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Client Talking Points

USD

On anything less than a 230,000 NFP we’d expect the Dollar Down, Rates Down and for Oil and Gold to go Up – that happened yesterday and it’s seeing some follow through this morning – stay tuned.

OIL

+0.7% WTI here after making a higher-low (vs. the March low) and don’t forget that the March bottom in oil came alongside the 1st big U.S. Jobs Report “miss” (March) vs. peak cycle expectations (labor peaked in FEB) – it’s not all about this, but this matters.

UST 10YR

2.23% this morning with immediate-term downside to 2.15% and intermediate-term downside to 1.77% - the Atlanta Fed tracker is one of the few GDP estimates close to ours for Q3 at 1.0% GDP (we’re at 1.4% quarter-over-quarter SAAR, +1.6% year-over-year).

 

**The Macro Show - CLICK HERE to watch today's edition at 8:30AM ET with Hedgeye CEO Keith McCullough.

Asset Allocation

CASH 60% US EQUITIES 4%
INTL EQUITIES 6% COMMODITIES 0%
FIXED INCOME 24% INTL CURRENCIES 6%

Top Long Ideas

Company Ticker Sector Duration
HOLX

HOLX’s earnings release were as good as we expected, and in some spots, much better than our optimistic view. Given the move in the price, we did begin to do some work on Hologic’s Diagnostic segment. We touched base with a lab Director who currently does his testing on Hologic/Gen-Probe’s Panther system. During the call management made some positive comments about uptake of the systems and rising utilization per box. Our contact suggested the benefit from the Affordable Care Act was substantial  over the last 12 months, pushing volume up to a mid-teens growth rate, but that trends were flattening. But on the positive side Qiagen continues to cede share with an out of date test and the alternatives are primarily Roche and Hologic, but not Cepheid’s system. The bottom line is that we may be too conservative with our estimates for Diagnostics, which we’ve been assuming treads water from here.  However, we’re starting to think there is some incremental acceleration that’s possible, which would be welcome news indeed.  

PENN

After attending PENN’s analyst day at the Plainridge Casino in Massachusetts our Gaming, Lodging & Leisure Team struggled to find any negative takeaways. The property opened very strong in late June, and the strength continued in July. We are now raising our win per day per slot assumption to $500 from $400. Terrific highway access, a lower gaming tax rate and garage parking provide a competitive advantage in what seems to be a deeper market than the consensus view. Our 2015 and 2016 estimates are materially above the Street for EBITDA and EPS. Most importantly, we think PENN should generate an ROI of 28% on Plainridge, much higher than the Street anticipates.

TLT

As largely expected a sequential acceleration in GDP from Q1 to Q2 on a seasonally adjusted annual basis pulled forward the market’s expectation for a rate hike which = USD strength. The USD finished positive on the week (+0.50% on Thursday’s print alone).

  • U.S. GDP reported Thursday for Q2 came in at +2.3% on a Q/Q seasonally-adjusted annual rate and the market took it as a positive print à rate hike expectations pulled forward.
  •  Remember that 1) Consensus focuses on this SAAR number and 2) The GDP acceleration came off of an awful Q1 print (Q1 revised to a measly +0.60% for Q1 vs. initially reported -0.20%)
  • On a Y/Y basis (crazy Hedgeye speak) GDP for Q2 actually decelerated to +2.3% YY vs. 2.9% prior
  • With very difficult base effects in our model for 2H 2015 GDP we expect Q2 data (especially the GDP print) to provide support for the USD
  • Our expectation for Y/Y GDP in Q3/Q4 are +1.6% Y/Y (+1.4% Q/Q SAAR) and +1.5% Y/Y (+1.7% Q/Q SAAR) respectively; These prints (Q3 will come in October) will stoke a relatively more dovish FED for a short time (USD headwind) but until then we’ll ride the Q2 data train.   

 

Three for the Road

TWEET OF THE DAY

Coo Coo https://youtu.be/kJN9L3rRW40  via @YouTube

@Hedgeye

QUOTE OF THE DAY

Life is like a combination lock; your job is to find the right numbers, in the right order, so you can have anything you want.

Brian Tracy

STAT OF THE DAY

North Korea is creating its own timezone by dropping clocks back 30 minutes in what will be called “Pyongyang time,” effective August 15.