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CONF CALL: MAY CRUISE PRICING SURVEY

The Hedgeye Gaming, Lodging, and Leisure team will host a conference call on Tuesday May 5 at 1PM to discuss the latest findings from our proprietary cruise pricing database.

 

Points of discussion include:

  • Expanded Pricing Database 
    • Almost doubled the number of itineraries to 20,000
    • Inclusion of river cruises and other ocean brands
    • Pricing two years out (on a rolling basis)
  • Latest pricing pivots (RCL,CCL, NCLH) 
    • (NEW*) weekly sequential pricing 
  • Is RCL holding price in the Caribbean?
  • New ship premiums
  • Same-store pricing 
  • NCLH 1Q preview
  • Research topic: Asia 
    • Pricing vs Bookings
    • China vs non-China
    • Ocean vs River

Sell in May and Go Away

Client Talking Points

RUSSELL 2000

The Russell 2000 has a very positive relationship to the USD, we like the Russell when the dollar is going up and we don’t like it when the USD moves lower (as U.S. consumer purchasing power goes down as well). The Russell is now signalling bearish trade (immediate term) and trend (intermediate term). 

 

GERMAN 10YR YIELD

The German 10YR Yield is up 157% since Monday (we care about rate of change not absolutes as a risk management factor). This is a mega move and it is driving the UST 10YR. People have been confused with the Fed getting easier and the USD going lower why bond yields haven't gone down as well...there has been a huge rate move that is correlated to European bond yields coming off of all time lows.

VOLATILITY

We have been highlighting this for the past few days, but risk ranges are WIDENING - this is a key leading indicator in our model and a signal to raise cash. Risk ranges are widening in the foreign currency markets and in the fixed income markets which eventually gets to the equity and commodity markets. Be very careful - Sell in May and Go Away on this bounce.

Asset Allocation

CASH 41% US EQUITIES 10%
INTL EQUITIES 12% COMMODITIES 0%
FIXED INCOME 31% INTL CURRENCIES 6%

Top Long Ideas

Company Ticker Sector Duration
MTW

The Dodge Construction Starts Index accelerated at its highest rate since 1982. The index was driven largely by non-building projects, which was 74% higher for the first three months compared to last year. The Architecture Billings Index (ABI), a survey of architects, increased ~3% month-over-month and ~5% year-over-year for March. The ABI Index typically leads nonresidential and residential construction spending by 9-12 months. More importantly, the ABI Index leads Manitowoc Crane Orders by 2 quarters. This suggests MTW’s crane sales should see a pickup in the first half of the year. MTW reports April 29th after the close. Earnings Call will be held at 10:00am eastern time the following day.

ITB

iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call. Housing went 4 for 4 in a data heavy calendar for the sector this week with demand improving across both the new and existing markets and the fledgling acceleration in price growth finding some positive confirmation. The builder stocks had a choppy week of performance as investors held mixed opinions of earnings reports and management commentary out of DHI and PHM but, from a fundamental data perspective, the Trend remains one of discrete improvement.

TLT

Ten-year rates dipped 12bps on the week (forward-looking growth expectations) and the USD got crushed for a 1.5% loss. Growth and inflation expectations get priced in AHEAD of the more dovish policy tone resulting from any sign of deterioration in the labor market. Wednesday’s Fed meeting will be the next catalyst that will steer the market’s expectation on forward-looking growth and inflation. We expect the dots (forward-looking federal fund rate expectations) to be pushed out….again.

Three for the Road

TWEET OF THE DAY

LIVE at 130pm ET $ATHN Best Long Idea Q&A w/Healthcare Sector Head Tom Tobin Click here: https://app.hedgeye.com/insights/43841-live-athn-best-long-idea-q-a-with-healthcare-sector-head … cc @HedgeyeHC @HedgeyeHIT

@Hedgeye

QUOTE OF THE DAY

The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.

Martin Luther King, Jr.

STAT OF THE DAY

ATHN reported 290 basis points year-over-year Gross Margin expansion driving majority of Non-GAAP EPS Beat of $0.24 v $0.14 consensus (Consistent with our view that ATHN has tremendous operating leverage).


Call Invite | Thought Leader Roundtable: A detailed look at the Cereal Industry

On May 5th at 11am we will be hosting a conference call on the Cereal industry with David Sprinkle.  David is the research director at Packaged Facts, which publishes a leading line of syndicated research reports on the U.S. food market.

 

Topics will include:

  • The future of the both the cold and hot segments
  • The split personality of the segment
  • Pricing trends
  • The ancient grain story
  • Where the category is struggling
  • Where the categories winners are
  • Why the category is important
  • What breakfast categories are growing/emerging

This call be will be followed by a detailed Black Book on General Mills on May 6th. 

 

David Sprinkle is the research director at Packaged Facts, which publishes a leading line of syndicated research reports on the U.S. food market.  He has contributed to publications such as Candy & Snack Today, Gourmet Retailer, Natural Products Insider, Nutraceuticals World, and Progressive Grocer, as well as  presented at industry conferences including Engredia, Fancy Food Show, GOED Exchange, Global Food Forums, Global Forum on the Future of Food, Healthy Beverages Expo, Ingredient MarketPlace, Institute of Food Technologists (IFT), IFT Wellness, International Baking Industry Expo, National Coffee Association, National Confectioners Association, Nutracon, SupplySide West, and World Tea Expo.  Book-length publications through Packaged Facts include Premium Consumers and the New Economy and Americans in 2020.  David has an MBA from Tulane University in New Orleans, where he also taught business communications.

 

The call will last about an hour including time for Q&A.


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

May 1, 2015

May 1, 2015 - Slide1

 

BULLISH TRENDS

May 1, 2015 - Slide2

May 1, 2015 - Slide3

May 1, 2015 - Slide4

 

BEARISH TRENDS

May 1, 2015 - Slide5

May 1, 2015 - Slide6 

May 1, 2015 - Slide7

May 1, 2015 - Slide8

May 1, 2015 - Slide9

May 1, 2015 - Slide10


CHART OF THE DAY: The Latest Household Income and Spending Numbers

CHART OF THE DAY: The Latest Household Income and Spending Numbers - DRAKE   CHART OF DAY

 

Editor's Note: This is a brief excerpt and chart from today's Morning Newsletter which was written by Hedgeye U.S. Macro Analyst Christian Drake. (You could read the whole thing and be staying a step ahead of consensus if you subscribe.)

 

In the Chart of the Day, we annotate the latest household Income and Spending numbers for March released yesterday.  

 

Generally, our Macro-for-Dummies/Lazy’s color-coding protocol follows a green = good, red = bad convention.  Over the last couple quarters, however, I’ve struggled with what colors to use to characterize the existent income and spending dynamics


Taken

“What I do have are a very particular set of skills.”

-Liam Neeson, Taken

 

Officially, the Taken film franchise is a trilogy. The 1st installment was a deservedly acclaimed action-suspense juggernaut with Liam Neeson launching what has been affectionately dubbed the “geri-action” star genre.

 

Unofficially, there are probably more like 6-10 Taken movies.  The high concept mystery-action airplane drama, Non-Stop, was essentially Taken on a plane.  The survival thriller The Grey was basically Taken in the woods, and the 2011 psycho-drama Unknown was more or less Taken with amnesia.  I’m sure there are others.  

 

The industry, I suppose, is simply supplying to the emergent demand and Neeson, after decades in the business, is simply capitalizing on an unlikely late career renaissance.  

Taken - DRAKE   LIAM

 

Back to the Global Macro Grind...

  • Fed is overoptimistic on growth forecast à dots get pushed out
  • Domestic and global growth (& inflation) disappoint à yields = lower for longer
  • 1st qtr GDP shows residual seasonality  à balance of year is better but full year shows we’re a 2% +/- economy. 
  • The U.S. decouples à ….until it doesn’t

 

If you feel like you've seen this Macro movie before, you’re not mis-Taken.

 

A  fascinating and sometimes confounding aspect of being a living participant in a Keynesian Eco Carnivale is that, at times, it’s difficult to tell which way is up.

 

In the Chart of the Day below, we annotate the latest household Income and Spending numbers for March released yesterday.  

 

Generally, our Macro-for-Dummies/Lazy’s color-coding protocol follows a green = good, red = bad convention.  Over the last couple quarters, however, I’ve struggled with what colors to use to characterize the existent income and spending dynamics.

 

Income ↑, Savings ↑, Spending ↓:  In recent months, aggregate wage and disposable income growth has been accelerating alongside a commensurate rise in the savings rate to multi-year highs.  The net of those dynamics has been further middling in aggregate consumption.    In other words,  while the capacity for consumption growth has improved alongside accelerating income, the ongoing rise in the savings rate has muted the translation to actual household spending growth. 

 

Is this good or bad?

 

In a Keynesian framework, total spending is paramount and the dearth of demand should be construed as a negative immediate-term development.  At the same time, however, it’s difficult to characterize accelerating income growth, a rising savings rate and moderate credit growth alongside increased investment as a fundamentally negative development for the populous balance sheet or the prospective durability of the expansion. 

 

How did spending and Income close out 1Q?

 

Income ↓, Savings ↓, Spending ↑:  The savings rate saw its largest sequential drop in a year in March and spending grew at a premium to income for the first time in 8-months while aggregate disposable and salary and wage income growth moderated for a 2nd month.   Inflation-adjusted disposable income actually declined -0.2% on the month while, on the spending side, a strong rebound in durables consumption growth buttressed headline spending against sequential softness in Services consumption and a modest gain in non-durables.  

 

There a few takeaways from the March numbers:

  1. Income:  the sequential deceleration in aggregate income growth wasn’t particularly surprising given the soft NFP number for March and the large contribution to personal income from dividends recorded in February.
  2. The Thaw:  the increase in spending and decline in savings lends (some) support to the view that the pace of domestic consumerism was stymied by unusually severe weather.   The re-acceleration in auto sales in March and marked rebound in housing activity in March/April are also supportive of the deferred consumption narrative.
  3. Inflation:  Core PCE inflation – the Fed’s preferred measure – accelerated modestly for a second month to +1.34% YoY in March.  The core PCE and CPI figures along with similar readings out of the billion prices index, a moderation in the $USD’s ascent, the counter-trend move in oil prices and the ramp in breakevens/inflation expectations, should buoy the Fed’s rhetorical expectation for stable to improving price trends. Also, the ECI data (note: the ECI data is a more comprehensive measure of employee compensation as it includes both wage income and benefits) for 1Q released yesterday showed employing compensation rising +0.7% in 1Q  and growing at the fastest pace in the current cycle.  This is a mixed bag.  For the Fed it augers (eventual) upside for consumer prices.  For many businesses, the prospect of accelerating inflation in the largest input cost in the face of a flat to decelerating topline probably does not augur upside in capex or profitability. 
  4. The Bounce:  Residual seasonality, weather, port-shutdowns, strong dollar, flagging export demand, and the cratering in energy sector investment have all been trotted out – with some justification – as a conspiratory cocktail of collective drag on economic activity in 1Q.  The traversing or moderation in each of those factors – and the now easy comp – should support a rebound in reported growth in 2Q.  Will the rebound be similar in magnitude to that observed in 2014?  Perhaps, but the early evidence isn’t particularly inspiring. 

 

What do you do with these divergent macro vectors from an investment standpoint?  Probably not a whole lot until we get the employment river card next Friday.  

 

While we like to think we have a “particular set of skills”, the expectation for 20-20 macro forecasting vision is quixotic.  As Keith highlighted yesterday, sometimes the cacophony of macro crosscurrents breeds confusion more than high probability opportunity….and “going to cash beats confusion.”

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.86-2.08%

SPX 2075-2106
VIX 13.03-14.99
USD 94.32-97.46

Oil (WTI) 53.38-59.93

Gold 1169-1204 

 

Sunny & 70’s on tap for the Northeast.  Enjoy the weekend.

 

Christian B. Drake 

U.S. Macro Analyst

 

Click image to enlarge. 

Taken - DRAKE   CHART OF DAY


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