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1PM TODAY CONF CALL: MAY CRUISE PRICING SURVEY

The Hedgeye Gaming, Lodging, and Leisure team will host a conference call TODAY at 1PM to discuss the latest findings from our proprietary cruise pricing database.  Please contact your Hedgeye salesperson for call details or video link.

 

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
  • Where is European pricing headed?
  • Is RCL holding price in the Caribbean? Is it good enough?
  • New ship premiums
  • Same-store pricing
  • NCLH 1Q preview
  • Research topic: Asia 
    • Pricing vs Bookings
    • China vs non-China
    • Ocean vs River

#LateCycle

Client Talking Points

CHINA

It’s so slow in China (in rate of change terms) right now that the nightly rumors on the next “stimuli” have accelerated to their fastest pace. The Shanghai Composite finally gives up -4.1% in a day, so that should have the levered long brokers thinking twice (for a day).

EURO

After tapping the top-end of our $1.06-1.13 refreshed risk range, the Euro has backed off (again) at lower-highs to $1.10 and European stocks love that! The Euro saw a big 2-day rally off oversold lows, but the question is can it hold now that European economic data is slowing sequentially? (UK Construction PMI 54.2 APR vs 57.8 last).

UST 10YR

After rallying to lower-highs in both DEC (2.27%) and MAR (2.25%) the UST 10YR has done it again (this time to 2.13%) and we can get you to where we started 2015 (2.17%) but what happens after that? Almost everyone we talk to is thinking better jobs report Friday – what if it’s worse? #LateCycle.

Asset Allocation

CASH 47% US EQUITIES 8%
INTL EQUITIES 10% COMMODITIES 0%
FIXED INCOME 31% INTL CURRENCIES 4%

Top Long Ideas

Company Ticker Sector Duration
ZOES

We view ZOES as a very strong long-term investment. Part of what we like about Zoe’s is its strong new unit economics.  Not only does Zoe’s have strong restaurant level margins, but also has best-in-class build out costs and cash-on-cash returns.  In addition, we believe Zoe’s new units are exceeding management’s targets, driven by higher than expected year three average unit volumes. While it may be difficult for some investors to swallow Zoe’s valuation, we believe it represents one of the best early stage restaurant growth chains trading on the public market.  

ITB

iShares U.S. Home Construction ETF (ITB) is a great way to play our long housing call. Builder performance was choppy in the latest week alongside beta volatility and investor attempts to square the net impact to housing from rising rates and ongoing improvement in housing fundamentals. As it stands currently, rates remain a tailwind to affordability relative to last year and would require a significant, expedited increase to have a material negative impact on housing activity in the immediate/intermediate term. Elsewhere across Housing Macro, the fundamental data continued to roll in strong.

TLT

Insomuch as the April Jobs Report may prove to be a bearish catalyst for Treasury bonds, slowing growth data over the next two quarters should prove decidedly bullish. Fighting buy-side consensus on the long side of Treasury bonds been a great call thus far so we’d be booking gains and taking down our gross exposure to this asset class on the next immediate-term pop. Ultimately, we think our #LowerForLonger theme prevails, but volatility is likely to pick up in the interim.

Three for the Road

TWEET OF THE DAY

LIVE | INTERACTIVE | SMART

The Macro Show, Live w/@KeithMcCullough at 8:30AM ET https://app.hedgeye.com/insights/43899-the-macro-show-live-with-keith-mccullough-at-8-30am-et… via @hedgeye

@Hedgeye

QUOTE OF THE DAY

Recognizing power in another does not diminish your own.

Joss Wheadon

STAT OF THE DAY

It costs the Department of Justice $6.5 billion annually to operate the federal prison system.


CHART OF THE DAY: The Bond Battler $TLT

CHART OF THE DAY: The Bond Battler $TLT - z 05.05.15 chart

 

Editor's Note: This is a brief excerpt and chart from today's Morning Newsletter written by Hedgeye CEO Keith McCullough. If you'd like to stay a couple steps ahead of consensus, we courage you to subscribe.

 

If you can take a punch (both in this game and the one I used to play on the ice), your career will last longer. Here’s what the body blows have looked like on rallies (in Long Bond Yield terms) for the last 6 months:

 

  1. December 2014, US 10yr Treasury Yield rallies to 2.28% on expectations of accelerating Q1 US growth
  2. March 2015, UST 10yr Yield rallies to 2.25% post another #LateCycle US Jobs report
  3. May 2015, UST 10yr Yield rallies to 2.14% on…

...Yep. I’ll take the bi-monthly black eyes for staying long Treasuries (TLT). For the next 3-6 months we think year-over-year US growth continues to slow. Staying with the process isn’t always easy. But we’ve got to be tough.

 


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 80.65%
  • SHORT SIGNALS 78.64%

The Bond Battler

“You got to be tough.”

-Hemingway

 

In classic Ernest Hemingway terms (tight and to the point), that’s what a young man by the name of Nick was told by an old street fighter after he got busted by a brakemen (thrown off a train) up near Macelona, Michigan. #BlackEyes

 

The short story is called The Battler – and it’s a beauty for those of us who have to (and love to) grind it out every day. Win, lose, or draw – there’s a lesson to be learned from every experience.

 

After being bearish on Treasury Bonds in 2013, I’ve been battling it out on the long side of these barbarous low-volatility-high-return Long Duration Bonds for going on 17 months now. Every time bond yields bounce to lower-highs, I hear it from every corner of the Twitter-sphere. You got to be tough to fight off the perma Bond Bears.

The Bond Battler - 3  yield Godot 07.27.2014

 

Back to the Global Macro Grind

 

Being deaf would probably help me too.

 

If all I did was what you should do when you are trying to handicap the probability of Long-term Bonds rising/falling (front-run the rate of change in growth/inflation), I’d concern myself less with daily moves. But some of you pay me to fight. So fight today, I will.

 

“They all bust hands on me – but they couldn’t hurt me.” –Hemingway

 

If you can take a punch (both in this game and the one I used to play on the ice), your career will last longer. Here’s what the body blows have looked like on rallies (in Long Bond Yield terms) for the last 6 months:

 

  1. December 2014, US 10yr Treasury Yield rallies to 2.28% on expectations of accelerating Q1 US growth
  2. March 2015, UST 10yr Yield rallies to 2.25% post another #LateCycle US Jobs report
  3. May 2015, UST 10yr Yield rallies to 2.14% on…

 

On what?

 

  1. Global Bond Yields having their biggest 6-day % move (off the all-time lows)?
  2. The Almighty Bond “Bubble” finally popping, for real this time, because it’s “expensive”?
  3. Expectations of a mean reversion back to #LateCycle jobs gains in the US (May 8th report)?

 

Triple Crown fans, if we’re betting on expectations, I’ll take all 3 for the trifecta. And I’ll fade #3, staying long The Battler (Long Bond) to win at Friday’s run for the roses.

 

I obviously get that all 3 of the aforementioned expectations can come to fruition. But I also get this thing called probability that I won’t fade unless I have fundamental reason to do so.

 

It’s been what, 37 years, since Affirmed won the Triple Crown? While it hasn’t been that long for Bond Bears to get paid (2013), don’t forget that the key wager then was that US growth would accelerate from 2012. And it did.

 

Put another way, until our models signal real US #GrowthAccelerating (year-over-year), we’re probably staying with our biggest asset allocation horse.

 

Since I gave the bears some air-time, don’t forget to contextualize what actually happened after those December and March Lower-Highs for 10yr yields:

 

  1. JAN-FEB 2015 = re-test of the all-time lows at 1.67% after bad US GDP data
  2. APR 2015 = two separate selloffs to 1.84% after a bad March Jobs report

 

In other words, “long-term investors” (i.e. those who understood that Global Growth and Inflation expectations were too high) who have remained bullish on Long Duration Bonds have been paid to take a few punches from the pundits.

 

But, but… according to consensus, jobless claims are “good.” C’mon now – that’s not true. They are actually fantastic! And that’s the point about the cycle. See slide 13 of our #LateCycle Macro deck – they are as good as they get.

 

In that same slide deck (slides 12-17) our Macro Research Team reviews the mean reverting #history of the labor cycle, reminding you what that economic indicator is – one of the latest and lagging indicators there are.

 

Yep. I’ll take the bi-monthly black eyes for staying long Treasuries (TLT). For the next 3-6 months we think year-over-year US growth continues to slow. Staying with the process isn’t always easy. But we’ve got to be tough.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.86-2.17%

SPX 2096-2126
RUT 1
VIX 11.73-14.70
EUR/USD 1.06-1.13
Oil (WTI) 54.85-60.39
Copper 2.79-2.97

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

The Bond Battler - z 05.05.15 chart


May 5, 2015

May 5, 2015 - Slide1

 

BULLISH TRENDS

May 5, 2015 - Slide2

May 5, 2015 - Slide3

May 5, 2015 - Slide4

May 5, 2015 - Slide5

 

 

BEARISH TRENDS

May 5, 2015 - Slide6

May 5, 2015 - Slide7

May 5, 2015 - Slide8

May 5, 2015 - Slide9

May 5, 2015 - Slide10

May 5, 2015 - Slide11
May 5, 2015 - Slide12


REPLAY | The Macro Show

We apologize for the sound issues on this morning's Macro Show.

 

 

The Macro Show is Hedgeye's dynamic pre-market rundown highlighting the most important global macro developments where CEO Keith McCullough shares 15 minutes or less of prepared market analysis and commentary and then answers your questions in a live Q&A session.

 

 

 


the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

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