Client Talking Points
The USD was +2.3% on the week and that keeps most other foreign currencies in crash mode (New Zealand Dollar -3.7% on the week!); took WTI Oil -4.9% on the week too – a Fed tightening into a slowdown will bring recessions in Texas, Canada, EM, etc.
One “good” jobs report (which actually saw NFP slow to 2.01% year-over-year vs. the cycle peak of 2.34% in FEB) that is subject to revisions trumps all other industrial and cyclical data slowing? We’ll see about that – TREND risk range on the UST 10YR looks like this now 1.85-2.51% and that will drive FICC volatility.
Japan is not Indonesia – Nikkei loved the smell of Burning Yens overnight, closing +2%, but EM (Indonesian Stocks) resumed their crash closing -1.5% (Australia -1.8%, Thailand –0.9%) – recession is probably too mild a word to describe Commodity and EM investments now.
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Top Long Ideas
Post earnings, the next catalyst for McDonald’s (MCD) is going to be next week's November 10th analyst meeting. The meeting will be an opportunity for management to shed more light on the progress of all day breakfast, additional G&A cuts and the potential of doing a REIT.
Our Restaurants team remains bullish on the name, and they look forward to giving you some material updates after the meeting.
Restoration Hardware (RH) hit all-time highs this week, but this story is far from over. We think RH will earn close to $11 per share in 3 years, which compares to the consensus estimate of just over $6. We estimate that the stock is worth $300.
The square footage component is well known, but we think people are missing…
Current policy makers remain fixated on the jobs market, and this Friday’s report was good on the surface. Here’s the rundown:
So, again, on the surface it was a positive report. However, as we’ve emphasized, consumption and labor market strength are staples of an economy that is late cycle.
Growth continues to slow, and a rate hike has the potential to pull-forward a recession and flatten the yield curve. In the event this happens, you’ll be happy you held onto your long-bond position. If you haven’t bought into the #slower-for-longer view, the market is giving you the chance to buy bonds at another lower high… For the 5th time this year.
Three for the Road
TWEET OF THE DAY
Must-See: Post Jobs Report – What's Next? https://app.hedgeye.com/insights/47412-must-see-the-best-of-rta-live … via @Hedgeye CEO @KeithMcCullough #Fed
QUOTE OF THE DAY
In any project the important factor is your belief. Without belief, there can be no successful outcome.
STAT OF THE DAY
Wage growth for production and nonsupervisory employees (~80% of the labor force) was +2.3%, below the private sector average of +2.5%.
- Bullish Trend
- Bearish Trend
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Nu Skin Enterprises, Inc.
J.P. Morgan Chase & Co.
Valeant Pharmaceuticals International, Inc.
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Nu Skin (NUS) is on the Hedgeye Consumer Staples Best Ideas list as a SHORT.
Today, Barron’s ran an article on VitaMeal raising some of the concerns that we have, but the article lacks many of the details around VitaMeal and the implication for NUS.
It's important to remember that NUS is currently under investigation by the SEC. Our call focuses on the process, ethics and execution of getting the needy children the food, which is questionable at best. If the SEC were to expand the scope of its investigation into NUS's business practices it would be financially devastating to the company.
Our call on Wednesday, November 11th, will cover the following topics that were not covered in the Barron's article
- Quarterly impact on NUS's sales and EPS since Q1 2012
- How NUS's multiple charities work jointly to sell VitaMeal
- An example of how distributors may be deceiving consumers (see graphic below)
- Names of the people and organizations in Malawi that are tied to NUS
- Why VitaMeal could increase the scope of the SEC investigation into NUS
- The financial condition of NUS and why this scandal could cripple the company
- And more...
The Barrons article also referenced a call, General Counsel Noah Bryson, had with VitaMeal distributors in October. We have a transcript of that call available if you would like to read it. Its quite entertaining.
Call with questions or contact if you would like to listen to the call.
Hedgeye CEO Keith McCullough came out guns blazing on RTA Live Friday morning following the jobs report. In this excerpt, he weighed in with his thoughts on a host of stocks and sectors including junk bonds, gold, and how to handle Fed Chair Janet Yellen.
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Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.