum for MTW’s Foodservice business. Restaurant same store sales have benefitted since the drop in oil prices. Furthermore, an indicator by the National Restaurant Association, RPI Capital Expenditures Index, has surged recently in part due to lower fuel prices driving restaurant traffic and restaurant owners’ outlook.

ITB

iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call. The housing data was again strong in the latest week with Pending Home Sales, HPI and Purchase Demand all accelerating to close out March. Pending Home Sales rose +3.1% sequentially in February with signed contract activity up a remarkable +12% YoY, taking the index to a new 19-month high. Mortgage Purchase Applications – the most real-time, high frequency housing demand indicator - rose +5.7% WoW on the back of last week’s +4.9% advance and accelerated to +7.6% on a year-over-year basis. HPI: The Case-Shiller 20-city series showed home prices grew +4.6% year-over-year in January.  A stabilization/inflection in home price growth is important as housing related equity performance tracks the slope of home price growth strongly.

TLT

It was another week of declining long-term yields getting you paid on the long-side of Low-volatility Long Bonds (TLT). To reiterate our view over the longer-term, we pin a good chance the U.S. Dollar will reach new highs ($120 anyone?) with the probably of long-term Treasury yields reaching all-time lows very much in play.

Three for the Road

TWEET OF THE DAY

LIVE Healthcare Q&A w/@HedgeyeHC + @HedgeyeHIT 4/14 @ 1PM ET $ATHN $HOLX $HCA $MDSO Click here. It's free: https://app.hedgeye.com/insights/43490-q-a-with-hedgeye-healthcare-sector-head-tom-tobin

@Hedgeye

QUOTE OF THE DAY

I am a slow walker, but I never walk back.

Abraham Lincoln

STAT OF THE DAY

The number of golfers in the U.S. has declined by 5mm, or 16%, in the past six years. On the flip side, the number of rounds per player is up 12% to 19 rounds per year over that same period.


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Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

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