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The U.S. Dollar, Nikkei and Yields

Client Talking Points

USD

There was a clean cut overbought signal for the USD vs EUR and Yen yesterday (see Real-Time Alerts product for timestamps) as the EUR/USD tested the low-end of its 1.11-1.14 risk range and is now bouncing on the Greek headlines.

NIKKEI

Get the Dollar (and Yen right), you’ll get Japanese stocks right – big rally in the Nikkei to its highest level since 1996 and with the Yen bouncing here this morning vs USD we would be booking some of those Nikkei gains as it is signaling overbought at 20,899.

 

YIELDS

Another day, another line of storytelling on why “bond yields are going to breakout” (this time it was our bull case on #HousingAccelerating, which we get – but please don’t look at the Durable Goods print of -2.5% year-over-year!) – 10YR pulls back -4 basis points to 2.37% this morning with no support to 2.18%; great spot to short the Financials and buy Long-term Bonds with those U.S. and Japanese equity gains.

 

**The Macro Show - CLICK HERE to watch today's edition at 8:30AM ET, with Macro Analyst Darius Dale, Restaurants & Consumer Staples Sector Head Howard Penney and CEO Keith McCullough will be dialing in.

Asset Allocation

CASH 36% US EQUITIES 8%
INTL EQUITIES 12% COMMODITIES 14%
FIXED INCOME 27% INTL CURRENCIES 3%

Top Long Ideas

Company Ticker Sector Duration
PENN

Shares of Penn National Gaming are up approximately 9% since it was added to Investing Ideas on May 26. Our Gaming, Lodging & Leisure team reiterates their high conviction on the stock and notes that Ohio and Kansas have both been super-strong revenue generators in the month of May. This positive development has has led our analysts to raise their estimates even higher (and we're already the highest on the street...).

ITB

It was a busy week across the housing space with a host of fundamental releases, builder earnings and notable regulatory updates.   Net-net-net....the past week offered another positive update on the state of the residential real estate market with housing turned in a second week of strong, positive absolute and relative performance. The NAHB HMI (Builder Confidence Index) for June surged across all categories and in all regions, posting its best reading in almost 10 years. Total Starts declined -11% MoM to +1.036 MM units with SF and MF starts declining -5.4% and -20.2% month-over-month, respectively.  Permits, meanwhile, rose to an 8-year high advancing +11.8% sequentially and +25% year-over-year.   The strength in permits augurs forward strength in Starts and suggest residential construction spending will be (increasingly) supportive of GDP growth over the next couple quarters.

TLT

Bottom line right now remains that Lower-For-Longer is firmly intact as long as US #GrowthSlowing is. As Keith pointed out on Friday, Consensus Macro is still stubbornly sticking to the tired idea that rates have to go higher - they just have to... because, they haven't? All told, it was a great week sticking with the process on the long side of bonds. Here we feature an in-depth discussion from Senior Macro Analyst Darius Dale which does a thorough job outlining where our macro team currently stands with respect to the Fed, interest rates, markets and economy. The prescient discussion occured just hours before release of the FOMC statement.

Three for the Road

TWEET OF THE DAY

Can a Strong Housing Market Carry Economic Expansion? https://app.hedgeye.com/insights/44835-can-a-strong-housing-market-carry-economic-expansion … via @hedgey

@KeithMcCullough

QUOTE OF THE DAY

The best way to have a good idea is to have a lot of ideas.

Dr. Linus Pauling

STAT OF THE DAY

Hawaii is now the first state to raise the minimum smoking age to 21, effective January 1, 2016.


The Macro Show Replay | June 24, 2015

 

 


June 24, 2015

June 24, 2015 - Slide1

 

BULLISH TRENDS

June 24, 2015 - Slide2

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BEARISH TRENDS

 

June 24, 2015 - Slide9

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June 24, 2015 - Slide11


Early Look

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Cartoon of the Day: Stinkin' Euro

Cartoon of the Day: Stinkin' Euro - Euro cartoon 06.23.2015

Despite a recent bounce, the euro has fallen 18% since this time last year.


CCL F2Q 2015 CONFERENCE CALL NOTES

Takeaway: CCL today confirmed the European challenges we have been highlighting. It is responsible for revenue yield guidance not being raised.

CCL F2Q 2015 CONFERENCE CALL NOTES - 1

 

CCL F2Q 2015 CONFERENCE CALL NOTES - 2

 

CONF CALL

  • Carnival brand: Double digit improvement in ticket revenue yields
  • Overcame European brand challenges from macro/geopolitical challenges
    • We have been stressing European pricing as a risk
  • Will deploy 4m cruise berths in 2016 in China
  • China outboard travel expected to double in 2020
  • Princess will be deployed in China in 2017
  • China represents 5% of CCL's guests
  • Onboard revenue +6% in constant dollars in F2Q
    • Successful rollout of our casino engagement program, beverage packages and additional bandwidth are just a handful of examples of initiatives that drove onboard strength
  • Remain on track for $70-80m savings
  • Will step up marketing costs in 2H 2015
  • Caution investors on ongoing macroeconomic and geopolitical risks not to get ahead of expectations for the year simply based on consistency and exceeding quarterly guidance.
  • Remain committed on double-digit ROIC growth target.
  • F2Q 
    • Beat driven by: better onboard/other yields, lower opex due to timing of costs, and better fuel/FX impact
    • Capacity up 2% - NA (flat), EAA (+6%) 
    • Net ticket yield: +3.5%
    • Improvement particularly strong in North America
    • Net fuel/FX benefited F2Q by 10 cents
  • FY 2015: anticipate $27m in restructuring costs, not included in guidance
  • Bookings for next 3 quarters have been strong; volumes ahead at slightly lower prices
  • At this point in time, cumulative fleet-wide bookings for the third quarter are well ahead at slightly lower prices but again driven by the unfavorable transactional currency impact. 
    • Caribbean itineraries are significantly ahead on occupancy at slightly lower prices, which bodes well for pricing on future bookings and pricing in the last six weeks has been higher. 
    • Alaskan itineraries are nicely ahead on both price and occupancy. 
    • All other North American brand deployments combine which includes the seasonal European program are highly ahead on occupancy but at lower prices which are being unfavorably impacted by transactional currency.
    • For EAA brands, all itineraries combined are nicely ahead on price with occupancies that are in line with the prior year. 

Q & A 

  • Why is the constant currency guidance unchanged despite the meaningful beat in the second quarter? Mostly Europe 
    • (Strong bookings there, which implies awful pricing)
  • Costa having trouble with yields. Lots of macroeconomic difficulties in Europe. 
  • Pricing discipline in Caribbean: CCL will continue to try to put pricing integrity in and discipline in for our brands independently of what anyone else does.
  • Advertising increases - not related to higher promotional spending
  • 3.7% capacity increase in 2016; 1Q 2016 ahead on occupancy; cautiously optimistic on 2016
  • Book load position: less inventory on bookings for rest of year
    • We think it's impacted by shift of Wave Season by a couple of months
  •  Anticipate LNG will be fuel of choice
  • Air/transportation: expect 20-25% improvement in costs
  • Onboard yields have been strong on NA brands. Weaker in EAA brands. 
  • MERS impact: Have itineraries from China that touch Korea and have modified some itineraries
  • Continue to see yield strength in China
  • In the next 3-4 years, CCL should hit double digit yields
  • Real competition for new cruisers is land-based
  • CCL wants the competition to advertise and promote
  • In the past, given $600m in advertising spend; this year will be 'few % points higher'
  • Overall 1st time cruisers are up dramatically - part of it due to China, another part of it due to the Caribbean since there was so much capacity last year.  The only way to fill those ships was to get a lots of new first time cruisers. 
  • New ship capacity: 6,600 is total capacity; passenger capacity is just north of 5,000 
  • No impact from China river boat incident
  • Assumed onboard spend rising 2% in 2H 2015; more challenging comps in 2H 2015
  • More dry docks in 2015 driving up costs by 2-3%. Expect dry docks to decline in 2016 (about half of 2015 increase will go away).
  • European capacity up 6% in 2015 but nowhere near double digit Caribbean capacity increase last year. So can't blame it on capacity.


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