prev

The Crossroads: Here’s What Twitter Management Needs to Do | $TWTR

 

In this excerpt from The Macro Show this morning, Hedgeye Internet & Media Analyst Hesham Shaaban weighs in on the biggest structural challenge facing Twitter in the months and years ahead and explains what management needs to do to right the ship. 

 

 

Subscribe to The Macro Show today for access to this and all other episodes. 

 

Subscribe to Hedgeye on YouTube for all of our free video content.

 


Beware of Taleb’s ‘Dead Turkeys’ (And How It Relates to U.S. Jobless Claims)

Editor's Note: Below is an abridged breakdown of this morning's labor data from Josh Steiner and our Financials team. If you would like to setup a call with Josh and his partner Jonathan Casteleyn, or trial their research, please contact sales@hedgeye.com

*  *  *  *  *

Consider a turkey that is fed every day. Every feeding will firm up the bird's belief that it is the general rule of life to be fed every day by friendly members of the human race 'looking out for its best interests,' as a politician would say. Then, shortly before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.

- Nassim Taleb, The Black Swan

 

Beware of Taleb’s ‘Dead Turkeys’ (And How It Relates to U.S. Jobless Claims) - z turkey

 

Just like Taleb's Turkey, initial jobless claims "appear" on solid footing below 300,000. However, the stark reality is that we're drawing inevitably closer to Thanksgiving Day ... and the market is, of course, the Turkey. 

 

The Transition

The current labor market trend shows a subtle shift from great to good.

 

Initial claims, put in their low watermark ~6 wks ago and are now in a 1.5 steps back, 1 step forward re-convergence higher, moving back toward 300k. While anything sub-300k isn't "bad" per se - remember, it's what happens on the margin that counts. This is especially true when the market is stretched on longer-term valuation metrics and is entering the upper echelons of historical bull market duration.

 

Outside of claims, yesterday's ADP print came in light vs expectations at 190k (consensus was looking for 210k) and this happened last month as well when consensus was also looking for 210k and ADP delivered 185k. On the NFP front, the last two months (June/July) have been in-line with expectations, but that actually follows the same great to good pattern, as the May NFP print was a 280k blow-out (consensus was 220k).

 

The Data

Prior to revision, initial jobless claims rose 11k to 282k from 271k WoW, as the prior week's number was revised down by -1k to 270k.

 

The headline (unrevised) number shows claims were higher by 12k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 3.25k WoW to 275.5k.

 

The 4-week rolling average of NSA claims, another way of evaluating the data, was -9.0% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -9.5%.

 

The Cycle

It's not easy to tease out exact causation here, but a few possibilities come to mind. One possibility is the inevitability of late cycle reality --> great becomes good (early late cycle --> mid late cycle) and then good becomes less good (mid late cycle --> late late cycle) and, eventually, less good becomes bad (late late cycle --> recession). Another possibility is that the confluence of fears from real energy sector headwinds, August market weakness and rising Global Macro uncertainty are conspiring to facilitate that first shift downward from great to good. It's also possible (likely, even) that the latter is simply this cycle's causal factor for the former.

 

The Bottom Line

Like an old broken record, we're here to remind you again that it's late cycle and it's time to start preparing for the inevitable cyclical downturn.

 

Beware of Taleb’s ‘Dead Turkeys’ (And How It Relates to U.S. Jobless Claims) - z jobs 1

 

Beware of Taleb’s ‘Dead Turkeys’ (And How It Relates to U.S. Jobless Claims) - z jobs 2


INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE

Takeaway: Claims remain benign but slowly/surely what has been great is now transitioning to good. We're getting later in what is already late cycle.

Below is the breakdown of this morning's labor data from Joshua Steiner and the Hedgeye Financials team. If you would like to setup a call with Josh or Jonathan or trial their research, please contact 

 

 

The Transition: The current labor market trend shows a subtle shift from great to good. Initial claims, put in their low watermark ~6 wks ago and are now in a 1.5 steps back, 1 step forward re-convergence higher, moving back toward 300k. While anything sub-300k isn't "bad" per se - remember, it's what happens on the margin that counts. This is especially true when the market is stretched on longer-term valuation metrics and is entering the upper echelons of historical bull market duration.

 

Outside of claims, yesterday's ADP print came in light vs expectations at 190k (consensus was looking for 210k) and this happened last month as well when consensus was also looking for 210k and ADP delivered 185k. On the NFP front, the last two months (June/July) have been in-line with expectations, but that actually follows the same great to good pattern, as the May NFP print was a 280k blow-out (consensus was 220k). 

 

The Cycle:  It's not easy to tease out exact causation here, but a few possibilities come to mind. One possibility is the inevitability of late cycle reality --> great becomes good (early late cycle --> mid late cycle) and then good becomes less good (mid late cycle --> late late cycle) and, eventually, less good becomes bad (late late cycle --> recession). Another possibility is that the confluence of fears from real energy sector headwinds, August market weakness and rising Global Macro uncertainty are conspiring to facilitate that first shift downward from great to good. It's also possible (likely, even) that the latter is simply this cycle's causal factor for the former.

 

The bottom line is that, like that old broken record, we're here to again remind you that it's late cycle and it's time to start preparing for the inevitable cyclical downturn

 

The Data

Prior to revision, initial jobless claims rose 11k to 282k from 271k WoW, as the prior week's number was revised down by -1k to 270k.

 

The headline (unrevised) number shows claims were higher by 12k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 3.25k WoW to 275.5k.

 

The 4-week rolling average of NSA claims, another way of evaluating the data, was -9.0% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -9.5%.

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims18 normal  2

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims2 normal  3

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims3 normal  3

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims4 normal  3

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims5 normal  3

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims6 normal  3

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims7 normal  3

 

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE

Takeaway: Claims remain benign but slowly/surely what has been great is now transitioning to good. We're getting later in what is already late cycle.

The current labor market trend shows a subtle shift from great to good. Initial claims, put in their low watermark ~6 wks ago and are now in a 1.5 steps back, 1 step forward re-convergence higher, moving back toward 300k. While anything sub-300k isn't "bad" per se - remember, it's what happens on the margin that counts. This is especially true when the market is stretched on longer-term valuation metrics and is entering the upper echelons of historical bull market duration.

 

Outside of claims, yesterday's ADP print came in light vs expectations at 190k (consensus was looking for 210k) and this happened last month as well when consensus was also looking for 210k and ADP delivered 185k. On the NFP front, the last two months (June/July) have been in-line with expectations, but that actually follows the same great to good pattern, as the May NFP print was a 280k blow-out (consensus was 220k). 

 

It's not easy to tease out exact causation here, but a few possibilities come to mind. One possibility is the inevitability of late cycle reality --> great becomes good (early late cycle --> mid late cycle) and then good becomes less good (mid late cycle --> late late cycle) and, eventually, less good becomes bad (late late cycle --> recession). Another possibility is that the confluence of fears from real energy sector headwinds, August market weakness and rising Global Macro uncertainty are conspiring to facilitate that first shift downward from great to good. It's also possible (likely, even) that the latter is simply this cycle's causal factor for the former.

 

The bottom line is that, like that old broken record, we're here to again remind you that it's late cycle and it's time to start preparing for the inevitable cyclical downturn. Below is a table of 1yr beta across Financials and below that is a table showing the best to worst early, mid and late cycle Financials subsectors.

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Beta Fins Table

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - relative subsector performance chart v2

 

The Data

Prior to revision, initial jobless claims rose 11k to 282k from 271k WoW, as the prior week's number was revised down by -1k to 270k.

 

The headline (unrevised) number shows claims were higher by 12k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 3.25k WoW to 275.5k.

 

The 4-week rolling average of NSA claims, another way of evaluating the data, was -9.0% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -9.5%

 

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims18 

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims2

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims3

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims4

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims5

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims6

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims7

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims8

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims9

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims10

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims11

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims19

 

 

Yield Spreads

The 2-10 spread fell -3 basis points WoW to 147 bps. 3Q15TD, the 2-10 spread is averaging 156 bps, which is lower by -2 bps relative to 2Q15.

 

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims15

 

INITIAL JOBLESS CLAIMS | LATE CYCLE & BETA DEFENSE - Claims16

 

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT


Central-Planning Panic

Client Talking Points

EURO

The Euro is hovering at $1.12 vs. USD with a wide immediate-term risk range of $1.09-1.16 as #cowbell fans await ECB President Mario Draghi’s next parting of the seas. We have no idea what he’s going to say – we can see clearly, though, what stock market-bailout fans are begging him to say.

 

STOCKS

Wacky wide risk range still very much in play, across major Global Equity markets with the U.S. range (SPX) now at 1,860-2,017 and our volatility signal suggesting 21 VIX is as probable here as 42 VIX – after covering SPY (lower) we are tee’ing up the SELL signal again.

HIKE

Oh yeah! Federal Reserve Vice Chairman Stanley Fischer woke up this morning feeling hard-core, suggesting to CNBC that he’s going to show the “market that it’s not in control” … but it is, and always is… this is the scariest comment we’ve seen yet – the Fed hasn’t tightened into a slowdown since Volcker.

 

**Watch the replay of The Macro Show with Internet & Media Sector Head Hesham Shaaban - CLICK HERE

Asset Allocation

CASH 67% US EQUITIES 0%
INTL EQUITIES 0% COMMODITIES 3%
FIXED INCOME 30% INTL CURRENCIES 0%

Top Long Ideas

Company Ticker Sector Duration
MCD

We recently tried out the "Create Your Taste" experience at the newly remodeled McDonald’s location in Midtown East on the corner of 58th street and 3rd Ave. Walking into the newly remodeled MCD, we were greeted by the brand new self-order kiosks with attentive staff there to assist you. Customers were very interested in using the kiosks, and everyone using them seemed to be having an easy time with it.

 

For it being only two weeks into the process we were very impressed by the efficiency and mastery the staff is already displaying. We plan to head back to the same McDonalds location and check on their progress.

PENN

Our Gaming, Lodging & Leisure team is going to furnish a new update following their recent meeting with Penn National Gaming's management. They note that the stock has held up quite well despite increased market volatility. The bullish thesis on shares of PENN remains intact. Regional revenues remain strong in addition to the 2-year growth story, etc. Stay tuned.

TLT

As we outlined through various channels, we expect that high levels of volatility are here to stay for the foreseeable future. The biggest shift last week that we’ll call out is a bullish to more neutral intermediate-term view on the U.S. dollar which is why we added GLD to investing ideas in replace of UUP. To be clear, if growth continues to slow we want to be long of bonds (that view hasn’t changed in a year and a half).

 

From an asset allocation perspective here is the set-up:

  • Growth slowing: Long bonds and low-beta yield chasing sectors (TLT, EDV, XLU)
  • Shift to more dovish policy: long of GOLD as the shift weakens the value of the USD

We re-iterate the same view we’ve had since the beginning of 2014: Growth is slowing, and deflation remains a real risk (central bankers can’t solve this by talking down the currency). The fed will continue to push out the dots on “policy normalization.”

Three for the Road

TWEET OF THE DAY

$LINE bonds mauled to new all-time lows today.  every LINN issue now trading for less than 40c.  one of the biggest HY energy issuers.

@HedgeyeEnergy

QUOTE OF THE DAY

Knowledge speaks, but wisdom listens.

Jimi Hendrix

STAT OF THE DAY

16.8% of the Harvard freshman class had one or more parents who went to Harvard.


CHART OF THE DAY: Winning (Not Whining) Is The Name of This Game

Editor's Note: The chart and excerpt below are from today's Early Look written by Hedgeye CEO Keith McCullough. We have good reason to believe this morning note is the best way to begin your market day. Give us a try and see for yourself!

 

CHART OF THE DAY: Winning (Not Whining) Is The Name of This Game  - z z km 1

 

...It’s really not that complicated. What complicates Wall Street’s narrative is the excuse making.

 

What always happens on the downslope of the cycle (see basic rate-of-change sine curve in today’s Chart of The Day) is that bullishly biased investors start to give you every reason why “stocks are cheap” (as both growth and earnings slow).

 

Then, as “cheap” gets cheaper, their performance starts to come unglued, their frustrations mount, and the excuse making accelerates. All I have to say about that is A) evolve (this is the 3rd #LateCycle slowdown since 2000) and B) stop whining.

 


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.

next