TWTR: Thoughts into the Print (2Q15)

Takeaway: We're not sure what happens on this print since it all depends on mgmt. TWTR will need to rebase expectations again, question is when.


  1. 2Q15 = UGLY PUNT: We're not sure which way the ball is going to bounce on this print since it really depends on how mgmt chooses to address the street (appease or rebase).  We see some upside to the print off light 2Q guidance, especially if it can sustain its CPE tailwind from 1Q15.  Further, mgmt's cautious 2Q MAU comments on its 1Q15 call should offer some breathing room as well.  But we're not sure if mgmt is going to try to appease the street as they historically have and guide high 3Q/increase 2015, OR attempt to rebase expectations prior to its 2016 guidance release.        
  2. WILL NEED TO REBASE AGAIN: We remain short for this reason.  Even though the 2Q15 print can go against us, we suspect that upside to be short-lived at best.  For context, the bulk of TWTR's 2015 guidance cut was concentrated into 1H15.  In turn, that's where consensus has concentrated its estimate revisions as well.  Consensus is now looking for TWTR to essentially flat-line a +50% advertising revenue growth rate from now through the end of 4Q16.  That will be a tall order given its precipitous decline in ad engagements, which we expect to continue without a clear shift in its monetization strategy (see note below).


TWTR: Thoughts into the Print (2Q15) - TWTR   2Q13 Supply Shock slide

TWTR: Thoughts into the Print (2Q15) - TWTR   FC Ad Revenue



Let us know if you have any questions or would like to discuss further.


Hesham Shaaban, CFA




TWTR: Rock and a Hard Place (1Q15)

04/29/15 08:15 AM EDT

[click here]

CHART OF THE DAY: Are You Long Inflation Expectations? (Hope Not)

Editor's Note: The chart and excerpt below are from this morning's Early Look written by Hedgeye CEO Keith McCullough. Click here to subscribe today. 


CHART OF THE DAY: Are You Long Inflation Expectations? (Hope Not) - Z 07.27.15 chart


...Uh, maybe we should be long, “decoupling”? Nope. We’ll stick with the #Quad4 asset allocations, which should have you long low-beta and yield chasing sectors (short Commodities). Currently I like Healthcare (XLV), REITS (VNQ), and Utilities (XLU); not the following...


Debt Deflation Knives

“Second prize is a set of steak knives.”

-Alec Baldwin


That, of course, was one of the best one-liners from the 1992 classic Chicago real-estate brokerage movie, Glengarry Glen Ross (which was based on a 1984 Pulitzer Prize winning book by David Mamet).


Baldwin played Blake and the aforementioned quote came during his epic “motivational” speech to the sales-force. As many of you economic-cycle fans will recall, it’s always toughest to create sales and demand, when growth is slowing (1 was no different).


Debt Deflation Knives - z ab stk


“So,” it’s probably not different this time. The cover of The (now for sale) Economist is trumpeting “The Empire of The Geeks” (Silicon Valley) at another #bubble peak for “growth” assets. Instead, they should be asking themselves if this is a 1999 or 2007 cyclical slow-down.


Back to the Global Macro Grind


When the cycle slows, those who rotate out of #LateCycle styles of investing like:


A)     Inflation expectations

B)      Cyclicals (think peak growth and margin expectations)


Get 1st place… and those who are long:


A)     “Reflation” (commodities, currencies, and countries linked to inflation expectations)

B)      “Global Growth is back” (energy, basic materials, industrials, etc.)


Get to own the falling steak knives…


Here’s how that marked-to-market Global Macro score looked last week (in the context of the last month):


  1. Commodities (CRB Index) down another -4.4% wk-over-wk = down -8.5% month-over-month
  2. Oil (WTI) down another -6.0% week-over-week = crashing -20.5% month-over-month
  3. Gold down another -2.1% week-over-week = down -7.6% month-over-month
  4. Copper down another -4.5% week-over-week = down -9.2% month-over-month
  5. Canadian Dollar (vs. USD) -0.6% week-over-week = down -5.1% month-over-month
  6. Canadian Stocks (TSX Composite) -3.1% wk-over-wk = down -5.1% in the last month


Blame Canada? Nah. In US Dollars, let’s keep going on these hot-commodity-currency-country-links to inflation expectations:


  1. Russian Ruble -2.5% week-over-week = -down 6.8% month-over-month
  2. Russian Stocks -5.8% week-over-week = down -8.9% month-over-month
  3. Brazil’s Real -4.9% week-over-week = down -7.6% month-over-month
  4. Brazilian Stocks -5.9% week-over-week = down -8.5% month-over-month
  5. Nickel -1.8% week-over-week = down -11.6% month-over-month
  6. Rubber -2.2% week-over-week = down -14.0% month-over-month


Nickel and Rubber? Two of the BRIC’s (Brazil, Russia, India, China)? Damn those people who have to sell things in #deflating prices and/or have to buy/consume things in devalued currencies. #Deflation during a global growth slowdown has to be bullish, right?


Right. Right. Steak knives for everyone with a “diversified” asset allocation pie-chart last week! The Latin American “emerging markets” (MSCI) Index was -7% last week (-11.2% in the last month), and Chinese stocks were -8.5%, overnight. Booyah!


Uh, maybe we should be long, “decoupling”? Nope. We’ll stick with the #Quad4 asset allocations, which should have you long low-beta and yield chasing sectors (short Commodities). Currently I like Healthcare (XLV), REITS (VNQ), and Utilities (XLU); not the following:


  1. Inflation expectations (5yr breakevens) dropped another -13bps = down -28 bps in the last month (1.42%)
  2. Energy (XLE) and Basic Material (XLB) stocks down -4.0% and -5.4% (-9.1-9.3% in the last month) respectively
  3. Industrial stocks (XLI) deflated another -3.7% to -6.5% YTD (down -4.5% month-over-month)


If you’re levered long to inflation expectations another way to look at your risk is from a Style Factor perspective (mean performance of the Top Quartile vs. Bottom Quartile in S&P 500 companies):


  1. LEVERAGE: High Debt (to Enterprise Value) stocks were down -3.3% last week and are down -7.0% in the last 3 months
  2. BIG BETA: High Beta stocks dropped -4.2% last week and are down -8.7% in the last 3 months


In other news, our long-standing (back to the beginning of 2014 when TLT was at $108) best way to be positioned for growth and inflation slowing (Long-term Treasuries) had a great week last week.


The yield on a 10yr US Treasury Bond is down to 2.25% this morning and I still think that 1.75% happens before 2.75% does. I also love being long Low-Beta vs. short things that are highly levered to falling #DebtDeflation knives.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 2.21-2.34%

SPX 2069-2098
Nikkei 202
VIX 12.53-14.58
USD 96.61-98.35
Oil (WTI) 47.07-50.49

Gold 1067-1117


Best of luck out there this week,



Keith R. McCullough
Chief Executive Officer


Debt Deflation Knives - Z 07.27.15 chart

Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

Monday Mashup

Monday Mashup - CHART 1




7/24/15 MCD | Right on Track


7/22/15 CMG | Is a Friend to Investors not a Faux





Friday, July 24

BWLD | Downgraded to neutral from buy at Dougherty & Co.  

Thursday, July 23

DNKN | In case you missed DNKN CEO blasting the NY wage board during their earnings call, here is a good summary (click here for article)

BWLD | Increases their credit facility from $100 million to $200 million (click here for 8-K)

SBUX | SBUX and PEP sign agreement to bring Starbucks ready-to-drink beverages to Latin America (click here for article)


Wednesday, July 22

DRI | Bondholders protest plan to spin off real estate (click here for article)

NY Board recommends phasing in $15 hourly wage (click here for article)


Tuesday, July 21

MCD | Might take all-day breakfast national (click here for article)

Lawmakers, White House explore tax revamp for U.S. firms with large overseas presence (click here for article)


Monday, July 20

DNKN | Announces plans for 26 new restaurants in Fresno and San Francisco (click here for article)



Casual dining and quick service stocks, in aggregate, underperformed the XLY last week. The XLY was down -0.4%, top performer from casual dining was RT posting an increase of 10.8%, while CMG led the quick service pack up 10.5%.


Monday Mashup - CHARt 2

Monday Mashup - CHART 3



From a quantitative perspective, the XLY remains bullish on a TRADE and TREND duration.


Monday Mashup - CHART 4



Monday Mashup - CHART 5

Monday Mashup - CHARt 6



Monday Mashup - CHARt 7

Monday Mashup - CHART 8

The Macro Show Replay | July 27, 2015




July 27, 2015

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July 27, 2015 - Slide4

July 27, 2015 - Slide2

July 27, 2015 - Slide3





July 27, 2015 - Slide5

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July 27, 2015 - Slide12

July 27, 2015 - Slide13

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