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JOIN HEDGEYE FOR HOLIDAY COCKTAILS & APPETIZERS

'Tis the Season…. We hope you can join us at La Biblioteca (622 3rd Avenue at 40th Street – located inside Zengo restaurant) on Wednesday December 9th, from 5-9pm for some holiday cheer!

 

Please RSVP to Kerrie at  if you can join.

 

We look forward to seeing you!

 

-Your Hedgeye Financials Team

 

JOIN HEDGEYE FOR HOLIDAY COCKTAILS & APPETIZERS - he client holiday party DEC2015

 

 

Joshua Steiner, CFA 

 
 

Jonathan Casteleyn, CFA, CMT 
 

 

 


*CORRECTION P | Sony Agreement ≈ Non-Event

Takeaway: We read this wrong. This is publishing deal, which is a very small part of P's content costs, and not the same rights covered by Web IV.

KEY POINTS

  1. PUBLISHING DEAL, NOT RECORDINGS: We appologize for the confusion.  The Sony Agreement is actually for Music Composition, which is less than 10% of P's content costs, with Sony representing some percentage of that.  The Web IV proceeding is for Music Recordings (92% of P's content costs).  So this agreement is largely a non-event relative to the much bigger Web IV issue.  Point 2 below was mostly historical context, so no updates there outside of removing the last two sentences.  Once again, we appologize for the confusion.  
  2. WAVING THE WHITE FLAG? Very recent development suggest that P is now expecting to lose.  P has committed over 60% of its cash reserves to the Ticketfly acquisition ($191M) + the Pre-1972 settlement ($90M), which is a fairly reckless move without knowing the Web IV outcome.  That is unless it was already planning to blow up its existing model prior to an expected Web IV defeat.  Also note that the pre-1972 settlement also covers the 2016 period, and it is pricing in a considerable rate increase (+40%).  Note that P’s CFO suggested during the 3Q15 call that expected future rates were considered as part of the settlement.  

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Let us know if you have any questions, or would like to discuss further.  See notes below regarding recent developments for P and our Web IV analysis.

 

Hesham Shaaban, CFA


@HedgeyeInternet 

 

 

P: Can We Still Be Friends? (3Q15)
10/23/15 08:14 AM EDT
[click here]

 

P: Dumb or Defeated? (Ticketfly)
10/07/15 11:02 AM EDT
[click here]

 

P: It's All About the Benchmarks (Web IV)
10/02/15 12:22 PM EDT
[click here]

 

P: Fool's Gold (Web IV)
09/21/15 02:05 PM EDT
[click here]

 


INITIAL JOBLESS CLAIMS | NEGATIVE ENERGY

Takeaway: A second wave of energy job losses has begun. Energy company hedges are rolling off as we move into year-end.

Moving into the end of the year when energy companies will likely experience losses as they roll over their hedges, the energy sector has seen an uptick in job losses recently. The spread between indexed claims in energy states and the U.S. as a whole in our chart below has widened in 9 consecutive weeks so far. That includes the most recent week ending October 24 where the spread widened to 25 from 22. Additionally, the Challenger job cuts announcement this morning reported oil-related cuts made up more than one quarter of the 50.5 thousand total layoffs announced in October. That marks a six-month high in oil-related layoffs. 

 

INITIAL JOBLESS CLAIMS | NEGATIVE ENERGY - Claims18

 

The Data

Initial jobless claims rose 16k to 276k from 260k WoW. The prior week's number was not revised. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 3.5k WoW to 262.75k.

 

The 4-week rolling average of NSA claims, another way of evaluating the data, was -7.0% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -9.1%

 

INITIAL JOBLESS CLAIMS | NEGATIVE ENERGY - Claims2

 

INITIAL JOBLESS CLAIMS | NEGATIVE ENERGY - Claims3

 

INITIAL JOBLESS CLAIMS | NEGATIVE ENERGY - Claims4

 

INITIAL JOBLESS CLAIMS | NEGATIVE ENERGY - Claims5

 

INITIAL JOBLESS CLAIMS | NEGATIVE ENERGY - Claims6

 

INITIAL JOBLESS CLAIMS | NEGATIVE ENERGY - Claims7

 

INITIAL JOBLESS CLAIMS | NEGATIVE ENERGY - Claims8

 

INITIAL JOBLESS CLAIMS | NEGATIVE ENERGY - Claims9

 

INITIAL JOBLESS CLAIMS | NEGATIVE ENERGY - Claims10

 

INITIAL JOBLESS CLAIMS | NEGATIVE ENERGY - Claims11

 

INITIAL JOBLESS CLAIMS | NEGATIVE ENERGY - Claims19

 

Yield Spreads

The 2-10 spread rose 1 basis points WoW to 142 bps. 4Q15TD, the 2-10 spread is averaging 143 bps, which is lower by -10 bps relative to 3Q15.

 

INITIAL JOBLESS CLAIMS | NEGATIVE ENERGY - Claims15

 

INITIAL JOBLESS CLAIMS | NEGATIVE ENERGY - Claims16

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 


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P: Waiving the White Flag? (Sony Agreement)

Takeaway: Terms are confidential, but to settle this close the Web IV decision suggests someone realizes that it's going to lose. That's likely P

KEY POINTS

  1. CONFIDENTIAL DEAL, ODD TIMING: All we know is that the two sides have come to terms, but we don't know what those terms are.  According to the press release, P will be paying a higher royalty rate and will have more flexibility in its product offerings.  We're guessing the latter would mean an interactive license, which we believe would be a step in the right direction for P.  The obvious question is the magnitude of the increase.  Note, P had previously said that a direct deal wasn't likely prior to the Web IV decision.  Given that we're only one month away from the decision, and that this deal will have precendential value in the next Webcaster proceeding, we suspect one of the parties realizes that it's going to lose, and the negotiated rates are heavily tilted toward one of the party's Web IV proposals.
  2. WAIVING THE WHITE FLAG? Very recent development suggest that P is now expecting to lose.  P has committed over 60% of its cash reserves to the Ticketfly acquisition ($191M) + the Pre-1972 settlement ($90M), which is a fairly reckless move without knowing the Web IV outcome.  That is unless it was already planning to blow up its existing model prior to an expected Web IV defeat.  Also note that the pre-1972 settlement also covers the 2016 period, and it is pricing in a considerable rate increase (+40%).  Note that P’s CFO suggested during the 3Q15 call that expected future rates were considered as part of the settlement.  So that said, we wouldn't assume that P is getting anything close to a sweetheart deal here.  If anything, it may be P's next step toward deemphasizing its ad-supported model (first one being Ticketfly).  

P: Waiving the White Flag? (Sony Agreement) - P   1972 settlement 

 

Let us know if you have any questions, or would like to discuss further.  See notes below regarding recent developments for P and our Web IV analysis.

 

Hesham Shaaban, CFA


@HedgeyeInternet 

 

 

P: Can We Still Be Friends? (3Q15)
10/23/15 08:14 AM EDT
[click here]

 

P: Dumb or Defeated? (Ticketfly)
10/07/15 11:02 AM EDT
[click here]

 

P: It's All About the Benchmarks (Web IV)
10/02/15 12:22 PM EDT
[click here]

 

P: Fool's Gold (Web IV)
09/21/15 02:05 PM EDT
[click here]

 


INVITE | Gold Flush? Materials Sector Launch Call (NEM, ABX, Gold Miners)

 

INVITE | Gold Flush?  Materials Sector Launch Call (NEM, ABX, Gold Miners)  - Materials Launch Image

 

We are hosting a kick-off call for Hedgeye Materials coverage on Monday, November 9th at 1:00 P.M., and will illustrate our investment process in the Gold Mining industry.

                    

Gold Bugs Bitten:  Gold prices in dollars have declined since 2011, despite two incremental rounds of quantitative easing and perpetual zero interest rates.  US long bonds have performed well in a similar environment.  What are the gold bugs missing?  We’ll put forth our data-driven take in our Materials launch deck.

 

Differentiated Sector Approach: The Materials coverage team of Jay VanSciver and Ben Ryan applies our experience in cyclicals, macroeconomics, and commodities to produce Best-Idea focused, process-driven Materials sector research. 

 

Our research process has three key components:

  • Structural Weakness/Strength: Identify structural vulnerability or resiliency in commodity related business (e.g. over/under capacity, demand susceptibility, deteriorating/improving structural position) that should have a dominant impact on market prices.
  • Unidentified Supply/Demand Changes:  We then look within those industries to see if consensus estimates for production or consumption are likely to prove incorrect based on our data-driven proprietary forecasts ranges.
  • Identify Companies Valued Inappropriately Relative To Forecast:  Deep-dive company specific valuation work oriented toward finding effective exposure our broader commodity thesis.  We align with our firm's top-down macro view when applicable.

 

Coverage To Broaden: While we believe the Gold Mining Industry provides a clear platform to demonstrate our process, our coverage will expand in coming quarters to areas where we see the best alpha opportunities.  We plan to host at least one Best Ideas call per quarter and to publish daily/weekly sector highlights, in addition to key research notes.

 

Call Details:

 

Toll Free:

Toll:

Confirmation Number: 13623545

Presentation Link: Materials Launch

 

As always, our prepared remarks will be followed by a live, anonymous Q&A session. Please submit your questions to . Also, for those of you who cannot join us live, we will be distributing a replay video of the call shortly after it concludes.

 


INVITE | Gold Flush? Materials Sector Launch Call (NEM, ABX, Gold Miners)

 

 

INVITE | Gold Flush?  Materials Sector Launch Call (NEM, ABX, Gold Miners) - Materials Launch Image

 

GOLD BUGS BITTEN:  Gold prices in dollars have declined since 2011, despite two incremental rounds of quantitative easing and perpetual zero interest rates.  US long bonds have performed well in a similar environment.  What are the gold bugs missing?  We’ll put forth our data-driven take in our Materials launch deck.

 

DIFFERENTIATED SECTOR APPROACH: The Materials coverage team applies our experience in cyclicals, macroeconomics, and commodities to produce Best-Idea focused, process-driven research. 

 

Our research process has three key components:

  • Structural Weakness/Strength: Identify structural vulnerability or resiliency in commodity related business (e.g. over/under capacity, demand susceptibility, deteriorating/improving structural position) that should have a dominant impact on market prices.
  • Unidentified Supply/Demand Changes:  We then look within those industries to see if consensus estimates for production or consumption are likely to prove incorrect based on our data-driven proprietary forecasts ranges.
  • Identify Companies Valued Inappropriately Relative To Forecast:  Deep-dive company specific valuation work oriented toward finding effective exposure our broader commodity thesis.  We align with our firm's top-down macro view when applicable.

 

COVERAGE TO BROADEN: While we believe the Gold Mining Industry provides a clear platform to demonstrate our process, our coverage will expand in coming quarters to areas where we see the best alpha opportunities.  We plan to host at least one Best Ideas call per quarter and to publish daily/weekly sector highlights, in addition to key research notes.

 

CALL DETAILS:

 

Toll Free:

Toll:

Confirmation Number: 13623545

Presentation Link: Materials Launch

 

As always, our prepared remarks will be followed by a live, anonymous Q&A session. Please submit your questions to . Also, for those of you who cannot join us live, we will be distributing a replay video of the call shortly after it concludes.

 

Macro Team


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