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The Macro Show Replay | November 18, 2015

 


November 18, 2015

 

  • Bullish Trend
  • Bearish Trend
  • Neutral

INDEX BUY TRADE SELL TRADE PREV. CLOSE
UST10Y
10-Year U.S. Treasury Yield
2.30 2.17 2.25
SPX
S&P 500
2,016 2,068 2,050
RUT
Russell 2000
1,134 1,172 1,153
COMPQ
NASDAQ Composite
4,907 4,991 4,986
NIKK
Nikkei 225 Index
19,015 19,933 19,630
DAX
German DAX Composite
10,663 11,002 10,971
VIX
Volatility Index
16.77 20.98 18.84
DXY
U.S. Dollar Index
98.20 100.13 99.70
EURUSD
Euro
1.05 1.07 1.06
USDJPY
Japanese Yen
121.83 123.92 123.42
WTIC
Light Crude Oil Spot Price
39.75 42.96 41.12
NATGAS
Natural Gas Spot Price
2.23 2.42 2.37
GOLD
Gold Spot Price
1,065 1,088 1,069
COPPER
Copper Spot Price
2.07 2.18 2.09
AAPL
Apple Inc.
110 116 113
PCLN
Priceline.com Inc.
1,195 1,306 1,258
VRX
Valeant Pharmaceuticals International, Inc.
68.01 78.91 70.32
FB
Facebook, Inc.
102 110 105
ATHN
Athenahealth Inc.
150 163 153
BABA
Alibaba Group Holding Ltd.
73.82 80.41 78.13

 

 


Cartoon of the Day: Loves Me... Loves Me Not

Cartoon of the Day: Loves Me... Loves Me Not - rate hike cartoon 11.17.2015

 

"... Remember that if/when the Fed pivots back to dovish from pretend-hawkish, they have to tell the American People why they are doing that," wrote Hedgeye CEO Keith McCullough in today's Early Look. "Say it with me now – Super #LateCycle Growth Slowing…"

 

 


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CALL REPLAY - PRA GROUP (PRAA): NEW BEST IDEA SHORT

Takeaway: We hosted a one hour call this morning introducing our bearish thesis on PRA Group (PRAA). Links to the deck and replay are below.

Slides: HERE

Call: HERE

 

CALL REPLAY - PRA GROUP (PRAA): NEW BEST IDEA SHORT - PRA roller coaster 

 

KEY POINTS 

  • Supply/Demand Headwinds: The market for buying defaulted receivables is especially unfavorable. Demand for paper has exceeded supply for a few years now, mirroring the environment last seen from 2005-2007 when shares of PRAA tumbled ~70%.
  • Growing Debt: Leverage at the company has risen quickly in the wake of the Activ deal.  
  • Insiders Dumping: Widespread insider selling suggests that insiders see similar intermediate/longer-term headwinds.
  • History's Guide: Our analysis of the interplay between labor markets, terminal IRRs and pre-tax margins will shed light on what to expect fundamentally from a timing standpoint.
  • Regulatory Pressure: The CFPB is expected to set new rules for debt collectors in 2016.
  • Current Value Unsustainable: The ERC less cost to collect and taxes is currently ~$400mn below the net debt of the company.

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT


BREAKING: Wall Street Consenseless Has No Clue About Fed Rate Hike

Takeaway: We don’t put much stock in Old Wall’s Fed predictions.

BREAKING: Wall Street Consenseless Has No Clue About Fed Rate Hike - consenseless  2

 

More data. More bad news for Fed-hike prognosticators.

 

Today, U.S. industrial production year-over-year slowed again to the lowest reading of 2015. Here’s analysis and a chart from Hedgeye CEO Keith McCullough:

 

“With Industrial Production only 0.3% y/y now (lowest reading of 2015 - see red circles) we’re entering the next leg down of the cycle = Industrial/Cyclical Recession. Don’t forget that growth is reported y/y and the toughest compares were in NOV/DEC of 2014 (see green circle). Things should slow faster in the coming months.”

 

click image to enlarge.

BREAKING: Wall Street Consenseless Has No Clue About Fed Rate Hike - industrial production

 

That’s just the latest underwhelming economic reading. Don't forget New York Fed president Bill Dudley's recent concern that inflation is running “well below our 2 percent objective.”

 

Below are a few more recent economic misses (for those of you keeping score):

 

BREAKING: Wall Street Consenseless Has No Clue About Fed Rate Hike - miss

 

So a December rate hike isn’t necessarily such a sure thing. The Fed is 'data dependent.' Remember?

 

BREAKING: Wall Street Consenseless Has No Clue About Fed Rate Hike - wsj econ survey

 

And yet, the latest headscratcher from Old Wall is the overwhelming expectation of a December rate hike. If you think their predictive track record matters, think again. Here’s a Wall Street Journal survey of economists:

 

“There is near-unanimous agreement among private forecasters surveyed that the Federal Reserve will begin raising short-term interest rates next month after holding them near zero for seven years.

 

About 92% of the business and academic economists polled by The Wall Street Journal in recent days said they expected the Fed to raise its benchmark federal-funds rate at its Dec. 15-16 policy meeting…

 

In the latest survey, the economists on average estimated the probability of a rate increase next month at 71%, up from 48% a month earlier.”

 

Right...

 

Now take a second to look at how “well” these same folks have done forecasting the next Fed rate hike. Below is a recap also from WSJ. (Notice the overwhelming consensus, in July and August, that the Fed would hike in September):

 

BREAKING: Wall Street Consenseless Has No Clue About Fed Rate Hike - econ consensus

 

No, we don’t put much stock in Old Wall’s predictions.

 

BREAKING: Wall Street Consenseless Has No Clue About Fed Rate Hike - ex economy


McCullough: Ignore Volume and Volatility At Your Peril

 

In this brief excerpt from The Macro Show this morning, Hedgeye CEO Keith McCullough explains why investors need to pay closer attention to volume and volatility.

 

 

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

 

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