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June 2, 2015

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BULLISH TRENDS

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BEARISH TRENDS

 

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Another Head-Fake?

Client Talking Points

YIELDS

German 10YR Bund Yields just ramped +20%, in a day – yes, from 0.49% to 0.59% is “from low levels”, but that’s not the point – rate of change matters most in macro and this move moved the entire FICC complex, dropping SPX futures fast too. We highly doubt ECB President Mario Draghi lets this manifest into a breakout in Yields at the ECB meeting tomorrow; fade it.

OIL

Yields Up, Euro Up, Dollar Down = Oil Up. WTI is up +1.3% this morning re-testing $61 – we still like Oil and Gold on the long side ahead of what could be a bad U.S. jobs report Friday (which could also drop 10YR UST back towards 1.99%). 

INDIA

India cut rates by 25 basis points to 7.25% and the BSE Sensex drops -1.6% on that! How do you like us now central planning fans? Australia down -1.7% is having a tough time convincing people that rate cuts and easing are the path to economic prosperity too. India continues to signal bearish TREND @Hedgeye with Global #GrowthSlowing.

Asset Allocation

CASH 47% US EQUITIES 4%
INTL EQUITIES 10% COMMODITIES 13%
FIXED INCOME 23% INTL CURRENCIES 3%

Top Long Ideas

Company Ticker Sector Duration
PENN

We see stability in regional gaming revenues over the next several months providing some much needed earnings visibility. PENN maintains the best new unit growth story in domestic gaming with the opening of the Plainridge casino in Massachusetts in June and the Jamul casino in Q2 2016. Both properties should well exceed current Street estimates for win per slot and EBITDA. PENN has a proven track record as the best regional casino operator and recently proved its prowess at successfully opening racinos (casinos at racetracks) with estimate beating Dayton and Mahoning commencing slot operations last year.

ITB

Housing went 3 for 3 as the Trinity of Fundamental Data Points released in the latest week continued to reflect accelerating rates of improvement across both the New and Existing markets. New Home Sales in April rose +6.8% month-over-month to +517K.  More notably, sales were up a remarkable 26% on a year-over-year basis as NHS re-converged back to the trend in New Home construction. Pending Home Sales rose +3.4% sequentially in April, accelerating to +14% year-over-year with the Index making a new 101-month high.  Pending Home Sales represent signed contract activity and are a historically strong lead indicator of Existing Home Sales.  The MBA’s weekly Mortgage Purchase Application Index re-captured the 200-level, rising +1.2% week-over-week and accelerating +250bps sequentially to +13.1% year-over-year.  

TLT

We believe the U.S. economy is past peak in rate-of-change terms and sliding down the slope to an eventual cliff (i.e. recession). That’s our call and we’re sticking to it. Friday’s negative revision takes our full-year estimate for real GDP growth down to +2% (from +2.3% prior). Both the Fed and Street are up at +2.5%, both of which continue to careen down from perpetual expectations of rainbows-and-puppy dogs (i.e. 3-plus percent growth) earlier this year. We reiterate our call to be long of long-duration in its many forms:  TLT, VNQ, EDV, and GLD (gold has historically performed well in down-dollar and down-interest rate environments and we think the June 17th FOMC statement has a high probability of being dovish and dollar-bearish).

Three for the Road

TWEET OF THE DAY

NEW VIDEO McCullough: Front-Run the Sell-Side Herd and Get Paid https://app.hedgeye.com/insights/44401-mccullough-front-run-the-sell-side-herd-and-get-paid … via @KeithMcCullough

@Hedgeye

QUOTE OF THE DAY

Don't watch the clock; do what it does. Keep going.

Sam Levenson

STAT OF THE DAY

The Chinese Shanghai Composite Index continues,  up +1.7% overnight to up +6.4% in 2 days, +52.1% year-to-date.


Invite | Avian Flu ― Thought Leader Call with Dr. Thomas Elam

Please join us on June 3, 2015 at 11:00am EST for a call discussing the Avian Flu (AI) and the effect it is having on the food and restaurant industries with Dr. Thomas Elam.

 

AI has reached epidemic levels and as we have been keeping you updated, we are bringing in a thought leader to speak to the effects AI is having on the food and restaurant industry. 

 

Dr. Thomas Elam, President of FarmEcon LLC will be meeting with us to discuss the topic and provide his insights that have been built up over his 40 year career. Dr. Elam has been recognized for his knowledge on the industry in numerous publications and written in-depth research on the topic. Dr. Elam brings a real business mind to the conversation, having been a professor of both economics and statistics. His education includes a BS degree in Economics with a minor in mathematics from Union University, Jackson, TN (1969), he also earned MS (1971) and PhD (1973) degrees in Agricultural Economics from the University of Tennessee, Knoxville.

 

He retired in 2003 and established a consulting practice, FarmEcon LLC. In November, 2006 Dr. Elam was recognized by Poultry USA magazine as one of the top 20 consultants to the U.S. poultry sector. Since 2003 Dr. Elam has worked on over 300 client projects, made over 100 personal appearances, and authored numerous articles on livestock, poultry and grain outlook.

 

Eggs are an important input for many products besides just table eggs, such as, baked goods, pasta, chocolate, ice cream, cosmetics, etc.

 

There are many companies currently being affected by AI:

 

Positively affected: GIS, K, ADM, CALM


Negatively affected: MCD, PNRA, POST, HRL, TSN, DIN, DNKN, NESN, BDBD


In this call we will discuss what losing 25% of your breaking eggs supply will do to food and restaurant industry supply chains and when it will make an impact on the bottom line.

 

CALL DETAILS:

US Toll Free:

US Toll:

Confirmation Number: 39899343

Materials: Coming Soon

 


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Invite | Avian Flu ― Thought Leader Call with Dr. Thomas Elam

Please join us on June 3, 2015 at 11:00am EST for a call discussing the Avian Flu (AI) and the effect it is having on the food and restaurant industries with Dr. Thomas Elam.

 

AI has reached epidemic levels and as we have been keeping you updated, we are bringing in a thought leader to speak to the effects AI is having on the food and restaurant industry. 

 

Dr. Thomas Elam, President of FarmEcon LLC will be meeting with us to discuss the topic and provide his insights that have been built up over his 40 year career. Dr. Elam has been recognized for his knowledge on the industry in numerous publications and written in-depth research on the topic. Dr. Elam brings a real business mind to the conversation, having been a professor of both economics and statistics. His education includes a BS degree in Economics with a minor in mathematics from Union University, Jackson, TN (1969), he also earned MS (1971) and PhD (1973) degrees in Agricultural Economics from the University of Tennessee, Knoxville.

 

He retired in 2003 and established a consulting practice, FarmEcon LLC. In November, 2006 Dr. Elam was recognized by Poultry USA magazine as one of the top 20 consultants to the U.S. poultry sector. Since 2003 Dr. Elam has worked on over 300 client projects, made over 100 personal appearances, and authored numerous articles on livestock, poultry and grain outlook.

 

Eggs are an important input for many products besides just table eggs, such as, baked goods, pasta, chocolate, ice cream, cosmetics, etc.

 

There are many companies currently being affected by AI:

 

Positively affected: GIS, K, ADM, CALM


Negatively affected: MCD, PNRA, POST, HRL, TSN, DIN, DNKN, NESN, BDBD


In this call we will discuss what losing 25% of your breaking eggs supply will do to food and restaurant industry supply chains and when it will make an impact on the bottom line.

 

CALL DETAILS:

US Toll Free:

US Toll:

Confirmation Number: 39899343

Materials: Coming Soon

 


EVENT: YELP SHORT Best Idea Update Call

Takeaway: Join us on Thursday, June 4th at 1:00pm EDT as we update our bearish thesis and assess the M&A landscape.

We will be hosting an update call to their SHORT Yelp (YELP) Best Idea.  YELP's business model is unsustainable, and is already breaking down.  Further, a new major red flag has emerged, which we believe is what prompted YELP to shop itself.  We don’t believe YELP will find a buyer, but we obviously can’t rule it out either.

    

Join us on Thursday, June 4th at 1:00pm EDT as we update our bearish thesis and why we see an additional 35%+ downside from here.

 

 

KEY TOPICS WILL INCLUDE  

  • Extreme Attrition Rate: Overwhelming majority of customers are churning off annually.
  • Insufficient TAM: YP.com is not the low-hanging fruit, it's a pipe dream.
  • New Major Red Flag: The story is going to turn much sooner, and get much uglier, than we initially expected
  • Is There a Buyer? Assessing the M&A landscape in terms of both ability and willingness of potential suitors

 

Hesham Shaaban, CFA

@HedgeyeInternet 

 


CHART OF THE DAY: Policy Mistakes (Remember Jean-Claude? No, Not Van Damme)

Editor's Note: The chart and excerpt below are from today's Morning Newsletter written by Hedgeye macro analyst Darius Dale. Click here to learn more about how you can subscribe. 

 

...History has spoken loudly for Mr. Greenspan with respect to determining whether or not the Federal Reserve’s actions (or lack thereof in many cases) contributed to the most severe financial crisis since the Great Depression. And while they may not readily admit it, policymakers – like investors – do indeed make mistakes.

 

CHART OF THE DAY: Policy Mistakes (Remember Jean-Claude? No, Not Van Damme) - z Chart of the Day

 


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