REPLAY | New Best Short Idea Overview with Healthcare Sector Head Tom Tobin


Hedgeye Healthcare Sector Head Tom Tobin and Analyst Andrew Freedman hosted a live Q&A segment today to discuss one of their newest Best Ideas: Short $CPSI.


In addition, they shared the latest updates to their maternity tracker and implications for related stocks, including $HCA and $MD.

CHART OF THE DAY: The Canadian Housing Bubble

Editor's Note: Below is a chart and brief excerpt from today's Morning Newsletter written by Hedgeye Director of Research Daryl Jones. Click here to become a subscriber. 


For those that follow global residential real estate markets, you probably didn’t have to get up that early to recognize that Canada’s housing market is solidly in bubble territory.   My colleague Josh Steiner pulled together a 130+ page deck last week that went through his short call on the major Canadian banks.  A key component of his thesis was based on the housing market and indebtedness of the consumer, specifically...


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CHART OF THE DAY: The Canadian Housing Bubble - COD


“Be willing to be a beginner every single morning.”

-Meister Eckhart


As most of you already know, we are early risers here at Hedgeye.  For better or worse, that’s how it goes when you aren’t the smartest hombres in the stock market operating business.   If you want to stay ahead of the competition, you have to get up earlier and out work them. (Or so we hope!)


Lucky for us, there is some credence to this early morning mantra and its relationship to success. Biologist Christoph Randler surveyed 367 university students, asking what time of day they were most energetic and how willing and able they were to take action to change a situation to their advantage.  In a follow up interview in the Harvard Business Review, he offered this conclusion about his study:


“When it comes to business success, morning people hold the important cards. My earlier research showed that they tend to get better grades in school, which get them into better colleges, which then lead to better job opportunities. Morning people also anticipate problems and try to minimize them, my survey showed. They’re proactive. A number of studies have linked this trait, proactivity, with better job performance, greater career success, and higher wages.”


Not only is there a correlation between success and getting up early, but early risers also are generally happier.  In fact, a 2012 study published in the American Psychological Association journal, Emotion, reported the following:


“Early risers are generally happier than night owls. More than 700 respondents, ranging from ages 17-79 were surveyed and asked about their emotional state, health and preferred time of day. Self-professed morning people reported feeling happier and healthier than night owls.”


Most importantly, for those of you that are up early and in your office by 8:30am, you can tune in to The Macro Show, which can be found here every day at 830am.




Cock-A-Doodle-Doo - 4 rr


Back to the Global Macro Grind...


For those that follow global residential real estate markets, you probably didn’t have to get up that early to recognize that Canada’s housing market is solidly in bubble territory.   My colleague Josh Steiner pulled together a 130+ page deck last week that went through his short call on the major Canadian banks.  A key component of his thesis was based on the housing market and indebtedness of the consumer, specifically:


  • Income growth broadly in Canada has outpaced home price growth by 87% in Canada from 2000 – 2014.  In 2006, at the peak of the bubble in the U.S., this metric was only at 67%;
  • From 2000, home prices in Canada are up 247% versus 176% over the same time period in the U.S.; and
  • Canadian Household debt-to-income ratio is 167% (the highest level ever) compared to 103% in the U.S.


The challenge with these extremes of home price appreciation and consumer indebtedness is that the banking system itself in Canada is very concentrated.  In fact, RBC and TD originate roughly half of all mortgages in Canada.  In aggregate, the largest six Canadian banks are 2.1x larger in asset size than Canada’s GDP!


There is also a bank that we think is a pure play on Canada going “supernova”.  As Steiner wrote in his presentation:


“There isn’t likely to be much, if anything, left of this company once this call plays out. Despite holding the bag on everything subprime, it holds the lowest loan loss allowance of the group and is levered 15x.”


If you would like to discuss the thesis with our Financials Sectorhead Josh Steiner or purchase his report, please email .


Even as we see a more volatile future in the Canadian economy and likely the Canadian stock market, the U.S. stock market continues to plod along in boring fashion.  According to a report from Bloomberg this morning, the SP500 hasn’t posted a gain of 2% for more than 126 days, which is the longest streak since the one ending in February 2007 (and we know what happened shortly after that!).  Further, the last time the index went without out a 2% move in the first half of the year was 2005.


On the topic of volatility, Keith had the following to say on the VIX in his 6am Direct from KM note this morning to subscribers:


VIX – the ole “buy everything” call worked, somehow – but this one wasn’t that hard to get right if you had A) a more dovish Fed and B) another Greek bailout right. It’s sad, but front-running predictable central planning behavior works; VIX still range bound 12.29-15.46.”


If you get up early and front run the Fed, you are probably having a decent year performance wise.


Speaking of the Fed, Jon Hilsenrath from the Wall Street Journal this morning highlighted what we’ve been highlighting for some time now, which is that the Fed’s economic projections are inaccurate at best.   Or as Chairperson Yellen says, they are “fraught with uncertainty.”  


On some level, she is correct as the Fed wrongfully predicted that the jobless rate would settle between 5.3% and 5.8% by the end of 2016 and instead it did by December 2014.  Since it’s almost 8am and we’ve been up for a few hours now, we won’t even get into the question of why either Yellen or Hilsy are fixated on such a meaningless stat . . .


Finally, in the public service announcement category, Keith will be on a panel at the 6th Annual Inside Alternatives Conference July 13-14, 2015 in Denver CO.  We hope to see you there! Click here to learn more.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.17-2.49% 

SPX 2105-2130 
Nikkei 20102-20839 
VIX 12.29-15.45
USD 94.01-95.62

Gold 1170-1203


Keep your head up and stick on the ice,


Daryl G. Jones

Director of Research


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Cock-A-Doodle-Doo - COD

Early Look

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LEISURE LETTER (06/23/2015)



  • June 23 - CCL Q2 2015 earnings 10am 
  • June 23 - Virgin Cruises Announcement 11am
  • June 24 - PENN Opening of Plainridge Park Casino
  • June 25 - AC tax bill 

Headline News

Macau Junkets - Portion of hotel bookings for Junkets collapses. VIP gaming promoters seeking to accommodate their clients now book between 30% and 40% of all the city’s hotel rooms vs 80-90% previously.


Takeaway: More hotel rooms will have to be sold on a cash basis. RevPAR was already heading lower even before the upcoming room supply increases over the next few years, including 25% growth in 2016. 


LVS - The Venetian Macau rips up their sporting event contract. Initially scheduled to broadcast big sporting events, the Venetian rescinded the contract on June 19th.  Spokesperson for the Venetian Macau declined to comment on the matter. 



PENN - Plainridge general manager Lance George reported only minor problems during a trial testing. “The restaurants stressed out at lunch time, in the kitchens and in seating people, but that’s a minor stumble. The machines performed beautifully. We are certainly optimistic about opening for real on Wednesday,” he said.


MA Gaming Commissioner James McHugh explained that Massachusetts has the most restrictive gambling law in the country. More casino profits will go into treatment and prevention of gambling addiction than in other states. Slot machines can warn customers when they hit a self-imposed spending limit. There are no free alcoholic drinks. Taxes are higher. And there will be no smoking allowed inside Plainridge or other casinos being developed in Massachusetts. But, at the invitation-only soft opening Monday for the first of those gambling venues, some customers said they like the smoking ban.



Takeaway: We expect stronger than projected results from Plainridge following tomorrow's opening. We're projecting $400 win per day per slot, well above the Street, and our estimate could prove conservative. 


Macau Visitors - The DSEC indicated that visitor arrivals edged up from April 2,547,435 to 2,548,562 in May 2015, an increase of 0.9% YoY.

  • Same-day visitors totaled 1,386,839 (54.4% of total), up by 2.6% YoY. The average length of stay of visitors increased by 0.1 day YoY to 1.1 days.
  • Visitors from Mainland China totaled 1,690,987, up by 3.6% MoM but down slightly by 0.5% YoY; those traveling under the Individual Visit Scheme increased by 3.5% YoY to 752,982.  Guangdong visitation was up 2.4% in May.

LEISURE LETTER (06/23/2015) - v1

LEISURE LETTER (06/23/2015) - v2

Takeaway: Visitation broke a losing streak in May but Mainland China visitation remain negative. June is not looking good.


Massachusetts - Residents of New Bedford, MA, will vote on a proposed $650 million Foxwood resort casino for the city's waterfront.  Polls open at 7 a.m. Tuesday and close at 8 p.m. Voter approval is critical for the plan to advance in the competition for the state's third and final resort casino license.


Takeaway:  If approved, it is likely that the proposed New Bedford location would lure people from the Cape Cod region, whereas Plainville will service the Central Mass and South of Boston customer base.  


Asia Macro

  • Macau - May CPI +4.93%  YoY, up from +4.51% in April 
  • Singapore - May CPI -0.5% YoY, up from -0.5% in April 
  • China - Flash PMI 49.6 vs. Consensus 49.4 and 49.2 in May

Hedgeye Macro Team remains negative on Europe 

Takeaway:  European pricing has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely in 2015.


Takeaway: Following the May pause, June has resumed the sequential softening trend of the last 15 months


We are forced to lower our June forecast yet again. Bad luck in the VIP segment may be partly responsible, but volumes also appear softer. Following a few hints of stability in May, June has resumed the softening sequential trend. 2015 and 2016 Street EBITDA estimates are very much in doubt – we’re not even confident with our below consensus projections – not just from a potentially lower top line. We also think the Street has the mix wrong – base mass is worse than expected, with significant margin and EBITDA implications.


Please see our detailed note:

Transporting Narratives

This note was originally published at 8am on June 09, 2015 for Hedgeye subscribers.

“Great is exactly what it isn’t.”

-Wallace Stegner


For some reason Willie Nelson is ringing in my head this morning. I’m on the road again.


And going West is where that quote from Stegner comes from. My Angle of Repose for the next 3 days will be across the sunny State of California, where I’m looking forward to debating Institutional Investors on what is really going on out there.


US and Global #GrowthAccelerating is exactly what isn’t right now. A #LateCycle US Labor report only reiterates that.

Transporting Narratives - It s different cartoon 06.08.2015


Back to the Global Macro Grind


For we strategist types, Transporting Narratives is fun. Meeting to meeting, that is what we do. So let’s start this morning’s narrative with the Transportation stocks.


In macro strategy there are some leading indicators that even the most creative storyteller can’t convince you that “it’s different this time.” When we went bullish on US #GrowthAccelerating in 2013, the Dow Transports (IYT) index was breaking out to the upside.


Now, after 73 months of a US economic expansion, it’s breaking down:


  1. Transports (IYT) led losers yesterday, down -2.1% vs. SPY -0.65%
  2. Transports (IYT) have been leading losers for the last month, -4.9%
  3. Transports (IYT) are now -8.7% for 2015 YTD


So what say you Mr. Global Growth Is Back man?


For those of us who have been on both the buy and sell side of the game, what we say with our #Timestamped positions speaks louder than our slide decks. On last week’s bounce, we signaled short the Transports (IYT) in Real-Time Alerts.


Here are my Top 3 ways to get out of the way on both US and Global #GrowthSlowing:


  1. Short Industrials (XLI) which continue to suck wind -2% YTD
  2. Short Financials (XLF) which failed (again) yesterday and remain in the red -0.4% YTD
  3. Short Transports (IYT) -8.7% YTD


Did I mention the Transports?


Actually there is a 4th way to express the Fed being more dovish (again) at the June 17th meeting, which is to take weakness in the US Dollar as a correlated tax on a #LateCycle and slowing US consumer (XRT).


Don’t forget that the US Retail Sales Growth cycle peaked in Q4 of 2014 at +4.5-4.7% year-over-year growth and has since slowed in its most recent reading (April) to +0.9% due to the sunny East coast weather. Did it rain enough in May?


Nah, let’s not talk about that data point or a 46.2 Chicago PMI reading for the month of May, when we can actually go back to a Durable Goods reading of -2.3% year-over-year in April and hope that the Fed didn’t see that one either.


Instead, let’s look away from the US data and see what Global Equities have been signaling for the last month:


  1. Russia -12%
  2. Portugal -9%
  3. Greece -8%
  4. Brazil -7%
  5. Turkey -7%
  6. Germany -7%
  7. Indonesia -6%
  8. Taiwan -5%


To be fair, I guess the Dow Transports are “outperforming” Taiwanese Stocks by 30 basis points in the last month. That must be the all-systems go on global growth signal, eh?


Oh, then there’s the narrative that “bond yields are rising because growth and inflation are back.”


On that data front this morning:


  1. Swiss consumer prices (CPI) deflated -1.2% year-over-year in May
  2. Chinese producer prices (PPI) deflated -4.6% year-over-year in May
  3. Chinese CPI slowed from +1.5% y/y in April to +1.2% in May


There’s definitely a narrative out there (perpetuated by Mario Draghi which I think was a huge mistake) that both the European and US economies are accelerating. We hear it in investor meetings every day (I think our competition is on the road too).


Unfortunately for the bullish growth narrative, both the economic data and market moves discounting future growth expectations are reminding you that #accelerating is exactly what it isn’t.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.03-2.41%

SPX 2067-2104
VIX 13.75-15.90
USD 94.64-96.41
EUR/USD 1.08-1.13
Oil (WTI) 56.99-61.50

Gold 1170-1200


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Transporting Narratives - Z 06.09.15 chart

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